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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?

#751

Post by oblio »

ggm wrote: post #446
aeternum wrote: post #437

Earlier quoted context omitted.

This is a common soundbite and an unfair simplification. Non zero sum games often still have winners and losers. Also a positive sum trade deal for both sides does not mean it is the best trade deal.

"best" is highly subjective. It certainly might not deliver the highest dollar value across the exchange. The reason for this highly unfair soundbite is that most international trade treaty processes are designed NOT to favour one economy over the others and use "most favoured nation" language to try and put equity on the table. Thats before the US enters the room: My reading online in years past says that every econ…

> Trump and his negotiators are not remotely interested in fixing problems globally, they're fixing their own vision of internal problems.

Look at their pharma complaints. Pharma companies (many of which are American, but far from all) develop new drugs. In single payer systems, these behemoths have to go against state managed insurance systems, which generally set specific rules for purchasing (maximum price, etc). As these pharma companies WANT to sell in all the markets they can, they accept these rules. As a result, drugs made by them cost, let's say, $100 in those countries.

In the US, where pharma companies are still behemoths, they can divide et impera insurance companies, so pharma companies pretty much impose their prices, leading to absurd stuff like fancier insulin costing $1000.

Now, instead of working to reduce costs in the US, too, Trump & co want to INCREASE the cost of these drugs globally.

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

#752

Post by oblio »

ggandv wrote: post #664
oblio wrote: post #625

Earlier quoted context omitted.

What China is not do Communism in any shape or form. It used to be back in Mao's days. Now it's just capitalist authoritarianism. What you are mistakingly calling "capitalism" that China should adopt is... democracy.

I’d argue. The CCP isn’t ideologically opposed to democracy but rather capitalism. Capitalism is an inherent feature of democracy. They despise capitalism (the Communist Party) even though they will play the long march and use it to subvert and destroy non-Communist ways of life. Edit to add link: https://en.m.wikipedia.org/wiki/Ideology_of_the_Chinese_Comm... (“views on Capitalism”)

The CCP is the single party of China. How are they "ideologically" not opposed to democracy? Democracy requires a multi-party system.

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

#753

Post by JackYoustra »

AnIrishDuck wrote: post #414
hahajk wrote: post #394

Earlier quoted context omitted.

some one really need to explain this in a way I understand, because this sounds very much like "free lunch". Matt Levine explained it as exporting debt ("The US is better than anyone at manufacturing financial instruments"). He also said we get computers in return for entries in a database. This sounds... untenable? too good to be true? a shakey foundation on which to build an economy?

The entries in a database are IOUs. The US will have to return something at some point, but as we have complete control over our own currency, the terms of the deal are... very flexible on our side. It's effectively a bet on China's part that (1) it's worth it to build their own industrial base and (2) the US won't renege, at least severely, because of the consequences. Worth noting that the current proposals to furt…

It's a lot more than this, right. People want dollars because people want dollars, their motives we can guess at but don't know with certainty. With all likelihood it's to buy US G&S (which is very similar to investing in the US) but it could also just be to have dollars to trade amongst each other.

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

#754

Post by JackYoustra »

neilwilson wrote: post #439
JackYoustra wrote: post #382

Earlier quoted context omitted.

> There isn’t the income There's always the real income, the probably is usually just the price rigidity! Most rich economies have no problem with this (the US and the EU can just adjust interest rates, which are comfortably above zero, to accommodate trade balances). Ironically, China is the biggest culprit here: their interest rates are way, way too high given their inflation and unemployment. This is unfortunate,…

There can’t be or China et al wouldn’t be selling their stuff for mere promises. People don’t swap bananas for apples. They sell them for money, and money is retained for its own benefit. Failing to treat money as its own exchange product is the problem. The world is not run by interest rates. It’s run by monetary flow, retained in its own right for insurance, status and mercantile purposes.

they would be, it's called saving.

Every day I sell my stuff for promises of being able to get stuff for free tomorrow. It so happens that China has a ferociously large savings rate as a consequence of a terrible social safety net - there's a lot on the literature of this, Brad Setser is a good person to read regarding this.

