National / International News

Trade Deficits aren't good or bad, just weird

Marketplace - American Public Media - Wed, 2014-11-05 12:00

We’re doing a series of explainers of economic concepts to mark Marketplace’s 25th anniversary, and today we take a look at the Trade Deficit. 

The United States has been running one one every year since oh... 1974. Currently, it’s about $40 billion or so a month, give or take a few billion

A trade deficit, you've probably heard, is when a country is buying more from the rest of the world than it’s selling to the rest of the world—importing more than it’s exporting. That may sound bad. If I personally ran a trade deficit for forty years like the U.S. has, I would be broke. But I am not a country - and the rules are different for countries.

“There’s actually nothing necessarily wrong about a trade deficit,” says Doug Irwin, professor of economics at Dartmouth. “In fact, here’s where economists always have a definitive answer to the question is a trade deficit good or bad and that definitive answer is, it depends!”

Depends on what, exactly?  

Well, before we can answer that we have to explain why it’s so neutral-ish in the first place. The reason is that trade deficits have this whole other side to them that is not obvious at all. 


Trade deficits actually have as much to do with international investment and debt as they do with importing and exporting. It’s invisible unless you look at the money, so let’s look at the money.

Let’s say the U.S. and Europe have a trade deficit (which they do)—meaning America imports tons of French wine, let’s say, but exports almost nothing to Europe. 

Wine stores across the U.S. will place their orders with wineries in Europe for massive quantities of Beaujolais and Chardonnay. And they will, of course, need to pay in Euros. French wineries don’t want a stack of Benjamins any more than you want that damn Turkish lira that somehow always ends up in your bag of change when you are trying to pay a toll on the freeway. 

So the wine stores—or the bank or the credit card company the wine stores use—will have to take their  U.S. dollars to an international currency market and convert them into Euros to give to the  French vineyard to buy the wine. Since the U.S. is buying massive amounts of French wine, that bank is going to have to convert massive amounts of dollars into Euros.


Here’s the problem: We have a trade deficit. We aren’t exporting much to Europe—As in, Europe isn’t buying our stuff, which means they don’t need dollars. Why would they need dollars? To use as paper weights? 


Now, you can imagine one way out of this. American banks might have to lower the price of the dollar. They might say ‘Fine, world! What if I give you $110 for $100 euros? $120?  $150?,' until finally someone in Europe decided that was a really good deal and they could use some dollars to maybe buy some American goods. It’s a kind of auto correct feature that trade deficits can have. 

“When the dollar falls, that stimulates U.S. exports, it discourages U.S. imports, and that fall in the value of the dollar will naturally begin to close the trade deficit,” says Irwin.
This can happen with trade deficits—they can push down a currency’s value.  


But that’s not happening with the U.S., nor is it happening with a lot of countries. The dollar is doing great. And yet we continue to import much more than they export. Somehow we are finding another way to deal with the problem that we can’t get Europeans to exchange our dollars so we can buy European wine.

The fact is, there ARE people abroad who want to give us Euros in exchange for dollars. These are not people who want to buy our stuff, though. These are people who need dollars...because....drum roll.... they want to INVEST in America. They’re investors.


Investors need U.S. dollars to buy U.S. assets: treasury bills, real estate, stocks, bonds, etc. After all, the NASDAQ doesn’t take Euros, so foreign investors need dollars to park their money in the U.S. and make a profit just like we need euros to buy wine. 

That’s how the U.S. economy finds the euros go import crazy. So if we are having a trade deficit, it is a sign that someone abroad is investing in some part of our economy. A trade deficit and investment are like two sides of a strange coin. We buy goods from the world, the world invests in us.   

This invisible connection between trade deficits and foreign investments is why a trade deficit can be good or bad—all it  means for sure is that other countries are coming to you to invest their money. That can be great if it’s growing your economy or it can be bad if it’s not—you can’t tell what’s going on just from having a trade deficit. 


