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Trade Deficit

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There's Reason to be Pessimistic about the U.S. Economy, but Never Panic

Pessimism increased again among investors last week, as a slew of economic data stoked fears of a double-dip recession.

Indeed, housing and unemployment continue to weigh on the U.S. economy. But don't panic. Remember that the prospects for a full economic recovery are much better outside the United States, and that it's often good to be greedy when others are fearful.

To find out more about the precarious state of the U.S. economy read on...

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Washington – Not China – Is the Real Manipulator Here

SHANGHAI, People's Republic of China - China just posted its first monthly trade deficit in nearly six years, a $7.24 billion shortfall for March that essentially torpedoes Washington's argument that the Asian giant is a "currency manipulator" of the worst kind.

The Obama administration's assertion that China is artificially keeping the yuan undervalued to gain a global competitive advantage isn't just misguided: It actually demonstrates that Washington lacks even a basic understanding of global economics. Given that the same U.S. leaders who have been pushing to hang this manipulator label on China and impose sanctions are the same ones who tried to end the financial crisis by creating a river of debt that will haunt us for years, I can't say that I'm surprised.

As the U.S. argument goes, pegging its currency to the dollar gives China a distinct advantage when it comes to less-expensive manufacturing and a strong export market. The implication is that somehow this is negatively impacting our economy, or - in a variation of the same logic - holding back our recovery. Washington points to the massive trade deficits we regularly run with that country as evidence of China's currency-market wrongdoing.

In reality, China's pegged currency has done two things. First, it's allowed the United States to keep its inflation rate at a much lower (and more-manageable) level than it should have been in view of the $14 trillion in debt that this country has taken on.

And, second, it's allowed China to fuel its own stimulus package while at the same time assuming a meaningful role in the ongoing global recovery.

Let's take a minute to talk about why this is true.

Europe-China Connection Could Rattle Stocks

I was watching the Asia Edge show on Bloomberg television Wednesday night when the lovely and smart Susan Li broke in breathlessly on her guest with news about China's consumer inflation numbers. Inflation was reported up just a touch in January, which was considered good news because if it was higher it would have made Chinese banking authorities more anxious to clamp down on interest rates and if it was lower it would have raised the awful specter of deflation.

The Shanghai stock market ended a fraction higher, so it was a bit anticlimactic. But the key thing to know is that the Chinese market still appears to be in a downtrend and that bodes ill for the rest of the emerging markets. The 50-day moving average of iShares FTSE/Xinhua China 25 Index (NYSE: FXI) has turned emphatically negative, as has the slightly longer 100-day average. The index fund also is already beneath its 200-day average, which tends to distinguish bull cycles from bear cycles.

Read more about the Europe-China connection...

U.S. Stocks: Winning Streak is Over, But Bull Market Continues

The winning streak is over. But the outlook for stocks remains upbeat. U.S. stocks on Friday suffered their first setback after six straight days of gains, but the damage wasn't severe. No news appeared to precipitate the decline, so chalk it up to light profit-taking. In the Friday session, the Dow Jones Industrial Average lost […]

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U.S. Trade Deficit Widens, but Signals a Healthier Economy

The U.S. trade deficit expanded at its fastest pace in more than ten years in July, accelerated by rising oil prices and increased demand for auto parts and industrial supplies. The gap between imports and exports rose 16% – the largest percentage increase since February 1999 – to $32 billion in July from a revised […]

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China Passing U.S. as World's Largest Auto Market

By Jason Simpkins Managing Editor Money Morning China likely outpaced the United States in auto sales for the first time ever last month – the beginning of what could be a lasting trend. Official data for China's January auto sales is scheduled for release tomorrow (Friday). However, preliminary estimates indicate that about 800,000 vehicles or […]

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Strong Exports Compress Trade Deficit

By Jason Simpkins Associate Editor  The September U.S. trade deficit narrowed slightly from the month before, as the U.S. dollar continued its slump and continued global growth continued to boost demand for lower-priced U.S. goods. The trade gap shrank 0.6% to $56.5 billion from a revised $56.8 billion in August, according to Friday’s report from […]

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Gold Climbs to 27 Year High, Oil Eclipses the $83 Level

By William Patalon III And Jason Simpkins Money Morning Gold prices rallied to their highest level in 27 years Friday, fueled by the continued decline of the U.S. dollar. Meanwhile, crude oil surrendered early price gains, but still managed to stay above the $82 level. Friday marked the close of a quarter that saw pricing […]

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U.S. Exports Grow at Fastest Pace in Three Years

Staff Reports July was a good month for U.S. exports. According to Tuesday’s report from the Commerce Department, the exportation of U.S. good and services increased 2.7% – the fastest seasonally adjusted growth in more than three years. And enough to put a small dent in the U.S. trade deficit, shrinking it by three-tenths of […]

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