Buffett: America's Growing Trade Deficit Is Selling the Nation Out from Under Us [pdf] (2003)
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Re: Buffett: America's Growing Trade Deficit Is Selling the Nation Out from Under Us [pdf] (2003)
#2(2003)
Re: Buffett: America's Growing Trade Deficit Is Selling the Nation Out from Under Us [pdf] (2003)
#3The salient part:
> The time to halt this trading of assets for consumables is now, and I have a plan to suggest for getting it done. My remedy may sound gimmicky, and in truth it is a tariff called by another name. But this is a tariff that retains most free-market virtues, neither protecting specific industries nor punishing specific countries nor encouraging trade wars. This plan would increase our exports and might well lead to increased overall world trade. And it would balance our books without there being a significant decline in the value of the dollar, which I believe is otherwise almost certain to occur.
> We would achieve this balance by issuing what I will call Import Certificates (ICs) to all U.S. exporters in an amount equal to the dollar value of their exports. Each exporter would, in turn, sell the ICs to parties—either exporters abroad or importers here—wanting to get goods into the U.S. To import $1 million of goods, for example, an importer would need ICs that were the byproduct of $1 million of exports. The inevitable result: trade balance.
Re: Buffett: America's Growing Trade Deficit Is Selling the Nation Out from Under Us [pdf] (2003)
#4The important part is that this doesn’t seek to force a zero trade deficit on a per-country basis. Imagine insisting Cambodia has to buy as much US goods (taking into account the type of goods the US exports) as US companies import from Cambodian factories.
Re: Buffett: America's Growing Trade Deficit Is Selling the Nation Out from Under Us [pdf] (2003)
#5The important part is that this doesn’t seek to force a zero trade deficit on a per-country basis. Imagine insisting Cambodia has to buy as much US goods (taking into account the type of goods the US exports) as US companies import from Cambodian factories.
Buffett's suggestion, while elegant, would require that Congress passes legislation on this, which there's zero percent chance that it would, in its present state.
Re: Buffett: America's Growing Trade Deficit Is Selling the Nation Out from Under Us [pdf] (2003)
#6Paper with some simulations and a tweaked version of Buffett's idea: https://www.levyinstitute.org/pubs/wp_538.pdf
Re: Buffett: America's Growing Trade Deficit Is Selling the Nation Out from Under Us [pdf] (2003)
#7The salient part: > The time to halt this trading of assets for consumables is now, and I have a plan to suggest for getting it done. My remedy may sound gimmicky, and in truth it is a tariff called by another name. But this is a tariff that retains most free-market virtues, neither protecting specific industries nor punishing specific countries nor encouraging trade wars. This plan would increase our exports and mig…
I am not sure this would haves worked since the return of the US stock market was quite high (due to that constant influx of foreign investment notably) compared to any other asset for people/businesses that wanted to invest their profit.
Also due to the reserve nature of the USD the dollar and international trade mostly done in USD there is a huge demand for dollars keeping it strong compared to other currencies. This fundamentally is at odd with an export driven economy.
Re: Buffett: America's Growing Trade Deficit Is Selling the Nation Out from Under Us [pdf] (2003)
#8Interesting point. I hadn't thought of it this way before:
> But imagine that the Japanese both want to get out of their U.S. real estate and entirely away from dollar assets. They can’t accomplish that by selling their real estate to Americans, because they will get paid in dollars. And if they sell their real estate to non-Americans—say, the French, for euros—the property will remain in the hands of foreigners. With either kind of sale, the dollar assets held by the rest of the world will not (except for any concurrent shift in the price of the dollar) have changed.
> The bottom line is that other nations simply can’t disinvest in the U.S. unless they, as a universe, buy more goods and services from us than we buy from them. That state of affairs would be called an American trade surplus, and we don’t have one.
> But under any realistic view of things, our huge trade deficit guarantees that the rest of the world must not only hold the American assets it owns but consistently add to them. And that’s why, of course, our national net worth is gradually shifting away from our shores.
Re: Buffett: America's Growing Trade Deficit Is Selling the Nation Out from Under Us [pdf] (2003)
#9The salient part: > The time to halt this trading of assets for consumables is now, and I have a plan to suggest for getting it done. My remedy may sound gimmicky, and in truth it is a tariff called by another name. But this is a tariff that retains most free-market virtues, neither protecting specific industries nor punishing specific countries nor encouraging trade wars. This plan would increase our exports and mig…
I am not sure this would haves worked since the return of the US stock market was quite high (due to that constant influx of foreign investment notably) compared to any other asset for people/businesses that wanted to invest their profit. Also due to the reserve nature of the USD the dollar and international trade mostly done in USD there is a huge demand for dollars keeping it strong compared to other currencies. Th…
> Also due to the reserve nature of the USD the dollar and international trade mostly done in USD there is a huge demand for dollars keeping it strong compared to other currencies. This fundamentally is at odd with an export driven economy.
What if the Dollar weren't the world's reserve currency, either due to deliberate policy by the U.S., or the inevitable fact that the U.S. economy will shrink as a share of the world's economy as India and China develop?
Re: Buffett: America's Growing Trade Deficit Is Selling the Nation Out from Under Us [pdf] (2003)
#10The salient part: > The time to halt this trading of assets for consumables is now, and I have a plan to suggest for getting it done. My remedy may sound gimmicky, and in truth it is a tariff called by another name. But this is a tariff that retains most free-market virtues, neither protecting specific industries nor punishing specific countries nor encouraging trade wars. This plan would increase our exports and mig…
If I understand this correctly, it would effectively be the same mechanism as carbon offset credits where carbon emitters can purchase credits from entities working to reduce carbon emissions.
I think that there could be some downsides to this because the US exports a lot of agricultural goods which are already subsidized as it is.