Wednesday, November 7

In this article, Sinking Currency, Sinking Country, Pat Buchanan attempts to explain the current devaluation of the dollar by placing most of the blame on the trade deficit (i.e., our propensity for foreign goods and services). His argument is not completely without merit, but he does not present a full picture of what is going on. Perhaps he is trying to distract people from, say, the United States' massive military budget. Although there is debate about the direction of causality, economists generally agree that there is a positive relationship between the federal budget deficit (caused in part by military spending) and the trade deficit.