Others said, "well at least the current account deficit is getting under control." Which, unfortunately, is not really happening. The trouble with these people is that they do the same thing over and over again and expect different results. Just as a consumption binge was driving US "growth" in the run-up to the crisis, so we have another one going on now. The evidence is a return to skull-crushing external deficits to accompany the budgetary one. They don't call them twin deficits for nothing as US imports hit all-time highs:
The U.S. trade deficit widened more than expected in January as high oil prices and resurgent demand helped pushed imports to a record high, a Commerce Department report showed on Friday. The trade gap swelled more than 4 percent to $52.6 billion, the highest since October 2008. The department also raised its estimate of the December trade deficit to $50.4 billion, from its previous figure of $48.8 billion. Imports rose 2.1 percent to a record $233.4 billion. China accounted for a big share of the gain, with imports from that country rising 4.7 percent to $34.4 billion.For the chronologically-minded, the Reuters article reminds us of the last time the US began running these sorts of external deficits:
Goods imports reached the highest level since July 2008, just before the financial crisis caused world trade to plummet. Stronger U.S. demand also pushed imports of services, autos, capital goods and food, feeds and beverages to record highs.The overall point is this: the US economy has not really reoriented itself away from being consumption-driven. Although American exports are rising, they obviously aren't rising enough to offset runaway increases in consumption-driven importation.
Though I hate to make predictions, consider the situation at the moment Stateside to what it was right up to the breakout of the crisis when many economic commentators believed that things were just hunky-dory: Back then you had colossal budget and current account deficits plus a run-up in equity prices--record stock market index levels even--driven by money-for-nothing monetary policies. Add in other suspiciously good macroeconomic figures such as that for employment. And at the present time we have...exactly the same sorts of things.
Everything old is new again. Indeed, some people never learn. Another walloping of the US economy looks like it's in the offing, and it would be interesting to see the aftermath if it happens before the 2012 presidential elections. Yet sooner or later the US will pay a well-deserved price for its renewed prodigality--unless you're of the free lunch persuasion, of course.