Posted originally on May 1, 2025 by Martin Armstrong
The Commerce Department’s Bureau of Economic Analysis (BEA) released its first estimate for US GDP in Q1, a 0.3% decline annually.
The decline was mainly due to a sharp 41% uptick in imports as they are subtracted when calculating the final GDP figure. Pharmaceutical goods, medicines and vitamins, computers and parts drove imports in the first quarter.
Government spending decreased significantly as well by 1.4%, with federal expenditures down 5.1%. National defense spending declined by 8%, while non-defense spending decreased by 1%. State and local government spending posted its slowest growth since Q2 of 2022 at 0.8%. Government-driven spending is one of the main components of GDP calculations, but a reduction in government-driven spending in an economy should be viewed positively.
There was a notable rise in business investment at 21.9% as capital is flowing to the US. This is a noteworthy difference, following a 5.6% decline in the fourth quarter of 2024. Nonresidential investment rose 9.8% in the first three months of the year, led by a 22.5% rise in equipment spending.
Consumer spending grew by 1.8%; services led spending with a 2.4% uptick, followed by goods at 0.5%. Personal savings as a percentage of income reached 4%, down from last year’s posting of 5.4%. Disposable personal income reached 2.7%.
ADP released its jobs report for April, anticipating a 62,000 uptick in private sector hirings. This should come as no surprise as thousands were laid off from their public sector positions. However, the figure is below estimates of 115,000 and sharply down from March’s 155,000 figure. “Unease is the word of the day. Employers are trying to reconcile policy and consumer uncertainty with a run of mostly positive economic data,” said ADP chief economist Nela Richardson. “It can be difficult to make hiring decisions in such an environment.” The Labor Department’s nonfarm payroll report is expected to show a 130,000 uptick, well beneath March’s 228,000 posting.
The April 2025 Consumer Price Index (CPI) will be released on May 13, a week after the next Federal Open Market Committee meeting. March posted a core inflation rate of 2.8% on an annual basis, down from February’s 3.1% figure and the lowest noted since March 2021.
Trump’s tariff policy is not to blame for the current state of the economy. War, inflation, debt, poor government policy, and collapsing confidence predate Trump. The Fed’s policy is not to blame either as their policy is almost irrelevant in the grand scheme.
Socrates warned of a massive global shift in 2015 as the sovereign debt crisis cycle turned and public confidence began to decline. The computer identified 2020.05 (May 2020) as a major Economic Confidence Model (ECM) turning point, and needless to say, 2020 was certainly a turning point in every aspect of the global economy. The stagflation we see now began, globally, post-pandemic. Once confidence breaks, stagflation is guaranteed to follow.
Posted originally on Apr 24, 2025 by Martin Armstrong
Donald Trump has come out to say that he had no plans to fire Federal Reserve Chairman Jerome Powell. “No, I have no intention of firing him,” Trump told reporters. “I would like to see him be a little more active in terms of his idea to lower interest rates,” the president added. “This is a perfect time to lower interest rates.”
Perhaps the president realized he did not have the power to fire the Fed Chair, as I have outlined. White House economic advisor Kevin Hassett declared less than a week ago that the administration was seeking loopholes to fire Powell. Around the same time, Trump declared that he did have the power to fire Powell, ““If I want him out of there, he’ll be out real fast.”
Powell, who was appointed under Trump’s first term, has face countless issues from presidents who refuse to align fiscal policies to meet monetary goals. Donald Trump has been pushing the Fed to lower interest rates dating back to his first term. Powell broke step with Washington and announced that former President Joe Biden’s reckless spending was endangering future generations. Now, Trump is once again pressuring Powell to drop rates despite the fact that QE policies have failed, and he is viewing the economy as a buyer rather than a lender.
Powell is likely eager for retirement, slated for May 2026. The president does not have the power to fire the chairman, but he does have the authority to appoint the next one. Fed governor Kevin Warsh, National Economic Council Director Kevin Hassett, economist Art Laffer, and Larry Kudlow are all potential contenders for the job based on reports. Some believe Warsh is the frontrunner for the role, and Warsh himself advised Trump not to fire Powell before his term was due to expire.
