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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?

#661

Post by NoMoreNicksLeft »

beeflet wrote: post #465
s1artibartfast wrote: post #227

Earlier quoted context omitted.

Just because there is a soft power upside does not mean that it is a net positive. I often see this stated without any form of quantification. It is essentially a matter of faith.

The net upside is maintaining the market that allows for a trade deficit in the first place. The problem is really that the two aren't directly linked. If you operate at a trade deficit, you don't need to manufacture at home. But if you can't manufacture at home, you can't build war machines efficiently, so you can't be the world police and ensure the market needed to operate at a trade deficit. By defunding the mili…

Unfortunately, at some point the people who are trading products for dollar bills will catch on that there's nothing that they can buy with the dollar bills that are worth the value of the products they sent across the ocean. When that happens, people will stop accepting the dollar bills as payment... but by that point, you've hollowed out your manufacturing to such a degree that you can't ever start it back up. So you can't trade for those products (no products of your own to trade), you can't purchase them (your own currency is worthless), You can't purchase them with other nations' currencies (nothing to sell for that), and you can't make the products yourself.

But "soft power". We traded long term prosperity for the short term ability to meddle in other people's countries and lives.

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

#662

Post by sorcerer-mar »

jerkstate wrote: post #641
sorcerer-mar wrote: post #397

Earlier quoted context omitted.

Outside of a few strategic industries or products, why is this bad?

I’m going to offer a less defense-oriented point of view: manufacturing jobs are more lucrative than service jobs that are available to uneducated people, and allow them to live a more prosperous, happy life. More of these jobs is a net benefit for society.

If you want a jobs program just say you want a jobs program. Instead of churning out uncompetitive widgets how about we tax the wealthy and employ people fixing our infrastructure?

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

#663

Post by sorcerer-mar »

bumby wrote: post #626
sorcerer-mar wrote: post #624

Earlier quoted context omitted.

That was in the premise of the question. Obviously if you don't have a secure supply chain for all the parts of a jet, you don't have a secure supply chain for a jet.

It’s probably hard to silo a modern weapon system in the way your question supposes, meaning it may not be a good premise.

By that logic, I guess we oughta onshore everything right? Lest there be a forgotten screw that we don't produce.

And yeah, engineering a market economy is hard (read: impossible). That's why it's largely a fool's errand to try to do it comprehensively.

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

#664

Post by ggandv »

oblio wrote: post #625
ggandv wrote: post #618

Earlier quoted context omitted.

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.

What China is not do Communism in any shape or form. It used to be back in Mao's days. Now it's just capitalist authoritarianism. What you are mistakingly calling "capitalism" that China should adopt is... democracy.

I’d argue. The CCP isn’t ideologically opposed to democracy but rather capitalism. Capitalism is an inherent feature of democracy. They despise capitalism (the Communist Party) even though they will play the long march and use it to subvert and destroy non-Communist ways of life.

Edit to add link: https://en.m.wikipedia.org/wiki/Ideology_of_the_Chinese_Comm... (“views on Capitalism”)

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

#665

Post by JPLeRouzic »

Buttons840 wrote: post #653
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.…

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?

I have interacted with Chinese people in IT for a few months, and they worked 5 days per week. I don't know how many hours they made per day.

Another interesting stat is that they live longer on average than US people.

And until recently, men retired at 60 and women at 55 yo.

https://www.bbc.com/news/articles/cpd9v48yn8ro

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

#666

Post by tastyfreeze »

analog31 wrote: post #640
tastyfreeze wrote: post #478

Earlier quoted context omitted.

Whatever people buy. If you are looking at the dollar value of gold you have to look at what a dollar would buy that year. That is the value. You will find that a similar amount of gold buys the same amount of things throughout time regardless of the dollar price. Another way to say that is that the dollar price of gold is correlated with the cumulative inflation of the dollar0 over time.

Thats the inflation adjusted curve, meaning it's what gold can buy relative to what a dollar can buy.

In 1900 a 20 dollar coin contained 0.9675 ounces of gold. An ounce of gold was legally defined as $20.67. No free floating gold price. A dollar coin contained 1.672 grams of gold.

1900 $1 is equal to 2025 $172

So a single dollar today will buy 1/172 of what it would in 1900. That is inflation. Not an inflation adjusted curve. Just the drastic devaluation of the dollar.

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

#667

Post by mrtksn »

sgc wrote: post #658
mrtksn wrote: post #643

Earlier quoted context omitted.

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…

Sure its bad but its worse for those who have it good. Also, people don't plan or predict every outcome, they just want change and when that change is denied that's how we have civil wars. It all starts with a peaceful protest or some petty grievances and keeps growing when ignored or dismissed.

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

#668

Post by codingbot3000 »

maeil wrote: post #213
codingbot3000 wrote: post #43

Earlier quoted context omitted.

Adam Smith already pointed out that a trade deficit is not really interesting, so I do not understand the American obsession about it ;) Also, the often-mentioned US-EU trade deficit is not that big if you count in services. Which I think should be done in the 21st century. Large parts of the US economy are focused on digital high-value services, and they are "exported" worldwide.

> Also, the often-mentioned US-EU trade deficit is not that big if you count in services. Which I think should be done in the 21st century. Large parts of the US economy are focused on digital high-value services, and they are "exported" worldwide. This is why, in case of reciprocal tarriffs on physical goods, the US ends up the big winner - they don't apply to digital services, which are a huge part of US exports. N…

Really good point. As a EU citizen, I hope the commission had at least the balls to put a retaliatory DST on the table in private. But I doubt it.

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

#669

Post by bumby »

sorcerer-mar wrote: post #663
bumby wrote: post #626

Earlier quoted context omitted.

It’s probably hard to silo a modern weapon system in the way your question supposes, meaning it may not be a good premise.

By that logic, I guess we oughta onshore everything right? Lest there be a forgotten screw that we don't produce. And yeah, engineering a market economy is hard (read: impossible). That's why it's largely a fool's errand to try to do it comprehensively.

This is a bad faith argument, and I think you know it. There is a wide gulf between “just a few industries” and “everything”. The first is naive and the latter is impractical. My suggestion is we take a targeted stance, where the solution resides in that gulf.

And for what it’s worth, your screw argument belies a poor understanding, especially given your example of a jet. Aerospace parts are notoriously expensive because we want to track and manage the entire supply chain. That’s why an airplane screw can cost $1k, when naive people assume you can just pick up an equivalent part at Home Depot.

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

#670

Post by codingbot3000 »

tonyhart7 wrote: post #58
codingbot3000 wrote: post #36

Earlier quoted context omitted.

See answer above - the EU is less "debt-fueled". But I also think that EU producers are more competitive. The US has a strong tendency towards local monopolies which are bad for export competitiveness.

"The US has a strong tendency towards local monopolies" also the problem is US is one of the largest market in the world, if you can conquer US market. you can pretty much do that elsewhere essentially monopolize an entire world

As you say - in software a US monopoly is usually a ticket to export success. Not so much in other markets. There is a reason the US telcos haven't found much success abroad as opposed to European or Arabian telcos, but prefer to milk off their less competitive home market.
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