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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?

#611

Post by coliveira »

alexey-salmin wrote: post #473
coliveira wrote: post #420

Earlier quoted context omitted.

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.

Ask Argentina how this kind of experiment is going...

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

#612

Post by coliveira »

alephnerd wrote: post #456
fakedang wrote: post #455

Earlier quoted context omitted.

Or maybe the EU should subsidize more instead of policing around? The EU reminds me of the teacher's pet going around the playground, telling all the other children that they should follow the rules. But of course, the pet doesn't have a big stick, so nobody really bothers listening to him/her.

I don't disagree with the EU's laggardness around changing economic tides, but if just about every major economic bloc and country is initiating trade barriers against China to protect their domestic industries, at some point the common denominator is China. And as I mentioned elsewhere, much of this overproduction would go away were Chinese consumers able to dip into their savings if China's social safety net was ex…

There is no such thing as "overproduction", all production in China is reaching a destination, so by definition it is the right production level.

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

#613

Post by alexey-salmin »

coliveira wrote: post #611
alexey-salmin wrote: post #473

Earlier quoted context omitted.

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.

Ask Argentina how this kind of experiment is going...

They didn't have the luxury to inflate-away their own debt.

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

#614

Post by neilwilson »

xk_id wrote: post #530
neilwilson wrote: post #152

It’s amazing how everybody misses the wood for the trees. Where else is China et al going to sell all the stuff they can produce via their physical overinvestment that was driven by the “export led growth” mantra? There is no untapped source of demand anywhere in the world. There isn’t the income. All they could do is produce less and cause their economies of scale to go into reverse. So instead they sell stuff for a…

Is it not true that China has enough domestic demand to not rely on exports? That was supposed to be the whole point of dual circulation https://en.m.wikipedia.org/wiki/Dual_circulation

If it was true why are the Chinese selling goods for foreign promises rather than collecting their own?

Why would they take the exchange risk?

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

#615

Post by coliveira »

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…

That's laughable, countries in BRICS are so "worried" about Chinese cheap industrialized products, like cheap comfortable EV cars, that they're making more and more treats with China to keep these products coming...

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

#616

Post by RivieraKid »

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…

Why does having a reserve currency status guarantee a trade deficit? For that to be true, (1) foreign-held dollar reserves would have to grow at a sufficient rate and (2) Americans would need to get increasingly indebted, which is a voluntary decision. The fact that foreign goods are cheap doesn't force Americans to get in debt in order to buy them.

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

#617

Post by coliveira »

alexey-salmin wrote: post #613
coliveira wrote: post #611

Earlier quoted context omitted.

Ask Argentina how this kind of experiment is going...

They didn't have the luxury to inflate-away their own debt.

The US won't have it either for much longer, investors are not so stupid as people think.

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

#618

Post by ggandv »

oblio wrote: post #589
deaddodo wrote: post #512

Earlier quoted context omitted.

> China's GDP (PPP) is already ~22% higher than the USA's [1]. Arguably, isn't this a better measure of value? PPP measures the real value to the citizens in a nation, and more closely measures actual economic activity. Only if the only things you purchase are exclusively domestic. Turns out, the vast majority of Chinese citizens with any means are interested in foreign products (like most people in the world).

> Only if the only things you purchase are exclusively domestic. Turns out, the vast majority of Chinese citizens with any means are interested in foreign products (like most people in the world). Are they, though? China has its own huge software stacks, cloud providers, car manufacturers, etc? Is China really starving for anything not made in China, except for luxury goods? To which, I would point at Lexus (the arch…

If China embraces capitalism more tightly that will be a good thing for the world. The problem with China is not its wonderful people or culture, nor its prosperity, the glaring problem with China is Communism and the morality of authoritarian style central planning and the Xi/Putin axis of evil.

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

#619

Post by fakedang »

alexey-salmin wrote: post #473
coliveira wrote: post #420

Earlier quoted context omitted.

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.

The US economy still hasn't "rebounded" from the effects of the 2008 recession, forget COVID, even after the bailouts and the offloading of the US debt onto Europe, Japan and China, even though that was in the order of single digit trillions. I don't know where people get the idea that adding a hundred trillion more is where you can cure the deficit. Especially when this time around, you're not going to have EU, China and Japan to baghold for you.

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

Huh how? When printing money, you make your ability to pay further down the line even more tenuous. I don't know how people can't see the obvious parallels between money-printing and currency-debasing of the Roman times (which led to the economic downfall of that empire).

The only way to cure a deficit while retaining your trustworthiness is to pay it down one way or another.That requires intense taxation for a few years on the rich and corporations alike, and using those proceeds to pay it off. And if possible, to loot someone's gold reserves or something, although that would destroy your trustworthiness on all other fronts and equate you to Nazi Germany.

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

#620

Post by [deleted] »

starspangled wrote: post #398
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"?

> 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…

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