Trade Deficit Surges To Highest Since October 2008, Trounces Expectations; Q2 GDP To Be Revised To Sub-1%

Tyler Durden's picture

As the attached chart shows, the recent Obama initiative to push exports to double in 5 years has started off, just like all other administration efforts, as an abysmal failure. The June balance of trade plunged to ($49.9) billion, on expectations of ($42.1) billion -  a surge of $8 billion compared to May's ($42) billion. This number was the highest since October 2008, and just $28 billion away from the all time record. At least we now know who the mystery "importer", that extracted Europe from the economic abyss, was in the past 3 months.

And courtesy of the Current Account equation, what this surge in deficits means is that Q1 GDP will now likely be revised to well under 1.0%! As JPM reported earlier, revision in BEA assumptions on wholesale and non-durable inventory alone will push Q1 GDP from the official 2.4% to 1.3%. Today's data is the last nail in the Q2 GDP number, and according to analysts will take out another 0.4% from the GDP, meaning that when all is said and done, Q2 GDP will come out to sub-1%. And this was in a quarter when the stimulus was still expected to be boosting GDP. We now fully expect that the final reports of Q3 and Q4 GDP, some time in 2011, to be solidly negative, as the economy is now officially contracting once again. In other words, the Double Dip-ression is (even more) official.

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crosey's picture

The Market rules, while Government drools.

bugs_'s picture

and the stimulus went to our "trading partners"

Sudden Debt's picture

and as we speak, they are writing a thank you note and will fax it to congress! MONEY WELL SPEND!

IBelieveInMagic's picture

Unfortunately, it is by design -- the global trading system is designed for the US to constantly run a trade deficit. It is a feature of the system, not a flaw...

Max Hunter's picture

Trade Bitchez!

Deficits are healthy !!!

hedgeless_horseman's picture

At least we now know who the mystery "importer", that extracted Europe from the economic abyss...

It was me.  Porsche, there is no substitute.

the not so mighty maximiza's picture

It is amazing leaders can be so wrong and still expect respect.

Cognitive Dissonance's picture

Why not? I mean, when no one else is willing to stand up to them, when the entire population rolls over at the slightest propaganda, when people are stuffing money in your pockets as you walk the halls of power. Who can blame them for a little grandiosity?

andyupnorth's picture

It's amazing how delusional leaders are in thinking that they can forcibly stimulate/jump start/[insert dumb expression here] the economy.

Government wastes everybody's time asking people to spend and businesses to grow.

The only time the government helps the economy is when they uphold the laws against fraud, theft, and injury in a consistent and predictable manner; while minding their business of repairing roads and bridges.

Anarchist's picture

Baloney. A number of products like food only sell overseas due to huge subsidies from the taxpayer. The US uses tariffs to limit or open up trade. The US uses the UN, WTO, IMF and World Bank to control trade in and out of countries. Foreign aid is only given if a US company gets a piece of the action. US military interventions have opened up many markets in the world. Ask the Iraqis and Afghanis who they must buy goods from?

So tell me again how the government only hurts exports?

sweet ebony diamond's picture


Nevertheless, Mr. Steinke also believes the U.S. trade balance could improve due to Asian consumption of higher-value U.S. products.

“You’re going to see agricultural products that really start to move in greater quantities, in larger numbers, and that really benefits those consumers, and it really improves the balance of trade,” Steinke said in relation to Asian exports starting to catch up with imports. “The higher value exports are now moving to those nations as opposed to waste paper, scrap hay, cotton and those kind of low value items,” Steinke said, telling CNBC’s Worldwide Exchange that 60% of goods coming into his port are from China.


So we ship all our wheat and corn to China ... OK.

Looks like the Bernanke version of the Irish potato famine. 

SheepDog-One's picture

WHAT 'US products'?? Grain reserves (gone) and scrap steel? What the fuck are you talking about?

Zero production economic model, bitchez.

Walt Whitman's picture

Wealth destruction continues unabated.

