Friday, January 28, 2005
Lehman Bros research dept discovers hole in the Willful Ignorance Zone Layer
"While the U.S. economy looks solid on the surface, there is a hole in the roof, and it is
getting bigger. The trade deficit jumped from an upwardly revised $56.0 billion in October
to $60.3 billion in November. That is $7 billion bigger than expected and easily a new
record. There was nothing fluky about the number. The widening reflected a $2 billion drop
in exports and a $2 billion increase in imports. Removing noisy, special factors, such as
aircraft and petroleum, shows a similarly wider deficit. The widening was “real” rather than
an artifact of changing prices. In particular, the widening cannot be blamed on a temporary
“J-curve” effect—where a weak currency pushes up the price of imports, worsening the trade
balance—because prices have not changed very much.
Over the past five years, the monthly trade deficit has tripled. Every time the numbers improve
for a month or two, optimists argue that the long worsening is over [however] the
trade balance improved slightly during the 2001 recession and seemed to plateau in 2003,
but each time it has resumed its relentless path downward.
Unfortunately, it appears that the deterioration is far from over..."
... the answer is simple: sell greenbacks, buy Euros.
... How's that working for ya?