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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?

#171

Post by garciasn »

icedchai wrote: post #109
garciasn wrote: post #50

Earlier quoted context omitted.

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.

There are some good deals out there where you basically get a free phone. However, I've also seen ones adding another $20 - $40 to your monthly bill for the duration of the contract.

I only do the ones where they charge you for the phone but immediately reverse it as part of the contract; so, I'm net zero on phone charges aside from the contract which I'd have anyway.

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

#172

Post by koolba »

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…

> 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."

It’s a matter of national security. Look what happened during Covid when we couldn’t produce basic medical necessities at scale.

If you go to war, do you think your adversaries are going to supply you with tanks and medicine?

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

#173

Post by actionfromafar »

dgfitz wrote: post #167
triceratops wrote: post #158

Earlier quoted context omitted.

"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.

That sounds great actually.

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

#174

Post by tiffanyh »

Nationalism

I'm surprised to not see nationalism talked about. The topic of trade deficit seems to be less about economic reasons and more about a political movement towards nationalism.

This can be seen in Europe right now, as well as India and Brazil - where those respective governments have taken actions that strongly favor local/in-country based companies over foreign.

And it appears the current US administration is taking a similar approach.

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

#175

Post by atoav »

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.

Yeah, only that if you spend more per capita on health care than comparable national, not less. So the argument of "We can't do $A like other countries do, because of $B" doesn't really fly if you spend more to get a worse outcome.

The problem the US has in regards to healthcare, that the goal of its system isn't to supply its population with the best quality healthcare for the lowest amount of cost — the goal instead is to allow all kind of market actors and middle man to make a profit without the population revolting.

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

#176

Post by rax0m »

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…

Another alternative to a non-national global reserve is of course gold (or dare I say the B asset which must not be named)

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

#177

Post by triceratops »

dgfitz wrote: post #167
triceratops wrote: post #158

Earlier quoted context omitted.

"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.

The entire NYC subway, the busiest system in the country, has 660 miles of track. NYC has a GDP of $1.3tn and the subway system has a big hand in making that possible. So that's actually a pretty good RoI. It'll go a lot further (haha!) in a less expensive city.

But that also goes back to the original comment about spending the surplus wisely.

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

#178

Post by vel0city »

yodsanklai wrote: post #75
CyanLite2 wrote: post #71

Because the USA has more money than other countries. People outside the US can't afford to buy our products, but we can afford to buy theirs. This is ideal for many people in the US who want cheap $200 flat screen TVs in every room of their house. This isn't good for unskilled labor in rural parts of America, often in swing states. Manufacturing had always been a place for high school grads to have a decent career. T…

Unemployment is low in the US though? what type of jobs do high school grads do? and would working in a (let say) doll factory be a better job for them?

As a high school grad with nothing but a diploma I got jobs working retail, doing data entry/discovery for a law firm, working the graveyard shift as a receptionist for a 24-hour facility. Are those better than doing factory work? I don't know. The discovery one was pretty cushy, but still rather monotonous.

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

#179

Post by ty6853 »

Attrecomet wrote: post #93
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/

Imagine having to tell the economy it can only grow as fast as a specific rare metal is mined for money to continue to make sense. The gold standard was a system breaking up by its inherent contradictions, as another poster has phrased it, when Nixon went off it.

>Imagine having to tell the economy it can only grow as fast as a specific rare metal is mined for money to continue to make sense

This is only the case if you have full reserve banking.

Under gold-backed fractional reserve there is no requirement that there be enough gold to back all the notes in circulation promising gold.

There are certainly problems with fractional reserve banking but gold backing is not a fundamental weak point here. Even IRL if everyone demands real dollar notes there is not enough in the banks and the FDIC reserves to pay it all out on demand if everyone recalled their deposits, they could not even run the money printer fast enough to cover it.

Yet somehow world trade still goes on, despite there being more value of goods in trade than currency than can back it.

Side note for completeness: theoretically all trade of any size happen with even a single gold coin by increasing velocity of money.

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

#180

Post by ty6853 »

triceratops wrote: post #165
franktankbank wrote: post #61

Earlier quoted context omitted.

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)

Dollar bills under the circa pre-Nixon gold standard were IOU for gold, there was no need to have enough gold to cover them as it was a fractional reserve.
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