Growing trade deficits contribute to a widening gap in the current account, the broadest measure of trade because it includes investments, and put the dollar at risk because the U.S. needs to attract more and more foreign capital to finance it.
Fed officials are watching the growing trade imbalance and its contribution to the $144.9 billion current account deficit. Staff members made a special presentation at the Fed's policy meetings June 29th and 30th, saying that ``outsized external deficits could not be sustained indefinitely.''
While adjustments to the imbalances aren't ``necessarily imminent'' and would likely be ``benign'' when they happen, ``more wrenching changes could not be ruled out,'' according to minutes from the meeting released yesterday.
What, I wonder, are these changes, and whom, do you suppose, they'll wrench?