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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?

#761

Post by bumby »

jerkstate wrote: post #747
bumby wrote: post #740

Earlier quoted context omitted.

With respect, I asked for data and you came back with “it seems obvious to me…” without citing any real data. I know enough to know people who make feelings-based arguments can’t be persuaded by data-driven discussions.

You can go find the data about the diminishing financial security of this class yourself - your only argument was an appeal to authority, btw.

A reference is not an appeal to authority, it’s an opportunity for you to verify the stance and poke holes in it if you have the capability to do so. You have the opportunity to use whatever authority you want and cherry pick data. I’m just asking for an effort that has some rigor beyond “I can’t prove it, I just know it’s true because my gut tells me so”

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

#762

Post by esseph »

herbst wrote: post #535
esseph wrote: post #69

Earlier quoted context omitted.

How many countries are US fast food franchises in? Music? Movies? Bleed over from US social media? There's something to that, I think.

Classic America centric view. Let me tell you some European view: You will find MC and BK nearly everywhere. Both selling hamburgers which are invented in Germany. Maybe subway is also kinda wide spread. The other chains aren't as common as you might think. Also all these chains are considered bad for your health and bad to environment, not something we are generally thankful for. Local charts are not dominated by US…

What you aren't disputing is that they are there.

Which does note a certain reach.

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

#763

Post by trod1234 »

zaphar wrote: post #659
avidphantasm wrote: post #645

Earlier quoted context omitted.

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.

> I have not seen an explanation that makes the case for taxes ... This is sort of what I mean by the discourse ignoring inflation.

I've not seen one that is properly based in reason either, most lines of thought in this vein typically use a strawman version of Say's law as the basis, following a deeply carved fallacy in economics from an early error of Keynes.

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

#764

Post by nec4b »

ta1243 wrote: post #64
rayiner wrote: post #14

Earlier quoted context omitted.

Or we would have automated assembly faster—the investment in which would’ve been counted in domestic investment offsetting the trade deficit, right? I’m trying to verify my mental model of what’s going on.

OK lets assume the entire chain is automated and you don't need to employ anyone. The factory can go anywhere, in China, in France, in California, in North Dakota. What benefit is that to the average American citizen?

America will gain the know-how how to make such factories and maintain them. Use the knowledge and experience to make more such factories in other fields. A whole industry can grow around it. Do you think factories in China pop-up like mushroom after rain by them self and there is no industry and jobs associated with building highly automated production lines?

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

#765

Post by seanmcdirmid »

adrian_b wrote: post #633
seanmcdirmid wrote: post #490

Earlier quoted context omitted.

The IP is important. Not only did you use $50 in parts, but the design, software, and marketing were done in the states. One critical flaw in MAGA thinking is that these inputs are worthless: the full value of an iPhone comes from China because that’s where it was assembled even if most of the value was actually added in the USA. China wants to be on the other side of the value chain as well and really don’t mind swa…

The value of the American "IP" consists more in the might of the US government than in the actual value of that "IP". A few years ago, Huawei was in a clear path of becoming the biggest producer of smartphones in the world, with smartphones that by now were based on their own IP, including CPUs and modems, even if Huawei had started 20 years ago by buying smartphone IP from companies like Siemens (which had been reck…

China is definitely getting there, no doubt. They won't be a place where assembly just happens anymore, it will be more like robots assemble things and people mostly focus on IP/software/etc...

The fairness of the competition between American and China in IP, I'm sure if you are heavy on one side or the other its obvious, but to me it seems like there is truth in China stealing secrets and there is truth in America using quasi-military actions to protect what is basically a monopoly on a segment of high-value goods. But whatever you think, what Trump is doing now ultimately benefits China and hurts America in the short and long term.

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

#766

Post by a123b456c »

trod1234 wrote: post #760
JPLeRouzic wrote: post #665

Earlier quoted context omitted.

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

It is well known and established that stats favor rhetoric, and by extension lack credibility as fact. If you can't guarantee the expected methodology conformed in collection, bad data in causes bad data out, its worse than no data at all.

Occasionally, I wish I commented often enough to get downvote privileges.

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

#767

Post by skissane »

bobthepanda wrote: post #743
sgjohnson wrote: post #548

Earlier quoted context omitted.

SDRs exist only on paper. Regular individuals or companies can’t deal in them.

What is in the SDR is public information, so if you wanted to track them, it's not that hard. https://www.imf.org/external/np/fin/data/rms_sdrv.aspx Part of the problem with a currency basket is figuring out which currency basket weighting you actually want to use, and maintaining it. USD just exists.

> What is in the SDR is public information, so if you wanted to track them, it's not that hard.