Caviar Emptor's picture

Yup! Double Whammy Beatchaez! 

What did we learn so far today:

We got rising imports and import prices (inflation) while GDP is being downgraded by the Fed and GS (deflation). Around the globe we got UK and China announcing cooling economies (deflation) with alarming CPIs at 3%! (Inflation!). 

Fed is not walking a tightrope, Fed is drunk trying to walk a straight line at 4AM after getting pulled over. Nobody likes the middle road choice they made yesterday (I predicted)because it confirms the worst, darkest fears: Double Whammy! They want to fight deflation to the death, but they're too scared of igniting inflation by going full Monty on QE. So thy were forced to accept QE lite which just confirms to investors that they're impotent to handle either one or both inflation and deflation. That's what I call out of bullets with a nuke remaining in the arsenal.

A Man without Qualities's picture

The problem is, they are using monetary policy to fight asset deflation (to prevent the banking system from collapsing) but owing to global demographics, there is no risk of deflation in goods, especially food and energy, so the "side effect" of flooding the system with liquidity is to cause sharp rises in input prices.  In my view, anyone who thinks this will benefit equities is an idiot.

jkruffin's picture

The government scam is unraveling bigtime.  I just hope that everyone still long stocks, after the repeated warnings, gets smoked. I know its not nice to wish others to lose their investments, but in this case, I must make an exception.  Time for the reality to set in. Next time they won't live in a fantasy world, expecting to make 40% gains a month.

SheepDog-One's picture

I hope all permabull 'tards get bent over and korn holed too, jkruffin! I dont feel sorry for them, theyre arrogant snotty bullheads, who cheer on evil so their little phony stocks might go up. Hell with em all.

Bill Lumbergh's picture

There will be no lasting, solid recovery until the massive corporate, government, and individual debt overhang is expunged.

IBelieveInMagic's picture

That is the plan -- the challenge for the power-that-be is how to do it without destroying the current financial system by being perceived by creditors and by the rest of the world to have given a free pass to the reckless (undermining the sword of credit rating, etc.). So, they are doing it in small steps and in hidden ways. Unfortunately for them, the system is unravelling faster than allowed by their timelines.

SheepDog-One's picture

Yep Lumbergh, and theyll fight to the DEATH before that ever is allowed to happen! Now about those TPS report cover sheets....

Borat's picture

I like to save these precious gems...

Cramer: ‘Fed Said Good Things—Buy’

SheepDog-One's picture

I dont understand the Cramer phenomenon, how anyone could be so consistently wrong and still be considered some kind of guru? I hope they all meet horrible and sudden demises.

Tense INDIAN's picture

Most people in this world are STUPID.....they wont think for themselves and they wont let others think .....absolutely crazy people ...

ElvisDog's picture

Is it wrong to want to have sex with Erin Burnett? Doggie style?

firstdivision's picture

"Cause when I dip, you dip, we dip"...

Tense INDIAN's picture

all the markets are HUGELY down today....indian japanese europe is in deep red....2.10% already .......So what exactly did they have in mind with their Q.E 2.0

SheepDog-One's picture

I really cant figure out what the fuck they were thinking yesterday, none of it makes any rational sense at all and I really have no idea WHO they think theyre fooling at this point!

Tense INDIAN's picture

may be they are just trying to keep up buying the Treasuries so that atleast the DEBT could be rolled over for sometime.....

fireangelmaverick's picture

Tyler, Do you mean

Q2 GDP will be revised down? I do not think they revise Q1 so any case June Trade deficit should not change that.

Charley's picture

Look for a devaluation against gold. With the Fed standing ready to monetize US debt, the Treasury Department may be free to begin announce it is buying gold.

Cursive's picture

In other words, the Double Dip-ression is (even more) official.

Shhh.  Don't tell Laksman Achuthan.  He and Mark Zandi are still having fun at Six Flags - Keynesian Rapides.