Kevin Warch is an academic without real trading experience who has been part of the revolving door between Wall Street and Washington. Warsh, 55, has a hawkish stance on inflation, and although he backs Republican priorities such as reduced taxation and deregulation, he does not fully support Trump’s stance on how the Fed should operate.
Warsh served as a Federal Reserve governor from 2006 to 2011, and failed to see the underlying risks that would lead to the 2008 Great Recession. Warsh played a direct role in the negotiations that would later lead to the Lehman Brothers’ downfall, supporting the decision to allow Lehman to fail, spurring global financial panic. “The die was already cast” before bankruptcy, Warsh told CNBC. He failed to grasp the global nature of this decision, which was not a surprise but a deliberate choice to allow the firm to fail.
He was against the central bank’s QE policies in 2010 and warned that it would not aid in economy recovery. He resigned from the Fed’s Board of Governors in 2011 after opposing plans to purchase $600 billion in bonds to push more money into the US economy. Warsh blamed the central bank for enabling reckless government spending during the pandemic by excessively printing money. He sided with Trump in pointing blame at the Fed for permitting inflation to rise in the post-COVID economy. Warsh still believes in managing the economy through intervention, rather than letting the business cycle play out naturally. Tinkering with the system only causes the cycles to become more volatile.
May 7, 2026, is the next major target on the ECM–8.6 years from the August 2017 turning point, and two years from the critical May 2024 benchmark we just passed. Something historic is brewing for May 2026.
Posted originally on Apr 18, 2025 by Martin Armstrong
While the press bashes Trump over the tariffs and trade war, they continue to ignore the facts and will always take the opposite position from Trump. If Trump said he wanted everyone to live an extra 5 years to help the economy because of declining birth rates, the Press would advocate mass suicide like Jim Jones’ Jonestown, just to prevent anything Trump does.
Starmer, the good Marxist follower, wants to reverse BREXIT, but knows that would be difficult. So he wants to join in trade and adopt all the regulations that the EU imposes, that has suppressed their economy from ever growing. As I have said, out of every $10 spent by consumers globally, the EU accounts for only $1.20 – a fraction of America, despite having 450 million people compared to the USA’s 330 million.
Even on a purely economic basis, Starmer is turning his back on the USA, which has a consumer market more than twice the size, for more regulations that will reduce trade with the USA. This is clearly not an economic decision – this is a Marxist political decision. Starmer is fulfilling our long-term forecasts. This year was a Directional Change, and next year is a Panic Cycle.
Europe has historically been the most hostile when it comes to trade. They cling to Marxism, and when they can’t justify tariffs, they regulate against allowing American products in. When Charles de Gaulle in 1966 said no American/NATO nukes in France, and he ordered all American military personnel to leave France, they asked if that applied to the dead Americans buried there to free France. This has been the position of the French elites. They still view the world as speaking French if Napoleon had won. They have not gotten over that.
To this day, Macron is the most hostile, and he wants France to replace the United States, offering their nuclear power to shield Europe from Russia. This is why Macron was the first to say he wanted to send troops into Ukraine, knowing that would start World War III.
The European Union (EU) does not impose a blanket ban on all food and veterinary products from the United States. However, it does enforce strict regulations that can result in restrictions or prohibitions on specific products that do not meet EU standards. Key points include:
Hormone-Treated Beef: The EU prohibits beef from cattle treated with growth-promoting hormones, a common practice in the U.S. This has been a longstanding trade dispute.
Chlorine-Washed Poultry: The EU bans poultry treated with antimicrobial rinses (e.g., chlorine washes), favoring stricter farm-to-table hygiene controls instead.
GMOs (Genetically Modified Organisms): The EU requires rigorous authorization and labeling for GMO products, limiting some U.S. agricultural exports unless approved.
Ractopamine in Pork: The EU prohibits meat from animals treated with ractopamine, a feed additive used in the U.S. to promote lean muscle growth.