An example of a trade deficit that was happening for good reasons was the U.S. during the 19th century, says Robert Lawrence, who teaches international trade at Harvard’s Kennedy School. The U.S. had increasing trade deficits, which were made possible by investors pouring in money from abroad. “The United States used the money to build rail roads and build the U.S. economy—so you can look in retrospect and say that was a pretty healthy deficit.”


An example of a trade deficit that was happening for less good reasons is Greece, he says. During the financial crisis, Greece was running a trade deficit made possible by investors who were pouring money in to purchase government debt. “During the global financial crisis, in Greece the government accumulated large debts—so large, in fact, that they couldn’t repay them.” 


Sometimes it can be ok to finance government debt, but if something scares investors and they all take their money out at once (like happened in Southeast Asia in the late 90s) that can spark a crisis. In cases like those, a trade deficit can be a sign of vulnerability.

So a trade deficit strictly speaking means investors are parking their money with you. Whether it’s good or bad depends on what you (or they) are doing with the money. 

The U.S. is lucky because investors keep coming back. As long as they do, we can import more than we export. 

We've got a bit of a big screen problem

Marketplace - American Public Media - Wed, 2014-11-05 11:47

It is officially holiday shopping season, and though some of us want to invest in covering an entire wall in our house with an interactive video screen, we aren't quite to that point just yet.

Marketplace Tech host Ben Johnson isn't thrilled about that, and he says to blame technology and cost.

Building digital video screens is not easy. Our screens use a layer of glass over these tiny transistors that convert code into images. And to make big versions of these screens is entirely too difficult.

"If you get one little tiny transistor wrong, after you've manufactured this you actually have to throw the whole thing out," says Johnson.

Manufacturers that want to make these screens have to build vacuum chambers into the factory, but that costs a pretty penny.

"It costs like $100 million just to make the factory that makes these things," says Johnson. 

Obama 'to ask for $6bn Ebola fund'

BBC - Wed, 2014-11-05 11:33
President Barack Obama is to ask Congress for $6.2bn to fight Ebola in West Africa and avoid it spreading in the US, officials say.

Trucking on, 60 hours a week, for 10 more years

Marketplace - American Public Media - Wed, 2014-11-05 11:27

If you talk to people outside the Washington Beltway, the view of life and the economy is pretty starkly different. 


Where economic messages were largely left out of midterm campaigns, the idea that we're growing our way into recovery doesn't resonate with a lot of Americans. 


"That's all on Wall Street. If you've got lots of money, you're doing fine. It's just us who are not," said Don Holzshuh. He drives a truck in the upper Midwest, delivering to hardware stories in Iowa and Minnesota. 


And, he says, the folks in the hardware stores agree. Things feel "pretty much the same" as they did 18 months ago. 


For Holzschuh personally, business is a little worse. What he used to earn in four-and-a-half days now takes six. He's added another run in his truck, bringing him to 60 hours a week on the road. Lower gas prices help with costs, but Holzschuh says the price of diesel along his route in Iowa is higher by about a dollar more a gallon compared with unleaded. He doesn't benefit much from the savings. 


"I'll probably be working til I'm 68... another 10 years, another million miles."


It's hard to imagine him continuing at 60 hours per week after 36 years on the road. Holzschuh has already clocked 4.5 million miles accident-free, but he doesn't see many alternatives. 


"Am I going to work at a gas station? Work three jobs in a gas station to get by?"


The extra years of work will go toward paying off the mortgage on his house. And if that doesn't work? 


"I'll be over at your house," he joked to Marketplace host Kai Ryssdal. 

Prison Dairy Gives Inmates Job Skills — And A Sense Of Purpose

NPR News - Wed, 2014-11-05 11:21

California's high-security Corcoran prison is home to a dairy that provides milk to almost every prison in the state system. For inmates who staff it, it's more than a job: It's a refuge and a future.

