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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?

#161

Post by dec0dedab0de »

alexb_ wrote: post #108
dec0dedab0de wrote: post #102

I always thought the plan was we give them pieces of paper for their stuff. Then if we ever needed to we could say those pieces of paper(or bits in a computer) are no longer worth anything unless you're a citizen. But I had a bunch of gift certificates for ChiChis when they went out of business, and I have been jaded to this sort of thing ever since.

Why on earth would we ever do that? That's a nonsensical proposal that would immediately make an immense amount of people poor (while also being hostile to so-called foreigners for no reason)

Well I purposely wrote it in a hand-wavy immature way because I don't really understand it. But I did say "if we ever needed to." So whatever the equivalent of declaring bankruptcy is for a country.

Though I would like to amend my nonsense from "a citizen" to "actually in the country" I am imagining cutting off foreign governments and oligarchs, not humans that are actually living here.

Basically, if there was a bad war or something, and we needed to cut ties with most of the world. It's better to be left with the goods than the cash. Because cash has no intrinsic value.

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

#162

Post by cvwright »

hunglee2 wrote: post #44
codingbot3000 wrote: post #43

Earlier quoted context omitted.

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)

Problem is that the USD factories don’t provide enough jobs for the US population

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

#163

Post by wpm »

NoMoreNicksLeft wrote: post #135
actionfromafar wrote: post #132

Earlier quoted context omitted.

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.

There is plenty to pay for public transit, education, and healthcare. There always has been, locked away in stock market value owned by precious few people.

On healthcare, we already pay way more than any other developed nation for far worse outcomes, we're literally WASTING money on it to make some shitheel health insurance CEOs a little richer.

FOH with this woe is us bullshit, boo hoo it's so hard to police the world (something we also overpay for). We could have been taking care of each other the entire time, there is nothing stopping us but lies and attitudes like yours the lies beget.

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

#164

Post by ryandrake »

hollerith wrote: post #154
ta1243 wrote: post #143

Earlier quoted context omitted.

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?

We are in a discussion of the US trade deficit. Obviously, moving a factory from China to Nebraska reduces the US's trade deficit.

But, how does changing some number on a "trade deficit" spreadsheet materially affect Apple or Americans? Apple pays slightly more taxes to the government than it did before. Big deal. There is no incentive to demolish an automated factory in China and re-build it in Nebraska.

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

#165

Post by triceratops »

franktankbank wrote: post #61
hunglee2 wrote: post #45

Earlier quoted context omitted.

Nixon broke Bretton Woods by coming off the gold standard, leading to massive expansion of the money supply. Lyn Alden has good analysis of this process https://www.lynalden.com/fraying-petrodollar-system/

The more I hear about this Nixon feller the less I like him. Seems like a real scoundrel.

Fruit vendor: You like these apples? That'll be $2.

Buyer: Yeah I want them. But Fort Knox doesn't have enough gold yet, so I don't have the dollar bills right now.

Fruit Vendor: No problem. Bring me an IOU from your bank that says you're good for it.

(The Invention of Paper Money)

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

#166

Post by parpfish »

ryandrake wrote: post #155
hunglee2 wrote: post #44

Earlier quoted context omitted.

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)

Out of all the many industries out there, I don't understand why we keep glorifying and romanticizing manufacturing and trying to "bring it back." Depending on what you are manufacturing, it can be a very boring, stressful, stinky, physically taxing, or dangerous job. And it really doesn't pay well. It may have paid well 70 years ago, but it doesn't today, and you can't turn time back. A lot of customer service and t…

[flagged]

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

#167

Post by dgfitz »

triceratops wrote: post #158
NoMoreNicksLeft wrote: post #135

Earlier quoted context omitted.

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.

"Policing the world" doesn't have to cost that much. Nearly $2tn spent just on the pointless Iraq misadventure. How much public transit and education could that have funded?

> How much public transit and education could that have funded?

Given the current costs for NYC to expand its subway, about 500 miles of track given the current costs per mile.

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

#168

Post by hedora »

neilwilson wrote: post #152

It’s amazing how everybody misses the wood for the trees. 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 a…

There’s plenty of demand for manufactured goods. They can just sell to other markets. US foreign policy is causing demand spikes everywhere.

For instance, I read 300M people are projected to starve to death this year. I’m sure China will happily send some of them any excess food, especially since it’s not going to sell it into US any more.

I think you mean there are not enough US dollars in those markets. There are at least two easy solutions: (1) Intentionally tank the dollar to increase the relative purchasing power of other countries (which they have probably been doing - someone is, but the “who” is a bit opaque). (2) Stop dealing in US currency entirely and switch the world economy to a new reserve currency. I suspect that the Euro and/or Yuan will win that war, though some argument could be made for crypto.

I agree Trump may as well be running around naked at this point. It wouldn’t affect most people’s opinion of his competence or professionalism (domestically or overseas).

Anyway: To answer the question that is the article title: Because the US is (was) rich, and has (had) a high but sustainable standard of living.

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

#169

Post by c-linkage »

jihadjihad wrote: post #107
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.…

> It _doesn't_ make sense. How is consumption on the income side of the equation? And even if that somehow did make sense, who is to say the consumption on the income side is the same as the consumption on the spending side such that they balance out? The model they are using is a simplified macroeconomic model. In their model, they are simply saying that when you account for Income--the total amount of money earned…

So in this simplified model, consumption is like a mobius strip in that while the mobius strip only has one side, income can only come from the consumption from spending.

The fact that they included it on both sides of the equation seems pointless, then, and only serves to confuse.

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

#170

Post by ryandrake »

sigmaisaletter wrote: post #63
chii wrote: post #33

Earlier quoted context omitted.

the assumption being that the automated assembly is going to be price competitive with the manual assembly. If this is the case, why doesn't it happen with the chinese supply chain? After all, there's no reason not to make it cheaper. The only conclusion you can draw is that the automated assembly will still be more expensive compared to the current manual one.

The chain of thought goes like this: -american labour is expensive -because of tariffs (or geopolitics) cheap asian labour unavailable -investment in automation research -first Gen automation is expensive -further research -2nd Gen automation is price-competitive with american labour -iterate n times -Nth Gen automation is price-competitive with asian labour > why doesn't it happen with the chinese supply chain The i…

Americans will not accept the quality-of-life sacrifice of their labor being competitive with Asia. It's never happening. The only way US manufacturing will be competitive with China's is if it is 100% automated from the mines to the store shelves.
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