For the first time since December of 2008, the US trade balance has moved beyond the psychological barrier of -$50B. The news has so far only added to pessimistic concerns that the August 2 deadline for an expansion of the debt limit will not be met in time; a sentiment that adds strength to investment shifts to safety and lower yielding assets.
The first time this level of trade imbalance was seen in the US was in 2004 as the nation began to depend more heavily on imports as it undertook two significant military campaigns in the Middle East. The over-exposure to foreign markets, some say, weakened the US financial system to hasten the collapse of the housing market, and Wall Street along with it.
The ability of Congress and President Barack Obama to reach a compromise on taxes and budgetary adjustments appears to have reached a nadir as both fight to define their boundaries. As the trade deficit widens, several analysts have begun to wonder whether this is a sign of worse to come as the US gets muddied in yet more economic stagnation alongside the rest of the world.
