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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?

#471

Post by beeflet »

wpm wrote: post #163
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.

There is plenty to pay for public transit, education, and healthcare. There always has been, locked away in stock market value owned by precious few people. On healthcare, we already pay way more than any other developed nation for far worse outcomes, we're literally WASTING money on it to make some shitheel health insurance CEOs a little richer. FOH with this woe is us bullshit, boo hoo it's so hard to police the wo…

>health insurance CEOs a little richer.

To be honest, I don't even think it's just the people at the top profiting. The whole system is like designed to create as many useless jobs as possible. If I want to get a blood test, I have to do like 4-5 referrals before I can just get my test done. If I want a diagnosis, I have to wait a week to talk with a doctor who is going to push sponsored medication anyways. I'm better off doing the research myself and buying drugs through telehealth service or the greymarket.

You would be better off just having a free market where consumers figure out what doctors/nurses/pharmaceuticals are safe on their own, and you strip intellectual property protections and legal requirements for prescription drugs. It shouldn't cost a million dollars to get an x-ray. It does because there are high legal barriers that allow rent-seekers to creep in.

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

#472

Post by ozgrakkurt »

AnIrishDuck wrote: post #411
chabska wrote: post #389

Earlier quoted context omitted.

> US manufacturing output is double that of China's on a per-capita basis. Only on a dollar value basis. And that's heavily skewed on how an item's value is calculated. When you use $50 of parts (all made in China) to assemble a machine that you sold at $500 , $50 of GDP value is attributed to China while $450 of GDP value is attributed to the US. But who did more "manufacturing"?

What other system of value are you using here? Bottle caps? Nostalgia? While the dollar remains the global reserve currency, this is just a wild theory of trade. If the $450 of value was so easy to extract, why wouldn't China simply assemble it in their own country and take the whole pie? (they clearly already do this everywhere they can)

The he issue with this is the dependency direction, if the supplier learns to do the assembly then they don’t need US anymore and can sell the same thing for a fraction of the price.

Or if you go to war then all those base manufacturing can be used to manufacture for military

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

#473

Post by alexey-salmin »

coliveira wrote: post #420
overfeed wrote: post #296

Earlier quoted context omitted.

> 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.

Do you understand what $100T printed overnight would cause to the economy? The price of everything starting from assets would skyrocket and in a few months we could be living in hyper inflation.

Yes, but it's a temporary turbulence that lasts for a few years, then you can rebound. The debt on the other hand can last for decades taxing the economy more and more. If the cost of servicing the debt crosses a certain threshold there can be no rebound, not without a default.

Effectively when printing money you reset both the debt and the savings. If your debt is much bigger than savings it becomes a good deal.

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

#474

Post by starspangled »

__m wrote: post #469
starspangled wrote: post #432

Earlier quoted context omitted.

Even if we take what you wrote as fact, that does not answer how it is living beyond their means if their means includes "providing mainly a financial service, by managing the dollar".

it's called the “exorbitant privilege”

I'm not asking what it's called, I'm asking why that's claimed to be out of their means when it quite clearly is within their means to have this exorbitant privilege, as evidenced by the fact that they have exorbitant privilege.

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

#475

Post by cryptonector »

dustingetz wrote: post #368
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?

Economies are not zero-sum games. World trade _is_ a zero-sum game (all exports and all imports worldwide must net out to zero).

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

#476

Post by vkou »

alephnerd wrote: post #209
mitthrowaway2 wrote: post #194

Earlier quoted context omitted.

China definitely has industrial policy supporting its manufacturing, but the wages argument is begging the question. The USD, as the global reserve currency, is over-valued; if an alternative system were used (eg. the Bancor) and the Yuan allowed to float, then those 34,000 Yuan would buy a lot more and the median US wage would buy less.

Hypothetically yes, but the lack of social safety net means most of that hypothetical purchasing power expansion in China is moot. China has a medical debt problem [0], education pricing problem [1], and private sector capital crunch [2] similar to that of the US. This makes it much more difficult for the median household to spend in China because there is an incentive to keep saving. In isolation an $8,000 EV looks…

> In isolation an $8,000 EV looks cheap to us earning a salary in the West, but that is still 1.7x the median household income (so half of all Chinese households have even less money to spend).

You're looking at China the wrong way. A better way to view it is as two countries - a developed urban one, tied to a developing, rural one.

The latter is currently bigger than the former, so it drives any median wealth metrics down. A lot.

But for the past 40 years, the developing part of it has been shrinking - while the developed part has been growing. On that kind of trajectory, that median divide of wealth is currently where the 60th percentile was a decade ago, and in a decade, will be where the 40th percentile is today.

Where does the median urbanite in China stand, compared to her Thai or Malaysian counterpart?

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

#477

Post by beeflet »

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.

Why do I need to trade with you when I can just rob you blind at gunpoint? What you're describing isn't sufficient leverage because you won't have jurisdiction to control trade in the future.

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

#478

Post by tastyfreeze »

analog31 wrote: post #421
tastyfreeze wrote: post #412

Earlier quoted context omitted.

Price does not equal value. One oz today will buy you about the same as 1 oz 100 years ago.

Yes, it'll buy you an oz of gold. https://www.macrotrends.net/1333/historical-gold-prices-100-... What does equal value?

Whatever people buy. If you are looking at the dollar value of gold you have to look at what a dollar would buy that year. That is the value. You will find that a similar amount of gold buys the same amount of things throughout time regardless of the dollar price.

Another way to say that is that the dollar price of gold is correlated with the cumulative inflation of the dollar0 over time.

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

#479

Post by beeflet »

cvwright wrote: post #162
hunglee2 wrote: post #44

Earlier quoted context omitted.

yes indeed - it has been conflated with the decline of US manufacturing. Reality is the most significant export of the US is the USD itself - that is the trade good which everyone must have (at US insistence)

Problem is that the USD factories don’t provide enough jobs for the US population

It doesn't matter. Even if zero new jobs are created, it still represents a capital investment in robots and lights-off factories to increase national security going forwards.

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

#480

Post by aylmao »

jorts wrote: post #448
motorest wrote: post #423

Earlier quoted context omitted.

> If the $450 of value was so easy to extract, why wouldn't China simply assemble it in their own country and take the whole pie? If you pay attention, you'll notice that's what China is doing. For decades, China's GDP growth towered over the US's. Around 2015, China's GDP PPP overtook the US's.

China’s GDP growth is great but they will face a huge pain now that they face an unsustainable population decline. They have more people aged over 52 than younger. I empathize with their youth.

China is automating at an impressive rate. Isn’t automation easier to face with population decline than with population increase? I’d imagine young people mind getting replaced by machines more than old people.
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