Posted on 06/21/2012 11:06:18 AM PDT by moonshot925
Imports certainly must be paid for; I was objecting to those who claim that the United States is borrowing money [financing] to do so. It isn't.
The government doesn't import goods, citizens do. And they either pay cash or borrow the money from the local bank and pay it back out of their earnings. The money China lends the U.S. government does not pay the bills for our imports from China. It funds the operation of the government.
They are two separate issues.
I live near the Canadian border. Now, I can buy my groceries in Buffalo, for example, and though I have a personal trade deficit with the supermarket, there is no addition to the national trade deficit. If I decide to cross over to Fort Erie, Ontario and buy my groceries there, I still have a personal trade deficit with the Canadian grocer, but now, interestingly enough, I've added to the national trade deficit.
Canada has financed nothing. I paid for it all.
If the government is truly worried about the trade deficit [it isn't,] it would set about to lower the costs of doing business in the U.S. so as to lower domestic prices. All trade takes place because of prices.
The US is able to pay for imports by exporting goods and services and because the US dollar is the world reserve currency. Billions of dollars have been printed or credited to overseas entities to buy imports. Most of these dollars remain overseas, used by virtually every nation on earth to trade with each other. Isn't it great to be an American?
Unfortunately, this free ride might be coming to an end. There are too many dollars overseas and there are too many foreign nations jealous of America's position and the seignorage it enjoys as a result of owning the world's reserve currency.
The creation of the Euro was, in part, an attempt to horn in on some of the seignorage the US dollar enjoys. The Euro experiment will end in a miserable failure and, ironically, might result in propping up, at least temporarily, the very US dollar it was supposed to replace or at least rival.
I, for one, wish it would. The short-term benefits have been great, but, in the long-term, the dollar's reserve status has allowed our government to indebt us and expose us to the risk of heavy price inflation. Bad moon rising.
There should have been a constitutional amendment to balance the budget. But, who needs the constitution anymore?
That's one thing politicians are good at, squandering.
I agree and, ultimately, it will have been a good thing. In my opinion, gold should be the international reserve currency but, despite the recent hype, I don't expect to see it until we've endured true misery.
Which we may.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.