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'Daily Show,' 'Colbert' Strain To Lampoon Democratic Losses

NPR News - Wed, 2014-11-05 11:11

Both comedy shows aired live, election-themed episodes Tuesday. NPR TV critic Eric Deggans says the broadcasts showed the limits of news-tinged satire on the political scene.

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Texas oil town votes to ban fracking

Marketplace - American Public Media - Wed, 2014-11-05 11:00

Denton, Texas, a growing, middle-class college town in the heart of fracking country, voted Tuesday to ban fracking. The vote was 59 to 41 percent. Denton is the first city in Texas to ban fracking, and the conflict there has drawn attention from fracking supporters and opponents all over the country.

Here's the story on how the Denton fracking ban came about.

On Wednesday morning the Texas Oil and Gas Association filed a lawsuit against the ban, and more suits are expected. Thomas Phillips, a former Texas Supreme Court justice, represents the association. He argues fracking regulation is the state's jurisdiction. "No city can just take it upon itself to say not in my backyard," he says. Other legal scholars say state law is not that clear on the matter, and that the Denton case represents new legal territory for the Lone Star State.  

Local fracking bans have been upheld in New York state but in Colorado, at least so far,  they're encountering trouble in the courts.  

Obama decides bourbon is fine after all

Marketplace - American Public Media - Wed, 2014-11-05 11:00

At his post-election press conference today, President Obama said a whole bunch of nice things about incoming Senate majority leader Mitch McConnell. He talked about how he's looking forward to working with him, including a comment about how he would enjoy a Kentucky bourbon with McConnell. 

Funny, but much funnier were the president's comments last year at the White House Correspondents Association Dinner about how he ought to make nice with the GOP.

Take this as a comment on how those who don't remember history can be condemned to repeat it.

Everything you've ever wanted to know about emoji

Marketplace - American Public Media - Wed, 2014-11-05 11:00

Emoji*** are about to get a lot more colorful.

The governing body for those graphics - yes, there is such a thing - says it’ll update its code so that those smiley faces can have various human skin tones.

The Unicode Consortium

While the Unicode Consortium is in charge of the graphical text messages between cellphones, the market for emoticons on messaging apps - which rely on your mobile phone's data plan - has been growing for several years. 

"Why punch out five characters to express yourself, when you can punch one character and say it all?” says Ram Menon, whose company Avaamo provides a secure messaging app for businesses. The app includes workplace-centric emoticons. 

"There’s a lot of things we try to express at work, we translated that into emojis, like 'anybody ready for lunch?,’ 'kill me now,’” which is just a guy with a gun to his head, Menon says. 

“The emoticon market is a super high-growth market right now,” says Evan Ray, CEO of Swift media, which sells packs of emoticons and digital stickers to a younger audience, most of whom are in their teens. 

"We work with a lot of major movie studios and we’re seeing a lot of success from entertainment brands,” says Ray. "Actually, surprisingly, one of your really big packs is actually Betty Boop."

The growth in the emoticon market has added up to measurable revenue. The Japanese messaging app Line said last year that it was making about $10 million a month just from digital sticker sales.

“It’s a place that brands really need to be for engaging new, young brand advocates," says Ray. "And it’s a place that they really need to look into… because it’s the new social network. It’s where people are going to be.” 

Ray says his company works with some 250 brands, including Disney. “Our most popular pack with Disney is definitely 'Frozen.'” 

And, Ray adds, all of this growth in a nascent emoji market has happened in a mere three years. 

“It’s been a crazy phenomenon… On the sticker side, the bigger emoticons, there’s about 6 billion sent every single day,” says Ray. He adds that the stickers are also a powerful marketing tool, for when new films, looking to drum up interest, sponsor packs of emoticons that can be spread around by messaging app users. 

Emoji FAQs

If you’re alive in 2014 and you’re not sure what emoji are, it’s ok—but it’s high time you learned.

