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2017-04-05

What's Really Driving the US Trade Deficit. Capital flows dwarf trade flows

During this time trade imbalances were mostly determined by direct differences in the cost of traded goods, while capital flowed from one country to another mainly to balance trade flows. 

Today, however, conditions have changed dramatically. 

Capital flows dwarf trade flows, and investment decisions by fund managers determine their direction and size.


Michael Pettis, Bloomberg 3 April 2017

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