Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

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

libertystreeteconomics.newyorkfed.org

Post reply on HN
Print view View original

571–580 of 814 posts

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

#571

Post by AnIrishDuck »

biorach wrote: post #568
AnIrishDuck wrote: post #563

Earlier quoted context omitted.

I pointed out they were providing ridiculous answers to the question of "how do you measure value" and they doubled down on the ridiculous. You are correct, there are many ways to measure value. However, I don't think picking various commodities as the "true" measure of what is "valuable" is a useful exercise. You may disagree. That's fine! I suggest you put your wisdom to use on the various markets that are set up f…

> I don't think picking various commodities as the "true" measure of what is "valuable" is a useful exercise. No one said that a commodity is a "true" measure of value. A commenter simply said that it is often a useful proxy. It is something that is useful to do to understand specific trade patterns. > I suggest you put your wisdom to use on the various markets that are set up for this purpose instead of arguing with…

> No one said that a commodity is a "true" measure of value. A commenter simply said that it is often a useful proxy. It is something that is useful to do to understand specific trade patterns.

Ok, if it helps replace "true measure" with "useful proxy". My argument remains the same.

Continue to accuse me of whatever you want, I still do not feel you are engaging with the substance of what I'm saying.

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

#572

Post by int_19h »

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.

> The best national security is for it to be in the interest of the counter party to trade with you rather than attack you.

This assumes that governments are rational actors. This isn't always the case.

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

#573

Post by immibis »

pirate787 wrote: post #223
bumby wrote: post #200

Earlier quoted context omitted.

> However, it's arguably a better export that commoditized goods, from a margin standpoint. Importantly, this is the same dynamic that causes economies to move away from manufacturing towards service-oriented economies. Capitalism is going to chase higher margins, but there should be guardrails that mitigate the negative externalities of such behavior. Else we are left with an eroded middle class, lack of supply chai…

The US is manufacturing more than ever and is the second largest manufacturer in the world after China. The US middle class has actually "eroded" upwards -- our wealthiest population cohort has tripled in the last thirty years.

By dollar value, but not by actual amount of manufacturing. When you peel back the US's real GDP growth, it just turns out prices rose faster than inflation.

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

#574

Post by immibis »

Aziell wrote: post #532

Trade deficit sounds bad, but it’s not always a problem. Other countries sell us stuff, then use the dollars to buy U.S. assets. It’s like we get goods, they get a savings account.

This. A trade deficit is a goods and services surplus. People are sending you shit for free. What's not to like about that? Well, it's unsustainable, so you should have a backup plan, but while it lasts it's pretty good. It's the singular reason the USA is the richest country, and the new regime wants to stop it.

In return you have to give them money, but you can just print that. It costs nothing to get.

You can also just confiscate it. If Trump was really worried about other countries having too many dollars, he could set their balances to zero with the stroke of a pen. They wouldn't trade with him any more after that, of course, and might even launch nukes. But hey, Nixon confiscated the world's gold and got away with it.

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

#575

Post by immibis »

trgn wrote: post #309
tastyfreeze wrote: post #282

Earlier quoted context omitted.

Who doesn't love the value of their savings being built 100% on the speculation of the public perception of made up things?

savings are a thermodynamical impossibility. real wealth decays (livestock will die, the roof over your head will leak, the bushel of corn will rot, ...). savings must be invested for it to have future value.

An underrated fact. The only savings that doesn't decay is someone else's debt, too.

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

#576

Post by friendzis »

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…

> > 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.

The argument presented here is that economic growth (more specifically trade volume increase) outside USofA forces USD acquisition transactions with USofA. This means that there is constant surplus of goods flowing into USofA without accompanying surplus of circulating money supply, leading to artificial deflation.

In other words, the cumulative productivity, measured in USD, of USofA is lower than cumulative outside-USofA-fair-market value of goods transacted in USofA. This effect increases gross value on supply side without balancing out gross value on demand side, allowing domestic players larger transaction volumes than their total productivity, with deficit covered by the central bank.

