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The U.S. Trade Deficit and the Dollar

"the world's primary reserve currency, a role once played by the British pound sterling"

and? what lead to the pound's demis?

Carry Trade Volatility

The volume of prudential reserves held by each Euro-Dollar (foreign) bank presumably is dictated by “prudence” – not by any legal requirement administered by a monetary authority. All prudential reserve banking systems have heretofore “come a cropper”. Money creation by private profit institutions is not self-regulatory- the “unseen hand” simply does not function in this area. Invariably the systems created too much money, speculation became rampant, inflation distorted and destroyed economic relationships, confidence that the banks could meet their convertibility obligations eroded, “runs” on the banks caused mass banking failures, and entire economies were left in ruin.

When the Rest of the World Stops Hoarding US Dollars

The U.S. dollar has no bottom. A flight from the dollar will generate hyperinflation in terms of dollar-denominated assets.

Today's Lesson: Why the Fed Raised Its Rates in 1931

There are different degrees of hyperinflation. Whether the dollar plummets today, or steadily declines, will not change deep-rooted stagflation. Stagflation is going to be an enduring feature on our landscape.

Today's Lesson: Why the Fed Raised Its Rates in 1931

A quarter century ago US oil imports accounted for the US trade deficit. The concerns expressed over the years about "energy dependence" accustomed Americans to think of trade problems only in terms of oil. The desire to gain "energy independence" has led to such foolish policies as subsidies for ethanol, the main effect of which is to drive up food prices and further ravage the poor.

Today oil imports comprise a small part of the US trade deficit. During the decades when Americans were fixated on "the energy deficit," the US became three to four times more dependent on foreign made manufactures. America's trade deficit in manufactured goods, including advanced technology products, DWARFS the US energy deficit.

For example, the US trade deficit with China is more than twice the size of the US trade deficit with OPEC.

The US deficit with Japan is about the size of the US deficit with OPEC.

With an overall US trade deficit of more than $800 billion, the deficit with OPEC only comprises one-eighth --- Paul Craig Roberts