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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?

#671

Post by bumby »

sorcerer-mar wrote: post #648
int_19h wrote: post #578

Earlier quoted context omitted.

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 al…

How many aircraft was the US producing in 1940? What about 1945?

The increase in aircraft manufacturing during that period came at the expense of lost civilian automobile manufacturing. There were practically no civilian American cars made from 1942-1945. Same can be said for other industries. To a certain extent, this belies load shifting rather than increases in overall capacity like your statement may suggest.

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

#672

Post by david927 »

JumpCrisscross wrote: post #347
overfeed wrote: post #296

Earlier quoted context omitted.

> but indebtedness and the future having to pay up for the spending of the past The debt is denominated USD, the US mint could hypothetically print a trillion dollar note and settle the debts. Doing so would wreck trust in the existing system - so it's not just about the debt, but people tend to gloss over how much control the US has over the debt, so the indebtedness (in USD) is a relatively small factor overall.

> Doing so would wreck trust in the existing system It would cause immediate hyperinflation. Those notes would go to bondholders who would use it to buy things because holding billions in cash printed by a defaulter isn’t anyone’s cup of tea. So anyone willing to take even absurd amounts of dollars for non-dollar assets is offered absurd amounts. Which means those who didn’t get the helicopter drop find their currenc…

And this is a timely discussion. Yesterday the Fed held an auction for US Bonds and no one showed up, so the Fed bought it all.

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

#673

Post by ryandrake »

Joker_vD wrote: post #590
chii wrote: post #484

Earlier quoted context omitted.

> In 10-15 years, we could be facing skyrocketing unemployment The productivity growth from such new technology would induce more consumption, and induce _different_ consumption. These would produce new work opportunities. UBI is not necessarily the only solution. And to me, it cannot be a solution from which taxation is utilized to fund.

> The productivity growth from such new technology would induce more consumption Whose consumption? There is nothing impossible about a scenario in which there are about 2-3 millions of owners of fully automatic businesses and/or landlords who, with their total output combined, produce more than enough of anything needed for, or desired by, 2-3 million people. The only problem is that the rest of humanity would have…

The future is looking a lot like the movie Elysium, with a few million owners doing all the commerce, safely segregated away from a few billion have-nothings who are barely economically relevant.

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

#674

Post by Draiken »

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…

> pretend that this is a meritocracy

That is unfortunately all we do today. If you think our current system is a meritocratic one, do I have some bad news for you.

> You might be worried for becoming communist or welfare state though.

What does communism have to do with anything parent wrote?

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

#675

Post by ryandrake »

chii wrote: post #639
ta1243 wrote: post #585

Earlier quoted context omitted.

The wealthiest 10% of America have increased the ownership of wealth from about 40% in the 1970s to 70% today, with no sign of slowing. A typical HN techbro may not care because they're likely in the wealthiest 35 million, but the only way for the top 3 million / 1% to continue growing at the same rate once the bottom 90% have nothing more to lose is to take the wealth from the 32 million between 1% and 10%. It took…

wealth isn't a zero sum game. Not to mention that it's a false dichotomy to claim that the wealth increase could only have came from taking it from someone else.

The pie may be growing, but when the rich take proportionally more from the pie every time it grows, then to the poor, it might as well be zero sum. To use the other analogy: it's a rising tide, but only the rich have boats.

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

#676

Post by empath75 »

acyou wrote: post #514

I assume that the New York Fed would like Americans to be more patriotic, save more, and buy less cheap imported crap, that's why they wrote this article in this way. But it skates past a few key issues. 1. Consumption doesn't zero out, because domestic consumption in the USA is mostly spent in China, not in the USA. That is what contributes to the trade deficit, not lack of saving. 2. Asset price inflation contribut…

> Domestic saving is in no way equivalent to productive investment in the US economy. Are people keeping money in their mattress considered accounting discrepancies? Companies hoard cash like dragons. What investment in USA? Have you seen much new equipment or new factories? What investment means here is pumping up USA asset prices, it stretches the definition of the word investment to the absolute limit. Domestic saving just ends up as unused savings in an account somewhere, we don't have a good mechanism to put it to actual productive use.

This is completely nonsensical. Banks (eliding a lot of important details about money and loan creation) use money in those accounts to make loans, and a large percentage of those loans are used for investing in businesses and real estate. "Pumping up USA asset prices", I assume means "buying stocks", which also leads to investment by the companies who sold those stocks. Companies that "hoard cash" don't literally have piles of dollar bills somewhere. Apple, for example has billions of dollars of "cash on hand", but a large percentage of that is actually in bonds and other liquid assets that are investments, and not actually just a useless hoard. They keep pure "cash equivalents" on hand mostly for operations purposes.

> Funds from abroad don't finance business investment in USA. They are foreign funds snapping up American real estate and other hard assets.

This is literally what investing is. Where do you think that money goes? To the people who built those buildings and other assets. Do you think they just light the money on fire? No, they build more buildings and other assets to sell to foreign investors. And they are still productive assets in the US, with different ownership.

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

#677

Post by analog31 »

tastyfreeze wrote: post #666
analog31 wrote: post #640

Earlier quoted context omitted.

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.

The curve suggests that there would also be periods of inflation and deflation, for instance of a market basket of goods and services, under a gold standard.

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

#678

Post by benjaminwootton »

seanhunter wrote: post #649

The whole idea of balanced trade makes no sense at all. Take New Zealand as an example. Last year the major import from NZ to the US was wine. The major export from US to NZ was military hardware. Now. Why should the dollar quantity of wine you buy from someone equal the dollar quantity of military hardware you sell them? There really is no reason at all that the bilateral trade between countries should be balanced a…

Isn’t the bigger problem that the US has a population of 340 million, New Zealand has a population of 5 million?

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

#679

Post by selimthegrim »

hakfoo wrote: post #467
starspangled wrote: post #398

Earlier quoted context omitted.

> 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…

I suspect in many cases, the "value add" an American firm provides is an intangible. In the pre-tariff omnishambles world, I could buy a more or less equivalent widget for $18 branded with a recognizable American brand, for $12 as a KWJIBO non-brand delivered from Amazon, or for $6 more-or-less manufacturer direct from AliExpress. Amazon added $6 of value by saying "I can get it to you in a timely manner and offer a…

Well, I never thought that Toby Jones barbecue and foot massage would have a resurrection, but here we go.

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

#680

Post by jerkstate »

sorcerer-mar wrote: post #662
jerkstate wrote: post #641

Earlier quoted context omitted.

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?

It’s fallacious that manufacturing can’t be done competitively in the US, it absolutely can, but policy allows business owners to make slightly more profit by offshoring production, so that’s what happens.

Regarding fixing the infrastructure, I like that idea too, but the government is pretty incompetent and full of grifters so I don’t really think that’s an efficient way to get money to poor uneducated people - most of the money will go to consultants and non-profit directors and so on.

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