Re: Federal Budget Deficit Expected to Reach Over $300 Billion Next

["B. Parady" <bparady@xxxxxxxxxxx>]

Is there an economist out there who can model this?

Gary Santos wrote:

>  Second, so the dollar corrects by 20%. Will people
> stop buying imported jeans and sneakers made in China if the price goes from
> $10 to $12? I mean to say, of course, it may take a lot more (raise trade
> barriers?) than just a depreciation to stop the bleeding.

Just how far does the dollar need to go down to reach
equilibrium?  It seems that a 20% adjustment gets you perhaps
a couple of percent decrease in overall trade.   Just a conjecture,
but it might take more than a 50% reduction in the dollar,
perhaps even more than 75%, to wipe out the current accounts
deficit and begin to run a surplus.  This could take the $10
jeans up to near $20.  Similarly for gasoline and petroleum.
Taking the price of oil up 4x could only raise our local $1.5-$2/gallon
to $3-$3.5/gallon; as bad as it sounds, it is not likely to stanch
demand, but it would stimulate some local production.

The real problem is that there are certain goods that are
relatively inelastic on importation such as oil that would
continue to drive up the current accounts deficit in the face
of depreciation.  This is the Argentina/third-world problem. This
leaves the government no choice but to confiscate oil
overseas to make up for a more massive current account
defict.

It would be great to see what sorts of things a good model
would generate.

Cheers

BP