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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?

#781

Post by _t9ow »

JackYoustra wrote: post #750
_t9ow wrote: post #550

Earlier quoted context omitted.

> only Singaporeans wouldn't consider that a tax Both forced savings and taxes are legally mandated by the government, but that does not mean that forced savings are taxes. Implementation details matter. Your money in your own CPF account accumulates interest (at decent/attractive interest rates that generally exceed inflation rates), and is then paid out tax-free to you after retirement. Additionally CPF funds are m…

Sure sure, my point is stuff like British national insurance and American social security are considered taxes, even though much of the money in expectation goes right back to you in retirement / health spending. In Singapore, the flows are similar, even though the accounts are broken out individually and the top-ups are explicitly done. In my view, the key is the government telling you what to spend your money on th…

> Whether they do so with labeled accounts or not seems more of an implementation detail.

I think this is an implementation detail of huge significance.

In the CPF system, your current contributions pay for your own future retirement. In the Social Security system, your current contributions pay for current retirees' retirement.

The CPF system is sustainable, because it truly is a savings scheme. The U.S. Social Security system is not, because it relies on having a tax base that never diminishes.

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

#782

Post by epistasis »

trade2play wrote: post #564
epistasis wrote: post #406

Earlier quoted context omitted.

It is utterly baffling to me that some Americans see the massive amount of free goods that they get as part of being the reserve currency with trade deficits, and somehow think "hollowed out manufacturing" rather than all that cheap stuff we get. The rest of those countries that are manufacturing things are far far poorer, and desperate to switch to industry higher up in the value chain, where the US is. And a half-a…

Play it forward a half century. Physical productive capacity is gone. Your global competitor is the de facto production hegemon. Debt has ballooned, and you can’t fund welfare programs. A big chunk of your country’s assets are owned by foreign investors. But yes, you got a lot of cheap things before the music stopped.

Play it forward half a century and the US has climbed on to the next generation of industry while all those holding our debt are still trying to catch up, our economy has grown so much that the "debt" seems small, and we are far far more productive than the rest of the world still.

The US has massive productive capacity in things where there's not enough supply and for which we gain a huge profit margin. We do not have massive productive capacity in cheap commodities with very low margins. This is a good thing. Switching our absolutely massive productive capacity into less productive jobs is a huge self-own.

If we have key industries, like food and computer chips, we subsidize them at a tiny tiny relative cost to the rest of the far more productive industries.

A small chunk of our countries t-bills are owned by foreign investors, something like 25%, and the biggest holder, Japan, is something like 3%. We are not in danger of being owned by foreign controllers, especially as long as we keep outgrowing all the other countries by keeping our workforce in highly productive areas instead of less productive areas like sewing T-shirts or assembling consumer electronics.

The biggest threat to our welfare programs, the biggest threat to the music stopping, is refocusing the workforce towards the industries of yesteryear. That's when we will stop outgrowing our debt and when we will face a world of hurt. And it's exactly where the masterminds in control are steering us right now.

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

#783

Post by chii »

rayiner wrote: post #729
ryandrake wrote: post #344

Earlier quoted context omitted.

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?

made do without some things - such as feature phones, and big tv screens.

People lived simpler. They had less material wealth, and was fine with it.

Will people today be the same? Judging by the amount of consumer debt and how much the buy-now-pay-later popularity grew, i dont think so.

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

#784

Post by pbhjpbhj »

starspangled wrote: post #768
pbhjpbhj wrote: post #602

Earlier quoted context omitted.

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.

Sorry, I made that hard to parse - "the dollar holders outside USA".

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

#785

Post by _1tem »

seanhunter wrote: post #769
_1tem wrote: post #746

Earlier quoted context omitted.

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…

The problem with trade deficits is that you eventually run out of money. It’s basic math. In what universe can you just keep spending more than your earn?

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

#786

Post by wkat4242 »

monkeyfun wrote: post #774
wkat4242 wrote: post #771

Earlier quoted context omitted.

