ting economies.7 Those with opposing viewpoints note that a weakened dollar creates inflation, whichleads to a variety of problems. Inflation causes the price of all products to increase -including materials exported from other countries. As inflation increases, products thatthe U.S. exports do not bring in as much money, which conversely affects trade. How Economic Crisis in Another Country Affects the United StatesEarlier in this paper, the negative impact of the exchange system on the Brazilian andRussian economy was explored. While this impact was critical from an internalstandpoint, the effects of these countries financial crisis on the United States can also beexamined. The economic crisis in Brazil is a good example of how problems with the exchange ratein any particular country creates problems in economies across the world. In the past,U.S. banks have lent Brazil money. Outstanding loans to Brazil made by U.S. banks andcompanies total over $27 Billion. U.S. companies have more invested in Brazil thananywhere, other than Canada and the U.K. (405 of the Fortune 500 companies haveBrazilian subsidaries) However, the crisis does not only affect the banks and companiesthat loaned Brazil money. The effects filter down into the American public - in their401(k) plans and their paychecks. Essentially, because of the interconnectedness of theworld economy, consumers end up paying for a portian of Brazils debt (albeit howsmall). 8V. THE TRADE DEFICIT: PROS AND CONSBenefits of the Trade DeficitWhile the trade deficit is generally seen as a negative, many economists, as well asmembers of the Clinton administration, are aware of the benefits of a trade deficit. Theprimary reason that these people believe that the trade deficit can be a pro, not a con, isthat they have concluded the trade deficit has nothing to do with how competitiveAmerican business is. They realize that the trade balance is not a function of how goodour product...
