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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?

#601

Post by jampekka »

ReptileMan wrote: post #466
jorts wrote: post #448

Earlier quoted context omitted.

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.

The good thing about being authoritarian is that you can easily solve the births issue. The same way there was one child policy, there could be 3 or 4 with penalties for non compliance.

Highly unlikely CCP would pursue coercive birth policy, or even could do it if it wanted. CCP is extremely powerful but it still has to rely on the consent of the governed. It has to frequently roll back policies due to public outcry.

Current birth rate increase policies in China are based mostly on rewarding for births and subsidizing parenting costs.

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

#602

Post by pbhjpbhj »

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…

When Aus print money they devalue the currency, spreading the cost over all Aus dollar holders.

When USA do the same, the non-USA dollar holders also take on the cost, same-same, excepting that is everyone around the World who trades in dollars. Which comes back to USA's military-industrial complex to some extent. It's like having the ability to steal a gram from every gold bar in the World.

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

#603

Post by Gravityloss »

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?

I wonder how much of the budget goes to sports.

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

#604

Post by RivieraKid »

epistasis wrote: post #406
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…

It is utterly baffling to me that some Americans see the massive amount of free goods that they get as part of being the reserve currency with trade deficits, and somehow think "hollowed out manufacturing" rather than all that cheap stuff we get. The rest of those countries that are manufacturing things are far far poorer, and desperate to switch to industry higher up in the value chain, where the US is. And a half-a…

They're not getting free goods and services, they are exchanged for debt, stocks, real estate.

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

#605

Post by starspangled »

jampekka wrote: post #569
starspangled wrote: post #545

Earlier quoted context omitted.

It's not a reserve currency because the US decided it is, it's a reserve currency because everybody else decided it is. They decided that because they decided it was in their own best interest to trade in and maintain reserves of USD. But whatever difference it makes is still just a matter of degrees. Countries keep reserves of and trade in currencies other than USD. Some get more benefit than others from this, and t…

USD became the reserve currency in the Bretton Woods, when it was pegged to gold and major currencies were pegged to USD. This was pretty much demanded by US in the Bretton Woods conference. In 1971 US unilaterally scrapped the Bretton Woods and essentially stole the gold reserves. Other countries protested heavily but could not really do much. US then transitioned to the petrodollar system where demand for and value…

In other words, what I said was correct.

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

#606

Post by pbhjpbhj »

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.

Please explain your position here?

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

#607

Post by mmillin »

Flemlo wrote: post #598
avidphantasm wrote: post #591

Earlier quoted context omitted.

Thank you for elucidating the fact that US “borrows” in its own currency and so as long as we have monetary sovereignty (which we do to a great degree due to USD being the global reserve currency) we have no deficit problems (as long as we keep inflation in check). I implore everyone reading this thread to read up on Modern Monetary Theory (MMT). Stephanie Kelton’s “The Deficit Myth” is a good place to start. Until m…

I don't think domestic manufacturing works anymore. The pressure to automate will just skyrock. I'm more for a global currency which will be given to everyone who does certain jobs we can't automate away or don't want to like nursing, teaching. Everyone around the globe can get worldfiat when they do these jobs. We need to start thinking beyond known capitalism in a modern highly automated world.

There are important reasons to have domestic manufacturing even if automated and not creating jobs.

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

#608

Post by randerson »

alexey-salmin wrote: post #513
randerson wrote: post #395

Earlier quoted context omitted.

Maybe I'm missing something, but the budget deficit and trade deficit are two separate issues. We can have a budget surplus (as we had under the Clinton administration) while still having a trade deficit.

They are separate but closely connected. Something has to cross the border in the opposite direction. Could be corporate stocks or bonds, could be government bonds. You can see export of government bonds as the last line of defense where the economy failed to produce enough of other instruments to cover the imbalance.

My understanding is that other countries who end up with those dollars from our trade deficit tend to invest those dollars in US financial institutions: treasuries being one form, but also US stocks and corporate bonds and so on. So the deficit indirectly helps anyone with a 401K, and also allows the government to keep borrowing money.

But the trade deficit is mostly a private sector thing. It doesn't stop the government from raising taxes and cutting spending to achieve a budget surplus and eventually paying down the debt.

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

#609

Post by OfficeChad »

avidphantasm wrote: post #591
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…

Thank you for elucidating the fact that US “borrows” in its own currency and so as long as we have monetary sovereignty (which we do to a great degree due to USD being the global reserve currency) we have no deficit problems (as long as we keep inflation in check). I implore everyone reading this thread to read up on Modern Monetary Theory (MMT). Stephanie Kelton’s “The Deficit Myth” is a good place to start. Until m…

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

#610

Post by OfficeChad »

motorest wrote: post #538
AnIrishDuck wrote: post #438

Earlier quoted context omitted.

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.

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