151–160 of 814 posts
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.
Where else is China et al going to sell all the stuff they can produce via their physical overinvestment that was driven by the “export led growth” mantra?
There is no untapped source of demand anywhere in the world. There isn’t the income. All they could do is produce less and cause their economies of scale to go into reverse.
So instead they sell stuff for accounting entries, which are then used on the asset side of their currency area balance sheet to justify issuing more of their own currency and maintain the circulation.
They could, of course, just buy the time currently used for producing excess exports and maintain the circulation in any case. But that would cause lots of people who are hard of accounting to get very upset.
So instead they continue with financial mercantilism, allowing everybody there to pretend that they are productively engaged, not metaphorically digging holes and filling them back in again.
And that would continue, thanks to those nations supplying the accounting entries and receiving all that nice output, but for somebody getting elected on the US side who actually believes the “lack of saving” line and decided to do something about it. To the loss of the US people.
Quite why he think that saying the US isn’t paying enough for Canadian lumber or Chinese cars is good for anybody is beyond me.
Another win for the Emperors New Clothes.
This is incredibly well written. The oil example is very compelling for import substitution. And the covid example is interesting in showing the savings rate only went up as an offset of gov spending. I'd love to see a follow up on (a) is it important for the US to increase domestic savings and (b) what are the best policies to do so, and why are they the best? I imagine blanket tariffs might actually increase the sa…
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The German export manufacturers show no great desire to leave Germany -- or at least they didn't till their energy supplies became very expensive in the wake of the Ukrainian invasion.
And apple seems happy staying in California and paying the tiny amount of tax it does. Assuming no change in costs, how does moving its factories from China to Nebraska change anything, for apple, for the US government or the US citizen?
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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.
yes indeed - it has been conflated with the decline of US manufacturing. Reality is the most significant export of the US is the USD itself - that is the trade good which everyone must have (at US insistence)
A lot of customer service and telemarketing jobs have gone offshore. Nobody is romanticizing about bringing them back. Same with textiles and clothing. Nobody is calling for a return of sewing sweatshops. So why does manufacturing win elections?
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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.
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I really don't think discussion of complex topics should be reductively reduced to snarky xkcd comics that aren't even right. Current account deficit already accounts for both goods & services. From a more formal perspective, deficts aren't neccessairly bad if they're being routed into productive investments at home, as with many developing countries needing to import machinery, but if it's being used to fund consump…
Well, as it happens, US Gov debt is about to become worst. And that part has only little to do with trade deficit.
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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.
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…
> Having access to goods and service is what gives you a better living standard I think the good faith critique is access to imports can be taken away by the other country if they want. eg. rare earth metals. So being too heavily reliant on imports without the capacity to produce domestically is less long run access
For imports to be useful you need multiple suppliers all of whom have to have capacity to expand if one of the supplier lets you down.
Same as in business.
Industrial policy should decide domestic vs external production on that basis.
As the world moves to trade blocs the case for trade between trade blocs falls - precisely because the risk of getting left high and dry increases
Because there are 1) willing exporters of US dollars USD (the US federal government USG ultimately, and US citizens in the final analysis); and 2) willing users of USD - us non-US-ian people around the world. When I sell stuff to someone in the UK, then pounds are fine as means of exchange. When I sell the same someone around the world, then the transaction not being domestic, the cash part that is 1/2 of it (or 1/4…