Don't worry about the trade deficit

There tends to be a lot more worry about the trade deficit then there is understanding of what it actually is or what reveals about the underlying global economic reality. This piece from WSJ shed's needed light. Excerpt:

Pundits claim that "financing" the U.S. current account deficit requires that foreigners purchase some $1.5 billion in U.S. assets a day, and warn darkly of the time when that need cannot be met. But the current account deficit is by definition the inverse of net capital inflow. So it can very easily be argued that U.S. assets are in such demand, even with Treasury yields at historic lows and after three down years in the U.S. stock market, that Americans have to find $1.5 billion a day worth of foreign goods just to spend all the money that's coming in.

U.S. Treasury Secretary John Snow, who made his G-7 debut in Paris this weekend, put the case plainly. The American economy is growing, and the Bush Administration, through its tax-cut proposal, is doing what it can to encourage even faster growth. If Europe is truly concerned about American "sustainability," it could do the same, cutting taxes and reforming labor markets to spur its own anemic growth.