Global Trade Deficits and Surpluses

Currencies / Global Economy Jan 04, 2009 - 10:46 AM GMT

Best Financial Markets Analysis Article How will other currencies be affected should the dollar collapse due to its horrible fundamentals ? The answer to this question depends on a nation's reliance on the dollar to finance a balance of trade deficit.

Macro factors for 2009

Due to global slowdown, many nations who might otherwise have been running surpluses will instead be running trade deficits this year:

1) Global demand for raw materials will remain depressed until 2010 or later. This means that oil producers and other commodity exporters will be running trade deficits for the foreseeable future.

2) Global demand for luxury, durable, and capital goods will remain depressed until 2010 or later. This means that "new economy" nations like US, UK, and Japan will be running trade deficits this year.

How a Dollar Collapse will drag other currencies down

Among these many nations running trade deficits, there are four groups whose currencies are vulnerable to a US dollar collapse:

1) Nations who are financing trade deficits by selling off dollar reserves . Nations in this category include: India, Japan, Saudi Arabia, Russia, and most middle-east oil producers.

2) Nation who are financing trade deficits with large amounts of US foreign aid. Nations in this category include Israel and Egypt.

3) Nation who are offsetting trade deficits with remittances from citizens working abroad. Nations in this category include Mexico and India.

4) Nation who are trade heavily with US while running trade deficits with rest of the world. Nations in this category include Japan and Mexico.

Trade Balance will be key to a currency's survival

What all this means is that the trend in a nation's trade balance in the last three month will most probably determine the fate of its currency. With that in mind, here is a listing of trade balances from nations around the world.

Asia

South Korea
Currency: won— Survivor
Trade Balance: Growing Surplus
Story: South Korea posted current-account surplus for a second straight month in November .

China
Currency: yuan— Survivor
Trade Balance: Growing Surplus
Story: China's trade surplus widened to a record $40 billion, from $35.2 billion in October

India
Currency: rupee— Outlook Negative (Huge dollar reserves)
Trade Balance: Growing Deficit
Story: India's Trade Deficit Grows Worse

Japan
Currency: yen— Outlook Negative (Huge dollar reserves)
Trade Balance: Growing Deficit
Story: Japan trade deficit explodes

Vietnam
Currency: dong — Doomed
Trade Balance: Growing Deficit
Story: Vietnam's Trade Deficit Widens to Record $17 Billion

North America

United States
Currency: dollar— Doomed
Trade Balance: Growing Deficit
Story: Why US trade deficit is worsening

Canada
Currency: dollar— Unclear
Trade Balance: Shrinking Surplus
Story: Canadian Trade Surplus Narrows for a Second Month

Mexico
Currency: peso— Doomed
Trade Balance: Growing Deficit
Story: Mexico monthly trade deficit hits record $2.8B

South America

Chile
Currency: peso— Survivor
Trade Balance: Growing Surplus
Story: Chile November Trade Surplus Grew as Imports Shrank

Brazil
Currency: real— Unclear
Trade Balance: Shrinking Surplus
Story: Brazil's Currency Falls as Trade Surplus Narrows

Europe (non-Euro)

Switzerland
Currency: Frank— Survivor
Trade Balance: Growing Surplus
Story: Swiss Trade Surplus, Retail Sales Rise; Fears Remain

Norway
Currency: krone— Unclear
Trade Balance: Shrinking Surplus
Story: Norway's global trade surplus slipped 0.3% on the year in October

Britain
Currency: pound— Doomed
Trade Balance: Growing Deficit
Story: UK trade deficit widens in October

Iceland
Currency: krona— Collapsed
Trade Balance: Collapsed
Story: How Iceland Collapsed , Events Turning Violent In Iceland

Ukraine
Currency: hryvnia— Collapsed
Trade Balance: Growing Deficit
Story: Panic as Ukraine's currency plummets , Ukrainian trade gap widens

Russia
Currency: ruble— Unclear (Huge dollar reserves)
Trade Balance: Shrinking Surplus
Story: Russia's trade surplus shrank to $7.1 billion in November

Turkey
Currency: lira— Unclear
Trade Balance: Shrinking Deficit
Story: Turkey's foreign trade deficit down 48.8 percent in November

Europe (Euro)

Euro Zone
Currency: Euro— Unclear
Trade Balance: Shrinking Surplus
Story: Euro area external trade surplus 0.9 bn euro

Germany (refuses to print money like US)
Currency: Euro— Unclear
Trade Balance: Growing Surplus
Story: German trade surplus unexpectedly expands In October

France (wants to print money like US)
Currency: Euro— Unclear
Trade Balance: Growing Deficit
Story: French trade deficit hits new record in October

Ireland
Currency: Euro— Unclear
Trade Balance: Growing Surplus
Story: Imports fell 14% in three months to October 2008; Exports rose 2%

Spain
Currency: Euro— Unclear
Trade Balance: Shrinking Deficit
Story: Spanish current account deficit narrows in october

Italy
Currency: Euro— Unclear
Trade Balance: Growing Deficit
Story: Italy non-EU trade deficit widens y/y in November
Side note: Ability to repay debt in question
Story: Italy's debt levels are greater than value of economy

Greece
Currency: Euro— Unclear
Trade Balance: Shrinking Deficit
Story: Greece's trade deficit dropped 13.9 pct in October
Side note: Ability to repay debt in question
Story: Greek debt spirals after Olympics

Middle East

Israel
Currency: shekel— Doomed
Trade Balance: Growing Deficit
Story: Israeli exports are plummeting

