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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?

#651

Post by johnrgrace »

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…

We don't have as problematic a deficit problem so long as reasonable sane people are running tr4e system and willing to turn on the printers when required so as not to generate excess inflation.

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

#652

Post by nr378 »

immibis wrote: post #574
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…

> People are sending you shit for free.

They aren't sending you stuff for free, they're sending you stuff in exchange for the right to receive future cashflows back from you (i.e. they're sending you stuff in exchange for taking ownership of your financial assets). This isn't necessarily a bad trade for you, but it's far from free.

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

#653

Post by Buttons840 »

IG_Semmelweiss wrote: post #634
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…

Your statement would be true without nuance. Yes. The mass of US consumers do benefit from penny subsidies of certain foreign product. However, for every penny of foreign subsidy benefitting US consumers buying finished iron or steel goods, a US metallurgist is losing a job somewhere. On strictly numbers, we are better off with foreing-paid subsidies yes, but there are losers, and they take the brunt of the downside.…

How does the life of a US metallurgist who works part time at a grocery store compare to a Chinese metallurgist who is working 70 hours a week doing metallurgy?

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

#654

Post by [deleted] »

fakedang wrote: post #623
StopDisinfo910 wrote: post #583

Earlier quoted context omitted.

Of course but the EU thinks it’s a better strategy to engage with China which remains a major partner to move the needle in the right direction rather than burn bridges. There are a lot of tools which could be used to limit the impact of Chinese surproduction and push China towards shoring up its internal market. The US used to do the same and will hopefully be sane again in three years.

Command economies hell-bent on economic dominance are not going to engage. The only way to limit Chinese super production is to either block their goods outright or to subsidize your own to out-price theirs locally. A lot of people don't understand the CCP mentality clearly. China was once the epicenter of human production, making things the rest of the world desired, from Chinaware to silk to tea. The rest of the wo…

[deleted]

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

#655

Post by [deleted] »

OGWhales wrote: post #638
zaphar wrote: post #627

Earlier quoted context omitted.

as long as we keep inflation in check That's the trick though isn't it? MMT discourse tends to gloss over or ignore the dangers of runaway inflation and act as if you can borrow all you want with no consequence. But that part that you put in parentheses above is precisely why you can't do that. What you borrow for your budget has to be payed back later. If you just print money to do it because you borrowed more than…

> MMT discourse tends to gloss over or ignore the dangers of runaway inflation and act as if you can borrow all you want with no consequence. I see people say this a lot, which is odd since as far as I have seen it's one of the main points MMT people make. I'm not sure how one of the core insights of MMT has become the main criticism of it, it's kind of funny. I suppose this is because some people have taken MMT to m…

[deleted]

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

#656

Post by h2zizzle »

zaphar wrote: post #627
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…

as long as we keep inflation in check That's the trick though isn't it? MMT discourse tends to gloss over or ignore the dangers of runaway inflation and act as if you can borrow all you want with no consequence. But that part that you put in parentheses above is precisely why you can't do that. What you borrow for your budget has to be payed back later. If you just print money to do it because you borrowed more than…

Taxes. Letting bubbles pop without bailing out the losers.

Both of those can be targeted in such a way as to deflate an inflated economy in a controlled way. The messaging is the hard part, as you're fighting against the emotions of a prideful workforce and the teeth-gnashing of the ambitious elite who see the stars as the literal limit. It is, however, possible to make sure everyone gets what they need to survive and even modestly thrive, while bringing the insanity of our current asset valuations and consumer prices back down to Earth, for a fraction of the cost of trying to keep the charade going indefinitely. You just have to throw rich people under the bus, instead of young and middle-aged workers whose purchasing power bleeds out every time we do yet another never-done-before thing to backstop failing banks and securities.

>That's a planned economy.

Man, do I have something to tell you about the FFR, porkbarrel spending, etc....

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

#657

Post by LorenPechtel »

xeromal wrote: post #245
ryandrake wrote: post #155

Earlier quoted context omitted.

Out of all the many industries out there, I don't understand why we keep glorifying and romanticizing manufacturing and trying to "bring it back." Depending on what you are manufacturing, it can be a very boring, stressful, stinky, physically taxing, or dangerous job. And it really doesn't pay well. It may have paid well 70 years ago, but it doesn't today, and you can't turn time back. A lot of customer service and t…

I think it's because if you tour through the US, you'll come across hundreds of cities that are completly abandoned and rotting that all used to manufacture items. It's hard not to wonder what happened. Instead of working at those hard but well-paying jobs, those people get to work at walmart for minimum wage.

But how many would still be around without the outsourcing? It's a convenient thing for the politicians to blame but the reality is that most jobs have been lost to machines, not overseas.

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

#658

Post by sgc »

mrtksn wrote: post #643
IG_Semmelweiss wrote: post #634

Earlier quoted context omitted.

Your statement would be true without nuance. Yes. The mass of US consumers do benefit from penny subsidies of certain foreign product. However, for every penny of foreign subsidy benefitting US consumers buying finished iron or steel goods, a US metallurgist is losing a job somewhere. On strictly numbers, we are better off with foreing-paid subsidies yes, but there are losers, and they take the brunt of the downside.…

Good point but I think these are about the choices you make. You can choose to look after your metallurgist who become obsolete as a laborers but I'm sure they are amazing people. You might be worried for becoming communist or welfare state though. You can choose to limit trade and other freedoms so you can artificially keep metallurgists at work so you don't have to share what you have with them without exchanging s…

> who don't mean bad but just want to see the current order teared apart at any price.

That sounds like a terribly bad intention to me. Significant destruction of social order leads to either authoritarianism or anarchy. Neither are even remotely desirable. The only sane path to deep, lasting, but also healthy change is to systematically work on each specific sector - only dismantling while building something better at the same time. Otherwise you are just an agent of suffering. This pathological egoism does not qualify, even remotely, as "don't mean bad".

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

#659

Post by zaphar »

avidphantasm wrote: post #645
OGWhales wrote: post #638

Earlier quoted context omitted.

> MMT discourse tends to gloss over or ignore the dangers of runaway inflation and act as if you can borrow all you want with no consequence. I see people say this a lot, which is odd since as far as I have seen it's one of the main points MMT people make. I'm not sure how one of the core insights of MMT has become the main criticism of it, it's kind of funny. I suppose this is because some people have taken MMT to m…

Exactly. The power of MMT is that it credibly explains what taxes actually are (not a source of government funding, but control rods for inflation and a constant source of domestic demand for the currency that helps maintain monetary sovereignty) and how to make sure spending is productive and not inflationary (e.g. through the currency issuer being the employer of last resort, etc.). You might not like it, but if yo…

I have not seen an explanation that makes the case for taxes as a good tool for controlling inflation. This is sort of what I mean by the discourse ignoring inflation. We already know what how inflation happens. MMT doesn't bring anything new to the table here.

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

#660

Post by MaxPock »

IG_Semmelweiss wrote: post #634
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…

Your statement would be true without nuance. Yes. The mass of US consumers do benefit from penny subsidies of certain foreign product. However, for every penny of foreign subsidy benefitting US consumers buying finished iron or steel goods, a US metallurgist is losing a job somewhere. On strictly numbers, we are better off with foreing-paid subsidies yes, but there are losers, and they take the brunt of the downside.…

You might be losing as an individual but the country gains.
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