Veterinary Medicines: Restrictions apply to certain antibiotics and hormones used in livestock for non-therapeutic purposes, aligning with the EU’s precautionary principle and emphasis on animal welfare.
Mutual Recognition Agreements (MRAs): Since 2019, some veterinary products are covered by MRAs, easing trade for compliant products. However, U.S. exporters must still meet EU standards.
These measures reflect differences in regulatory philosophies that are used in reality as trade barriers. The EU prioritizes its regulations, knowing that there are different standards internationally. Trade negotiations (e.g., TTIP) have sought to bridge these gaps but with limited success. The restrictions are not actually becoming outright bans by requiring compliance with EU rules, which are stringent to prevent trade that pretends it is not the goal.
After World War I, European countries began imposing high tariffs in the early 1920s as part of a broader shift toward economic protectionism, driven by postwar reconstruction challenges, political instability, and efforts to shield domestic industries. France implemented significant protectionist measures, particularly through the 1927 Tariff Law (Loi du 3 août 1927), which marked a major shift toward economic nationalism. This law replaced the earlier Méline Tariff of 1892. It was enacted in response to post-World War I economic challenges, including the need to protect domestic industries and agriculture from foreign competition. At the same time, France was pushing the United States Federal Reserve to lower interest rates (G4) in an attempt to reverse the capital inflows to the United States.
The tariff increases were enacted in 1927, though France had maintained generally protectionist policies throughout the 1920s. The 1927 law formalized and expanded these measures sharply. The 1927 tariffs were part of a broader European trend toward protectionism in the interwar period. The 1927 law introduced a flexible tariff system, allowing the government to adjust rates based on reciprocal trade agreements or retaliation against foreign protectionism. Tariffs were applied differentially, with higher rates on agricultural goods (to protect French farmers) and certain industrial products.
France’s Agricultural products saw the implementation of tariffs on items like wheat, meat, and wine. These rose significantly, with some rates exceeding 30% (e.g., wheat tariffs increased to protect against cheaper imports from Eastern Europe and the Americas). The Industrial goods saw rates that were less restrictive yet still varied widely, targeting textiles and machinery. These sectors saw tariff rates between 15% and 25%, depending on the product and origin.
France also combined tariffs with import quotas (e.g., for coal and steel) to shield its economy further. Overall, France has always been the most protectionist of all European nations. Its cost of living is above average in the EU. According to Eurostat’s 2022 data, France’s price level index (with the EU average set at 100) was 116.5, placing it above the average but below several other EU countries. This compares to Denmark (141.7), Ireland (138.7), Luxembourg (134.0), Sweden (128.9), and Finland (123.3). The devil is in the details. While Paris is one of the EU’s more expensive cities to live in, the national average is lowered by cheaper costs in other regions.
The 1927 law made France one of the most protectionist economies in Europe by the late 1920s. While this was effective in shielding domestic sectors, these policies contributed to reduced international trade and economic fragmentation, exacerbating global tensions, leading to the Great Depression, and the US response in June 1930 by the Smoot-Hawley Act.
In the United Kingdom, there was the 1921 Safeguarding of Industries Act, which imposed tariffs on “key industries” like chemicals and optical goods deemed vital for national security. This was Post-WWI Economic Struggles, in which Britain lost the status of the Financial Capital of the world to New York. After the war, Britain faced industrial decline, unemployment, and foreign competition. Key industries critical during the war (e.g., chemicals, optics, scientific instruments) were all at risk of collapse. The Brits raised the National Security concerns of over-reliance on foreign imports for strategic goods, and this was the argument to impose tariffs to try to resurrect their industries.
Tariffs on Imports under this act imposed a 33.3% tariff on imported goods in strategic sectors, including chemicals, optical glass, and scientific instruments. This aimed to make foreign products less competitive and protect British industries. They also targeted industries that they deemed vital for national defense and economic resilience, reflecting lessons from wartime shortages. The Act was passed under Prime Minister David Lloyd George’s coalition government, though it aligned more with Conservative Party tendencies toward protectionism, marking a shift from Britain’s traditional free-trade stance.