This is an emoji: 

So is this: 

And this: 

Emoji are little pictures or smileys you can incorporate into text. They can be faces, buildings, food, weather, dancing ladies or poop and they represent feelings, emotions and activities. And food. And more.


Some people use emoji to replace words. For example, if I’m out for dinner and my friend texts me to ask what I’m doing, instead of typing “I’m getting dinner,” I can just text a emoji of what I'm eating....


...and my friend will understand and probably want to join, because...

 = "Fun."

Emoji started in Japan, but have spread to the U.S., thanks to something called the Unicode Consortium.

What is the Unicode Consortium?

Unicode sets the industry standard of code, which means it regulates the presentation of text across different platforms and languages - including the emoji language. The emoji you find on your iPhone use Unicode. They were developed in Japan.

How are emoji and emoticons different?

Emoticons are smiley symbols. :-) 

Emoji are only the standardized set of Unicode icons and include smileys, but also a broader collection of icons. Like poop.

What are the other picture things I see the kids sending?

A lot of messaging apps like WhatsApp and Line have developed stickers. While emoji are directly incorporated into your phone’s texting keyboard, stickers are exclusively for the app in which they live.

However, several apps are creating hybrids that can function as stickers within the app, but can also be incorporated into text.

For example, Bitstrip recently rolled out an app called Bitmoji where you can turn your face into a sticker and put that sticker into a text message. Or comic strip.

Line has done something similar with their set of stickers called Sticons.

What else is new in emoji-land?

With the announcement of the Apple Watch came an animated emoji. This emoji will be customizable, able to be sent with one touch and, to editorialize for one moment, creepy.

The announcement prompted a yearning for the days when the only animated face was on a Microsoft Word paper clip.

Microsoft Office

Why should I care about emoji ?

If anyone under the age of 40 was at your Halloween party this year, you probably saw someone with an emoji-themed costume.

People use them all the time. This website tracks which emoji are getting the most usage on Twitter.

This is a Tumblr where someone re-created emoji in real life (IRL, as the kids say).

Katy Perry released a lyric video for her song “Roar” in 2013 where she transformed the lyrics into emoji:

That's all for now!


Bitstrip Nova


and Bitstrip Seth


These midterms mean gridlock. So Wall Street's happy.

Marketplace - American Public Media - Wed, 2014-11-05 11:00

Come next year, there will be more Republicans in the U.S. Senate and the House of Representatives. On Wednesday, President Obama held a news conference, and he told Americans he is open to compromise.

“I am eager to work with the new congress to make the next two years as productive as possible,” the president said.

But in all likelihood, Washington is going to get more polarized, and consensus is lawmakers are not going to pass any big legislation. Congress could tackle tax reform or pass a budget, but it is more likely that gridlock and dysfunction will be on the agenda.

“For the most part, it’s going to be largely a replay of the last few years,” says David Lefkowitz, a senior equity strategist with UBS. That may drive many Americans crazy; but for investors, stasis is one kind of certainty. “To the extent that we just have a continuation of the status quo, but maybe with a slightly different flavor, investors can sort of get their arms around that, and understand what that means,” he explains.

There is also a belief, according to Russ Koesterich, BlackRock’s chief investment strategist, “that having divided government prevents either party from their worst excesses, and generally, divided government is associated with better market returns.” He cautions that belief is based more on instinct than historical evidence.

According to Greg Valliere, the Potomac Research Group’s chief political strategist, Wall Street has grown accustomed to the way Washington works – or doesn’t. “I talk to a lot of professional investors, and many of them sort of roll their eyes when you talk to them about Washington,” he says.

And while they can make due, especially when the U.S. economy is on the upswing and the dollar is strong, Lefkowitz says investors can get impatient. “We still will have the budget battles, and we will have to raise the debt ceiling next year,” he notes. Those two debates, which have led to government shutdowns and put the country’s credit rating at risk, are not far off.


Obama Cites 'A Moment For Reflection' In Election Results

NPR News - Wed, 2014-11-05 10:55

Speaking one day after his party lost control of the Senate to the Republican Party, President Obama says he's not "mopey" over the trouncing Democrats endured but rather energized.

