5 ms·

U.S. trade deficit shrinks 21% to 26-month low as imports tumble

82 points by Octokiddie 4y ago

danuker 4y ago
Another effect of the money printer slowing down. The money supply hasn't shrinked this quickly since before 1960. https://fred.stlouisfed.org/graph/?g=YrsY https://fred.stlouisfed.org/graph/?g=YrsY
- JumpCrisscross 4y ago
  > effect of the money printer slowing down Sort of? Rising rates are cooling aggregate demand. But they also make the dollar stronger, which should increase the trade deficit.
  - danuker 4y ago
    The dollar is stronger, as in, you need fewer dollars to buy something. So if the volume of goods and services stayed the same, their dollar value would be expressed in a smaller number.
    - deleted 4y ago
      [deleted]
    - blindriver 4y ago
      Your conclusion is completely backwards. The dollar is stronger, which means that imports are cheaper and exports to other countries are more expensive for those that are buying American goods. This leads to a larger trade deficit.
      - nwah1 4y ago
        You are both right. With unchanged demand for imports, then the total value of imports in USD would be the same, but a stronger dollar would affect the relative demand for imports vs domestic commodities in reality given basic supply and demand assumptions. But the point is still correct that you would have to adjust for the relative change in currency prices to know whether the amount of stuff we are taking in from abroad has really changed or not.
      - danuker 4y ago
        There are two ways to measure the "strength" of the dollar. One is comparing it to goods and services (consumer prices). The other is comparing it to other currencies (DXY). I guess these two factors have varying influence on imports and exports, but I suspect DXY is the more relevant in this case. So, I suspect my focus has been wrongly on the money supply, as opposed to the supply relative to other currencies, with DXY having almost reached the 2002 maximum in October 2022. So, I thank you for insisting.
      - HPsquared 4y ago
        Larger trade deficit in terms of dollars, or in terms of "stuff"?
  - nobbis 4y ago
    Rising rates don't make the dollar stronger. There's no empirical relationship between interest rates and exchange rates.
    - JumpCrisscross 4y ago
      > no empirical relationship between interest rates and exchange rates Wat [1][2][3][4]. [1] https://www.investopedia.com/ask/answers/040315/how-do-changes-national-interest-rates-affect-currencys-value-and-exchange-rate.asp https://www.investopedia.com/ask/answers/040315/how-do-chang... [2] https://www.kansascityfed.org/documents/443/1986-Interest%20Rates%20and%20Exchange%20Rates--What%20is%20the%20Relationship%3F.pdf https://www.kansascityfed.org/documents/443/1986-Interest%20... [3] https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp548.pdf https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp548.pdf [4] https://www.investopedia.com/carry-trade-definition-4682656 https://www.investopedia.com/carry-trade-definition-4682656
    - zaroth 4y ago
      Interest rates are actually the predominant driver of demand for a currency!
    - chimeracoder 4y ago
      > Rising rates don't make the dollar stronger. There's no empirical relationship between interest rates and exchange rates. I think this is the first time I've ever heard someone try to claim that printing money does not, ceteris paribus, impact the exchange rate.
- blablabla123 4y ago
  The whole inflation seems transitory after all and might not self-accelerate. Also in the EU things seem to stabilize
  - smartbit 4y ago
    MegaThreats, Ten Dangerous Trends That Imperil Our Future, And How to Survive Them by Nouriel Roubini might be an interesting read https://www.littlebrown.com/titles/nouriel-roubini/megathreats/9780316284059/ https://www.littlebrown.com/titles/nouriel-roubini/megathrea... It helped me understand inflation, deflation & stagflation.