The problem is the contents of the basket changes every 5 years. It is trivial to build your own “emulated SDR” just by holding appropriate amounts of the underlying currencies; but the problem is that in 2027 the IMF is scheduled to change the weights of the basket again; that means you may have to execute some (potentially very big) currency transactions to rebalance your “emulated SDR” to match the real one, and there’s a risk you won’t be able to do so at the rates the IMF assumed when it decreed the reweighting, especially since it doesn’t use spot rates, it uses 3 month average rates.

One option is to treat each edition of the SDR as a separate currency, so you might offer 2022 SDR and 2016 SDR in parallel. Another would be to have your “eSDR” aim to converge to parity with the SDR in the long-run, but allow it to temporarily deviate from parity whenever the basket updates.

SDR issued by the IMF don’t have this problem-whenever the definition changes, they all update accordingly-they are to a certain degree a “fiat” currency. There are two problems though-the first is that only sovereign states and certain international organisations established by treaty are legally allowed to possess them, private individuals and companies cannot. Some would like the IMF to change the rules to allow private ownership, but the US always blocks that because they are afraid of the SDR competing with the USD as the de facto global currency-and the IMF’s rules were architected to give the US a veto over all major decisions. The second issue: if you legally own SDR, you can take them to the IMF and ask to swap them (e.g.) for USD, and the IMF will work with the US Fed to ensure the transaction happens at the current official USD-SDR exchange rate. The problem is, the IMF rules only let holders carry out these transactions under quite restrictive conditions, meaning the SDR isn’t in practice freely convertible with its basket currencies-again, the IMF could loosen those rules, but the US would likely veto it.

Ultimately, some kind of private edition-based SDR emulation, or even a continuous emulation which closely tracks the SDR but temporarily diverges from it around reweighting time, is entirely feasible for a private actor (such as a bank or ETF issuer) to issue. I think the main reason why they don’t, is there just isn’t market demand for it - and an emulated SDR issued by a private actor is potentially at the regulatory mercy of the country to which that private issuer belongs, to a much greater extent than real SDRs would be.

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

#768

Post by starspangled »

pbhjpbhj wrote: post #602
starspangled wrote: post #517

Earlier quoted context omitted.

Many countries control their currency and can print money to pay debts, and can control their fiscal and monetary policies to best gain advantage for themselves. And they do. US can do some things more, bigger, longer, etc., for various reasons. Just like Australia can do more, bigger, longer, etc., than Tonga. I don't really see anything profound being said here. USA might be in some advantageous position now, and i…

When Aus print money they devalue the currency, spreading the cost over all Aus dollar holders. When USA do the same, the non-USA dollar holders also take on the cost, same-same, excepting that is everyone around the World who trades in dollars. Which comes back to USA's military-industrial complex to some extent. It's like having the ability to steal a gram from every gold bar in the World.

> When USA do the same, the non-USA dollar holders also take on the cost

They don't. If they aren't holding USD or something pegged to it then it is not devalued.

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

#769

Post by seanhunter »

_1tem wrote: post #746
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…

You misunderstood: balanced trade is about the sum across all countries, not necessarily between any two countries. There can be a trade imbalance between NZ and the US without an overall trade deficit in either country. The point is, that NZ might sell wine and buy fighter jets, but they have to sell enough wine to the rest of the world to pay for the fighter jets, then their trade is balanced. There’s no problem if…

I didn't misunderstand at all. There is no reason to expect bilateral trade to be balanced and thus there is no reason to expect the aggregate of a large number of bilateral trade relationships to be balanced.

"Nothing, however, can be more absurd than this whole doctrine of the balance of trade, upon which, not only these restraints, but almost all the other regulations of commerce are founded. " Adam Smith, "Wealth of Nations"

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

#770

Post by wkat4242 »

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…

> The solution is a non-national global reserve, calculated on a basket of national currencies. This was Keynes argument at Bretton Woods, but the US would not have it then, and does not want it now.

The US is getting that now whether they want it or not. The financial confidence in them has been destroyed by the insane off-the-cuff trade tariff jumps and I don't think it will ever recover. The trust in the dollar is gone, it's just not so obvious yet because financial systems don't get changed in a day. It's a slow ship to turn but it's also slow to turn back. Europe is now working on replacing the Visa/MasterCard duopoly which currently backs all our payment cards. It'll take a while but when it's there it will never come back.

Even consumer confidence (and affinity) is now gone and I see a lot of people proudly avoiding American products and services. Tariffs or not, this will only increase the deficit. You can't force people to buy your stuff, not if you so strongly advocate a free market.

Even when there's hopefully a sane president again, the US has shown it's always possible there'll be another Trump out of the blue that screws things over again just from one day to the next. Financial markets can't handle that huge risk. The world is going to move on from trusting the US.

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