Funding trade deficit via home equity
All these pictures show that the deficit is big and growing.
The Trade Deficit links to the US housing bubble and government deficit
The most basic view of the economy is diagramed below. Households earn the wages they spend on the goods and services from the businesses:
The following chart adds that consumers spend a portion purchasing foreign goods. The foreigners then recycle the dollars they collect from this trade into the US government debt by buying Treasuries and into Agency debt of Government Sponsored Enterprises like Fannie Mae, which then provide money for housing.
Foreigners have funded our housing boom and provided enough credit that the growing Federal deficits have not driven interest rates up. Much is simplified out of the above explanation, but the value is that we can see the biggest and most important money flows.
The US credit market matches the amount borrowed and lent. The accumulated foreign contribution of $4 trillion of lending (investment) has provided the credit for the borrowing by the US government whose debt held by the public is now similar in size to the accumulated foreign loans to the US. The chart below shows the size of Federal government debt and the foreign accumulated current account debt to point out that foreigners are funding credit at comparable levels:
A comparison of Mortgage Debt and Current Account shows similar growth rates:
Subprime mortgages are a symptom of the same unweildy spending of money, I believe was influenced by the capacity to hand money off by computers and cards, rather than cash passing from hand to hand. We couldn't see or feel how bad our transactions are.
$2333 a year going out. Per person, this includes kids.
Government needs to nationalize oil drilling where we made all the leasing available, but have not used it.
The core is actually an attitude towards money, resources, and assets that is all confused.
So, let me repeat - trade deficit is a number one problem.
Trade deficit and other money issues are an expression of a core attitude problem about money.