> However, for every penny of foreign subsidy benefitting US consumers buying finished iron or steel goods, a US metallurgist is losing a job somewhere. The US consumers can't bear the prices of US craftspeople anymore. Their purchasing power will drop so much that they would wish they still had the deficit and access to AliExpress. And nobody in the US will want to do factory jobs anymore. Really who wants to screw…

You're overall correct, but made me notice that there is actually an unusually coherent argument (by their standards) being presented by the reactionaries pushing for the things you mention. It goes roughly like: >The reason these jobs are terrible is because immigrants are doing it for wages that would be intolerably low to anyone else. >This is also why it's hard to find a decent job in general, our competition is…

Well it's not just that but also the expectation that their wages will increase. The current government is only trying to drop the minimum wage (under the guise of minimum wage earners being losers/leeches which is a strange reasoning)

And very few Americans are actually unemployed. The disappearance of manufacturing is a process that started decades ago and most people have moved on to bigger and better things. So why would they be making more in a minimum wage factory job? They will be making less and without access to cheap Asian manufacturing they can do even less with it. I totally agree the idea of companies doing the right thing is wrong.

But yes the reasons we're doing better in Europe is that we're not giving free reign to companies and have good welfare systems. When people have less worries about their survival they spend more. Of course to Trump backers this is unthinkable because of 'socialism'. Yes it is socialist which is different from communism.

We do of course have similar problems (housing is a problem too and there is resentment of immigrants)

I think the problems here are less bad though because:

1) We don't have a two party system (except for the UK which is in a similar situation to the US). That means it's not a zero sum game. A loss for one isn't an automatic win for the other. So politics are more focused on the positive than kicking the other down. Also we don't have this powerful singular leader with the kind of power the US president has.

2) Right wing politics is more a religion than anything. Not in a god per se but in the narrative and leader. Its followers like being told what to believe. This works best on the poorly educated. We see the same here but because our education system is better (less difference in quality between poor and affluent areas), less people fall into that trap.

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

#787

Post by adrian_b »

seanmcdirmid wrote: post #765
adrian_b wrote: post #633

Earlier quoted context omitted.

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 u…

I have no doubt that China has stolen IP whenever they had a chance.

For example, Huawei was famous for draconic rules imposed to its employees in order to ensure that they could not take out any information from their computers and also that no information could be accessed by any visitor or by anyone outside working hours.

Presumably they were very careful with this because that is how they would have attempted to exploit a competitor.

Nevertheless, the many Americans who still believe that the Chinese success is based on stolen IP are completely delusional.

China has bought most of the IP with which they have started developments and not stolen it. Reckless companies from USA and EU have sold all that IP. Talking about "stealing" is just a tactic used to obscure who are the culprits, who have obtained nice financial gains from selling IP to China.

Moreover, in recent years China no longer has much to steal from USA, more the opposite becomes true.

If I look at recent research papers, even if there are also many published Chinese papers that are garbage, there also many that are very innovative, and such innovative Chinese research papers have become much more numerous than the innovative research papers coming from USA. The reason appears to be that the Chinese seem now willing to assume more risks, in searching paths that are uncertain to lead to useful results, while the research in USA seems to have become more conservative, striving to obtain immediate and guaranteed results, which however may not be able to exit a local optimal point in the space of solutions.

I assume that as research financing becomes more difficult, the research in USA will become even more conservative, diminishing its chances to compete successfully in innovations with China.

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

#788

Post by [deleted] »

ppseafield wrote: post #749
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

Look up 996. https://www.bbc.com/news/world-asia-china-58381538 https://www.technologyreview.com/2021/11/15/1039650/china-te...

[deleted]

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

#789

Post by southernplaces7 »

datavirtue wrote: post #722
abirch wrote: post #687

Earlier quoted context omitted.

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 participat…

>Teaching kids real fincial literacy and how to leverage derivatives

That was a very specific skill you named. What are you referring to though? Literally leveraging derivatives on that market or are you being metaphorical?

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

#790

Post by JumpCrisscross »

JumpCrisscross wrote: post #683
david927 wrote: post #672

Earlier quoted context omitted.

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.)

As suspected, “the Fed held an auction for US Bonds and no one showed up, so the Fed bought it all” is crap. The Treasury held an auction. It was weak but didn’t fail. The Fed, as required by law, did not participate in the auction.
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