The Act had mixed results at best. While it provided temporary relief for protected industries, critics argued it was too narrow, benefiting only specific sectors. Consumers faced higher prices, and retaliatory tariffs from other countries harmed British exports. The limited scope initially covered 6,000 items but was seen as insufficient to address broader industrial decline. Amendments in 1925–1926 expanded coverage to include more goods like lace and gloves. This Act shifted toward protectionism as Britain abandoned free trade, foreshadowing more extensive protectionist policies during the 1930s that followed the 1932 Import Duties Act, which expanded tariffs to most imports (except from the British Empire), formalizing protectionism during the Great Depression.
In the United States, the strong dollar resulted in making foreign goods cheap. The 1921 Act in Britain led to the US response in 1922. The Fordney-McCumber Tariff of 1922 was a significant piece of U.S. legislation that raised tariff rates on imported goods to protect American industries in the aftermath of World War I. It was signed into law by President Warren G. Harding in September 1922. Republican Congressman Joseph Fordney and Senator Porter J. McCumber have sponsored it. This reversed the lower tariffs of the 1913 Underwood Tariff. The tariff increases: did elevate import duties to historically high levels (averaging about 38.5%), targeting both agricultural and industrial goods to shield domestic producers from foreign competition due to the strong dollar. This tariff provided a flexible authority granted to the president, allowing him to adjust tariff rates by up to 50% based on recommendations from the U.S. Tariff Commission, although this flexibility was rarely used.
While tariff hikes began in the early 1920s (e.g., the UK in 1921), they did not prevent the bull market, nor did they prevent the Great Depression. This protectionist spiral fragmented global trade and worsened the Great Depression, but certainly did not create the economic crisis.
Posted originally on Apr 18, 2025 by Martin Armstrong
Socrates has honed in on 2025 becoming a year of great stagflation in the United States. The Federal Reserve has finally admitted that the data is undeniable—the United States will experience stagflation.
The economy is declining but prices are rising. Most understand inflation, especially in the post-COVID world, but few understand stagflation. Stagflation is when you have high inflation and stagnant economic growth at the same time. Normally, inflation is supposed to go hand in hand with rising demand and growth. But during stagflation, prices go up even though the economy is barely moving.
“Powell said the president’s tariffs announced so far had been ‘significantly larger than anticipated’, adding that ‘the same was likely to be true of the economic effects, which will include higher inflation and slower growth’,” as reported by every major media outlet. Powell “later added that those economic effects may place US rate setters ‘in the challenging scenario in which our dual-mandate goals are in tension’. The Fed’s dual mandate is to maintain the target 2% inflation while encouraging “maximum” employment levels.
“Maximum” employment is simply not possible during a period of stagflation. Investments dry up, confidence collapses, and businesses face higher costs in every area from wages to materials. Consumers lose purchasing power and are less likely to purchase nonessential goods at inflated prices, affecting business revenue and overall GDP. This then forces businesses to cut back on hiring instead of focusing on expansion. Many businesses will be unable to maintain large workforces if the revenue is not there.
The FOMC members seem to agree that stagflation is inevitable, although some argue about how long it will last. “Several Fed officials — including John Williams, head of the New York Fed, and Governor Christopher Waller — have said inflation is likely to surge in the coming months on the back of the administration’s proposed tariffs. While Waller thinks the impact of tariffs will prove short-lived, other members of the rate-setting Federal Open Market Committee, which Powell chairs, believe Trump’s tariffs have increased the odds that inflation will be a longer problem for US consumers.”
Now the central bank has maintained interest rates at 4.25-4.5% this year. Everyone is holding their breath for the Fed’s May announcement, but there is very little that the Fed can do here. Capital investment depends on confidence. Our models have honed in on May 19, 2026, as a major turning point in confidence where the next Panic Cycle will begin, and unfortunately, confidence will decline into 2028.
