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pest · 04-11-2003, 08:00 AM

Yep, inflation is the biggest reason. Finite supplies of money are another reason trade deficits arent really that big a deal. If we run a large trade deficit with japan, we pay in dollars (usually). Now japan has all these dollars that dont work at the 7-11. Maybe they can spend them in a few places, but for the most part those dollars will make their way back to the US, mostly thru trade. Maybe they use them to set up a business here. they still need to pay locals to do he work. Weak dollar/strong dollar doesnt really matter either. Weak dollar means are goods are now priced more competitively overseas, we can now produce cheaper in a relative sense. Strong dollar, we have more purchasing power, but imports will increase.

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pest is Offline Senior Member Posts: 2,828 Join Date: May 2002 Location: Buzzin around the dung pile...	04-11-2003, 08:00 AM Yep, inflation is the biggest reason. Finite supplies of money are another reason trade deficits arent really that big a deal. If we run a large trade deficit with japan, we pay in dollars (usually). Now japan has all these dollars that dont work at the 7-11. Maybe they can spend them in a few places, but for the most part those dollars will make their way back to the US, mostly thru trade. Maybe they use them to set up a business here. they still need to pay locals to do he work. Weak dollar/strong dollar doesnt really matter either. Weak dollar means are goods are now priced more competitively overseas, we can now produce cheaper in a relative sense. Strong dollar, we have more purchasing power, but imports will increase.