An article today titled ‘In Deeper U.S. Trade Deficit, Good News for World’s Economy’ says “The U.S. trade deficit hit its highest level in six months in July as a record rise in imports outpaced a third straight increase in foreign demand for American products, according to government data released Thursday. Both gains provided more evidence that the worst recession since the 1930s is losing its grip on the global economy”.  Yesterday the U.S. Commerce Department reported that in July the U.S. trade deficit was $32 billion, much larger than the $27.4 billion economists had projected.  The trade deficit is a ‘net number’ determined by subtracting U.S. exports from U.S. imports.

Aside from my view that ‘one swallow doesn’t make a summer’ and that in any event the July U.S. trade deficit number is a meaningful litmus test on world economic recovery is a ‘stretch’ readers of this post may find some historic data useful.  The U.S. had neither a cumulative net trade deficit or surplus in 1971 when then President Nixon’s administration took the U.S. off the gold standard and the U.S.$ became the world’s reserve fiat currency.  28 years later (by 1999) the U.S. had accumulated an aggregate net trade deficit of just under $2 trillion.  Here’s where I think it gets really interesting.  By December 31, 2008, only 9 years after 1999, the U.S. cumulative net trade deficit stood at just over $7 trillion (3.5X what it was in 1999) and has continued to grow by between $25 – $30 billion each month since then.  You can see the build-up of these numbers by visiting StockResearchPortal.com, clicking on Economic Research in the Main Navigation Bar, and clicking on U.S. Trade Deficits near the bottom of the left Navigation Bar of the webpage you are then on.

From my perspective the U.S. through loss of manufacturing jobs after the year 2000 has escalated its dependence on its trading partners and that dependence increases each month.  Without question the U.S. is the #1 military power in the world, and currently continues to be the world’s largest individual country economy.  That said, I don’t think one has to look beyond the U.S. trade deficit accumulation and current position to see that we are well on our way to a ‘new world order’ – and one in which not all countries share the U.S.’s ideology.  Where this ultimately leads is anyone’s guess, but my guess is that it leads over time to continued weakening of the U.S. through ever more dependence on its trading partners – and to a much reduced standard of living for U.S. residents from their current average standard of living.

There is a second article that I recommend readers of this post take the time to read carefully.  Titled ‘Americans are getting poorer, and it’s going to get worse’ it reports “The early impact of the worst recession since the 1930s pushed median incomes down, forced millions more people into poverty and left more Americans without health care in 2008, according to new annual survey data from the U.S. Census Bureau” and for reasons spelled out in the article “the worst is yet to come”.  I have never understood why people broadly don’t observe the simple things that surround them, think about those things, and act accordingly.  Ask any person on the street in the U.S., Canada or any other developed country about the behavior of squirrels, and my guess is to a person they would know and say that squirrels don’t eat all the nuts they find in the fall – rather they store nuts away to enable them to survive the winter.  The average U.S. resident (and to a lesser degree Canadian resident) has eaten all the nuts available to them as they have found them – retaining no nuts for bad times.  One shameful conclusion that could be drawn from this is that the average citizen knows how squirrels behave and knows why they behave that way, but just maybe squirrels are smarter than the average citizen – come on, that can’t be true.

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