It’s those pesky accounting identities again.

With govt deficit reduction, it’s up to domestic credit expansion to offset the demand leakages.

Global Trade Flows Show Exports Are No Magic Bullet

By Simon Kennedy

October 25 (Bloomberg) — When HSBC Holdings Plc’s economists from around the world recently pooled their forecasts, virtually all had a similar source of growth in mind for the region they monitored: exports.

The impossibility of every nation being able to sell more than it buys means some of the analysts must be wrong — unless the rest of the solar system becomes a source of demand for the globe’s products, Stephen King, HSBC’s chief economist, told an Oct. 16 conference in London, flashing a slide of the planets.

“Export claims are just far too optimistic,” said King, a former U.K. Treasury official.

The bet on trade is flopping for companies and policy makers who had hoped it would power recoveries held back by weak domestic demand. This week alone, Caterpillar Inc. (CAT) and Unilever (UNA) complained of sliding overseas buying and data showed global trade volumes fell in August by the most since February.

Trade is falling short as emerging markets from Brazil to India slow and the dollar resumes a slide abetted by the Federal Reserve’s maintaining stimulus. The deterioration in cross-border commerce could provoke a response from policy makers eager to protect their expansions and even clashes between them if it endures, said Simon Evenett, professor of international trade at the University of St. Gallen in Switzerland.

“Trade would have picked up much more in a normal recovery,” Evenett said in a phone interview. “The outlook is more of the same as there is much more economic uncertainty than at the start of the year.”