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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?

#321

Post by laverya »

ty6853 wrote: post #247
variadix wrote: post #203

Earlier quoted context omitted.

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.

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

Sure, but if your biggest export is your country's particular flavor of monopoly money, is it actually in your counterparty's best interests to trade with you?

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

#322

Post by kelseyfrog »

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.

The U.S. can absolutely fund Scandinavian‑style social programs, it just chooses not to, in part because the reserve‑currency framework makes the optics of deficits uniquely skewed.

This is one of the consequences of the US's self-inflicted burden of the Triffin Dilemma.

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

#323

Post by s1artibartfast »

foobarian wrote: post #262
s1artibartfast wrote: post #224

Earlier quoted context omitted.

>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…

These all seem like side effects of the global reserve currency status. You can't balance the budget until that is given up. Giving up that status would be very painful, so given the choice of pain now or pain later, the current situation seems reasonable to me.

I disagree, it is a consequence of debt outpacing growth.

The key characteristics of a reserve currency are stability and liquidity. If you have these, you don't even need to pay interest.

With properly managed that, being the reserve currency is a win on all fronts. You get to run a deficit because people are happy to trade real products for your paper. People are also willing to loan your paper back to you at more favorable rates. The only downside is if you get drunk and outspend even the inflated demand for your currency. The smart move is to rain in deficit spending if you can't get favorable lending rates.

Blowing up reserve status doesn't help this problem. Then you just have to pay higher and higher interest rates because no one wants your paper anymore

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

#324

Post by fennecbutt »

jandrewrogers wrote: post #212
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 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…

And how much of that money actually goes to educating children vs. In the back pockets of all the private enterprises that so many love to espouse.

It's like the majority of us were born to be peasants, so many people are quite happy to give the rich tax breaks for example, as long as their own taxes don't go up. Money's gotta come from somewhere.

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

#325

Post by kelseyfrog »

jandrewrogers wrote: post #274
hluska wrote: post #270

Earlier quoted context omitted.

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.

Sure it can. The president can declare a national emergency(IEEPA) and regulate international commerce by taxing capital inflows ie: A tariff on money. The only reason he doesn't is because the political backlash resulting in making the dollar undesirable as a reserve currency would have massive political fallout. In short he can, he just doesn't want to enough.

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

#326

Post by neilwilson »

hedora wrote: post #168
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 a…

Don’t confuse desire with demand. Economic demand is desire coupled with the ability to pay.

Nothing to do with dollars. The system is limited by world income.

China is not going to send anything to people who can’t pay. Otherwise they’d continue shipping to the US for absolutely nothing in return rather than the vague promise they are currently taking

And if they can pay then supply will already have expanded to service them.

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

#327

Post by rayiner »

johnisgood wrote: post #258
rayiner wrote: post #13

Earlier quoted context omitted.

Living on a farm and getting three square meals a day is a good deal… until it isn’t.

There are always trade offs. I want to live on a farm, but at the same time, I need a relatively quick access to hospitals.

It’s a joke about short sighted farm animals thinking they have it good not seeing the big picture.

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

#328

Post by goatlover »

palmotea wrote: post #319
ijk wrote: post #304

Earlier quoted context omitted.

You joke, but wars are won on logistics. Famously, the US military can deploy a Burger King anywhere on Earth within 24 hours.

> You joke, but wars are won on logistics. Famously, the US military can deploy a Burger King anywhere on Earth within 24 hours. But not only on logistics. If the "US military can deploy a Burger King anywhere on Earth within 24 hours," but little else, it's fucked. Right now its production base is so addled and weakened that it can't even sustain the wartime production really needed by Ukraine without cleaning out t…

A sustained conflict with a nuclear power is a no go. The risk of nuclear escalation is too great.

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

#329

Post by rangestransform »

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?

Policing the world is a jobs program for all of the unionized factory workers at lockmart and Boeing that would otherwise be, at best, trades workers earning a more modest wage. We can thank the MIC’s placement of factories in strategic congressional districts for that

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

#330

Post by rayiner »

ryandrake wrote: post #170
sigmaisaletter wrote: post #63

Earlier quoted context omitted.

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.

Imports from China were under $20 billion in 1990. At that time, the majority of clothing was still made in the U.S.! My wife’s dad worked as a forklift operator at a Heinz factory in the early 1990s. His job disappeared shortly after NAFTA. The extreme reliance on foreign-made goods happened within the lifetime of millennials. It’s not some inexorable fact about America.
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