Wednesday, January 14, 2009

To Dispose a Soul to Action We Must Upset Its Equilibrium

Rebalancing is taking place, just not in the right way

Look at the decline for goods and the balance. The dashed lines represent three month rolling averages, so the declines are somewhat dampened so far (the scale is also compressed so the grids match up). The month over month declines were around 25% for goods and the balance, and about 3% for services.

So, if trade goes to zero, the current account will be in balance. Unfortunately, at the same time the country will be in a depression.

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