The Trade Deficit Myth

American Thinker ^ | March 31, 2016 | Thomas Nichta

[expat_panama]

Every purchase we make is trade. We trade to improve our lives and trade occurs only when both parties benefit from the transaction. Individuals and companies engage in trade; countries do not trade, as countries are just geographic areas with political boundaries.

The term “Trade Deficit” causes a lot of confusion and implies that one country is in debt to another country. This is not the case.

The “Trade Deficit (or Surplus)” used to be called “The Balance of Trade.” I do not know when or why the name was changed, but one possibility is that “trade deficit” sounds more ominous and gives the government a chance to address a problem that doesn’t exist...

...our employer has a huge trade deficit with you; that is, your employer buys all of your work, but sells you little or nothing. You probably have a trade deficit with your grocer; you purchase from the grocer, but your grocer has no need for your programming skills and does not purchase anything from you.

Similarly, the people of Massachusetts have a trade deficit with the people of Florida...

...trade keeps the customer the king.

One reason the reported trade deficit keeps growing is that foreign entities use those dollars to bankroll the National Debt/Annual Deficit rather than purchasing goods and services. When the government runs a deficit, the government has three choices: increase taxes, print money, or borrow money. The first is out of the question. The second can be used for a short period, but eventually the taxpayer feels the pain of price inflation. The third is the easiest option, especially when there are eager lenders. Maybe reducing the size of the federal government and its need to borrow would lead to “balanced” trade.

[expat_panama]

Some people have quoted Trump as saying that rather than being a "Free Traitor™" that he considers himself a "Fair Traitor™".  My guess is he never said any such thing but if anyone has an actual link please post.   To my knowledge he's also never gone in w/ the America First people (nor has he ever tried to invade Poland for that matter) and his slogan instead is "America Great", which not only avoids problems w/ "America First" but also has a lot more pizzazz than "America Nice".

Seriously I do agree completely that Trump's policies would be terrific for America, but (in case you haven't noticed) I try not to run off on some kind of sacred mission over it.

[cba123]

Our “mythical” trade deficit is about 20 trillion dollars, and both parties are completely at fault.

This is the main reason I am enthusiastically supporting Donald Trump this time.

Because EVERYONE ELSE IS SELLING OUT OUR OWN COUNTRY.

[combat_boots]

Truth

[dp0622]

This article is double talk BS.

there is SUCH A THING as a trade deficit, and that means a lot LESS goods are being exported than imported.

Many should read the 1920s document on Republcians’ stance on trade. Sounds more like trump than Romney or Ryan.

[baltimorepoet]

The false, underlying assumption of most economic theory is that people are rational and make rational transactions.

Drug addicts purchase heroin and overdose; obviously their behavior is not rational. Economics is bunk, just like astrology and phrenology (reading bumps on people’s skulls).

[Mollypitcher1]

How do such idiots get the right to preach their idiocy as if most of us don’t have a clue? Trump has it right and has my support without any ifs, ands, or buts. Our national security and our economy depend on regaining our lost sovereignty.
Go Trump.

[Vanbasten]

Excellent article, thanks for posting it. It breaks down the silliness of the ‘trade deficit’ for the layman, better than I could ever do.

Just as the budget deficit is a less important figure than the actual debt, and often used to confuse voters rather than enlighten them, the trade deficit is not the source of great American economic pain.

I’ll admit that it is not all positive. The worst probably being that inhumane sweatshops do exist in countries to produce goods for our economic benefit, but since this occurs in other sovereign countries, and the goods would just as likely be purchased by other western cultures, there is very little that can be done short of invasion.

[Daveinyork]

Trump doesn’t care about the trade deficit. He has his brand name stuff made overseas. When it’s his own money on the line, he knows there is no such thing.

[expat_panama]

 

Good morning all!  Headline: Stocks Rally; Breakouts Add Beef; Nasdaq Finally Tops 200-Day Line --that "beef" part has to do w/ Sonic doing well as with the entire restaurant sector.  Metals have  held up well too tho today's futures see them down today -0.76% in contrast to stock indexes up a bit +0,25%.   More reports:

7:30 AM Challenger Job Cuts
8:30 AM Continuing Claims
8:30 AM Initial Claims
8:30 AM Continuing Claims
9:45 AM Chicago PMI
10:30 AM Natural Gas Inventories

--and more FR theads:

• Who is "Economy in Crisis"?
• The WTO Has Put America on the Path to Becoming a “Colony” Again
• Trump angst pours in from overseas governments (lobbyists working for foreign govs)

--etc:

The Stock Market Does Not Believe Janet Yellen - Chris Matthews, Fortune
The Yellen Fed Can't Do Forward Guidance - Caroline Baum, MarketWatch
Why Wall Street's Quarter Is Really Bad News - Stephen Gandel, Fortune
Economics Is Much Easier Than You Think - David Gordon, Mises Institute
Our 'Trade Deficits' With China a Sign of Strength - Paul Brandus, USAT
The U.S. Economy Has Stalled, Again - Anthony Mirhaydari, Fiscal Times
Barney Frank Is No Fan of Bernie Sanders' Econ. - Isaac Chotiner, Slate
Wall of Trump Violates Property Rights - Randal John Meyer, Daily Beast

[wideminded]

your employer has a huge trade deficit with you; that is, your employer buys all of your work, but sells you little or nothing.

