The piece above by Marketplace.org is relatively recent, being based on August numbers, show the trade gap widened to its greatest level in 14 years. Although the current President and others may be against trade deficits, this could be a sign of consumer confidence and purchasing power.
As consumers are purchasing imported inputs for future exports, we need the rest of the economy and world to demand more of our goods to help our recovery.
At the end of the article it mentions comparative advantage and references the US being a net exporter of services. And selling more services can be more lucrative than t-shirts.
According to the people quoted in the piece, a trade deficit may show a quicker recovery in the US than the rest of the world. We are preparing for more exports in the future.
I know I will have pent up demand after this pandemic and will be looking for ways to escape when safe and available. I do believe that the economy should be steady in the future with a more consistent government in place and a feeling of relief with a vaccine and much less virus spread.
Pretend for a moment that Canada completely fell apart and began to experience capital flight. How does that affect interest rates and the US/CA exchange rate? How will it affect the US economy?
Canada's economy is in freefall. Our neighbors to the North have made monetary decisions which have caused extreme capital flight. Investors are calling on banks for cash looking for safer places to deposit money. As investors move capital from Canada to the US, they sell Canadian assets and buy American assets. This will increase the Canadian capital outflow. This capital outflow change then causes a supply issue of Canadian dollars in the exchange market. This capital outflow also starts to affect the demand curve for loanable money. This will eventually cause the Canadian dollar to depreciate in value. Capital flight increases interest rates and decreases the currency value in the foreign-currency exchange.
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