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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?

#681

Post by sorcerer-mar »

bumby wrote: post #669
sorcerer-mar wrote: post #663

Earlier quoted context omitted.

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 bec…

But you just said we effectively can't do it for narrow industries.

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

#682

Post by cryptonector »

hiddencost wrote: post #500
cryptonector wrote: post #468

Earlier quoted context omitted.

> You've fallen into the exact zero sum thinking trap that the parent comment mentioned. If investment causes the overall pie to be bigger, then both sides win with no tradeoff. The economy is _not_ a zero-sum game. The world economy is _not_ a zero-sum game. Trade very much _is_ a zero-sum game because all the exports of all the countries have to be equal imports in the others -- worldwide imports and exports must n…

? Trade is zero sum over what time with what metric? https://en.m.wikipedia.org/wiki/Comparative_advantage

I explained. Exports and imports must net to zero. It's very simple. It's very obvious. Start with a one-country world: no exports, no imports, zero. Then add a country, so now A's exports have to equal B's imports. Add a third, and keep doing this until you're convinced.

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

#683

Post by JumpCrisscross »

david927 wrote: post #672
JumpCrisscross wrote: post #347

Earlier quoted context omitted.

> 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.

Source? (I’ve been on holiday.)

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

#684

Post by zaphar »

h2zizzle wrote: post #656
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…

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 an…

Taxes don't remove money from the supply unless the government is refusing to spend it. In which case that is just "reduce your budget and spend less" with extra steps. If you could do one you could do the other just as easily.

And letting bubbles pop isn't an MMT thing. It's bog-standard economic theory. The fact that politicians often don't do it has nothing to do with which theory they subscribe to. It's just cowardice on their part.

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

#685

Post by mediaman »

mrtksn wrote: post #115
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…

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…

The idea that the hard goods are sold for "imaginary numbers" is popular but a bit of a misnomer.

These "imaginary numbers" are actually claims on future income generated by the United States economy. It is true that they are "imaginary", in the sense that any property ownership is imaginary in a way that a toaster is not. The most common form is Treasuries, which the government then pays interest on and which must eventually be either repaid or rolled over.

So it would be more correct to say that China is trading hard work building goods in exchange for claims on future US income.

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

#687

Post by abirch »

MaxPock wrote: post #660
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.…

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

This is the exact same as automation. We need to be sure that we take care of those who lose their jobs.

Truck Driver is one of the most popular professions in most states but the end is coming soon: https://www.cnn.com/2025/05/01/business/first-driverless-sem... you can imagine that they'll only need drivers that aren't on interstates or for inclement weather.

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

#688

Post by sorcerer-mar »

bumby wrote: post #671
sorcerer-mar wrote: post #648

Earlier quoted context omitted.

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.

In 1940 the US manufactured 3MM cars. In 2024 it manufactured 10MM. Seems like there's industrial capacity to go around?

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

#689

Post by rcpt »

rangestransform wrote: post #345
rcpt wrote: post #184

Earlier quoted context omitted.

Car infrastructure and sprawl is hugely expensive and we spend tons on it

Even alon levy disagrees that maintaining suburban infrastructure is a huge driver of spending https://pedestrianobservations.com/2024/10/07/taxes-are-not-...

"Even alon levy" is worded to sound like "all the experts" but if you read the article it's clear that he's taking a minority opinion.

And that's because he's wrong. The US spends huge amounts on car infrastructure. At every level of government numbers are just gigantic.

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