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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?

#351

Post by robocat »

ty6853 wrote: post #179
Attrecomet wrote: post #93

Earlier quoted context omitted.

Imagine having to tell the economy it can only grow as fast as a specific rare metal is mined for money to continue to make sense. The gold standard was a system breaking up by its inherent contradictions, as another poster has phrased it, when Nixon went off it.

>Imagine having to tell the economy it can only grow as fast as a specific rare metal is mined for money to continue to make sense This is only the case if you have full reserve banking. Under gold-backed fractional reserve there is no requirement that there be enough gold to back all the notes in circulation promising gold. There are certainly problems with fractional reserve banking but gold backing is not a fundam…

> Under gold-backed fractional reserve there is no requirement that there be enough gold to back all the notes in circulation promising gold

What happens when foreign buyers want to withdraw gold and not hold "money" in an account?

Internally, gold-backed fractional reserve sounds reasonable.

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

#352

Post by ty6853 »

robocat wrote: post #349
ty6853 wrote: post #192

Earlier quoted context omitted.

Yet interestingly the USA could put you in jail for wire fraud for 20 years for doing so even if you never interacted with the USA or any US citizens or ever stepped foot on their territory.

The wire fraud laws seem like they are meant to catch everything? The law seems to get used whenever the US wants to jail someone it doesn't like (but doesn't have a good reason)

Well there has to be something a little softer than the extrajudicial drone executions.

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

#353

Post by WrongAssumption »

throw_m239339 wrote: post #205
lotsofpulp wrote: post #37

Earlier quoted context omitted.

The US isn’t forcing anyone else to use USD. People around the world use USD because they are confident it will help them buy products and services they want in the future.

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

20% of oil is traded in currencies other than the US dollar.

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

#354

Post by triceratops »

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…

If there's so much money, why do American schoolteachers buy classroom supplies out of their own pocket?

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

#355

Post by triceratops »

rayiner wrote: post #342
ryandrake wrote: post #338

Earlier quoted context omitted.

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 t…

That’s a different argument. The point above was that americans would not accept the quality of life sacrifice involved in manufacturing domestically. But they did quite recently, in a time period that is broadly viewed as a very good one. Now you can argue that the cheaper prices we have today is even better and worth the lost factory work. But that’s a different argument than saying domestic manufacturing isn’t fea…

> But they did quite recently [accept the quality of life sacrifice]

It wasn't a "sacrifice". It was literally the only life they knew at the time. But going back to it now would be an actual sacrifice for a lot of people.

Running a household on an income of $70k isn't a sacrifice if that's what you make right now. It would be a sacrifice if you make $500k right now and had to immediately start making do with $70k.

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

#356

Post by neom »

tiffanyh wrote: post #174

Nationalism I'm surprised to not see nationalism talked about. The topic of trade deficit seems to be less about economic reasons and more about a political movement towards nationalism. This can be seen in Europe right now, as well as India and Brazil - where those respective governments have taken actions that strongly favor local/in-country based companies over foreign. And it appears the current US administration…

Well: we are about to enter the resurgence of the cold war to the n'th degree, so it makes sense to focus in-country during the ramp up.

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

#357

Post by jaredhallen »

jasondigitized wrote: post #193
codingbot3000 wrote: post #43

Earlier quoted context omitted.

Adam Smith already pointed out that a trade deficit is not really interesting, so I do not understand the American obsession about it ;) Also, the often-mentioned US-EU trade deficit is not that big if you count in services. Which I think should be done in the 21st century. Large parts of the US economy are focused on digital high-value services, and they are "exported" worldwide.

There wasn't an obsession. Trump just weaponized the word deficit to justify tarrifs. Anyone with an IQ over 100 and two minutes to listen to an explainer video on this would quickly understand the con.

As has been mentioned a couple times in this thread, the trade deficit does have a real negative impact on US industry. Whether or not that's good or bad for a particular person depends on their socioeconomic situation. One would reasonably assume that Trump's base is largely made up of folks for whom the trade deficit has real negative consequences.

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

#358

Post by rangestransform »

downut wrote: post #84
yodsanklai wrote: post #75

Earlier quoted context omitted.

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?

They move to where the jobs are. And the small town where they got their schooling hollows out.

They move to where the jobs are but the ones left behind without a big-city job have disproportionately large political power and disproportionately little education. Letting land vote was a generationally catastrophic mistake, the US has a political system suited for an agrarian/early-industrial/frontier society rather than an urban industrialized society that also happens to be hegemon of the world.

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

#360

Post by ashdksnndck »

triceratops wrote: post #354
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…

If there's so much money, why do American schoolteachers buy classroom supplies out of their own pocket?

It’s up to the local school board to carve up the budget. Usually the top items are salaries, pensions, and health insurance for teachers and staff.

If we’re looking for contributors to differences in education spending between the US and other countries, those school boards are one place to look. The overhead of administrative staff at thirteen thousand local school districts is significant.

The US also has quite high salaries by international standards, which increases per-capita spending on pretty much anything.

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