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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?

#531

Post by xk_id »

greenavocado wrote: post #422
xk_id wrote: post #416

Earlier quoted context omitted.

> The deindustrialization of America was the greatest wealth transfer from working people to corporate elites in history, dressed up as "free trade." You make it sound like this was a conspiracy, and perhaps it did devolve into that eventually, but this system was introduced at the time in order to deal with the stagflationary crisis of the 70s. Only because things had gotten so bad, did Reagan and Thatcher manage to…

The gold standard didn't cause stagflation. Government overreach did. Germany conquered inflation in 1923 by re-pegging to land (the Rentenmark) then gold (the Reichsmark) a few months later. The rchitects of this system KNEW what they were doing. Treasury Secretary Connally's infamous quipped to European ministers: "The dollar is our currency, but your problem." This wasn't economic theory, it was a declaration of f…

> The 1971 decision didn't solve stagflation it just kicked the can down the road

It kicked the can down the road for half a century. It bought a lot of time. This approach, of betting on a miraculous solution in the future, is deeply ingrained in policy making; it’s not unique to the neoliberal reform. In fact, the next solution could just be figuring out how to kick the can again.

The next phase looks like it will entail gov intervention, by issuing loan guarantees, or by mandating the investment of national savings into specific industries, like manufacturing and energy. Capital misallocation and the return of stagflation will lead to another crisis, but in a few decades from now.

Pegging to gold by itself doesn’t really solve anything, if the overarching system remains based on relentless exploitation by selfish interests. Sooner or later, overdraft facilities will emerge for gold that doesn’t exist; so, the traumatic cycles of boom and crash will be repeated. Not to mention the deflationary dynamic, which will overwhelmingly favour those who already own gold. In general, you can’t de-politicise monetary policy (by fixing its supply), without inevitably amplifying the overarching system.

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

#533

Post by dns_snek »

starspangled wrote: post #508
dns_snek wrote: post #488

Earlier quoted context omitted.

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 m…

> I will one day become infirm and unable to earn money, that does not mean I'm currently living beyond my means.

That is not the same thing because it's real productivity, labor is the only thing in the world that has any real value. You're exchanging your own labor for other people's labor. The US is exchanging something that has no inherent value (USD) for other people's labor.

If I take on all the debt that I can, max out my credit cards, mortgage my house, and spend everything I have on luxuries, am I living beyond my means, or am I living within my means as evidenced by the fact that I'm actually doing it?

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

#534

Post by AnIrishDuck »

chabska wrote: post #459
AnIrishDuck wrote: post #411

Earlier quoted context omitted.

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)

> What other system of value are you using here? Bottle caps? Nostalgia? A common proxy is "metric tonnes of steel produced" and "metric tonnes of sulfuric acid produced". For China, these have been going up in-line with their GDP growth, whereas for USA they have flatlined since 1980 despite the increase in manufacturing dollar-value output.

You, of course, can choose these as your units of value.

I think it is telling that the rest of the world (particularly the central banks of most countries) have instead chosen USD (well, more specifically US treasuries) as their preferred store of value.

Well, at least, for now...

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

#535

Post by herbst »

esseph wrote: post #69
lesuorac wrote: post #62

Earlier quoted context omitted.

Isn't that just a software thing (if at all)? It's not like Canadian lumber mills conquered the world. Ford F-series isn't the highest selling car in the world.

How many countries are US fast food franchises in? Music? Movies? Bleed over from US social media? There's something to that, I think.

Classic America centric view.

Let me tell you some European view:

You will find MC and BK nearly everywhere. Both selling hamburgers which are invented in Germany. Maybe subway is also kinda wide spread. The other chains aren't as common as you might think. Also all these chains are considered bad for your health and bad to environment, not something we are generally thankful for.

Local charts are not dominated by US music.

Also thanks to Netflix (an US company) we have a lot more European movies today. Nobody likes the same ending where America saves the day, so these movies convert well. US movies have constantly sinking box rates and sales for a while now. The era where everybody watched the new Hollywood movie is long over.

I haven't lost any blood for social media yet. But also here there is a strong and growing sentiment about not trusting the US. Media reports every other week how meta refuses to play with European privacy rules. People aren't using social networks as they used before. And if anything china dominates the market by far.

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

#537

Post by ljosifov »

JCattheATM wrote: post #210
ljosifov wrote: post #94

Because there are 1) willing exporters of US dollars USD (the US federal government USG ultimately, and US citizens in the final analysis); and 2) willing users of USD - us non-US-ian people around the world. When I sell stuff to someone in the UK, then pounds are fine as means of exchange. When I sell the same someone around the world, then the transaction not being domestic, the cash part that is 1/2 of it (or 1/4…

> non-US-ian FYI better not to use silly terms like 'US-ian' as they are confusing and cause problems while solving none. Just stick to the standard 'American', context makes it clear what you mean :)

Haha :-) - fine, hope no offence taken. :-) (none was intended) It came with the flow, flow was - US-... -Government, -Citizens, -Dollar, and then when it came to "people of the world that are not US citizens" (but are users of US dollars) programatically is seems to my compute mind, it came as "non-US-ians" fits that set of people well, and plus tallies with the "US-this-and-that" of the wordings prior. I'm originally from the Balkans, and so cognisant and got some experience with "verbal mines" and nuances in all manner of names and naming-s. I intuit what you are saying. :-) thanks

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

#538

Post by motorest »

AnIrishDuck wrote: post #438
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.

Growth is trivial to achieve when you are starting from zero. My footnote very much alludes to this. This is incidentally what the US did to powers like Britain a century and a half ago. I just find it amusing that in this theory of trade China has found a way to do all the work while the US does nothing and takes all the value. Perhaps all that extra money is not as easy to claim as the OP suggests. Maybe economies…

> Growth is trivial to achieve when you are starting from zero.

China currently reports the second highest GDP in the world.

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

#540

Post by sgjohnson »

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…

> all USD transactions go through US institutions regardless of where those transacting partners are located

This is not true. See: Eurodollar - https://en.m.wikipedia.org/wiki/Eurodollar

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