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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?

#721

Post by aaronbaugher »

cogman10 wrote: post #717
germinalphrase wrote: post #632

Earlier quoted context omitted.

I do not think that labor sentiment has a strong impact on whether or not jobs are automated away. Go watch an old movie from the 40’s or 50’s that features a hotel. The number of small, niche jobs that existed are surprisingly numerous by modern standards: porters, elevator operators, switchboard attendants, and so on. Busy places employing a lot of people. This was undoubtably true across industries, and we have au…

This sort of automation along with consolidation has been the death of small cities and towns in the US. It's basically what's mostly killed my own small town. My hometown, with a fairly consistent population of about 300 people, used to have a restaurant, bowling alley, full-service station, hardware store, bar, and grocery store. In my childhood, the restaurant, grocery store, and hardware store were still around.…

I come from (and still leave near) a similar-sized town, and it went through the same process. And my dad remembers when it had even more businesses than I can remember, with movie theaters and the like.

It's actually gotten a little better in the last decade, I think because people got some hope again that jobs might come back, and because remote work meant fewer people were driving to the bigger town down the road every day, so there became more of a market in the small town for things like a grocery store or Dollar General-type store again. There are also more home-based businesses, started by people who work full- or part-time remotely and put their spare time into starting a local business.

But in the 90s/2000s, it was nothing more than a bedroom community for the town 20 miles away, which was sad. It's still nothing like it once was, but at least there are some signs of life now.

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

#722

Post by datavirtue »

abirch wrote: post #687
MaxPock wrote: post #660

Earlier quoted context omitted.

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.

People who lose their job need to take care of themselves. That's the only way it works. You can only make it easier on them and enable success.

Teaching kids real fincial literacy and how to leverage derivatives is an approach to solving this problem (most adults can't even grok a check book). Save while you can and preserve and multiply your wealth.

In the typical truck driver world they have zero market participation other than selling their labor and maybe a 401k stuck in money markets or bonds, no derivative strategy and zero clue on what saving for retirement entails or how the money is leveraged in retirement. They do understand that they plan on working until they die but that isn't likely to pan out either.

We have a <100 IQ population living in a 120 IQ world and have created a meat grinder with all these tech and tax laws. You shouldn't have to work for 40 years.

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

#723

Post by chasd00 »

fakedang wrote: post #619
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.

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, Chin…

> The US economy still hasn't "rebounded" from the effects of the 2008 recession

This is a true statement lost on many people who don't remember. The chickens coming home to roost are not from the actions taken during COVID but from the 2008/9 bailout. That's when the whole ZIRP regime started and ran for over a decade. COVID added fuel to that fire but, really, the 2008/9 bailout "kick the can down the road" policy is to blame. We're back to the can and out of road to kick it down.

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

#724

Post by datavirtue »

pjmorris wrote: post #692
MaxPock wrote: post #660

Earlier quoted context omitted.

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

Chris Arnade wrote a book, 'Dignity', traveling and talking with 'back-row' Americans about the individuals who have had the losing end of how the US economy has been run. I also think of James McMurtry's song 'Can't Make It Here Anymore.' Lastly, I'd wager anyone who's on the winning end of the US economy can drive half an hour out of town and find empty storefronts and rundown houses. If the purpose of the country…

In the 1920s almost the entire countryside of small towns evaporated to the major cities and urban sprawls.

Since the 1950s anyone has been able to find empty towns in all directions.

There are some slight variations but most populations across US small towns peaked in the early 20th century.

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

#725

Post by JCattheATM »

ljosifov wrote: post #537
JCattheATM wrote: post #210

Earlier quoted context omitted.

> non-US-ian FYI better not to use silly terms like 'US-ian' as they are confusing and cause problems while solving none. Just stick to the standard 'American', context makes it clear what you mean :)

Haha :-) - fine, hope no offence taken. :-) (none was intended) It came with the flow, flow was - US-... -Government, -Citizens, -Dollar, and then when it came to "people of the world that are not US citizens" (but are users of US dollars) programatically is seems to my compute mind, it came as "non-US-ians" fits that set of people well, and plus tallies with the "US-this-and-that" of the wordings prior. I'm original…

It's all good man, appreciate your comment :)

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

#726

Post by pjmorris »

AnIrishDuck wrote: post #411
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"?

