Trade matters: the US is forced to borrow $2.14 billion per day (net) from abroad even in the middle of the worst financial crisis since at least the 1930s

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Today’s Dept. of Commerce report on US losses in global business during February again provides a window into the remarkable power of the debt industry, their “expert” retainers and a largely clueless and/or extremely cynical media.

The US is in a financial crisis that is finally being admitted to be the worst since at least the 1930s.

Today’s report confirms that in the 29 days of February, the US spent $62.3 billion more on foreign-made goods and services than it was able to earn from all exports of US-made goods and services. That is, even with the US in financial crisis, it was forced to borrow – net -- another $2,145,000,000 every single day in February. This represents an accelerated pace of daily net borrowing (or asset sales) from January.

The good news for the debt industry and those tied to its interests, is that, as with the trillions of dollars of existing debt, this new debt brings with it lavish new fees, commissions and income. The bad news for everyone else is that even as these unimaginable future repayment obligations rocket higher, the globally competitive strength of once-unparalleled US producers – firms and workers – continues its long, rapid erosion.

Sharply and unevenly rising (and falling) prices now make economic comparisons hazardous. We can only guess at what the March deficit might be but after price-adjustments, it seems unlikely that the trade deficits drag on GDP growth was worse in 2008-Q1 than it was in 2007-Q4. That is, trade is unlikely to affect estimates of the decline in Q1 GDP.

Still, today’s report shows that through the first two months of 2008 the nominal US deficit in goods and services trade is -4.9% worse than in the same period last year. This worsening total loss obscures the sharp, 39.6% increase in the yr/yr “services” surplus and an -8.9% worsening in the goods deficit. Much of the rising surplus in services is due to weaker dollar – and a rush of foreign tourists coming to the US on bargain shopping holidays. The worsening goods deficit results from higher energy fuels prices and the inability of the rest of the US goods-producing sectors to pay for it from sufficiently increased exports.

The Manufacturing trade deficit improved 12.2% yr/yr over the first two months of 2008 while – thanks to soaring prices – the Agriculture sector’s surplus has tripled. Nonetheless, 54 of the entire 82 SITC-defined goods-producing industries have trade deficits in 2008, one more industry in deficit than last year. (Last year the US sold more crude fertilizer abroad than it imported. This year, despite strong growth in both the export and import of crude fertilizer, the US is importing even more of it that it can sell abroad. No data on ponies.)

Of special interest is that the US trade deficit – production shortfall – in the massive, deeply troubled “auto” sector is worsening in 2008 beyond last year’s -$10 billion each month. This is occurring despite a reduction in losses for autos and trucks because the deficit for auto parts has worsened by -67.1% yr/yr. Through the first two months of 2008, the sector’s trade losses have reached -$21.9 billion compared with losses over the same period last year of -$20.8 billion.

This year will be the NINTH consecutive year that the US economy grows slower than the world economy. Measured in currencies other than the US dollar, the US economy has actually declined over this period and will very probably decline even in $US terms in 2008. What has grown is debt – foreign and domestic – and, until recently, the commissions and the power of those who sell it with claims that debts and deficits don’t matter.