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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?

#241

Post by testing22321 »

chris_va wrote: post #191

The author seems to gloss over the economy not being a zero sum game. As an example, since this is HN: the US creates a ton of startups. Any country that creates new businesses is going to see foreign investment, which on paper leads to a trade deficit. Essentially, the US exports businesses to the rest of the world, but that is not tallied in a 19th century model for the trade balance of goods. However, it's arguabl…

> Clearly the US hasn't run out of cash and needed to massively print dollars to cover foreign debt

Foreign debt is skyrocketing, with interest payments alone already becoming unworkable. Five or ten more years of this spells disaster, it’s totally unsustainable.

Either something very drastic has to change, or that money printer will have to go into overdrive.

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

#242

Post by bumby »

pirate787 wrote: post #223
bumby wrote: post #200

Earlier quoted context omitted.

> However, it's arguably a better export that commoditized goods, from a margin standpoint. Importantly, this is the same dynamic that causes economies to move away from manufacturing towards service-oriented economies. Capitalism is going to chase higher margins, but there should be guardrails that mitigate the negative externalities of such behavior. Else we are left with an eroded middle class, lack of supply chai…

The US is manufacturing more than ever and is the second largest manufacturer in the world after China. The US middle class has actually "eroded" upwards -- our wealthiest population cohort has tripled in the last thirty years.

Counterpoint: We aren’t necessarily manufacturing the things that contribute to national security in the same way we were after WW2. The DoD has listed lost manufacturing capacity as a major risk.

And I think you’ll need to elaborate more on your point about the middle class. Depending on how you measure it, people can move from middle class into upper class, but also into lower classes. Your post acts as if class mobility is only in one direction. A bifurcated distribution supports the point that the middle class is eroding.

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

#243

Post by 4fterd4rk »

chris_va wrote: post #191

The author seems to gloss over the economy not being a zero sum game. As an example, since this is HN: the US creates a ton of startups. Any country that creates new businesses is going to see foreign investment, which on paper leads to a trade deficit. Essentially, the US exports businesses to the rest of the world, but that is not tallied in a 19th century model for the trade balance of goods. However, it's arguabl…

[flagged]

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

#244

Post by [deleted] »

a2128 wrote: post #28
pydry wrote: post #18

Earlier quoted context omitted.

It seems great until those imaginary numbers become worthless overnight. Then you might have a bit of an "oh shit" moment as you realize that the industrial ecosystem required to substitute those imports would take a decade and a half to build even if your money were worth something, which it now isnt. Lots of countries collapse due to overreliance on foreign imports. Argentina never recovered from its peak in the 19…

Why would they become worthless? The entire world is forever beholden to Microsoft Windows, Office, AWS, X, iOS, Google Play, whether people like it or not. People have made free or cheaper or local or better alternatives and they have never succeeded at dethroning these

[deleted]

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

#245

Post by xeromal »

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…

I think it's because if you tour through the US, you'll come across hundreds of cities that are completly abandoned and rotting that all used to manufacture items. It's hard not to wonder what happened. Instead of working at those hard but well-paying jobs, those people get to work at walmart for minimum wage.

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

#246

Post by lotsofpulp »

Vicarium wrote: post #239
jandrewrogers wrote: post #212

Earlier quoted context omitted.

The US spends $1T on education. It is extremely difficult to justify spending more when the US already spends far more per student than other developed countries. Same with infrastructure and healthcare. Without accountability for where that money went it would be foolish to throw even more money at it. Also, in the US, infrastructure, education, and healthcare is primarily the responsibility of individual States, so…

Its never competency and focus. Individual influence averages out, its the system that creates the result at scale. To some extent higher per-student fees are expected in certain areas, most countries with heavily funded education aren't facing the same issues of rural population density. There's a lot of overhead costs to run so many schools. Then state policies and regulatory capture is the other side of course, al…

The system can’t do anything if academics and discipline aren’t instilled at home.

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

#247

Post by ty6853 »

variadix wrote: post #203
ryandrake wrote: post #155

Earlier quoted context omitted.

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…

National security is the obvious reason. That includes the ability to switch to a wartime economy, which requires low-tech manufacturing and resource extraction to not be reliant (and thus vulnerable) on imports from potential adversaries. Maintaining a talent pipeline is also important, we’re not going to be able to produce enough high skill machinists quickly enough when we need them because that takes time. Manufa…

The best national security is for it to be in the interest of the counter party to trade with you rather than attack you.

Tariffs and protectionism tilt the favor closer to attack. In the extreme, a nation that completely refuses to trade can't offer nor take anything beyond spoils of war.

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

#248

Post by bumby »

hypeatei wrote: post #231
bumby wrote: post #200

Earlier quoted context omitted.

> However, it's arguably a better export that commoditized goods, from a margin standpoint. Importantly, this is the same dynamic that causes economies to move away from manufacturing towards service-oriented economies. Capitalism is going to chase higher margins, but there should be guardrails that mitigate the negative externalities of such behavior. Else we are left with an eroded middle class, lack of supply chai…

> weakened national security manufacturing capacity, What products specifically would be a national security concern? The CHIPS act was passed to revitalize semiconductor manufacturing because we rely heavily on Taiwan. From my understanding, we already have a lot of domestic manufacturers for various parts, who are too expensive for the average American but are the main suppliers to the DoD.

As mentioned in another post, the DoD lists lack of manufacturing capabilities as a growing risk. There are many small batch parts that the US could manufacture, but companies aren’t interested. There are also those items which they no longer have the capacity to make, or deliver. Ted Koppel’s book Lights Out gives examples of long lead time items that can’t be made in the US and we also lack the ability to deliver them because the necessary infrastructure is no longer there

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

#249

Post by xeromal »

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?

A lot of people work dead end jobs at walmart or trucking (which is another industry that has taken a big shit like manufacturing)

Manufacturing and trucking jobs and the like paid 20-40% above what you could make at Walmart and other big corporations.

I grew up in a rural town and people decry losing jobs to places like walmart. That said, I still think the bread and butter of american business are all the small businesses that are still kind of trucking.

Small construction companies, small engine repair, home repair, mechanics, etc.

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

#250

Post by ty6853 »

triceratops wrote: post #233
ty6853 wrote: post #232

Earlier quoted context omitted.

Developed real estate titles are notoriously one of the least fungible assets in existence. Relatively uniform rural undeveloped farmland titles might work but I doubt it would get the same historical inertia since gold outlasts governments more reliably than land titles.

That's a problem for any foreign holder of USD who wants to redeem it. So far they've been ok with it. (I didn't mean the government hands out land titles. The holder of USD uses it to buy assets in the country)

I've re-read your statement several times and I'm still not quite getting it. If your point is that railroads or factories are as valid a basis as 'can be used to bail someone out of IRS agents with machine guns shooting their dogs and putting them in a little cage' than I agree with you.

Although it brings me back to, you can see how maybe it was simpler historically for people to just settle in a fungible, transportable, easily dividable hard asset that had essentially as good inflationary properties as anything else they could find.

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