One of the components of GDP is "net exports". As you know, net exports went seriously negative since about 1980:

Graph #1: Balance on Current Account See also this comparison at FRED |

But how big is that trade imbalance, anyway? What if we could zero it out? What would GDP look like if we don't reduce it for net exports? I mean, we can add the value of those imports to GDP, as if we produced the stuff here. It will bring the GDP number up -- but how much? What would Real GDP growth look like, then? Would it still be trending down? In other words, do imports really account for the decline of US production?

Here's how the Balance on Current Account looks in comparison to GDP:

Graph #2:Balance on Current Account (blue) and GDP (red) |

If we subtract our growing trade deficit from GDP we get a number that's larger than GDP by the amount of the trade deficit. Graph #3:

Graph #3: GDP (red) and GDP with the Trade Deficit Subtracted (blue) |

It's higher, yes, but not a lot higher.

These things always surprise me.

So now, if we look at the growth rates of those two lines...

Graph #4:Growth Rate Comparison |

And if I show Graph #3 after taking the natural log of the values, the two lines follow a similar path. Both show a slowdown in the early 1980s:

Graph #5:Log Scale Comparison |

Two more graphs to look at, and we're done. I want to strip out the inflation, and compare the two versions of "real" GDP:

Graph #6: "Real" Values, Log Scale Comparison |

Graph #7: "Real" Values, Growth Rate Comparison |

## 3 comments:

How about as a fraction of GDP?

http://research.stlouisfed.org/fred2/graph/?g=xQe

Greatest negative under GWB. Significant collapse during the GR. I'm guessing the destruction of American Manufacturing during the GWB regime is a factor.

Here's another factor. Oil prices.

http://research.stlouisfed.org/fred2/graph/?g=xQf

Cheers!

JzB

So now that Chinese labor is becoming more expensive and oil production in the US is increasing, these dollars (otherwise reinvested in debt and stocks and bonds) should be returning to the domestic (US) economy. I'd like to think I can measure that flow with M1, GDP, Total Savings and Net Exports. And this is what I found. I would expect the velocity of money to shoot up, but it hasn't, so I guess I am somewhat baffled.

Labor dollars won't flow back to the U.S. They'll flow to Bangladesh or wherever labor is the cheapest.

U.S. oil production is still only a fraction of the total.

Gotta run.

JzB

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