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Labour reshuffle follows Murphy exit

BBC - Wed, 2014-11-05 10:54
Ed Miliband carries out a mini-reshuffle of his top team after Jim Murphy quit to run for the Scottish Labour leadership.

From Blue Bleach To Hazmat Hacks, Students Take On Ebola Challenges

NPR News - Wed, 2014-11-05 10:39

College students excel at thinking creatively under pressure. Now they're designing tools to confront the challenges of Ebola, including friendlier-looking protective gear and diagnostic aids.

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Have You Broken A Wrist? Men Are At Risk Of Osteoporosis, Too

NPR News - Wed, 2014-11-05 10:30

A broken wrist may not seem like much, but it can be the first sign that you're headed for a broken hip or spinal fracture. Men often don't realize they are at risk of osteoporosis as they age.

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Egypt rights record under fire at UN

BBC - Wed, 2014-11-05 10:22
Egypt is strongly criticised by Western countries and right groups during a regular review of member states at the UN Human Rights Council.

Brazil: The Land Of Many Lawyers And Very Slow Justice

NPR News - Wed, 2014-11-05 10:15

Brazil has more law schools the rest of the world combined and more lawyers per capita than the U.S. But there's a huge legal backlog: One department of five judges is now handling 1.6 million cases.

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The numbers for November 5, 2014

Marketplace - American Public Media - Wed, 2014-11-05 10:14

Midterm elections aren't quite over yet, thanks to a runoff in Louisiana, but the Republican victory was decisive nonetheless. The GOP gained at least seven seats to take control of the Senate, and further cemented its control of the House. Even in some races that were supposed to be close, NPR called the night "a derecho" — an intense, destructive storm — for Democrats.

For his part, President Barack Obama said at a press conference Tuesday afternoon that he won't be "mopey," and will compromise with the legislature on some issues, without backing down on others.

In an exhaustive report, the Washington Post detailed exactly how we got here. As the Democrats were preoccupied by in-fighting and discontent with the White House, Republicans were shrewdly picking candidates, avoiding gaffes and working to tie opponents to Obama.

Stocks and oil are both on the rise after the Republican victory. Here are some other numbers we're watching Tuesday:


One more election note: that's the new minimum wage in Alaska at 2016, approved overwhelmingly by voters Tuesday. They also legalized marijuana, as did Oregon and Washington DC. South Dakota, Arkansas and Nebraska voters OK'd minimum wage hikes too, Forbes reported. Several ballot measures not typically associated with the GOP were surprises in an election that otherwise represented a rightward shift.


That's how much Uber is saying it will save its drivers on car payments with car loans facilitated by the car service, but financed through third parties. Uber says the arrangement is mutually beneficial, adding drivers to its network and connecting people with cars who might have bad credit or no credit. But others aren't so sure. Gawker's Valleywag blog has poked holes in Uber's claims and recent press coverage, citing drivers' reports of unpredictable wages and pointing to the recent surge in sub-prime auto loans.


The very first Guy Fawkes Day, when a plot to blow up Parliament was exposed over 400 years ago. The BBC has a fun explainer about the history of the holiday and its continued notoriety, thanks in no small part to "V for Vendetta."

Paralympian Etherington, 23, retires

BBC - Wed, 2014-11-05 09:29
British skier Jade Etherington, who won four medals at the 2014 Sochi Paralympics, announces her retirement at the age of 23.

Children dead in new Ukraine violence

BBC - Wed, 2014-11-05 09:24
Two teenagers were killed and four hurt while playing football at a school in eastern Ukraine, amid fears that a fragile ceasefire is falling apart.

VIDEO: Ebola sick urged to stay at new centre

BBC - Wed, 2014-11-05 09:23
A British-run facility to treat people with Ebola near the Sierra Leone capital, Freetown has opened.