Thoughts on deficit drop

Some quick thoughts on whythe drop in the US trade deficit.

Low dollar means foreign goods are more expensive here, so demand drops. Low dollar also means the US goods are cheaper elsewhere so demand abroad increases. This may be fine while it lasts, but a low currency is not what I would call a sustainable competitive advantage for the US.

The positive side to this, however, is that exports could help lessen the impact of a recession. Recovery could very well be export-lead.

Low confidence could mean that consumers are spending less, that would worsen the impact of any recession. On the plus side, however, if consumers are spending less, that could mean that they are (hopefully) saving more.

If that becomes sustained, that would be a huge plus because it would keep permanent downward pressure on the trade deficit, could boost liquidity without excessive interest rate cuts, and in the long run will make the individual financial situation of US consumers more stable, especially in their retirement.