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Net 'capital inflows' doesn't mean what you think they mean. They are a liability. A debt. Which is why the continued U.S. import habit is representing a net reduction of U.S. savings and wealth.

Okay then, let me just pin you down as long as you've spelled it out the way you wanted to. This so-called liability does not necessarily have to be debt - a bond purchased by a foreigner, for instance. The 'capital inflow' [I'll leave it between the '' for your edification] can be a bond, yes, but it can also be an equity or it can be plant/property/equipment. You're with me so far, right Mr. Ross?

Okay, so when an American individual or business invests in a foreign bond, a foreign equity, or foreign plant/property/equipment, it becomes a 'capital outflow' [again, for your edification I place this in between '']. The flip-side of this capital outflow amounts to a reduction in the so-called trade deficit. In other words, it decreases the absolute amount of the Net Exports number and makes it less negative. Still with me, Mr. Ross?

When the 'capital outflow' is used for Foreign Direct Investment by Americans to purchase foreign PP&E or to purchase a foreign stock or to purchase a foreign bond, this investment abroad leads to creating jobs in foreign countries - jobs that could have been created in America instead.

So, in short, Mr. Ross, you mistakenly believe that a trade deficit hurts us on one hand but then pine away because of the consequences to the very same balanced trade objectives that you advocate so strongly for. You cannot have it both ways.

Okay? Now, lets' review what I wrote to Unseen in post #512:

Say, did you know that American capital that flows out of the United States and into other countries (purchasing things like production facilities and the subsequent outsourcing of some production that used to be done domestically) actually helps to balance our trade deficit? This must make you a closet supporter of outsourcing and of the principle that Americans should be buying up foreign assets a.k.a. Foreign Direct Investment.

And here was your reply to me after chiming in (post #514):

I'm sure an outsourcer...and their import-lobby apologists... would glibly claim that.
Let's see your empirical data.
And then explain how we really don't have a trade deficit.

To which, in post #515, I wrote:

Net exports are equal to net capital outflows and, conversely, net imports are equal to net capital inflows. I have stated, many times to you, in fact, the last portion of that sentence. You have never disagreed with it before and now all of a sudden when I state the first portion of the sentence, you just now call B.S.?

After all of this, the final reply from you to me is your conclusion in which you wrote:

You got it precisely backwards. Net Trade Imports don't increase our capital. Our well-being. They are a capital liability. Hence They reduce it and our savings of it. GDP is also confirmed to be directly reduced by a trade deficit. Y=C+I+G+NX Translated: GDP = Consumption + Domestic Investment + Governmental Spending + Net Exports. In these equations, a negative number for NX, the net exports, lowers GDP 1 for 1.

I'll ignore your complete lack of understanding of what happens to Y through changes to C, I, and NX...I'll only stick with one issue for now. Based on what you wrote and they way I'm letting you frame the debate, the only logical conclusion is to run trade surplus with other countries, buying up their assets and creating the same economic conditions abroad that exist in America today, right? Because, according to you, we would make the foreigners worse off then they are now. That's is a correct assessment of your sentiment, right?

If this is indeed true, you should celebrate when foreign production facilities open with American provided capital and that those things that were once made here in America are now made abroad because an American business would be getting a better rate of return on their investment. You must, therefore, be in favor of outsourcing.

And, you must also celebrate if, instead of direct investment, an American buys a foreign bond and lends money - indirectly - to a foreigner who either wants to purchase a home or who wants to start or expand his business - a business that may just compete with a domestic producer for the global consumer.

What if the American buys a piece of property and rents it to a foreign resident? How do you feel about that? Shoot, what if it is purchasing a foreign equity, making the foreign firm even more leveraged to finance their business activities? What then, Mr. Ross? Let me know if I've got any of this wrong when you respond to this post. You've spun yourself into your own web, Mr. Ross, how are you ever going to spin yourself out of it?

Oh, one more thing; must I really provide you emperical evidence now to bak up what I wrote earlier concerning Net Exports being equal to Net 'Capital Outflows'?