Anarchist's picture

Blaming Odummo for the pathetic state of US exports is off base. In many cases we only export food because of huge farm subsidies. Many other food exporters cannot afford subsities. Are we now going to give subsidies for all US manufacturers who want to export so they can compete? Germany's exports kicked into overdrive with the Euro drop. Germany also has many world class exports we do not have. A similar drop in the dollar will not achieve the same effect since commodity costs go up when the dollar drops. I find it funny the US is temporarily dropping some import tariffs so US manufacturers can buy commodities cheaper. Why do we have many of these tariffs to begin with?

The US only has a few uniques exports we can easily sell. Many go boom. Too bad the Ziofascists have dictated who we can sell them to. Nice that Israel gets to sell billions in weapons to China yet we cannot sell to the Saudis.

ElvisDog's picture

It's comforting to know that Obama and his crack economic team of Bernanke, Geithner, and Summers have everything under control.



America has monetized all its debt. We have no national debt whatsoever because we pay (in effect) no interest on our IOUs which means all our Treasury IOUs are now currency.

Chinaman to Bernanke: Me wanna buy USA Treasury IOU that me can cash in for $1,000,000 thirty years from now. How much that cost right now?

Bernanke to Chinaman: That will cost you $999,999 and 99 cents. Here’s your $999,999 and 99 cents for that boatload of electronic ball scratchers you just unloaded. You’re just in time because we Americans are too freaking lazy to scratch our own balls.

Chinaman to Bernanke: Duh, OK. Here is $999,999 and 99 cents. Please give me valuable, genuine USA Treasury IOU.

Bernanke to Chinaman: Here it is. Nice doing business with you.

Chinaman to Bernanke: Me come back thirty years from now and collect $1,000,000 dollars.

Bernanke to Chinaman: Thanks a lot, stupid, and I’ll see y’all next week as usual. Don’t spend all the interest in one place. HAW! HAW! HAW!

Ladies and gentlemen, the only difference between a Federal Reserve note and a Treasury IOU is that a Treasury IUO pays interest. If you sell a Treasury IOU to some chump (excuse me, I meant esteemed creditor) at zero (or near zero) interest it’s really just a Federal Reserve note, albeit in a huge denomination (and dare I say just like Zimbabwe).

But not to worry. Luckily for the Glorious American Empire there exists a race of industrious cretins who can‘t grasp this concept. This race of 1.3 billion morons will make stuff for us forever and we will give them nothing but currency pawned off as interest bearing IOUs forever. They are so stupid they hoard this currency instead of spending it which they would certainly do if the morons realized they were getting currency instead of interest bearing IOUs.

And please don’t tell them they are actually getting negative interest because we are electro-printing up more and more Treasury IOUs at an ever increasing rate. If they wise up we’ll have to scratch our own balls … Unthinkable!

hedgeless_horseman's picture


You get it!

Here is a fun exercise.  Find a taxpayer; anyone will do.  Take out a dollar bill from your pocket, which is clearly labeled Federal Reserve Note.  Have the taxpayer fill in the following information for this note.








I find that two things usually occur.  First, the taxpayer gets on average 3 of the answers correct.  Second, the taxpayer gets angry at you for having them do this simple exercise.

Good times, good times.


Anarchist's picture

So China in the end will never receive any benefits for selling all these goods? How about all the infrastructure they built over the last 30 years? The hundreds of millions of Chinese who saw their standard of living go up 100x? The Chinese investments around the world that will be paying off for the next 50 years? Locking up long term commodity deals for the next 20 years? The largest trade surplus in the history of the world? Zero debt? Trillions in cash? etc..etc

All an illusion? Clueless.... 


Certainly the Chinese have received much benefit from their mighty labors and so have we. Doubtless the Chinese will continue to receive much benefit from their labors and rightfully so; I admire them and wish them well. The question is how long will we continue to get a free ride now that we are paying them with no-interest funny money and the technology gap between us is shrinking to near zero.

Attitude_Check's picture

You mean the market doesn't bow to fiat direction of the US PRESIDENT!  Does that mean we have to change our ways to change our results?  SHUDDER?