  - dahfizz 4y ago
    Two years of high inflation is not "transitory". Inflation is barely slowing down, but is still very high.
    - oneoff786 4y ago
      Inflation, being the rate of change, has slowed down significantly and is back at pretty normal levels. The 12 month rate remains high because the previous months inflation was very high. The prices themselves will not go down in price, but they’ve stopped rising at abnormal rates.
      - dahfizz 4y ago
        CPI data per month can be found here: https://fred.stlouisfed.org/series/CPIAUCSL https://fred.stlouisfed.org/series/CPIAUCSL (This is the raw price levels, so inflation is the derivative of this graph). The most recent month of data (Oct - Nov) has been pretty flat. But the previous few months, (Sep - Oct, Aug - Sep) is still a higher change than normal. I don't think that one data point is enough to declare inflation is back to normal.
        oneoff786 4y ago
        Annualized inflation July-Dec was 2.5 (very normal) Annualized inflation Feb to July was 11 The total “annual inflation rate” peaked in June at 9.1% and has shrunk down to about 7 due to the above.
- xhrpost 4y ago
  Good, but still looks like a blip on the nominal chart. https://fred.stlouisfed.org/series/M2SL https://fred.stlouisfed.org/series/M2SL I wonder, with the economy having expanded since 2020, many former hospitality workers now doing better paid office work and lower paid workers seeing significant raises, how many more dollars are "appropriate" to be in the economy now? M1 is currently at 20T, we probably don't want to go back to 4T pre-pandemic, but what number makes sense for limited inflation without recession?
  - JumpCrisscross 4y ago
    > how many more dollars are "appropriate" to be in the economy now? We don’t know. We know money shortages are bad. But quantifying where excess liquidity occurs is unsolved [1]. (We see a variety of optima that defy simple explanation [2].) More solvable: targeting price levels and central bank balance sheet [3]. [1] https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp696.pdf https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp696.pdf [2] https://data.worldbank.org/indicator/FM.LBL.BMNY.GD.ZS?end=2020&start=2020&view=map&year=2020 https://data.worldbank.org/indicator/FM.LBL.BMNY.GD.ZS?end=2... [3] https://advisors.vanguard.com/insights/article/thefedsplantoshrinkitsbalancesheetquickly https://advisors.vanguard.com/insights/article/thefedsplanto...
  - mempko 4y ago
    Keep in mind, most of that 20T didn't go to regular people. It mostly went to asset price inflation.
    - xhrpost 4y ago
      Yea you raise a fair point. What matters is, where are those dollars now? If more so in the hands of rich people, who have a higher propensity to save cash, then those dollars are likely more removed from the economy in a way. Partly why we track Money Velocity as well: https://fred.stlouisfed.org/series/M2V https://fred.stlouisfed.org/series/M2V
  - travisporter 4y ago
    Is M2 is basically how many dollars exist in the world?
CabSauce 4y ago
I still think we're seeing some rubber-banding from the glut of inventories after the pandemic and supply chain issues. https://tradingeconomics.com/united-states/business-inventories https://tradingeconomics.com/united-states/business-inventor...
- deleted 4y ago
  [deleted]
- wiremonger 4y ago
  Can confirm. Amazon's warehouses have been absolutely packed lately, sellers have have been complaining about inbound shipping limits for most of Q4. This is despite Amazon growing warehouse capacity by a huge amount in 2021 and having plenty of excess capacity earlier in 2022. Also, the lead times at our factories in Asia are the shortest that they've been since the pandemic began.
  - randomopining 4y ago
    Retrospectively it was so easy to predict this. Interesting to hear it first hand though

