+ us trade deficit, oil prices and the usd index+

  1. 22,691 Posts.
    An important part of the US trade deficit is the price of oil. It affects the US Index as wel.

    So, the price of oil was somewhat lower in Dec and the Trade deficit fell somewhat.

    Unfortunately, this won't continue for the following reasons:
    1. US production is becoming less and less.
    2. There are question marks over the OEC supply.
    3. There are problems with other countries' supplies; some are starting to import, having been exporters before.
    4. An immediate and critical issue which can't be solved: Russia says that supply is down, Venuzuela, the fourth biggest supplier is to sell to China as well.
    Not much is known about the current contracts with the US; be assured that the Chinese will be getting their share.
    5. The new Cartel with China and Russia as the leaders; India may join and so do Brazil and Venuzuela.
    One function is for the members to supply energy to China-China will have priority.
    6. The ruthless locking in of resources by China who supplies the infrastructure needed, credit, troops and military installations to protect that energy and other commodity supplies.
    7. The current unbalanced Middle East where the Saudi regime is in difficulties, the low supply from Iraq because of sabotage; the role of IRAN in Iraq and the need for US troops to protect this oil supply.

    Summary: As the price of oil rises (shocks may occur), the US has little protection because of a low dollar, hefty deficits and the increasing negative effects from outsourcing.
    These shocks to come will affect the USD Index and the trade deficit which will be permanently in the red with danger signals flashing.

    And so, the Current account deficit will remain high no matter what spin is being used.
    The Budget deficit has been fudged, so no luck there either.

    The Spill-over effect could affect many countries who will also pay a lot more for oil anyway.

    Gerry
 
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