But hopefully your employer does have someone else to sell things to for more money that they pay their employees or they would go bankrupt.

It's usually not a good sign when you see "American Thinker" at the top of an article on FR.

[meadsjn]

Our “mythical” trade deficit is about 20 trillion dollars, and both parties are completely at fault.
This is the main reason I am enthusiastically supporting Donald Trump this time.
Because EVERYONE ELSE IS SELLING OUT OUR OWN COUNTRY.

And the lie just continues. The Free Traitors ignore the facts.

US citizens are taxed on their incomes. When millions of US citizens lose their incomes due to anti-American trade agreements, the remaining workers with incomes are taxed more heavily to provide for the newly unemployed. The 20 Trillion Dollars national debt is a tax burden to be imposed on future citizens as well.

The only beneficiaries of these unfair trade agreements are the establishment pukes of both parties. This is why they are pulling out all the stops to defeat the only candidate who proposes Making America Great Again. They are traitors to the USA and its citizens. They intend our destruction.

[bert]

The first thing one must do is quit reading obsolete stuff. It is not 1920, that was a hundred years ago.

Although many fear globalists, they completely confuse the interaction between companies that act as vendors and customers across national borders with the few that think there can and must be a government ruling all. The difference is that companies, even not so large companies, can interact across national borders by trading goods and services for money within the bounds of whatever local rule apply.

Those that use the term Free Traitor have no real understanding of what American companies both large and small can and do accomplish everyday in markets all over. They somehow take the actions of the foreign governments as a personal affront when it is not. Many American companies are lazy and fearful and therefore unable to engage in trade that could magnify their earnings. That fear becomes jealousy and vitriol

Part of the challenge of international trade is the very acts of engagement and wits with vendors and customers. Taken as a game, the daily challenges become sources of satisfaction and fun

[ReaganGeneration2]

We have a goods-out deficit, but a goods-in surplus. Our (printed) money flows out to China, their goods flow in. How are these freely done transactions inherently bad things? It’s not perfect, but it’s freely done.

Unlike the free defense we “export” to Europe and Asia, we get goods back.

[USS Alaska]

I’ll admit that it is not all positive. The worst probably being that inhumane sweatshops do exist in countries to produce goods for our economic benefit, but since this occurs in other sovereign countries, and the goods would just as likely be purchased by other western cultures, there is very little that can be done short of invasion.

Bullshit. Ronald Reagan, the "greatest of all conservatives" imposed a 45% tariff on all jap made motorcycles and saved Harley Davidson. When did Reagan "invade japan"?

Nations create the trade imbalance with their tax, regulation and trade policies and individual people always pay the price.

It's just like war, countries and politicians start them, and working, fighting class people get killed in them.

[Mollypitcher1]

Bullcrap! Obviously, you don’t understand the issue.

Our Manufacturing Base has been decimated by over-regulation, over-taxation,and union greed. Our government has KILLED our Goose that laid the golden egg, helped by out of control unions who bought and paid for politicians. Add to that the killing blow of so-called FREE Trade, the “deals” which shackle American business and send our jobs, money, and natural resources elsewhere, while penalizing us for defending our own country.

Trump wants our manufacturing freed from government overregulation, overtaxation, and wants control of free enterprise back in the hands of the people, AND he wants the EPA out of its power position which intends to destroy what is left of American business.

WHEN Trump clears the way for corporations and small business to return in America, his ties and shirts will once more be made in America. Why don’t YOU help him accomplish that instead of siding with the political idiots who have destroyed us in the first place. CRUZ VOTED FOR “FREE” TRADE. CRUZ VOTED FOR enabling the IRAN “DEAL.” CRUZ is a traitor to his “Adopted” country. Cuz is NOT eligible to run for president!

[cba123]

China is busy buying up American companies.

America is not buying up Chinese companies. America cannot buy up Chinese companies.

China doesn’t allow it.

Yet we allow China to buy up American companies. Why?

[ClearCase_guy]

Buying on credit is not smart.

Buy a computer for $1000. Put it on your Visa at 18%. Pay the minimum every month. In 5 years you will still be paying for that crappy 5-year old computer.

We print money and buy goods from China. The goods depreciate and we pay interest on the $20T that we owe. This is not smart. This is not clever. Sening out IOUs in return for foreign goods is dumb.

[major-pelham]

That sounded pretty lefty to me.

[central_va]

We used to make fun of debtor nations and trade deficits when we ran a surplus with the rest of the world. We did that to reaffirm the common sense that debtor nations e are losers. Now we have switched sides. How humiliating it is.

Only an anti American traitor could say this situation is not a problem? They can't....

[Mollypitcher1]

Obviously you are either ignorant or have no reasoning power if you believe the BS in the article.
Example: “Massachusetts has a trade deficit with Florida.”
Does it occur to anyone that both States are part of the United States and pay taxes to the United States? The wealth then is created and distributed within the bounds of the United States for said country’s benefit. WHAT benefit do we see by building up China by sending our wealth there and then having to pay interest on borrowing it back? China benefits, we don’t.