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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?

#331

Post by rayiner »

ta1243 wrote: post #64
rayiner wrote: post #14

Earlier quoted context omitted.

Or we would have automated assembly faster—the investment in which would’ve been counted in domestic investment offsetting the trade deficit, right? I’m trying to verify my mental model of what’s going on.

OK lets assume the entire chain is automated and you don't need to employ anyone. The factory can go anywhere, in China, in France, in California, in North Dakota. What benefit is that to the average American citizen?

If we have magic machines that produce everything soup to nuts, you don’t see why it benefits us to have those in america rather than in China?

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

#332

Post by rayiner »

ta1243 wrote: post #111
hollerith wrote: post #99

Earlier quoted context omitted.

The US government can tax the factory and spend the tax revenue on average Americans. The German government for example gets a big fraction of its revenue from taxes on export industries that employ only a small fraction of Germans.

So the company owning that factory moves it to Iceland or Ireland or India who don't tax it. Or you could bypass all that and simply tax Apple now, despite their factory being in China.

[flagged]

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

#333

Post by johnisgood »

rayiner wrote: post #327
johnisgood wrote: post #258

Earlier quoted context omitted.

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.

Oh! Okay, I understand it now, my bad. :D

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

#334

Post by Sohcahtoa82 »

ta1243 wrote: post #283
ryandrake wrote: post #170

Earlier quoted context omitted.

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.

Which means 100% of the money goes to the owner. At least now some goes to foreigners who watch stuff on youtube so american workers get a little of the money.

> Which means 100% of the money goes to the owner.

As more jobs get automated, this is becoming more and more inevitable anyways.

There have been massive strides in computer vision and planning in the past few years. I think in 5-10 years we'll have robots that can handle nearly any manual labor task.

In 10-15 years, we could be facing skyrocketing unemployment. We'll either see the collapse of society as the economy collapses, or we'll need to increase taxes on the owners to fund UBI.

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

#335

Post by mrguyorama »

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…

The amount of dollars the US gives to school districts does not tell you how much the US spends on education, because only a portion of that money actually goes to pay for the school or teachers. The rest goes to nonsense like obscene administrator salaries, which have seen the same stupid growth as CEO salaries.

Why are Teacher salaries still so low and teacher:pupil ratios continuing to get worse if we spend so much on education? Why is it that literally the primary thing that education tax dollars should be spent on, educators, is not what it is spent on?

Consider that one of the best states in the US for education, supposedly new jersey, pays it's teachers a MEDIAN of $82k. Starting is above $50k according to teachers.

In pretty much every state, the median teacher wage is equal or within 5% of the state's "living" wage.

Most places require a college degree for teachers. If they don't, that's scary in other ways. But why the hell am I spending $40k on a college degree to make barely living wage for the rest of my life? You know who does that? People who aren't very smart. Gee, I wonder why we struggle to find good teachers.

40% of our nation's teachers have a second job. That's funny, because I assure you that damn near any teacher that actually does their job works twice as hard as most other professional jobs. You don't actually get any time in your day to grade student work most of the time, so you have spend your own personal time to do your job. Every single piece of homework your child brings home is at least an hour of grading for that teacher, and that's just a niche subject or small class size. Good teachers are also running their departments, designing lesson plans, building entire portfolios of tests and work, and none of the promises of technology have done anything to improve these parts of the job. Digitized grade books are pretty good, but now they mean teachers have to deal with the worst parents bitching about their kids getting a bad grade because they didn't study, which is not something the teacher can help.

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

#336

Post by corimaith »

tiffanyh wrote: post #112

Can someone clear up if "services" are included. I read quite often claims that state if services were included, the US would be in a trade surplus. But in my own rudimentary research, it appears services are in fact included. Can someone confirm.

The Trade Balance definition is murky depending on who you ask, it's better to use the Current Account Balance that includes trade balance amongst other things as an indicator of net flows. The Current Account does explicitly include goods & services, and the US is running a hefty deficit today.

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

#337

Post by rayiner »

mrtksn wrote: post #115
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…

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…

It seems like a bit of A and a bit of B, perhaps more A than B.

How do we maintain global reserve status—what is the cost? Is it one of the reasons why have military bases all over the world? Back in the day, people used to say the U.S. went to war in Iraq because Saddam was going to switch away from the petrodollar. Under your reserve-currency theory, that seems quite possible, no?

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

#338

Post by ryandrake »

rayiner wrote: post #330
ryandrake wrote: post #170

Earlier quoted context omitted.

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.

A lot has happened in 30 years. Developing countries spent 30 years developing and are now capable of doing all this work. And shareholders have required 30 years of profit growth, much of it coming from labor costs. Textile and factory workers in China make, what, ¥15-¥30 per hour, which is around $2-$4/hr. No American is going to take these jobs here, even for 3X the pay.

So we can either 1. artificially increase the price of offshore-created goods, causing higher prices for consumers and a whole bunch of factories and mills being needlessly built here, assuming it somehow becomes cheaper to build them here than there (The current administration's plan), or 2. give up on the romanticism of factory work and accept it's going to be done where it's cheapest.

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

#339

Post by corimaith »

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…

> There’s plenty of demand for manufactured goods.

This is not true. The US is by far the largest consumer of final household goods at 18 trillion, the EU at 10 trillion, China at 6.7 trillion, Japan at 2 trillion, UK at 2 trillion, India at 2 trillion, the rest of insignificant. You would more of less need to combine every other significant market to match the loss in exports to the US market.

And that won't happen, because of these markets are export driven economies, hence their economies are not structurally designed to suddenly take on mass deficits without mass unemployment coming at hand. Nobody wants to take on the world's surpluses as a deficit country save for the USA, which people in this thread seem quite ardent in convincing Americans to do so, even if they won't support similar policies in their own countries.

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

#340

Post by ryandrake »

Sohcahtoa82 wrote: post #334
ta1243 wrote: post #283

Earlier quoted context omitted.

Which means 100% of the money goes to the owner. At least now some goes to foreigners who watch stuff on youtube so american workers get a little of the money.

> Which means 100% of the money goes to the owner. As more jobs get automated, this is becoming more and more inevitable anyways. There have been massive strides in computer vision and planning in the past few years. I think in 5-10 years we'll have robots that can handle nearly any manual labor task. In 10-15 years, we could be facing skyrocketing unemployment. We'll either see the collapse of society as the economy…

This is the obvious end-state of unregulated capitalism. Fewer and fewer people owning and benefiting from the means of production, and more and more people with nothing and nothing to do besides revolt and (eventually) chop heads off. All the ownership class needs to stop the "head chopping" part is a robust and powerful police/surveillance state, which we all know they are diligently working on right now.
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