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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?

#271

Post by treis »

Anon1096 wrote: post #264
treis wrote: post #254

Earlier quoted context omitted.

Exporting business ownership when seen on a national level is just another form of debt. You're trading future production for stuff now. The fundamental problem is that the balance of goods flows into the US today. If debts and profits are going to be paid out eventually that will have to reverse. But it's going to be politically impossible for the US to ever send out 5-10% of its GDP in goods. That's the fundamental…

You've fallen into the exact zero sum thinking trap that the parent comment mentioned. If investment causes the overall pie to be bigger, then both sides win with no tradeoff. > If debts and profits are going to be paid out eventually that will have to reverse. No it absolutely won't. The US exports financialization and technology services which don't show up on a trade deficit chart but do materially make the US and…

(1) Perception is reality. The pie might be bigger and the US might be better off but that's not what people will act on.

(2) Foreign debt is growing faster than the pie. It's an unsustainable situation. Debt as a percent of GDP has gone from 10% in 2000 to 30% today.

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

#272

Post by hinkley »

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…

Other countries federal reserves like to diversify into other currencies to help guard against hyperinflation. And the dollar is stable as currencies go, so people are happy enough to buy T bills but now there are a bunch of say Kronors the US government doesn’t know what to do with, so let’s buy some oil, fish, and steel to get it back where it’s going without fucking with the exchange rate.

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

#273

Post by legitster »

I think this model is useful on a theoretical level, but I think the fundamental relationship being made is backwards. Domestic savings being weak is an outcome, not an input.

Trading partners want to sell us goods for no more than our money. If we have nothing they want to buy, then the result will be a surplus of US currency out there. Parking it in US assets drives the cost of debt way down for the US, and the low rates disincentivize domestic savings.

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

#274

Post by jandrewrogers »

hluska wrote: post #270
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…

It’s interesting. Whenever someone says “the US needs to do a better job of funding education” someone always comes out with this exact comment. Yes, the world knows that your country spends more per capita on education than other countries. That’s been made abundantly clear time and time again. But, if the system is so good and utopian, why do so many children get shot at school? And why do so many American elected…

No one said the current system is good, just that it can’t be fixed with more money nor can it be fixed at the Federal level. None of the issues you mention have anything to do with education spending.

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

#275

Post by chessgecko »

Anon1096 wrote: post #264
treis wrote: post #254

Earlier quoted context omitted.

Exporting business ownership when seen on a national level is just another form of debt. You're trading future production for stuff now. The fundamental problem is that the balance of goods flows into the US today. If debts and profits are going to be paid out eventually that will have to reverse. But it's going to be politically impossible for the US to ever send out 5-10% of its GDP in goods. That's the fundamental…

You've fallen into the exact zero sum thinking trap that the parent comment mentioned. If investment causes the overall pie to be bigger, then both sides win with no tradeoff. > If debts and profits are going to be paid out eventually that will have to reverse. No it absolutely won't. The US exports financialization and technology services which don't show up on a trade deficit chart but do materially make the US and…

Or maybe a lot of it can't deliver returns in line with the current price. The world realizes that and stops sending us stuff for those investments. Then we're stuck with limited manufacturing, high inflation and relatively low ownership of our existing high value exports.

If the pie gets bigger too slowly then I think we still lose.

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

#276

Post by triceratops »

mitthrowaway2 wrote: post #251
triceratops wrote: post #230

Earlier quoted context omitted.

You don't. You give them a title to the infrastructure. Exchange paper for paper. Pretty neat right?

The point of backing currency with gold is to overcome low trust, or a potential future breakdown in trust. A claim to infrastructure that can simply be nationalized during a dispute / a military coup / etc, is not really serving the same purpose that a gold standard serves. Plus, now you've somehow got to manage price controls on ports and infrastructure...

> A claim to infrastructure that can simply be nationalized

If your currency is in such high demand that people still accept it, even knowing this, that's a feature not a bug. You hopefully never have to use but it remains as a nuclear option.

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

#277

Post by icedchai »

garciasn wrote: post #171
icedchai wrote: post #109

Earlier quoted context omitted.

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.

That's pretty good. I bought an unlocked phone and switched to T-Mobile prepaid. I'm paying like $15/month + tax.

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

#278

Post by nradov »

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…

Rural population density isn't a real problem for education. Some rural school districts have to run longer bus routes to service their students but those aren't particularly expensive.

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

#279

Post by analog31 »

tastyfreeze wrote: post #153
obblekk wrote: post #146

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…

The only policy that will increase savings rate is a stable or depreciating currency. People are incentivized to use an inflationary currency so they can maintain value.

But they can spend it on stocks, with the hope of maintaining or increasing value. Thats savings, right?

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

#280

Post by ty6853 »

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.

Because the population has been tricked way too many times with the "we're allocating these taxes to education" dogwhistle.

When every fucking time they open a lottery or have a new tax, and promise it will go to the schools, but they defund what's coming out of the general fund to the schools by that exact amount, you can only cry wolf so many times before that doesn't work anymore.

To get this to work anymore you're going to have to create a constitutional amendment or something that the school gets X and there will be no fuck fuck games that they aren't just defunding the schools some other place so they can use it on the next corrupt "construction" project.

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