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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?

#291

Post by csomar »

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…

Capital investment are potential future negative outflows. They do not replace exports (goods and services). That is unless these investments are a scam (ahem), investors are probably expecting a yield in the future and to retrieve their investment. Movement of capital will be good if it was balanced, but it is not: https://en.wikipedia.org/wiki/Net_international_investment_p...

The US runs a NIIP of negative $27 Trillion. This is a consequence of the trade deficit as the deficit is being financed mainly with this money.

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

#292

Post by alephnerd »

mitthrowaway2 wrote: post #289
alephnerd wrote: post #261

Earlier quoted context omitted.

> Meanwhile imports of agricultural products and other things into China becomes cheaper, and the cost of food gets lower Food costs are already dropping in China [0]. That is not what is dampening Chinese spending. > if the CNY properly appreciates relative to the US dollar, that CNY60k ($8,000) EV becomes a CNY 60k ($16,000) EV. The median Chinese wage goes from CNY 34k ($5,000) to CNY 34k ($10,000). But a critical…

... Yes. Although, you've phrased that like it's in some way a rebuttal to what I wrote, when it's actually consistent with what I said.

Because your point is that the wage gap between the US and Chinese household would close significantly - yet it does not.

Even with those multipliers, the wage gap between your median Thai and Malaysian household and your median Chinese household is significant, let alone with an American household.

The wage gap cannot be solved until there is a serious expansion in China's social safety net if China wishes to continue to use a production driven growth model.

This is what Japan, Germany, the US before Reagan, South Korea, and much of Eastern Europe did when they reached similar developmental precipices to China today.

China can see a significant jump in living standards similar to that which Poland saw over the past 15-20 years if the social safety net is expanded.

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

#293

Post by foobarian »

lotsofpulp wrote: post #220
throw_m239339 wrote: post #205

Earlier quoted context omitted.

> The US isn’t forcing anyone else to use USD. I disagree. The petrodollar is a thing.

What kind of force is the US using to force oil sellers to only accept USD (assuming they only accept USD). Are Canada and Russia and Iran only accept USD for their oil sales? https://www.investopedia.com/articles/company-insights/08231...

> What kind of force is the US using to force oil sellers to only accept USD

Ask Saddam Hussein, Hugo Chavez, or Muammar Gaddafi

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

#294

Post by csomar »

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…

The issue is that the US now wants to have the cake and eat it too. Trump wants the rest of the world to subsidize the US industry. It'll be interesting how this will pan out.

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

#295

Post by psunavy03 »

Why is this even a question? I run one hell of a personal trade deficit with Costco and Safeway, because they have groceries and supplies I need to buy, and I have money to give them. Countries are no different.

The whole point of free trade is a win-win game. Someone has stuff/services you need, and you're willing to pay for them. In the end, everyone is happier than before.

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

#296

Post by overfeed »

s1artibartfast wrote: post #224
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…

>There's the risk of this system stop working and that's when the US might have hard times due to being forced to live by its means and have no ability to kickstart its own production when that time comes. I think the risk is greater than that. A concern is not just a regression to the mean, but indebtedness and the future having to pay up for the spending of the past. I think a different analogy would be a joint cre…

> but indebtedness and the future having to pay up for the spending of the past

The debt is denominated USD, the US mint could hypothetically print a trillion dollar note and settle the debts. Doing so would wreck trust in the existing system - so it's not just about the debt, but people tend to gloss over how much control the US has over the debt, so the indebtedness (in USD) is a relatively small factor overall.

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

#297

Post by chessgecko »

csomar wrote: post #291
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…

Capital investment are potential future negative outflows. They do not replace exports (goods and services). That is unless these investments are a scam (ahem), investors are probably expecting a yield in the future and to retrieve their investment. Movement of capital will be good if it was balanced, but it is not: https://en.wikipedia.org/wiki/Net_international_investment_p... The US runs a NIIP of negative $27 Tri…

Actually since the qe to fix 2008 foreign investors/governments cut down on bond buying. Treasury has foreign bond holdings up about 2T since 2014 and current account deficits sum to around 7T.

Nowadays we're mostly selling companies and real estate. (though there was a nice jump in bond buying a few years when rates went up)

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

#298

Post by Suppafly »

silisili wrote: post #290
Suppafly wrote: post #287

I saw a comment here or reddit that basically said that trade deficits aren't real anyway since we're essentially exporting dollars and importing goods. It changed how I thought about these trade deficits a bit. I wasn't overly concerned in the first place, since it seems like a right-wing boogeyman than an actual problem, and also being a country and mostly imports high end finished goods seems like winning at capit…

I mean, you can say the same thing about every purchase you make. The potential problem is that you don't have infinity dollars, so if you aren't getting them back, you have to make more.

>The potential problem is that you don't have infinity dollars, so if you aren't getting them back, you have to make more.

That's basically the basis of how our banking system works though.

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

#299

Post by mitthrowaway2 »

alephnerd wrote: post #292
mitthrowaway2 wrote: post #289

Earlier quoted context omitted.

... Yes. Although, you've phrased that like it's in some way a rebuttal to what I wrote, when it's actually consistent with what I said.

Because your point is that the wage gap between the US and Chinese household would close significantly - yet it does not. Even with those multipliers, the wage gap between your median Thai and Malaysian household and your median Chinese household is significant, let alone with an American household. The wage gap cannot be solved until there is a serious expansion in China's social safety net if China wishes to contin…

Thai workers are not paid in the global reserve currency, so that is irrelevant. The wage gap will shrink because USD will come down relative to CNY. I make no argument that Chinese wages will increase in CNY, nor that the gap will close all the way to zero.

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

#300

Post by munificent »

parpfish wrote: post #166
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…

[flagged]

> some segments of American men really glorify their work.

What should they glorify instead?

Being valued by a community? Consumerism and mobility has fragmented communities such that most Americans aren't part of any meaningful social institutions anymore. Secularism (which I think is overall a good thing) has cut off church as another aspect of community.

Being a good friend? Again consumerism and mobility has led to a massive loneliness epidemic with many men reporting they have zero close friends.

Venturing into the unknown and discovering new resources to bring back home? The map is fully painted in. The exploring that's left to do is in the deep reaches of science that requires massive education investment in order to spend years in a lab making a tiny discovery.

Going off to war and protecting the innocent against violent invaders? The last arguably justifiable war was nearly a century ago.

It's hard world to find dignity and meaning in today, especially for men in the US, and especially for ones who by personality lean as much towards using their body as their mind. The US used to offer them form or factory jobs that were, yes, hard and dangerous, but (at least in our romanticized memory of it) enabled them to come home at the end of the day and feel they'd provided some value.

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