Posted originally on Apr 16, 2025 by Martin Armstrong
QUESTION: We all know who copies your work and pretends it is his. He is out now scaring the world that the dollar is going to crash, for the Chinese are selling dollars. You are the only person with a real database. What is your view on the dollar?
WKN
ANSWER: I know who you are talking about. I get emails about him all the time. He likes the notoriety but lacks the staff or the database to provide his self-proclaimed forecasts. I will provide the specifics on the private blog. However, April has been our target for many months. The often people out there constantly calling for the demise of the dollar are MORONS. They never look outside of the United States. They may be claiming that China is dumping dollars, but they began liquidating US debt in the tens of billions in 2013, and accelerated that because of Biden’s Neocons post-2022. They pretend this is something new, all because of Trump. They make it sound like they are on top of this, but where have they been since 2013?
Trump is fulfilling the cyclical forecast. We have been expecting a sell-off into 2025, which has been the biggest target identified by our computer for the past few years. I have conveyed my concerns to people in Congress. I am not so sure this does not just go over everyone’s head. The volatility will rise even further next year. If we penetrate the 2025 low next year, then this selling of US debt will continue into 2030, if not into 2032. That will be because NATO launches its contrived war against Russia and utterly destroys the European economy and extinguishes the EU.
Posted originally on Apr 7, 2025 by Martin Armstrong
QUESTION: Mr. Armstrong, you have said that we have lost manufacturing because of taxes rather than tariffs. I believe you also said that a trade deficit is not a bad thing under your capital flow analysis. Can you please explain this? The press seems to say the opposite, but they are political fake news.
Thank you
GG
ANSWER: There are two account balances: the capital account and the trade/current account. Just because we have a trade deficit does not mean that it is negative for the economy. That is offset by the capital account, which is money coming in that is (1) foreign capital investing in the USA, from treasuries, shares, to real estate, and (2) US companies bringing capital home. Under Ronald Reagan, we had a rising trade deficit, but the economy was booming.
Volcker’s insane interest rates attracted foreign capital, causing the dollar to rise dramatically and sending even the British pound to nearly par in 1985. As the dollar rose, that brought down inflation, but it attracted foreign capital inflows. Interest expenditures flow through the current account when they flow outside the USA. That had nothing to do with goods or even services. It was interest payments on the debt.
The corporate tax rate in Michigan is a flat rate of 6% on federal taxable income (with certain adjustments) for C-corporations under the Corporate Income Tax (CIT), which replaced the Michigan Business Tax in 2011. The City of Detroit imposes a corporate income tax on businesses operating within its jurisdiction, a 2% tax on net income for corporations, and Michigan’s state corporate income tax rate of 6%.
If you look at where the US manufacturing hubs were, the local and state income taxes on top of federal taxes were the primary cause for manufacturing fleeing the USA. Add the fact that the Supreme Court ruled that because the federal income tax did not expressly exempt overseas income, that stupid decision meant Americans were subject to worldwide income on every level. I left New Jersey because if I held a conference in Hong Kong, I had to pay New Jersey 10% on top of the Feds for what? We held a conference in Philadelphia, and never again would I ever hold one there, for then I had to pay Philadelphia taxes, although I did not live or work there.
The Democrats make it sound like these corporations are greedy, and they go offshore because they get to pay $10 an hour instead of $20. That is the LEAST of the problem. It is always the taxes. You need accountants, and then lawyers, all to make sure to have crossed every “t” and dotted every “i” and all of these expenses are far more than anything you pay an employee. Now the latest is auditing you to see if you have “contract” employees instead of employees, since you do not take out taxes and match taxes on a contract employee. I just went through that audit, and it cost me $25,000 IN LEGAL AND ACCOUNTING FEES to prove I did not owe anything.
When the government looks in the mirror, it sees itself as all-powerful. It has no idea about humanity. It’s always about them and never the people. Just look at all the states where manufacturing used to be. They left, and it was not because they were paying someone else cheaper wages. The Democrats have blamed the “rich” and corporations for the damage that they have done to society, all for their corruption and greed.
