Posted on 08/12/2010 9:47:57 AM PDT by NetRight Nation
We live in an odd world. All too often, good news is turned on its head and made out to be bad news. Such good news that is often dragged through the mud is the trade deficit widening. Each time that it is reported to widen, the news organizations and the protectionists come out and trash the news. But what is so bad about having a trade deficit?
For starters, a trade deficit occurs when a nation imports more than it exports. Currently, the U.S. imports more than it exports. Protectionists argue that more imports than exports harms American jobs and business. However, such arguments fail to understand the law of supply and demand.
When a nation has higher imports than exports that sends a couple of important signals.
First, it indicates that it is cheaper to meet demand by importing goods from other places. Division of labor across the globe creates efficiencies that are realized when imports help meet the demand of those in the marketplace. There is nothing wrong with this. It simply means that there is such a high demand for certain goods that companies around the world are finding ways to help meet that demand.
Second, the current trade deficit in the United States indicates that it is cheaper to produce goods outside of the nation than inside of it. This could be due to all of the following factors: labor unions, high minimum wages, taxes, government regulations, etc. While protectionists argue that jobs are lost because of outsourcing to companies overseas, they are never looking at the causes of those jobs leaving. The production of certain products is simply not worth the cost in America. Importing the goods from overseas is a good thing in this case as it saves the consumer money.
Just think of the trade deficit this way. If a consumer goes to a deli to purchase a sandwich, does a trade deficit occur between the person consuming the sandwich and the company that makes it? If we followed the protectionist arguments, it would. But they would never say so. When the company hands the sandwich off to the consumer, they are not receiving a sandwich back in return. Both parties though receive what they want. The company wants to make money and the consumer wants to spend money on a sandwich. No trade deficit here.
And the same goes with the United States. Consumers wanted their goods at a certain price and overseas exporters were able to meet demand. There is no true deficit in the relationship between the companies and the U.S. consumers that do business with them.
Besides, as long as the federal government is going to impose outrageous taxes on American businesses, enforce a minimum wage that prices workers out of the workplace, and support the thuggery of Big Labor, the supposedly evil trade deficit that delivers cheap goods will remain commonplace and deliver cheaper but quality goods to all consumers.
Adam Bitely is the Editor-in-Chief of NetRightDaily.com for Americans for Limited Government.
Read more at NetRightDaily.com: http://netrightdaily.com/2010/08/the-trade-deficit-widening-should-be-praised/#ixzz0wPWk5mUq
Authors like this are one of the biggest problems we have. We are _transferring_ our wealth by the trillions to foreign entities, enemy states. That same transferred wealth returns to lead USA by the nose, buying everything in USA, such as our government, corporations and institutions.
When we buy something we need to have a clue about what impact it has on our own country. The price of something isn’t it’s actual value. It’s value is better measured by the good/bad it does. Putting USA citizens out of work for selfish convience. Destroying our wealth. Obvious to me.
Cheaper prices for consumers, but the consumers don't have jobs, which have been exported to China. We have tens of millions of uneducated and unskilled labor and we import over a million more each year thru our immigration policies. Where is the money going to come from to support our welfare and entitlement systems?
The companies are in business to make a profit. It has nothing to do with some phony euphemism about "finding ways to help meet that demand." They are sending their factories into places like China and India to get the cheapest labor possibile in order to maximize profits. That is well and good, but with 25 million Americans looking for full time employment, one wonders where the jobs are going to come from, especially for the unskilled in the US and the millions more pouring across our borders, legally and illegally.
You forget the fact that Americans can’t afford ot buy certain products from American companies. It’s simply to expensive. And, what are the enemy states that sell you stuff?
As the old saying goes, “Where goods cross borders, armies don’t.”
You forget the fact that Americans can’t afford to buy certain products from American companies. It’s simply to expensive due to all sorts of factors including your government and Big Labor. You forget that the true enemy here that you are upset over is those factors.
And, what are these enemy states that sell you stuff?
As the old saying goes, “Where goods cross borders, armies don’t.”
Oddly, people seem to be buying stuff irregardless of employment status. Perhaps if business wasn’t taxed to death and Big Labor wasn’t allowed to run rampant, jobs wouldn’t go overseas.
I agree up to a point. There is no way we can compete with Chinese and Indian labor, which pays pennies and is supported by the government. I have been to India and China. We are exporting entire factories, modern in all respects, to produce the stuff. Lowering taxes and controlling US labor costs aren’t enough. And look in the future for many technical and other high skilled jobs to go abroad. China and India are producing first rate college graduates in huge numbers. They will be cheaper than Americans with equivalent skills.
Consumption is going down in this country. We are going to have a lower standard of living as we go further and further into debt. Debt servicing costs are $20 billion a month now and that will increase dramatically once interest rates go up as we try to borrow more and more money. 43 cents of every federal dollar spent is borrowed now.
That's because you're ignorant of economics.
And that's obvious to me, as it is to many of us.
Trade deficits have ruined our economy. If we had balanced trade or tariffs we would not be in hock to China for the Treasuries they obtain because we import more than we export. We don’t ship back gold to balance, we send other countries ownership of America.
I’m not quite sure you understand what a trade deficit really is.
A trade deficit is prima facie evidence that we are simply inflating at a higher rate than our trading partners. Dollars flow out; foreign goods (at less inflated prices) flow in.
Foreign exporters holding our U.S. dollars cannot spend them in their respective countries; they eventually must exchange them for their own currency. If laws permit, they will often exchange the U.S. dollars they hold for gold — thus, during a trade deficit, the dollars eventually flow back into the U.S. but gold flows out. International trade agreements in the past have often required that foreign countries “peg” their respective currencies to the value of the dollar; foreign exporters cannot get rid of the U.S. dollars they have for gold, but must directly exchange dollars for their own native currencies. Foreign central banks often have to create more of their own currency in order to have enough to make the exchange — thus, trading partners end up by inflating their own currencies. What this amounts to, in essence, is that we actually do have an important export: we export inflation.
Assuming, for the sake of argument, that foreign exporters are not buying U.S. gold (perhaps as per trade agreements), they will be forced at some point to inflate their own currencies at the same rate as the U.S., and that will equalize the trade deficit; for at that point, their goods will also be more expensive, and will no longer be a competitive threat to expensive U.S. goods.
Wrong. If the federal government balanced its budget, there wouldn't be any Treasury Bonds for the Chinese to buy! Don't blame a trade imbalance for something it did not create.
China is our enemy. What kind of people pay for their enemies modernized military? A military which will be used against us when the capability level makes it worth the risks. The predators are going to have a wonderful time taking what wealth remains by force.
Your defense of trade deficits is insufficient. Trade deficits cause job losses here with the corresponding loss of taxes, bankruptcy, and unemployment costs to government. This country did well economically when we were an exporting country as today other exporting countries are.
We have to produce more of what we import. It is the only path to prosperity.
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