US Fiscal Stimulus Disproportionately Increased Imports and Trade Deficit; Expect the Reverse with Austerity
The US fiscal stimulus led to increased imports and slowed the growth of exports. A reduction in the government deficit would likely lead to a devaluation of the dollar, reduce the trade deficit, and increase America's output of exports. Thus, devaluation should be seen as a positive because it would revive American's export market and increase the US' net wealth, especially since foreign assets tend to be denominated in foreign currencies while liabilities are denominated in dollars.
Buchanan, Joy A., Steven Gjerstad, and Vernon L. Smith. US Fiscal Stimulus Disproportionately Increased Imports and Trade Deficit; Expect the Reverse with Austerity.” Economists’ Forum. 26 July 2011. Web.