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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?

#361

Post by const_cast »

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?

Because like most US systems, the institutions are far too fragmented and therefore overly complex and inefficient. So, a lot of the money just goes towards the overhead of logistics and managing the beast - aka, administration.

It's the same problem in healthcare. We spend a lot of government dollars on healthcare. But when you have thousands of insurers and then boards per state and extremely complex billing, you're going to be putting the majority of your money into not-care.

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

#364

Post by ggm »

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…

> The author seems to gloss over the economy not being a zero sum game.

The current incumbent of the WH seems to think two things:

1) all games are zero sum games

2) he has authority to sack or functionally wreck any institution he likes without legal recourse.

I would expect in the light of 2) it's possible people write as if 1) is being respected.

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

#365

Post by cryptonector »

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…

Everyone gets something, or every country anyways. The export-led growth Asian miracles are really just a part of this. Maybe the Chinese worker gets screwed, but China maybe doesn't. Something like that.

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

#366

Post by coolguy4 »

Because there is a fiscal deficit which requires borrowing, which means that new money is created. If the new money were spent only in the USA it would cause prices to go up a lot, so the money goes overseas so that the price increases are more moderate (arbitrage). Why is there a fiscal deficit? Because politicians want to win elections. If the fiscal deficit were ended then mathematically there could not be a trade deficit.

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

#367

Post by thresh »

pstation wrote: post #187
ta20240528 wrote: post #104

Earlier quoted context omitted.

>> all USD transactions go through US institutions regardless of where those transacting partners are located. Do they? It is my understanding that the (originally London based) Eurodollar market deals in USD without US treasury oversight. As will Hong Kong soon.

Correct. You can open up an USD account in maybe Zambia and transfer funds to another USD account in Dubai without it ever touching the US financial system.

Is that correct? My understanding is that the SWIFT transfer will go through a US correspondent bank in this case.

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

#368

Post by dustingetz »

coolguy4 wrote: post #366

Because there is a fiscal deficit which requires borrowing, which means that new money is created. If the new money were spent only in the USA it would cause prices to go up a lot, so the money goes overseas so that the price increases are more moderate (arbitrage). Why is there a fiscal deficit? Because politicians want to win elections. If the fiscal deficit were ended then mathematically there could not be a trade…

if this is zero sum-ish then who is the counterparty that’s getting screwed and how?

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

#369

Post by starspangled »

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 gets massive amounts of products and services enabling the US residents live well beyond their means.

What does this mean really? That is their means.

For a somewhat topical example, people of Australia get access to cheap medications (in part because they pay to subsidize the cost of them but also because) their government negotiates with pharmaceutical corporations to pay lower prices. This kind of negotiation would be completely out of reach of any private Australian person, but they are not living outside their means. Their means includes the means to elect governments to run the country for the benefit of its own people including doing things like securing lower prices for medications.

> 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.

Until 1990, Kenya had a higher GDP per capia than China. It is absolutely not "imaginary". Work produces real value, just because you can represent or trade that for allegedly "imaginary" currency does not mean that the value created was imaginary.

> US is definitely not the victim here. 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.

US manufacturing output is double that of China's on a per-capita basis.

> It makes sense to be worried for such an eventuality but US is definitely not being taken advantage here.

Seems like that's the popular assertion but I don't see much solid reasoning behind it in this thread (not picking on you specifically), just handwaving about how USD's status as a global currency somehow makes trade deficits inevitable despite simple facts available that US had a surplus trade balance 50 years ago, when the USD has been considered the global / reserve currency for over 60 years.

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

#370

Post by Retric »

cryptonector wrote: post #365
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…

Everyone gets something, or every country anyways. The export-led growth Asian miracles are really just a part of this. Maybe the Chinese worker gets screwed, but China maybe doesn't. Something like that.

Chinese workers got actual work vs being automated out of the farming industry and starving. China gets to import raw resources from other countries to feed both domestic production and foreign export.

It was a rational strategy that’s getting outdated as China’s economy grew enough that exports can’t ramp up any more.

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