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

#755

Post by jampekka »

chii wrote: post #629
jampekka wrote: post #569

Earlier quoted context omitted.

USD became the reserve currency in the Bretton Woods, when it was pegged to gold and major currencies were pegged to USD. This was pretty much demanded by US in the Bretton Woods conference. In 1971 US unilaterally scrapped the Bretton Woods and essentially stole the gold reserves. Other countries protested heavily but could not really do much. US then transitioned to the petrodollar system where demand for and value…

The gold reserves wasnt stolen - it is the US's gold that was acquired as a result of WW2. The revocation of the convertability of the US dollar to gold was suspended because it became impossible to honor it due to the increase in the amount of circulating dollars (what people generally call printing - it isn't "printed", it is debt created that produced more currency). And imho, while it seemed like other countries…

The situation was similar to there being a gold ETF that just decides to remove the gold peg and start diluting the shares. Whether that's essentially stealing or not is a matter of terminology IMHO.

US for sure didn't do it out of goodness of their hearts even if it led to arguably better monetary system. And US did get lopsided benefits out of it. Consistently recieving more goods than you give out is a huge benefit.

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

#756

Post by maest »

542354234235 wrote: post #739
datavirtue wrote: post #722

Earlier quoted context omitted.

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…

> People who lose their job need to take care of themselves. This feels incredibly simplistic. Taxpayer dollars go into funding tons of research that has led to automation improvements. Why shouldn’t taxpayers get some sort of return on that investment? When the US government negotiates trade deals, the money the country “saves” could go anywhere, to anyone. Why does almost all of it go to companies and not taxpayers…

> Taxpayer dollars go into funding tons of research that has led to automation improvements. Why shouldn’t taxpayers get some sort of return on that investment?

But I am getting return on my investments: shipping costs will go down and, as a result, the toilet paper I've ordered online will be 5c cheaper and arrive 2h faster.

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

#757

Post by nuancebydefault »

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…

What you are advocating is almost pure kapitalism. Its unfair/unbalanced as much as pure socialism is inefficient.

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

#758

Post by Flemlo »

mmillin wrote: post #607
Flemlo wrote: post #598

Earlier quoted context omitted.

I don't think domestic manufacturing works anymore. The pressure to automate will just skyrock. I'm more for a global currency which will be given to everyone who does certain jobs we can't automate away or don't want to like nursing, teaching. Everyone around the globe can get worldfiat when they do these jobs. We need to start thinking beyond known capitalism in a modern highly automated world.

There are important reasons to have domestic manufacturing even if automated and not creating jobs.

Sure but that's not enough to give people enough jobs.

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

#759

Post by trod1234 »

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…

This is not really accurate.

National currency as the defacto reserve currency does not necessarily guarantee a trade deficit. It just happens that way in history quite often, but it is unsustainable throughout the currency lifecycle.

> The solution is a non-national global reserve ... Keynes argument.

Keynes was wrong about a great many things which weren't really recognized until after the 1970s. His depiction of Say's law (and the disproving caricature of it which meant nothing), as well as the related actual failures of monetary policy in low interest rate environments, where his theories indicate contradictory outcomes.

I'd like to know why you think this would be a solution. It is not an obvious stance, and in fact the suggestion has been discounted in the past as impossible/intractable for a large number of reasons. First and foremost any system would be fundamentally unstable, and the risk of economic contagion unmitigated, there are cultural, sovereign, and other influences at the intersection of fiscal and monetary policy.

Most of the issues under that proposal are caused by the lack of economic calculation being possible, and growing chaos, and its a problem where the indicators lag behind the wave, so it comes without warning, or possibility to react.

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

#760

Post by trod1234 »

JPLeRouzic wrote: post #665
Buttons840 wrote: post #653

Earlier quoted context omitted.

How does the life of a US metallurgist who works part time at a grocery store compare to a Chinese metallurgist who is working 70 hours a week doing metallurgy?

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.

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