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U.S. Trade Gap Widens on Oil Imports
Posted by WARREN MOSLER on May 12th, 2009
(email exchange)
>
> On Tue, May 12, 2009 at 9:20 AM, wrote:
> As you predicted….
>
You mean as I feared!
Higher oil = dollars easier to get overseas = weak dollar all else equal (which it never is, of course)
Higher crude = higher headline CPI = higher government and private CPI adjusted payments
And I suspect higher fuel prices will mean higher government transfers to ‘help Americans afford to heat their homes etc.’ which is not a ‘bad thing’ but does serve to drive up prices that much further.
Creating more spending power does not create more fuel (at least in the medium term) – only higher prices.
The world’s newly forming higher income individuals are back to outbidding our lower income individuals for fuel. With food following close behind as biofuels continue to link the two.
WSJ NEWS ALERT: U.S. Trade Gap Widens to $27.58 Billion on Oil Imports
by Jeff Bater
May 12 (WSJ) — The U.S. trade deficit widened for the first time in eight months during March, as the price and use of imported oil both climbed. The U.S. deficit in international trade of goods and services increased to $27.58 billion from February’s revised $26.13 billion, the Commerce Department said Tuesday. Originally, the February deficit was estimated at $25.97 billion.
U.S. exports in March slipped by 2.4% to $123.62 billion from $126.63 billion as trading partners bought fewer consumer goods and cars from the U.S. Imports fell at a lower rate, dropping 1% to $151.20 billion from February’s $152.76 billion.
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May 13th, 2009 at 10:20 am
Warren,
I dont think I have ever (and I mean ever) seen anyone in the media, Govt, mainstream, etc. put the causation from higher oil to a weaker dollar.
They without exception have it backwards (IMO) as they say the weaker USD means higher oil prices!
Resp,
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May 13th, 2009 at 11:08 am
the causation may be from the dollar to crude prices on any given day in the very short term.
my take is on the more medium term fundamentals. and it would change if our mix of imports changed, etc.
thanks!
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Curious Reply:
May 13th, 2009 at 2:12 pm
I don’t see the causation in either direction. Oil cannot be traded for any other currency except dollars, so it cannot be arbitraged, can it? Higher price of oil means more dollars overseas, but they can only be invested/spent in the US, regardless whether they are owned by foreigners or US citizens. How does that weaken the dollar?
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Matt Franko Reply:
May 13th, 2009 at 10:45 pm
C,
This is a post Warren made a couple of months ago wrt dollar shortages ouside of the US. May provide some insight.
http://www.moslereconomics.com/2009/03/04/bis-report-on-usd-shortage/
From my own recent obs. wrt oil, I have been tracking the USD loans from the US Fed to the ECB over the last few quarters, the amounts put a bottom in ($130B) and started to increase ($160B) back in late Feb. after oil went down to the 30’s. usd index topped about a week later. Since then as oil has rebounded to the 50’s, the loan amounts have started to recede again (back to $130B area). My expectation would be that if oil price weakens again to the low 40’s, youll see the Dollar Index back around 90.
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Curious Reply:
May 14th, 2009 at 1:28 am
Thanks Matt, I’m unable to view the report (“the file is damaged and cannot be repaired”). Are you able to view it?
Matt Franko Reply:
May 14th, 2009 at 6:40 am
C,
Try Google-ing:
“BIS The US dollar shortage in global banking”
And you can download the PDF from the BIS website and open in Acrobat Reader. It is a Adobe pdf file and it may be that your web browser will not automatically launch adobe reader when you link to a pdf file, so just download directly.
Resp,
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