Skip to comments.Thank Goodness for Trade Deficits
Posted on 12/04/2004 11:56:27 AM PST by rdb3
Agreed. Let's put this archaic concept on the old ash-heap right next to mercatilism and protectionism.
---while I don't claim to be an expert on international finance, "trade deficits" were an issue when I was in high school in the '50's and have apparently been largely negative ever since--
The real reason we have a weak dollar policy is so that Greenspan can keep interest rates low. The trade deficit gives a good political excuse to do so.
There's a more recent Federal Reserve study that found the same thing. Another thing not mentioned is the article, is the affect on the price of all that oil we import.
Should have put Walmart is Evil in the title. That way everybody would read this very good article.
At some point you have to make something that someone wants to buy. Really. You can try to justify trade deficits and deficit spending all you want, but they are really bad things.
That was a good idea!
For your reading pleasure.
I guess domestic buyers don't count.
We can't be a nation of middle-men. Look at the GAP, Banana Republic, Old Navy operation. They have minimal employees here in the states earning much money -- mostly they are sales clerks -- while all the manufacturing is done overseas.
What about Boeing and Catrpillar? What other country would you rather live in from and economic standpoint?
Boeing and Cat are good examples. There should be more of them.
There's no other country I'd rather live in from any standpoint, economic or otherwise.
That's why we run a trade deficit (capital surplus). Many people can't move here, but they can send their money.
You understand that we're sending money out and other countries are sending goods in, right? Our national debt is now 5 point something of the budget and rising, not counting private bonds, such as mortgages etc. that are held by the Chinese and Japanese. And that consumer debt, acquired in the purchase of imported goods, is at an all time high.
Debt is a sign of prosperity. If you borrow it means you are projecting hire revenue to pay for it.
Let's hope those projections come true, otherwise we're in for a world of hurt.
Straw man alert.
What the author above fails to understand (being generous and not presuming that he deliberately ignored facts) is that the Dollar isn't fairly valued.
That's the fundamental flaw of the crowd that is criticizing the current fall of the Dollar...that the Dollar was fairly valued in the past.
For decades, the U.S. Dollar has been artificially propped up by foreign governments and central banks. The U.S. has even *cooperated* with such behavior by coordinating currency interventions.
Now fast forward to today: all in the world that the U.S. is doing now is simply *not* intervening in the currency markets to aid Asia and Europe in keeping the Dollar propped up.
That's it. We're simply not continuing our old behavior of intervening in the currency markets to keep the Dollar overvalued.
In the absence of U.S. market intervention, Asia and Europe are left to hold up the Dollar on their own...and they simply don't have economies large enough to maintain that trick forever.
They want to keep the Dollar propped up, but they can only hoard U.S. Dollars for so long, and the more that the Dollar falls, the worse position those foreign governments are in (with regard to keeping the Dollar propped up). As the Dollar falls further, it becomes even *more* difficult for them to push it back up.
...And the more that the Dollar falls, the more expensive their exports to the U.S. become, making them less competitive.
Eventually, the Free Market will prevail and the U.S. Dollar will be fairly valued again (after a substantial fall from its earlier heights). At that point, the trade deficit will reflect a Free Market balance.
We're not quite there yet, however. The Dollar still isn't fairly valued. For one thing, the Chinese Yuan to Dollar peg has to be broken first.
But even when the Dollar falls to that Free Market valuation, it still won't be "cheap."
We're not talking about Argentina or Wiemar Germany here; we're merely talking about the Dollar finally becoming fairly valued again - instead of maintained at orbital altitudes.
"Boaz noted that he ran up trade deficits with his grocer, dentist, and department store, all of which bought nothing from him. On the other hand, Boaz had a trade surplus with his employer, along with the publisher of his book."
First sentence means that he bought items without paying for them (on credit). So that everyday he doesn't pay interest on these goods and services increase dramatically. Then these bills are handed over to the collection agency who hounds the poop out of him causing him stress and emotional turmoil until he goes to a doctor who prescribes high-cost medicine and those bills are eventually turned over to the collection agency too, causing further stress and emotional anxiety until he keels over with a heart attack. The trade surplus with his employer doesn't exist because if he doesn't work because of stress and anxiety, he doesn't get paid. When the man dies, the big loser is the publisher who advanced the cash and will receive not one iota on a book that will never be written.
Weird how that trade surplus and deficit works.
Actually I believe it's the lender that projects higher revenue for the borrower.
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