The weak dollar, for all its ills, is good for at least one thing: reducing the trade deficit. Soaring oil prices have obscured the extent to which the trade deficit is now shrinking as a per cent of GDP. In the first quarter of 2008, the trade deficit was, on annualized basis, $717 billion, or 5.05% of GDP–with the bulk of that amount being oil, to the tune of $449 billion. From Time:
The good news is that once oil goes down, the US may have a shot at reducing the trade deficit to more palatable levels, even as the dollar strengthens. The bad news: will oil go down?
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