JEREMY HOBSON: Now let’s get to this morning’s news on the trade deficit. It fell slightly to about $46 billion in February. That means we bought about $46 billion more from other countries than we sold to them.
Let’s get the details now from our regular Tuesday analyst Juli Niemann of Smith, Moore and Company. She’s with us live from St. Louis. Good morning.
JULI NIEMANN: Good morning Jeremy.
HOBSON: So these days, when you hear deficit — you think “bad” — is that the case when it comes to a trade deficit?
NIEMANN: Well, it’s neither good nor bad. A trade deficit just means you bought stuff on credit and paid for it with an IOU. Here in the United States, we’ve got oil, clothes, consumer goods from the rest of the world because we don’t make much of it here.
NIEMANN: We sell machinery, technologies, services, agriculture products. But right now we’re buying more than we’re selling. The problem is how do you pay for it? Since we buy more than we sell, we have to pay for it with IOU’s — that means borrowing money, namely issuing treasury bonds and racking up more debt. Now it’s bad when governments borrow a lot of money to pay for it all, and then they blow it — I mean, spend it wastefully. And if you spend it productively and grow that’s good but that’s not what we have been doing. We’ve just been racking up a lot of debt.
HOBSON: Well, Juli President Obama has said he wants to double the number of exports that we do. Do this morning’s numbers indicate we are doing everything that needs to be done in order to do that?
NIEMANN: Well, it’s a swell a idea to sell more to the rest of the world, except they’ve got a lot of debt too. We’ve got a debt bomb basically hanging over the whole world. And unless we get some good, strong global economic growth, nobody can pay down the debt to be able to afford to buy more stuff. So you have to take care of first things first. Work off the debt, re-schedule the debt, and then get productivity going back into the rest of the world so that we can afford to buy stuff from each other.
HOBSON: It all comes back to the debt. Juli Niemann, analyst at Smith Moore and Company, thanks so much.
NIEMANN: You bet.
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