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

#577

Post by gnfargbl »

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]

> It's exactly what's happening: what used to be leaders in ICE cars are now the laughing stocks of the EV world.

This is really nonsense. VAG, BMW and Mercedes have been making good EVs for many years and are now progressing to making excellent ones. They only really lag Tesla on the software/hardware integration (and that isn't actually much of a selling point outside the HN crowd) while they lead on more traditional points like cabin quality.

If you previously wanted to drive a Golf (and tens of millions of people did), then you're likely to want to drive an ID.3, ID.4 or Enyaq. If you previously wanted to drive a Passat, then you're likely to want to drive an ID.7. If you liked the BMW saloons, you'll like the i4. Mercedes are a little further behind, but they're getting there with the EQE.

If I wanted to bet on the shape of the European car market in five years, I'd be betting on German, Korean and Chinese EVs dominating. I don't see much future for American brands on this side of the Atlantic.

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

#578

Post by int_19h »

ijk wrote: post #350
palmotea wrote: post #319

Earlier quoted context omitted.

> You joke, but wars are won on logistics. Famously, the US military can deploy a Burger King anywhere on Earth within 24 hours. But not only on logistics. If the "US military can deploy a Burger King anywhere on Earth within 24 hours," but little else, it's fucked. Right now its production base is so addled and weakened that it can't even sustain the wartime production really needed by Ukraine without cleaning out t…

Which was part of the rationale for supporting Ukraine: the best way to build up a manufacturing base is if you have customers, and so supplying munitions to Ukraine was a win/win/win from the military's point of view: Ukraine gets ammo, the US gets to ramp up domestic military production with, effectively, someone else paying the bill. (Granted, some of that was US funds, so the 'someone else' was often another part…

Note that Ukraine is using somewhere around 5k shells per day, and that's only because they have to ration it due to insufficient amounts.

For another comparison, Russia is making 250k shells every month, and using 10-15k every day.

At peak levels of artillery use in late 2023, when both sides still had ample stockpiles, the combined total was ~40k shells per day.

So, yeah, it's good that we're ramping it up, but also, no, it's nowhere near fast enough if we want to be ready for a major war.

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

#579

Post by mtrovo »

starspangled wrote: post #517
mrtksn wrote: post #504

Earlier quoted context omitted.

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 consequen…

Many countries control their currency and can print money to pay debts, and can control their fiscal and monetary policies to best gain advantage for themselves. And they do. US can do some things more, bigger, longer, etc., for various reasons. Just like Australia can do more, bigger, longer, etc., than Tonga. I don't really see anything profound being said here. USA might be in some advantageous position now, and i…

It doesn't matter how much money you print if your debts are USD denominated. If for example Tonga has double their currency in circulation with a debt of Y USD tomorrow they will still owe Y USD and their currency will probably be worth half of what it was before.

In the case of the dollar if you suddenly double the supply it's not just the US national debt that is affected, it's all the secondary financial products indexed on dollar that are affected: debt from countries and private companies across the world, commodities and all transactions between countries not involving US that are dollar denominated. So in a way the value of a single dollar is diluted but it's diluted over a much bigger pool of participants.

That's the main reason printing money is cheaper to US as is reflected on the bond market, just look at supply vs inflation around the years following the global pandemic.

Living beyond their means is very relative. When credit is virtually free for years it makes sense to run 10x leveraged, the problem is when interest rate rises and you have to deleverage without showing too much that you don't have that much money as failing to do so could result in a death trap spiral.

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

#580

Post by gambiting »

Ray20 wrote: post #567
aylmao wrote: post #480

Earlier quoted context omitted.

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.

>Isn’t automation easier to face with population decline than with population increase? No? These things do not seem to be connected in any way.

I mean, of course they are. If you have a population increase you have plenty of young people who will complain that automation is taking their jobs. But with a population decrease you eventually end up with just old people and not enough working people to sweep the streets or wash cars or whatever - so automation is welcome because it doesn't "steal" jobs.
Post reply on HN