The current account of the United States is a critical component of its balance of payments, reflecting the nation’s economic interactions with the rest of the world. It comprises four main elements. As you look at this list, you will see what I am talking about that this is by no means simply goods and services. All dividends, interest, and profits from multinational corporations that flow out to foreign investors. Thus, selling US Treasuries to foreigners expands the “trade” deficit as interest is paid. Since China has 10% of the US national debt and interest expenditures of $1 trillion, in theory, we send them $100 billion in interest. Tariffs are not going to reduce that, but they could result in selling domestic assets and returning that investment home, which would then go through the Capital Account, reducing the Trade/Current Account Deficit. The Press and even most Congressmen do not understand this.
1. Trade in Goods and Services (Net Exports)
Goods:
Exports: Physical products sold abroad (e.g., machinery, aircraft, agricultural goods).
Imports: Physical products purchased from other countries (e.g., consumer electronics, oil, automobiles).
The U.S. typically runs a trade deficit in goods due to high imports.
Services:
Exports: Financial, educational, tourism, and intellectual property services provided globally.
Imports: Services purchased from abroad (e.g., foreign travel, software licensing).
The U.S. often has a surplus in services, partly offsetting the goods deficit.
2. Primary Income (Net Income from Abroad)
Investment Income:
Earnings from U.S.-owned foreign assets (e.g., dividends, interest, profits from multinational corporations).
Payments to foreign owners of U.S. assets (e.g., interest on Treasury bonds held by foreign governments).
Compensation of Employees:
Wages paid to foreign workers in the U.S. (outflow).
Wages earned by U.S. residents working abroad (inflow).
3. Secondary Income (Net Current Transfers)
Government Transfers:
Foreign aid, grants, and donations (e.g., U.S. financial assistance to other countries).
Private Transfers:
Remittances sent by foreign workers in the U.S. to their home countries (outflow).
Gifts or inheritances received from abroad (inflow).
Current Account Balance
The sum of these components determines whether the U.S. has a surplus or deficit:
Deficit: The U.S. has run a persistent current account deficit, driven by:
A large goods trade deficit (imports > exports).
Outflows from secondary income (e.g., foreign aid, remittances).
Partial offsets come from services surpluses and primary income (e.g., returns on U.S. overseas investments).
Key Implications
Reflects the U.S. role as a net borrower globally, financing consumption and investment through foreign capital inflows.
Highlights structural economic factors, such as reliance on imports and the dollar’s role as a reserve currency, and exporting dividends and interest on US investments.
Posted originally on Apr 7, 2025 by Martin Armstrong
QUESTION: Mr. Armstrong, you have said that we have lost manufacturing because of taxes rather than tariffs. I believe you also said that a trade deficit is not a bad thing under your capital flow analysis. Can you please explain this? The press seems to say the opposite, but they are political fake news.
Thank you
GG
ANSWER: There are two account balances: the capital account and the trade/current account. Just because we have a trade deficit does not mean that it is negative for the economy. That is offset by the capital account, which is money coming in that is (1) foreign capital investing in the USA, from treasuries, shares, to real estate, and (2) US companies bringing capital home. Under Ronald Reagan, we had a rising trade deficit, but the economy was booming.
Volcker’s insane interest rates attracted foreign capital, causing the dollar to rise dramatically and sending even the British pound to nearly par in 1985. As the dollar rose, that brought down inflation, but it attracted foreign capital inflows. Interest expenditures flow through the current account when they flow outside the USA. That had nothing to do with goods or even services. It was interest payments on the debt.
The corporate tax rate in Michigan is a flat rate of 6% on federal taxable income (with certain adjustments) for C-corporations under the Corporate Income Tax (CIT), which replaced the Michigan Business Tax in 2011. The City of Detroit imposes a corporate income tax on businesses operating within its jurisdiction, a 2% tax on net income for corporations, and Michigan’s state corporate income tax rate of 6%.
