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Why does the U.S. always run a trade deficit?

libertystreeteconomics.newyorkfed.org

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Re: Why does the U.S. always run a trade deficit?

#111

Post by ta1243 »

hollerith wrote: post #99
ta1243 wrote: post #64

Earlier quoted context omitted.

OK lets assume the entire chain is automated and you don't need to employ anyone. The factory can go anywhere, in China, in France, in California, in North Dakota. What benefit is that to the average American citizen?

The US government can tax the factory and spend the tax revenue on average Americans. The German government for example gets a big fraction of its revenue from taxes on export industries that employ only a small fraction of Germans.

So the company owning that factory moves it to Iceland or Ireland or India who don't tax it.

Or you could bypass all that and simply tax Apple now, despite their factory being in China.

Re: Why does the U.S. always run a trade deficit?

#113

Post by sorcerer-mar »

lumost wrote: post #103
sorcerer-mar wrote: post #89

Earlier quoted context omitted.

> We literally murder people and bomb countries that even joke about not buying and using our worthless currency, Citation needed

There is a common thread in the 1991 gulf conflict that Iraq was going to sell oil in alternative currencies. The entire 1991 conflict is actually quite confusing, the majority western cold war apparatus moved to Saudi Arabia to fight the war. There aren't many reasons for why this was done.

Seems at least equally probable (IMO far more) that was due to the whole invading Kuwait thing.

Carter ten years prior: "Let our position be absolutely clear: An attempt by any outside force to gain control of the Persian Gulf region will be regarded as an assault on the vital interests of the United States of America, and such an assault will be repelled by any means necessary, including military force"

Re: Why does the U.S. always run a trade deficit?

#115

Post by mrtksn »

hunglee2 wrote: post #35

Using a national currency as the de facto global reserve guarantees a trade deficit for that country. No one else can manufacture USD's, so other countries have to acquire them by shaping their economies to supply goods and services demanded by the US. They can then use these earned dollars to transact with other countries, as the US itself insists they do. For the US, this is a simple trade off - gain massive politi…

US doesn't just get political influence. It gets massive amounts of products and services enabling the US residents live well beyond their means.

China for example, sends huge number of electronics and all kind of other consumer goods that Chinese produce by sweating in 12 hours shifts in 6 day work weeks in exchange for imaginary numbers.

US is definitely not the victim here. There's the risk of this system stop working and that's when the US might have hard times due to being forced to live by its means and have no ability to kickstart its own production when that time comes.

It makes sense to be worried for such an eventuality but US is definitely not being taken advantage here. The situation is more like selling your startup at young age and live a lavish lifestyle with the money without working and studying and risk becoming penniless and unemployable by the 50s.

Re: Why does the U.S. always run a trade deficit?

#116

Post by ta1243 »

garciasn wrote: post #50
icedchai wrote: post #47

Earlier quoted context omitted.

iPhones also used to be carrier subsidized. I remember getting a new one for $200 - $300 thanks to AT&T.

They still are, in the same exact way: with contracts. I haven't paid for an iPhone with cash, ever; I only have to sign a multi-year contract, just like it was in the past. I am currently using an iPhone 16 for 'free' in this way. It's just that people now want the latest and greatest NOW and are willing to pay monthly rates to do so, instead of waiting a few months for whatever carrier deal there is.

Whether you pay $40 a month to apple for 2 years and $10 a month for your contract, or $50 a month for a contract for 2 years with a "free" phone, doesn't change anything (other than being locked into the airtime contract needlessly)

Re: Why does the U.S. always run a trade deficit?

#117

Post by mastax »

c-linkage wrote: post #86

I've always disliked economics because it never seems to make much sense. The first equation in the article -- the basis on which the entire premise rests -- just feels wrong. > Spending is either on the consumption of goods and services or investment spending on equipment, structures, and intellectual property products. Income is allocated to either consumption or to saving by households, businesses, and government.…

In the real world approximately zero saving occurs by stuffing cash in the mattress, so “all saving is investment” is a correct simplification.

Re: Why does the U.S. always run a trade deficit?

#118

Post by chollida1 »

ta20240528 wrote: post #104
hunglee2 wrote: post #35

Using a national currency as the de facto global reserve guarantees a trade deficit for that country. No one else can manufacture USD's, so other countries have to acquire them by shaping their economies to supply goods and services demanded by the US. They can then use these earned dollars to transact with other countries, as the US itself insists they do. For the US, this is a simple trade off - gain massive politi…

>> all USD transactions go through US institutions regardless of where those transacting partners are located. Do they? It is my understanding that the (originally London based) Eurodollar market deals in USD without US treasury oversight. As will Hong Kong soon.

You are correct and the original poster is wrong in this specific regard.

Infact one of the most interesting/scary incidents for the US dollar was China selling USD denominated bonds and getting almost the same rate as the US government gets, which essentially means China can compete for USD with US government.

The implications of this is that if CHina wants, they now have another level to compete with the US. They can now issue USD denominated debt along the yield curve in areas where it would hurt the US hte most.

In the short term that is the frond end of the yield curve(short term under a year) where the US has to roll about $8 Trillion in debt over the next year.

With China competing by offering bonds here they will force up the interest rate the US has to pay pushing yields up with is the exact opposite of what Trump has publicly stated that he wants and making the US's already large fiscal deficit an even larger problem.

Re: Why does the U.S. always run a trade deficit?

#119

Post by duxup »

codingbot3000 wrote: post #43
hunglee2 wrote: post #35

Using a national currency as the de facto global reserve guarantees a trade deficit for that country. No one else can manufacture USD's, so other countries have to acquire them by shaping their economies to supply goods and services demanded by the US. They can then use these earned dollars to transact with other countries, as the US itself insists they do. For the US, this is a simple trade off - gain massive politi…

Adam Smith already pointed out that a trade deficit is not really interesting, so I do not understand the American obsession about it ;) Also, the often-mentioned US-EU trade deficit is not that big if you count in services. Which I think should be done in the 21st century. Large parts of the US economy are focused on digital high-value services, and they are "exported" worldwide.

It's useful as a political tool, that's about it.

Up until now it was a fairly harmless political distortion. I suspect in the past we maybe had some executives who themselves bought into it but they took input from folks more educated on the matter and just let sleeping dogs lie.

But now we have an administration who at least seems to believe it whole heatedly and isn't interested in anyone who is educated on the subject providing input.

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