[blueberry12]

"We're by far the richest nation on earth. Doesn't it stand to reason that the nation with the most money will have the most to spend?"

Yes, but a growing trade deficit means that US dollar is going overseas and foreign products are coming in. So, money is going out of the US which means we have less and less money to spend. Am I wrong?

"Every international transaction that Americans engage in will, by definition, leave both parties to the transaction believing they are better off than before - otherwise the transaction would not occur. By this measure, the 'balance of trade' is always positive, benefiting the nation as a whole."

Yes, but trading does not mean that in the end both parties will profit. Both parties may be better off RIGHT NOW; but as time passes, they find out who had a better deal. If it were true that both parties profit from trading, then nobody would lose money on Wall Street, for example, because both parties (sellers and buyers) would end up with a profit. That sounds impossible...

[Jaysun]

Yes, but a growing trade deficit means that US dollar is going overseas and foreign products are coming in. So, money is going out of the US which means we have less and less money to spend. Am I wrong?

Yes, but trading does not mean that in the end both parties will profit. Both parties may be better off RIGHT NOW; but as time passes, they find out who had a better deal. If it were true that both parties profit from trading, then nobody would lose money on Wall Street, for example, because both parties (sellers and buyers) would end up with a profit. That sounds impossible...

This may not be a perfect example, but I can't think of a better way to explain it. Let's say you get a job for the first time and your income is $500 per week. After a few weeks you decide to go to the mall to get some things for your apartment, and let's say that you spend $50, and you continue to spend $50 per month at the mall. Now you're running a "trade deficit" of -$50 per month and the mall is running a "trade surplus" of $50 per month. After working three years you get promotions and raises and now you're making $2,000 per week. Let's suppose that by now it's not abnormal for you to spend $750 at the mall every month. Your "trade deficit" has grown - it's 15 times higher than it was just 3 years ago!

The fact is that you're spending more because you're making more. The fact that you're able to spend $750 per month on the things you want and need is a positive thing - it shows that you're doing well. The flip side of that is your loser pal from high school. He doesn't work and he never has. He also has a very low "trade deficit".

So it is with America.

Does that make sense?