If you look at where the US manufacturing hubs were, the local and state income taxes on top of federal taxes were the primary cause for manufacturing fleeing the USA. Add the fact that the Supreme Court ruled that because the federal income tax did not expressly exempt overseas income, that stupid decision meant Americans were subject to worldwide income on every level. I left New Jersey because if I held a conference in Hong Kong, I had to pay New Jersey 10% on top of the Feds for what? We held a conference in Philadelphia, and never again would I ever hold one there, for then I had to pay Philadelphia taxes, although I did not live or work there.
The Democrats make it sound like these corporations are greedy, and they go offshore because they get to pay $10 an hour instead of $20. That is the LEAST of the problem. It is always the taxes. You need accountants, and then lawyers, all to make sure to have crossed every “t” and dotted every “i” and all of these expenses are far more than anything you pay an employee. Now the latest is auditing you to see if you have “contract” employees instead of employees, since you do not take out taxes and match taxes on a contract employee. I just went through that audit, and it cost me $25,000 IN LEGAL AND ACCOUNTING FEES to prove I did not owe anything.
When the government looks in the mirror, it sees itself as all-powerful. It has no idea about humanity. It’s always about them and never the people. Just look at all the states where manufacturing used to be. They left, and it was not because they were paying someone else cheaper wages. The Democrats have blamed the “rich” and corporations for the damage that they have done to society, all for their corruption and greed.
The current account of the United States is a critical component of its balance of payments, reflecting the nation’s economic interactions with the rest of the world. It comprises four main elements. As you look at this list, you will see what I am talking about that this is by no means simply goods and services. All dividends, interest, and profits from multinational corporations that flow out to foreign investors. Thus, selling US Treasuries to foreigners expands the “trade” deficit as interest is paid. Since China has 10% of the US national debt and interest expenditures of $1 trillion, in theory, we send them $100 billion in interest. Tariffs are not going to reduce that, but they could result in selling domestic assets and returning that investment home, which would then go through the Capital Account, reducing the Trade/Current Account Deficit. The Press and even most Congressmen do not understand this.
1. Trade in Goods and Services (Net Exports)
Goods:
Exports: Physical products sold abroad (e.g., machinery, aircraft, agricultural goods).
Imports: Physical products purchased from other countries (e.g., consumer electronics, oil, automobiles).
The U.S. typically runs a trade deficit in goods due to high imports.
Services:
Exports: Financial, educational, tourism, and intellectual property services provided globally.
Imports: Services purchased from abroad (e.g., foreign travel, software licensing).
The U.S. often has a surplus in services, partly offsetting the goods deficit.
2. Primary Income (Net Income from Abroad)
Investment Income:
Earnings from U.S.-owned foreign assets (e.g., dividends, interest, profits from multinational corporations).
Payments to foreign owners of U.S. assets (e.g., interest on Treasury bonds held by foreign governments).
Compensation of Employees:
Wages paid to foreign workers in the U.S. (outflow).
Wages earned by U.S. residents working abroad (inflow).
3. Secondary Income (Net Current Transfers)
Government Transfers:
Foreign aid, grants, and donations (e.g., U.S. financial assistance to other countries).
Private Transfers:
Remittances sent by foreign workers in the U.S. to their home countries (outflow).
Gifts or inheritances received from abroad (inflow).
Current Account Balance
The sum of these components determines whether the U.S. has a surplus or deficit:
Deficit: The U.S. has run a persistent current account deficit, driven by:
A large goods trade deficit (imports > exports).
Outflows from secondary income (e.g., foreign aid, remittances).
Partial offsets come from services surpluses and primary income (e.g., returns on U.S. overseas investments).
Key Implications
Reflects the U.S. role as a net borrower globally, financing consumption and investment through foreign capital inflows.
Highlights structural economic factors, such as reliance on imports and the dollar’s role as a reserve currency, and exporting dividends and interest on US investments.
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This is a library of News Events not reported by the Main Stream Media documenting & connecting the dots on How the Obama Marxist Liberal agenda is destroying America
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