More Red Ink

    The trade deficit grew last quarter. Again. Not good. From The Wall Street Journal.

The U.S. reported that the deficit in its current account, the broadest measure of trade, widened further in the second quarter -- underscoring concerns about economic imbalances voiced by global finance ministers this past weekend.

Finance officials have long warned that the dimensions of U.S. borrowing from abroad -- reflected in the current-account figures -- threaten the stability of the world economy. The current account measures not just trade in goods and services, but also some financial flows; the deficit effectively amounts to how much the nation borrows abroad to finance U.S. consumers' appetite for imported goods and services.

Yesterday, the Commerce Department said that the U.S. current-account gap widened by $5.21 billion to $218.41 billion in the second quarter. The wider deficit was due in large measure to soaring global oil prices, which raised the U.S. bill for imported petroleum. The deficit remained 6.6% of the U.S. economy, the Commerce Department said, a large slice of the U.S. economy.

Critics say huge current-account deficits, which approached $800 billion last year, can't be sustained forever and warn there may be a heavy price to pay -- in the form of higher interest rates and falling stock values -- if foreign investors ever decide to pull back.

    And who do you think will be hit hardest when interest rates rise and stock values fall?

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