82 points by Octokiddie 4y ago

Another effect of the money printer slowing down. The money supply hasn't shrinked this quickly since before 1960. https://fred.stlouisfed.org/graph/?g=YrsY https://fred.stlouisfed.org/graph/?g=YrsY

JumpCrisscross 4y ago
> effect of the money printer slowing down Sort of? Rising rates are cooling aggregate demand. But they also make the dollar stronger, which should increase the trade deficit.
- danuker 4y ago
  The dollar is stronger, as in, you need fewer dollars to buy something. So if the volume of goods and services stayed the same, their dollar value would be expressed in a smaller number.
  - deleted 4y ago
    [deleted]
  - blindriver 4y ago
    Your conclusion is completely backwards. The dollar is stronger, which means that imports are cheaper and exports to other countries are more expensive for those that are buying American goods. This leads to a larger trade deficit.
    - nwah1 4y ago
      You are both right. With unchanged demand for imports, then the total value of imports in USD would be the same, but a stronger dollar would affect the relative demand for imports vs domestic commodities in reality given basic supply and demand assumptions. But the point is still correct that you would have to adjust for the relative change in currency prices to know whether the amount of stuff we are taking in from abroad has really changed or not.
    - danuker 4y ago
      There are two ways to measure the "strength" of the dollar. One is comparing it to goods and services (consumer prices). The other is comparing it to other currencies (DXY). I guess these two factors have varying influence on imports and exports, but I suspect DXY is the more relevant in this case. So, I suspect my focus has been wrongly on the money supply, as opposed to the supply relative to other currencies, with DXY having almost reached the 2002 maximum in October 2022. So, I thank you for insisting.
    - HPsquared 4y ago
      Larger trade deficit in terms of dollars, or in terms of "stuff"?
- nobbis 4y ago
  Rising rates don't make the dollar stronger. There's no empirical relationship between interest rates and exchange rates.
  - JumpCrisscross 4y ago
    > no empirical relationship between interest rates and exchange rates Wat [1][2][3][4]. [1] https://www.investopedia.com/ask/answers/040315/how-do-changes-national-interest-rates-affect-currencys-value-and-exchange-rate.asp https://www.investopedia.com/ask/answers/040315/how-do-chang... [2] https://www.kansascityfed.org/documents/443/1986-Interest%20Rates%20and%20Exchange%20Rates--What%20is%20the%20Relationship%3F.pdf https://www.kansascityfed.org/documents/443/1986-Interest%20... [3] https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp548.pdf https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp548.pdf [4] https://www.investopedia.com/carry-trade-definition-4682656 https://www.investopedia.com/carry-trade-definition-4682656
  - zaroth 4y ago
    Interest rates are actually the predominant driver of demand for a currency!
  - chimeracoder 4y ago
    > Rising rates don't make the dollar stronger. There's no empirical relationship between interest rates and exchange rates. I think this is the first time I've ever heard someone try to claim that printing money does not, ceteris paribus, impact the exchange rate.
blablabla123 4y ago
The whole inflation seems transitory after all and might not self-accelerate. Also in the EU things seem to stabilize
- smartbit 4y ago
  MegaThreats, Ten Dangerous Trends That Imperil Our Future, And How to Survive Them by Nouriel Roubini might be an interesting read https://www.littlebrown.com/titles/nouriel-roubini/megathreats/9780316284059/ https://www.littlebrown.com/titles/nouriel-roubini/megathrea... It helped me understand inflation, deflation & stagflation.
- dahfizz 4y ago
  Two years of high inflation is not "transitory". Inflation is barely slowing down, but is still very high.
  - oneoff786 4y ago
    Inflation, being the rate of change, has slowed down significantly and is back at pretty normal levels. The 12 month rate remains high because the previous months inflation was very high. The prices themselves will not go down in price, but they’ve stopped rising at abnormal rates.
    - dahfizz 4y ago
      CPI data per month can be found here: https://fred.stlouisfed.org/series/CPIAUCSL https://fred.stlouisfed.org/series/CPIAUCSL (This is the raw price levels, so inflation is the derivative of this graph). The most recent month of data (Oct - Nov) has been pretty flat. But the previous few months, (Sep - Oct, Aug - Sep) is still a higher change than normal. I don't think that one data point is enough to declare inflation is back to normal.
      - oneoff786 4y ago
        Annualized inflation July-Dec was 2.5 (very normal) Annualized inflation Feb to July was 11 The total “annual inflation rate” peaked in June at 9.1% and has shrunk down to about 7 due to the above.
xhrpost 4y ago
Good, but still looks like a blip on the nominal chart. https://fred.stlouisfed.org/series/M2SL https://fred.stlouisfed.org/series/M2SL I wonder, with the economy having expanded since 2020, many former hospitality workers now doing better paid office work and lower paid workers seeing significant raises, how many more dollars are "appropriate" to be in the economy now? M1 is currently at 20T, we probably don't want to go back to 4T pre-pandemic, but what number makes sense for limited inflation without recession?
- JumpCrisscross 4y ago
  > how many more dollars are "appropriate" to be in the economy now? We don’t know. We know money shortages are bad. But quantifying where excess liquidity occurs is unsolved [1]. (We see a variety of optima that defy simple explanation [2].) More solvable: targeting price levels and central bank balance sheet [3]. [1] https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp696.pdf https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp696.pdf [2] https://data.worldbank.org/indicator/FM.LBL.BMNY.GD.ZS?end=2020&start=2020&view=map&year=2020 https://data.worldbank.org/indicator/FM.LBL.BMNY.GD.ZS?end=2... [3] https://advisors.vanguard.com/insights/article/thefedsplantoshrinkitsbalancesheetquickly https://advisors.vanguard.com/insights/article/thefedsplanto...
- mempko 4y ago
  Keep in mind, most of that 20T didn't go to regular people. It mostly went to asset price inflation.
  - xhrpost 4y ago
    Yea you raise a fair point. What matters is, where are those dollars now? If more so in the hands of rich people, who have a higher propensity to save cash, then those dollars are likely more removed from the economy in a way. Partly why we track Money Velocity as well: https://fred.stlouisfed.org/series/M2V https://fred.stlouisfed.org/series/M2V
- travisporter 4y ago
  Is M2 is basically how many dollars exist in the world?

CabSauce 4y ago

I still think we're seeing some rubber-banding from the glut of inventories after the pandemic and supply chain issues. https://tradingeconomics.com/united-states/business-inventories https://tradingeconomics.com/united-states/business-inventor...

deleted 4y ago
[deleted]
wiremonger 4y ago
Can confirm. Amazon's warehouses have been absolutely packed lately, sellers have have been complaining about inbound shipping limits for most of Q4. This is despite Amazon growing warehouse capacity by a huge amount in 2021 and having plenty of excess capacity earlier in 2022. Also, the lead times at our factories in Asia are the shortest that they've been since the pandemic began.
- randomopining 4y ago
  Retrospectively it was so easy to predict this. Interesting to hear it first hand though