Saudi Arabia
Currency: riyal— Outlook Negative (Huge dollar reserves)
Trade Balance: Growing Deficit
Story: Saudi Arabia's 2009 Budget Deficit

Egypt
Currency: yuan — Doomed
Trade Balance: Growing Deficit
Story: Egypt govt deficit above target in July-Sept

Africa

Zimbabwe
Currency: Dollar— Collapsed
Trade Balance: Collapsed
Story: Zimbabwe: Living with hyperinflation

South Africa
Currency: rand— Doomed
Trade Balance: Growing Deficit
Story: South Africa's rand falls against euro as trade deficit widens

South Pacific

New Zealand
Currency: dollar — Doomed
Trade Balance: Growing Deficit
Story: New Zealand's annual current account deficit increased to 8.6 percent of GDP

Australian
Currency: yuan — Doomed
Trade Balance: Growing Deficit
Story: Australian Trade Deficit Grows for 75th Consecutive Month

By Eric deCarbonnel
http://www.marketskeptics.com

Eric is the Editor of Market Skeptics

© 2008 Copyright Eric deCarbonnel - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Eric deCarbonnel Archive

Comments

Money
21 Jan 09, 20:10

Money Supply

World Economy 2000 to 2100

==========

World Economy 300 Trillion

China 46 Trillion

Africa 40 Trillion

India 31 Trillion

United States 29 Trillion

European Union 28 Trillion

Brazil 16 Trillion

Russia 15 Trillion

Japan 12 Trillion

Pakistan 8 Trillion

Bangladesh 7 Trillion

Iran 5 Trillion

Vietnam 5 Trillion

Nepal 2 Trillion

Afganistan 2 Trillion

All other 54 Trillion

Though you agree that the America and Japanese people per person have a larger wallet.

India GDP (2000 to 2100)

==========

Population 15% to 19%

Land 2% to 10%

Food Production 6% to 15%

Electricity 4% to 15%

Tech 4% to 15%(Cell Phones, Computers, etc)

Roads 5% to 15%(Roads, Waterways, Railroads)

Culture 10% to 25%(Movies, Resturants, Events)

Forex 1% to 10%(Euro, Dollar, Yuan, Taka)

Debt -1% to -15%(External, Trade Deficit)

——————————

Anticipated GDP 10% of world economy (4% to 19%)

China GDP (2000 to 2100)

==========

Population 14% to 25%

Land 5% to 20%

Food Production 5% to 23%

Electricity 3% to 19%

Tech 5% to 22%(Cell Phones, Computers, etc)

Roads 3% to 17%(Roads, Waterways, Railroads)

Culture 5% to 18%(Movies, Resturants, Events)

Forex 5% to 25%(Euro, Dollar, Rupee, Yen, Taka)

Debt -1% to -10%(External, Trade Deficit)

——————————

Anticipated GDP 16% of world economy (5% to 24%)

United States GDP (2000 to 2100)

==========

Population 4% to 10%

Land 3% to 15%

Food Production 5% to 20%

Electricity 5% to 25%

Tech 3% to 15%(Cell Phones, Computers, etc)

Roads 5% to 20%(Roads, Waterways, Railroads, Airports)

Culture 5% to 20%(Movies, Resturants, Events)

Forex 1% to 15%(Euro, Dollar, Yuan, Taka)

Debt -5% to -25%(External, Trade Deficit)

——————————

Anticipated GDP 9% of world economy (2% to 19%)

Bangladesh GDP 2000 to 2050

----------

Population 1.0% to 5%

Food Production 0.5% to 3%

Land 0.1% to 5%

Electricity 0.1% to 5%

Roads 0.3% to 3%(Roads, Waterways, Railroads)

Tech 0.5% to 5%(Computers, Phone, TV)

Culture 1.0% to 5%(Movies, Resturants, Events)

Forex 0.1% to 5%(Dollar, Rupee, Euro, Yuan)

Debt -0.3% to -5%(External, Trade)

==========

Anticipated GDP of Bangladesh 1.1% of World Economy (0.2% to 5%)

Pakistan GDP (2000 to 2100)

==========

Population 2.6%(1% to 10%)

Land 0.6%(0.3% to 5%)

Food Production 2.1%(0.5% to 5%)

Electricity 0.4%(0.1% to 5%)

Tech 1.4%(1.0% to 5%)(Cell Phones, Computers, etc)

Roads 0.7%(0.5% to 5%)(Roads, Waterways, Railroads)

Culture 0.9%(0.5% to 5%)(Movies, Resturants, Events)

Forex 0.2%(0.1% to 5%)(Euro, Dollar, Yuan, Rupee, Dinar)

Debt -0.1%(-0.1% to -5%)(External, Trade Deficit)

——————————

Anticipated GDP 1.2% of world economy (0.2% to 6%)

Vietnam GDP 2000 to 2100

----------

Population 0.5% to 5%

Food Production 0.5% to 4%

Land 0.2% to 3%

Electricity 0.1% to 2%

Roads 0.3% to 3%(Roads, Waterways, Railroads)

Tech 0.5% to 5%(Computers, Phone, TV)

Culture 0.5% to 5%(Movies, Resturants, Events)

Forex 0.1% to 5%(Dollar, Yen, Euro, Yuan)

Debt -0.4% to -5%(External, Trade)

==========

Anticipated GDP of Vietnam 0.9% of World Economy (0.2% to 3%)

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