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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?

#131

Post by jcfrei »

Symmetry wrote: post #40
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…

The US dollar was the global reserve currency in the 1960s but the US was running a trade surplus then.

There were no free floating currencies back in the 1960s nor open capital markets as we understand them today. Cannot really compare the two eras.

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

#132

Post by actionfromafar »

mrtksn wrote: post #115
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 wor…

Even more sad that the US chose NOT to invest this surplus, for instance in infrastructure, education and a sensible health system.

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

#133

Post by hgomersall »

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.…

Economics is the formalisation of confusing stocks for flows.

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

#134

Post by jongjong »

My take is that the US likes to export US dollars... Then wealthy foreigners don't know what to do with them, so they pour them into the NASDAQ and NYSE and fill the pockets of US executives. The US can also leverage its powerful military to coerce artificial demand for USD within foreign nations to prevent it from being redeemed for US labor. Like how the US coerced Australia into a ridiculously expensive AUKUS deal; really, it's just a scheme to prop up USD and has nothing to do with submarines.

The US has long been playing a game where they give other nations currency that it prints out of nothing on the pretext that this currency can be redeemed for something of real value, but then goes to great lengths to ensure that those foreign nations never actually redeem the currency. This is the 1971 gold crisis in a nutshell. Now the trade deficit in fiat money is just a continuation of this scheme... Backed by even less value. That's why it feels like western economies are being hollowed out. The US economy has been hollowed out and taking its allies down with it.

It's kind of ridiculous how much backlash Trump was getting for trying to do something that is both sensible and necessary. To restore the real economy.

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

#135

Post by NoMoreNicksLeft »

actionfromafar wrote: post #132
mrtksn wrote: post #115

Earlier quoted context omitted.

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 wor…

Even more sad that the US chose NOT to invest this surplus, for instance in infrastructure, education and a sensible health system.

The surplus came with alot of responsibilities, like policing the world. And that had a hefty price tag... nearly $1 trillion annually. Wasn't much left over for public transit and free foot massages. I can entertain arguments that it was a bad bargain.

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

#136

Post by danans »

elzbardico wrote: post #129

Why would you not if you don't incur in external debt doing so? The real wealth is not dollars or pounds or whatever, the real wealth is goods and services. Having access to goods and service is what gives you a better living standard, the money is just a way to exchange them and to store value. The US has the privilege of having high international demand for its currency, as it is the default global reserve currency…

> The real wealth is not dollars or pounds or whatever, the real wealth is goods and services.

You missed one that is arguably more important: ownership of assets that provide security, shelter, and productivity.

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

#137

Post by padjo »

standardUser wrote: post #90

I wish someone would explain to Trump that decades of low tariffs and trade deficits is what has (had) cemented the US at the center of global trade, with all of the many benefits that comes with. Getting the rest of the world on board with the US-centric economic order has been THE American project of the last 80 years, it's been astoundingly successful, and Trump appears intent on ending it.

It’s been quite amusing to hear him describe the system America set up for its own benefit as being ripped off by the rest of the world. What a victim complex.

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

#138

Post by [deleted] »

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…

[deleted]

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

#139

Post by sorcerer-mar »

phkahler wrote: post #130
sorcerer-mar wrote: post #91

Earlier quoted context omitted.

Manufacturing was “crumbling” in the US decades prior to anything that people today refer to as "free trade."

Automation was reducing the number of manufacturing jobs. But "free trade" has taken away a lot of the manufacturing itself. The US as a whole can no longer make the TVs and iPhones that it consumes so many of.

There's more manufacturing than there ever has been in the United States.

It doesn't make low value-added goods like TVs, it doesn't employ a lot of people, and it's not growing as fast as other sectors, but we still manufacture more than ever before.

The “crumbling” sensation is because fewer people are employed by it and more people are employed (and earning more) in other sectors.

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