I have a huge trade deficit with Kroger.. I buy several hundred dollars worth of groceries from them every month. As far as I know Kroger has never spent a dollar with me?
How long do you think I would continue to exist if I decided to end my trade deficit on food purchases by not buying any food unless the grocer spends the same amount with me?
There are only two possiblities. First we buy from a foreign country. We give them dollars in exchance for goods. We know they are not buying goods from us. Thus we have a huge trade deficit. So is the transaction over when we are giving them pieces of paper with green ink on it, and in return we get goods like shirts, shoes, furniture, oil and gasoline?
HOW DARE THOSE DAMNED FOREIGNERS TAKE OUR PAPER MONEY IN EXCHANGE FOR THINGS AND THEN DON"T MAKE US GIVE THEM ANYTHING BUT GREEN INK ON PAPER IN RETURN?
Can you imagine how ticked you would be if you bought my home and paid me with a check I never cashed? I can just hear you screaming... " I have title to my new home and I paid you with a $300,000.00 check and you never cashed it. No one is going to screw me like that.!!!! I DEMAND YOU CASH THAT CHECK!!"
Of course the other possiblitiy is that they do spend the money we give them. They don't hide it under a matress. The facts are they buy services from us and invest in our nation. Services and investments are not counted in the trade deficit.
We are in the process of becoming a service providing nation. A hundred years ago we transistioned from a farming nation to a manufacturing nation. But since the middle of the 20th century we have been transistioning to a service economy. Every year since the 1950s the percentage of our workers engaged in manufacturing has declined.
Between 1880 and 1920 about 80 percent of our workers had to find new occupations. They changed from being farmers to being factory workers and service providers.
If we demand that Nations buy manufactured goods from us in order to sell us manufactured goods neither will happen. They will sell their goods elsewhere and buy their services else where.
It was the Republican party in the late 1920s that thought the way to greater prosperity was to limit imports. They passed the Smoote Hawley tarrif act. It brought on a world wide depression that lasted until world war II and its repeal.
There are only two things that can be done with money we pay foreigners for imported goods. The people that get that money can save it or spend it. If they save the money, our nation in effect got the goods with out payment until they do spend the money. If they spend the money it comes back to this nation.
Just as the money I spend for food goes into the nations economy. That economy provided the wealth that gives me my next months pay check.
But if you would like to sell me your house and then never cash the check I give you for it, I am willing to let you punish me that way forever.