H
HiloHaole
Guest
The headlines are that "Trade Deficit Sets Another Record" and has this
statement:
The Commerce Department reported Tuesday that the gap between what America
sells abroad and what it imports rose to a record $763.6 billion last year,
a 6.5 percent increase from the previous record of $716.7 billion set in
2005. For December, the deficit rose a bigger-than-expected 5.3 percent to
$61.2 billion.
The numbers are misleading and here's why. Suppose, in 2005, we exported $50
worth of goods and imported $100 worth of goods. That's a $50 deficit.
Now, if inflation was everywhere at 100%/yr and all goods imported and
exported didn't change, then in 2006 there would be $100 worth exported and
$200 worth imported. That's a $100 deficit -- an increase of 100%!!! Yet,
everything remained that same from 2005 and 2006.
statement:
The Commerce Department reported Tuesday that the gap between what America
sells abroad and what it imports rose to a record $763.6 billion last year,
a 6.5 percent increase from the previous record of $716.7 billion set in
2005. For December, the deficit rose a bigger-than-expected 5.3 percent to
$61.2 billion.
The numbers are misleading and here's why. Suppose, in 2005, we exported $50
worth of goods and imported $100 worth of goods. That's a $50 deficit.
Now, if inflation was everywhere at 100%/yr and all goods imported and
exported didn't change, then in 2006 there would be $100 worth exported and
$200 worth imported. That's a $100 deficit -- an increase of 100%!!! Yet,
everything remained that same from 2005 and 2006.
