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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?

#501

Post by Teever »

alephnerd wrote: post #440
pacifist wrote: post #402

Earlier quoted context omitted.

"the China story will stagnate if a serious effort at helping the bottom half of Chinese does not develop" So 800,000,000 people raised out of extreme poverty is a lie? Sounds like the bottom half is being well taken care of over there.

None of what I said detracts from China's success in eradicating extreme poverty. That said, the majority of Chinese households are still significantly less well off than their peers in other upper middle income countries as stats have shown multiple times. I don't see why anyone would be so virulently opposed to moving some industrial subsidy spend to expanding healthcare, revamping the current insurance system, pro…

Could it be possible that the CCP is concerned that such an increase in household disposable income could lead to an increased risk of uprising?

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

#502

Post by _t9ow »

alephnerd wrote: post #434
coliveira wrote: post #415

Earlier quoted context omitted.

What about the EU stopping its own subsidies first, before asking this from other countries?

Why not China. China spends 1.73% of it's GDP on subsidizes compared to 0.4-0.6% for France and Germany [0]. At least Germany and France open factories across the EU. Chinese manufacturers did not until the EU began tariffs actions. Furthermore, Chinese dumping in solar destroyed Germany's original lead in PV manufacturing, and China continues to force foreign manufacturers like VW to partner with Chinese SOEs. Europ…

> force foreign manufacturers

Is it accurate to say that these companies are "forced"? Shareholders make cold, unfeeling, selfish calculations all the time. The shareholders of these companies could simply elect not to do business in China and accept the consequences of diminishing their access to the Chinese market.

Using the word "force" suggests that the largest shareholders of these corporations are victims acting under duress, which they most certainly aren't.

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

#503

Post by michaelt »

starspangled wrote: post #369
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…

> 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…

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

If you're going around quoting those figures, you should be aware they're kinda sketchy.

Headline manufacturing output figures measure "real" output, rather than $ of output, as the latter would just be a graph of inflation and exchange rate. And when measuring "real" output, if a factory making 1TB SSDs switches to producing 2TB SSDs it has increased its output, despite the fact they're shipping the same number of boxes as they were yesterday.

Sure, the numbers say real output per worker has risen a lot since 1980. But most of the "rising efficiency" comes from the folks making 33MHz 1-core CPUs now making 5GHz 24-core CPUs. Cut out that sector and you'll discover why the US has an entire region known as the "rust belt".

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

#504

Post by mrtksn »

starspangled wrote: post #369
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…

> 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…

For other countries USD is something they have to work for or sell something to acquire it. If they screw up they may end up in crisis being unable to obtain USD. Borrowing in their own currency will be much more limited and borrowing in USD much more costly.

USA on the other hand can just print it out of thin air and because the global USD liquidity is huge they can do it for much longer without facing the consequences of it. USA is also borrowing in currency they can just print to pay their debts. Very advantageous position for USA and they took advantage of it, imported crazy amount of products and services otherwise they wouldn't have.

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

#505

Post by psalaun »

wqaatwt wrote: post #449
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.

> GDP PPP That’s not a particularly meaningful metric.

No more no less than GDP. They outline different realities, which are all interesting to analyse as a whole.

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

#506

Post by intended »

coliveira wrote: post #413
starspangled wrote: post #398

Earlier quoted context omitted.

> Only on a dollar value basis. Uh, yes. > And that's heavily skewed on how an item's value is calculated. An item's value is calculated according to what it is bought and sold for. That's how value is determined. What would you rather it "skew" towards? > 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 attr…

> then clearly that company created an enormous amount of value No, it is more like these companies monopolized access to the high income market and exploited this inefficiency. It is similar to buying a stock for $10 then increasing the bid ask spread to sell it for $100.

This applies to a very specific type of constrained market, and does not generalize in this manner, making your example trivial to argue against, and then confuse readers.

If access was monopolized, then no competition would exist. Competition very much exists, and has resulted in a massive amounts of growth and improvement globally.

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

#507

Post by deaddodo »

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…

> They can then use these earned dollars to transact with other countries, as the US itself insists they do.

I feel like people who post this have no idea of the "eurodollar"[1] or the fact that it was London (and the EU, at the time, in general) that benefited from popularizing the USD as a reserve currency versus pegging one to their previously decentralized currencies or risking their own currency control.

The US doesn't need to insist on anything. As you yourself stated in the paragraph previous to this, it's a natural side effect of being a large economy that everyone wants/needs to trade with. For the most part, the eurodollar has been a pain in the side of the US as it removes some control over their own currency. In some cases this has helped, as it's tempered certain recessive/depressive effects during downtimes (especially with Europe), but it's also caused inflationary issues that are outside the hands of the Fed. The US (like pretty much any nation minting their own currency) would prefer to have that control over some ephemeral benefits that very few can ever seem to articulate or meaningfully quantify.

1 - https://en.wikipedia.org/wiki/Eurodollar

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

#508

Post by starspangled »

dns_snek wrote: post #488
starspangled wrote: post #474

Earlier quoted context omitted.

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.

Because at some unspecified point in the future, the rest of world will stop playing the game where the house always wins.

No, the meaning of the phrase "living beyond one's means" doesn't go to the unavoidable fact that circumstances change over time. I will one day become infirm and unable to earn money, that does not mean I'm currently living beyond my means.

US dollars might one day cease to be the global reserve currency in which case Americans will not see such benefits associated with that. This is a true statement. That doesn't mean they are currently living beyond their means either though.

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

#509

Post by dns_snek »

TacticalCoder wrote: post #346
EasyMark wrote: post #313

Earlier quoted context omitted.

I see this tossed around but no one ever seems to point out that EU has similar numbers, which are about half, but still extremely higher than global average; and much more so in the richer countries of the EU (per capita of course)

[flagged]

Why stick around if you have this amount of pent-up hatred and disgust for the EU, the people who live here, and everything they believe in at a fundamental ideological level?

If you believe the grass is so much greener on the other side then why not just go for it? Judging by your nickname I'm assuming that you have the means to move just about anywhere if you really wanted to, but I think you'll be sorely disappointed no matter where you end up going.

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

#510

Post by intended »

dns_snek wrote: post #488
starspangled wrote: post #474

Earlier quoted context omitted.

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.

Because at some unspecified point in the future, the rest of world will stop playing the game where the house always wins.

The rest of the world wants to be the house.

The rest of the world was and remains very happy to play this game, because it reduces the amount of trouble people have when exchanging currencies.

It gives advantages to America, sure. But America recognized that there were consequences.

Today, 1/3rd of the American electorate is insulated from reality, and its politics are free to downplay, or ignore consequences, if not just blame them on the opposition.

No one has an answer to a broken market of information. In the end, reality will have its due.

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