What other system of value are you using here? Bottle caps? Nostalgia? While the dollar remains the global reserve currency, this is just a wild theory of trade. If the $450 of value was so easy to extract, why wouldn't China simply assemble it in their own country and take the whole pie? (they clearly already do this everywhere they can)

> If the $450 of value was so easy to extract, why wouldn't China simply assemble it in their own country and take the whole pie?

As someone else pointed out, they do, under various odd brand names.

You make what seems like an obvious point. However, The iPhone is assembled in China for the ballpark cost you mention, and sells for double the $450 price you mention... so they must have reasons to not take the whole pie.

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

#727

Post by 0xBDB »

zaphar wrote: post #684
h2zizzle wrote: post #656

Earlier quoted context omitted.

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 cowa…

> In which case that is just "reduce your budget and spend less" with extra steps.

I'm pretty sure the extra steps are the point, in that I simply don't believe the MMT folks expect them to ever take place.

It's not a coincidence it's an American theory, from a country where it's politically almost impossible to raise taxes. Otherwise it would just be a roundabout way to raise taxes and pay for stuff in reverse order. But in fact it isn't "buy now pay later". It's "buy now YOLO LOL". But hey, maybe I'm missing something.

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

#728

Post by Ray20 »

pbhjpbhj wrote: post #606
Ray20 wrote: post #567

Earlier quoted context omitted.

>Isn’t automation easier to face with population decline than with population increase? No? These things do not seem to be connected in any way.

Please explain your position here?

By population decline we mean a depopulation scenario, when the birth rate falls, the number of young people decreases, while the proportion of elderly people increases?

Automation can create a dynamically changing labor market. Today you had a job, tomorrow it is automated, you need to find another job, learn new skills required for it, and all of this.

Not a problem for the young (especially since automation increases the general standard of living, so young people will often find that their new job pays better).

But older people find it more difficult to adapt, learn new skills and find their place in a changed world.

And then there is career growth. Imagine an elderly gentleman who has spent 30 years building a career, accumulating valuable experience, and is USED to receiving a huge salary for his qualifications... And he is told that he has been replaced by a video card, his skills are now worth nothing on the market, and in the job available to him he will now be paid the same as a snotty 20-year-old yesterday's schoolboy. Do you think this won't become a point of social tension in a situation where there aren't many young workers?

There is also a solidarity pension system, which creates a greater burden on workers the smaller the proportion of young people and the greater the proportion of old people.

And in the scenario of a population decline with a simultaneous increase in living standards - this will create enormous social tension, when the shrinking working class will ask itself: why should we give more and more of the money we earned with our sweat and blood to old people who were unable to save for their old age when were younger?

Even if no one voices this as an official slogan, it will still be implied in political decisions and will boil down to at least the fact that old people will be denied an increase in their standard of living ("because we are already giving them more and more, but look at what a terrible world they left us, and now they want to live in luxury at the expense of our sweat and blood?").

But with the aging of the population, the proportion of old people will increase very much, and, if we are talking about democratic regimes, their political influence will be increased.

And the situation, when we have a confrontation between a shrinking productive minority and people who do not produce anything, but have power over them and live at their expense - can end badly. It will definitely end badly. Like, really badly

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

#729

Post by rayiner »

ryandrake wrote: post #344
rayiner wrote: post #342

Earlier quoted context omitted.

That’s a different argument. The point above was that americans would not accept the quality of life sacrifice involved in manufacturing domestically. But they did quite recently, in a time period that is broadly viewed as a very good one. Now you can argue that the cheaper prices we have today is even better and worth the lost factory work. But that’s a different argument than saying domestic manufacturing isn’t fea…

I'm saying that Americans will not accept the quality-of-life sacrifice of their labor being competitive with the current price of similar labor in Asia. It doesn't matter what the past competitive landscape looked like, as we're never going back to it without market-distorting tariffs, which bring with them their own problems. Americans will not work for $2-$4/hr which would be required in order for American-made go…

So what did we do in the 1990s?

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

#730

Post by tialaramex »

philistine wrote: post #718
tialaramex wrote: post #401

Earlier quoted context omitted.

No, in order to win a war, it must have a clear objective which can be successful. The US is terrible at this because the objectives of war by a democratic country will be set by politicians, who've never seen an objective which couldn't be made vaguer. Operation Iraqi Freedom had so many sub-objectives key military leadership didn't even agree what the goals all were - and even then some of those goals are nonsense,…

Under your premise that you must have a clear objective to the exclusion of other things, Russia would have handily won its war against Ukraine years ago. Their objectives are very clear.

It's a necessary but not sufficient criterion.
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