What is the negative effect of a trade deficit on the country which is not buying as much?
348246
I couldn't understand what is it exactly what you are asking. But i will do my best to give and honest answer that might shed some light on you.\n\nThe idea of a negative effect of the trade deficit has been discussed thoroughly by economists and it seems like we haven't got a proper answer yet. Is it good or bad? we don't know yet. WE know deficit and surpluses are favorable and unfavorable.\n\nAn expanding U.S. economy fuels demand by American consumers and producers to buy more imports as well as domestically produced goods and services.\nRising U.S. domestic output, in turn, attracts the foreign investment that finances an expanding U.S. current account deficit. \nIn contrast, slowing U.S. domestic demand not only depresses U.S. output and employment growth — but also lessens demand for imports and the inflow of foreign investment. \n\nIn addition to the uncertain causality, the evidence also does not address the question of how persistent and rising current account deficits may affect the U.S. economy in the long run.\nThe "sustainability" of the U.S. current account deficit has been much debated among the experts. But whatever negative impact the deficit may have in the long run, there is no evidence that it poses a drag on the U.S. economy in the short run. \n\nWhy does all this matter? The answer is simple. Misperceptions about the U.S. trade deficit and the economy can tempt U.S. policymakers to "do something" about the deficit to show that they are concerned.\n\nFrom my point of view i would say that a trade deficit (just as a fiscal deficit) is a tool used by a country to do some economic policy.\n\noh, and that "natural market consequence" that you are looking for might be the exchange rates. A fall in the exchange rates will cause foreigners to buy more of our goods and us to buy less foreign goods.
444615
The national debt is actually something that is undermining our national security by handing over a very large portion of our economy to foreign powers.\n\nIn international finance, everything is balanced through a very complicated system including value of exported and imported goods, value of currency, value of precious metal reserves (gold & silver), and other valued goods. When the US spends more than it makes as a nation, there are several things that could happend: 1. Other countries step in and "loan" money to the US through the purchase of Treasury Bills (T-Bills); 2. The US dollar is devalued (i.e. goes down compared to other currencies).\n\nRight now, foreign nations are purchasing T-Bills in order to loan the US the money that it spends. Basically, the T-Bill is a note that promises the purchaser that the US Government will pay back the money owed.\n\nThe problem is, when other countries have large amounts of these T-Bills, they effectivly control the US economy by the threat of dumping the t-bills onto the international market. For instance, if China decided that it really didn't want the US to supply arms to Taiwan, it could take all of its T-bills and dump them in the international market. Overnight, the US Dollar would plummet, thus raising the cost of imported goods in the US. The result is that $5 t-shirt made overseas now costs $10. Inflation would be rampant, businesses would shut down, unemployment would rocket up, and the US economy would be in tatters in a matter of weeks.
425387
Historically, countries have overprinted their currency, leading to devaluation, and often, dire economic crises such as depression.  A careful balance must be struck to ensure that the money in circulation does not adversely impact the economy.
352178
The negative effect is that no country can produce everything it needs due to lack of natural resources. So, the standard of living will not be as great. Fewer things to buy and enjoy.
510758
It is when the dollar assumes status of primary reserve currency in the international financial architecture.  It prevents exporting nations from spending domestic dollars they earn from the U.S. trade deficit and forces them to finance U.S. capital surplus.  This sends wealth to the U.S. in exchange for the privelege of financing U.S. debt to further develop the U.S. economy.\n\nThanks for asking this, had never heard of it so I learned something new today!  I just had to look it up when I read it, make sure you weren't making something up.  :)  No offense intended.
702112
A good question (but perhaps better off in the economics area of the site). Every pound or euro note you hold has been printed and spent by the state (before you receive it from your bank or employer or client), and on the day it was printed, the total number of pound notes in the country changed slightly.\n\n  This is the issue we are discussing here: how much money can a country print before it causes disaster?\n\n    The answer is that generally a country may print or create a small amount of cash on top of the notes it takes out of circulation, but while deciding how much to print, it must take a very careful look at recent inflation and exchange rate statistics.\n\n   If a country prints too much money, both the inflation and the exchange rates will go haywire / will be adversely affected. This is because, as money becomes more abundant but the things you buy with money do not, the ratio of people wanting to buy stuff and people selling stuff changes. \n\n  Simply put, if a country doubles the amount of money in circulation, then market forces will automatically take down the value of the exchange rate at least by half, prices of all goods and services will go up (will double), and imports become harder to afford as it now takes at least twice as much money to but the same imported goods.\n\n   Why is this not the case for the USA (and the Eurozone)? It is sometimes and to an extent (for the above reasons), but:\n when much of the extra money that is added into circulation does not get spent and then spent again by the person who received it, and again ..., instead the money is stockpiled somewhere (by a person, a company or a government), then the above affect does not take place until the stockpiled money is spent again. \n\nAnd if the total amount of money in the world being stockpiled (most large stockpiles are in dollars and euros as there are used for international trade and to keep other currencies stable) goes up, so (to conclude in the correct jargon) non-inflationary increases in money supply are possible.
537356
Rate determined in the market by the demand for and supply of the currency in question.Any economy is better or worse is a relative measurement.The demand and supply of the currency in turns depends on the export and import of the country.
584961
Yes, it leads to weakening of the dollar which makes commodity's cost more firing inflation. The interest alone could fund every social program that the repuglicans hate so much. It is a sad day when we spend more on a useless  war then to help people in our own country. In the long run it will cost as taxes will have to be raise on everybody to pay for the tax cuts to the very rich.
736616
Russia is the example and it is not a very old story. They are not doing good, their economy is at the line of crunch. They cannot hold much long.
1007014
Nobody knows how long the large US trade deficits can be sustained.  But most economists say that these deficits cannot continue forever.  And the more these deficits accumulate, the more likely it becomes that investors will panic and sell off the US dollar.   \n\nOr the countries that are accumulating the US dollars now may want to spend them in the US some time in the future.  And such spending will cause inflation of prices.\n\nOr countries that are accumulating US dollars now may continue to hold them in US government bonds which pay interest.  And eventually these interest payments will become so large that much of US tax dollars will end up going to foreign countries instead of being used for the benefit of US citizens.\n\nNone of these scenarios are good.   But there is no easy way to cut back on these trade deficits.  People in the US are used to live beyong their means.  And such a habit is very difficult to break.  People will change their spending habits only when economic circumstances force them to.
226540
Fiscal deficit is spending more than is taken in. When it's government spending the difference is made up by borrowing, for example, selling bonds. This leaves the debt and interest to be paid by our children.  Last week I heard the current deficit has indebted each US citizen $27,000*.  In 2000, at the end of the last administration, there was a surplus (spent less than was taken in).
434243
When a government prints more money and puts it into the system, it causes HYPO inflation, and then instead of needing 3 dollars for a gallon of gas, you will need 30,000 dollars.  It causes way too much problem.  You do not want that to happen, no jobs, not work and not trillion of dollars to buy it with.  \n\nNo other country would trade with such a country and eventually that country would fall into depression and total collapse.
460782
Depends on a variety of economic factors. Every country has its own reasons for fluctuations.
607862
Not in the near future.  It will continue to decrease for the forseeable future.  A decreasing US dollar will help our exports and support the US economy.
167917
if it is negative then we have a deficit of workers or more jobs than workers.
493889
It largely depends on how self sufficient the country is.  When you say "enough money"  are you referring to a certain level of profit or actually referring to loss?
664307
unrestricted free trade may lead to extreme inflation.