Weak Dollars

For the generations of college kids who learned the ABCs of global economics from Paul Samuelson, a weak dollar is supposed to tip the balance of trade in favor of the nation's exporters. So why is the trade deficit exploding?

Definition of Trade Deficit : Imports exceed Exports

When your currency is weak, people will buy goods from your country especially if their currencies are stronger than yours. This is because this will permit them to ship a larger amount of goods at a lower price that before. Exporters in the country should have a time of their life during this period where the U.S dollar is at an all time low.


"While the weak dollar gives Wall Street every reason to tout the stocks of individual exporters, the flood of petrodollars leaving the country continues to wash the foundation out from under the rest of the overall economy."


"A close look at the September trade data shows most of that widening gap -- $20.5 billion -- stems from petroleum imports."


Even though the United States has been heavily involved in the exports industry, much of their efforts to earn a huge profit has been oblierated by the evil oil industry. It is imperative that they continue to import oil, first because they do not have much themselves and secondly, they function on oil more than anything else. Because of the heavy imports of oil, the profits made from exports are offsetted and trade deficit starts to explode as a corollary.

This problem is further exacerbated when the oil prices hike whenever the U.S dollars dive. It just pulls the two extremes further apart each time it happens. You get lower profits when your dollar weakens and thus you have to pay more dollars for the same volume of oil now.


So isn't it flagrant now why the trade deficits are exploding now?

Credits -marketwatch, -investorwords, -wtrg