Comment by Berniek

The trouble with running a trade deficit is that you have to "borrow" to finance it, so you issue bonds. But once the bonds become due you need to issue more bonds to replace those that expired. BUT the new issue is the original bond + its interest rate. So the deficit you are financing with bonds is growing effectively at the interest rate of the bond. It gets to the point where the debt is self sustaining, regardless of what you do in the "real" economy. The only way to stop the spiral is devalue the currency (the market wont let the fed do that they just bid up the dollar - its has become a global currency) so the next way to do it is force interest rates down...but that causes inflation because people can borrow and waste more without the increase in productivity, that normal investment should produce. Someone has to pay for all this political stupidity and it will almost certainly be the poorest in society and the small businesses.