Today, with the release of January’s $58.3 billion dollar trade deficit (the second worst monthly result on record), the enormity of the imbalance was once again overshadowed by the rhetoric immediately following its release. As he has in the past CNBC’s Larry Kudlow extolled the virtues of the trade deficit as reflecting America’s superior economic growth, while chastising Europe and Japan for not doing their fair share in moving the world’s economy forward.
In essense, Mr. Kudlow criticized Europeans and Japanese as being economic slackers (because all they do is save money and manufacture products), while praising Americans, who borrow those savings and consume those products, for doing all the hard work. Give me a break.
When asked if he though the fact that Americans were “living beyond their means was a problem” Kudlow’s reply was to deny that they were. Apparently, he believes that one’s means are merely a function of how much one can borrow. It reminds me of the old joke about the housewife who was amazed to discover that her checking account was overdrawn as there were still unused checks remaining in her book. Further, when asked if he believed that the debt Americans were accumulating was problematic, he assured the television audience that it was not, because “Americans were putting the money to good use.” I’m not exactly sure to what good use he is referring, as American’s borrow mainly to consume. Imagine trying to convince a banker to loan you money on the grounds that you would put it to good use by buying a big screen T.V. and taking a vacation.
Mr. Kudlow’s rhetoric typifies an ongoing Wall Street, government, and media propaganda effort that would even amaze George Orwell. I have addressed these ridiculous arguments many times in the past, but rather than rehashing them, please review some of my past commentaries in the archieves in response to similar statements on this issue made by John Snow and Arthur Laffer.
January 13, 2005
John’s Snow Job on the Record Trade Deficit
January 4, 2005
Laffer on the Trade Deficit