Posted on 12/14/2005 9:35:14 AM PST by Willie Green
TRADE DEFICIT: Formally termed a balance of trade deficit, a condition in which a nation's imports are greater than exports. In other words, a country is buying more stuff for foreigners than foreigners are buying from domestic producers. A trade deficit is usually thought to be bad for a country. For this reason, some countries seek to reduce their trade deficit by--
- establishing trade barriers on imports,
- reducing the exchange rate (termed devaluation) such that exports are less expensive and imports more expensive, or
- invading foreign countries with sizable armies.
ping
Patience my friend. One day when we are really into them, we'll attack. Or maybe not.
I see no problem with a large trade deficit? We still have infrastructure, we still have manufacturing capabilities, we just enjoy a more wealthy national lifestyle than countries like India and China who are experiencing the equivalent of turn-of-the-century America.
more good economic news masquerading as bad news.
I hope the deficit goes higher.
If trade deficits are so great, why don't we double them each year?
Give it time, we're trying the best we can.
Was your Nissan built in the U.S.?
The basic facts about international trade are not difficult to understand. What is difficult to untangle are all the misconceptions and jargon which so often clutter up the discussion ...
For example, the terminology used to describe an export surplus as a "favorable" balance of trade and an import surplus as an "unfavorable" balance of trade goes back for centuries. At one time, it was widely believed that an import surplus improverished a nation because the difference between imports and exports had to be paidin gold, and the loss of gold was seen as a loss of national wealth. However, as early as 1776, Adam Smith's classic, The Wealth of Nations argued that the real wealth of a nation consists of its good and services, not in its gold supply. Too many people have yet to grasp this, even in the 21st century.
If the goods and services available to the American people are greater as a result of international trade, then Americans are wealthier, not poorer, regardless of trade. As for gold, India had the world's largest supply of gold in 2003, but no one considered it the world's richest nation. Indeed it is one of the poorest.
Incidentally, during the Great Depression of the 1930's, the United States had an export surpluse - a "favorable" balance of trade - in every year of that disasterous decade ...
Or you could keep your money and listen to the rustle of bills in your wallet. That's if you think its better to have gold than goods.
Economists from Adam Smith to Milton Friedman have taught us that any decision to reduce imports involves a corresponding decision to reduce exports. We could reduce imports, but it would involve the economy falling into a recession.
Japan and Germany both have large trade surpluses. Would you prefer 15 years of Japanese deflation or Germany's 11% unemployment rate?
"Let London manufacture those fine fabrics of hers to her heart's content; let Holland her chambrays; Florence her cloth; the Indies their beaver and vicuna; Milan her brocade, Italy and Flanders their linens...so long as our capital can enjoy them; the only thing it proves is that all nations train their journeymen for Madrid, and that Madrid is the queen of Parliaments, for all the world serves her and she serves nobody."
(Prominent Spanish official - Alfonso Nunez de Castro in 1675)
I take it you work in something like finance.
"WASHINGTON - The U.S. trade deficit unexpectedly rose to an all-time high in October as oil shipments soared and the United States set deficit records with China, Europe, Canada and Mexico."
Anyone who calls an October increase in the dollar value of the trade defecit "unexpected" is a liar or a complete fool.
When do these morons think retailers are buying the goods they sell during the Christmas season?
A trade deficit is in general not something you want to have. We'd rather be having other people buy things from us. However, since we're by far the richest country on earth we're going to have a trade deficit.
The size of the trade deficit is a problem. It's a serious problem. However when the article starts off with an comment as stupid as an increase in the trade deficit in October being "unexpected", there's not likely much by the way of sueful or credible commentary to follow.
At this rate the deficit is running at an annual rate of 800 billion a year. That is too much. We are trading our future for spending now.
How about equal access to the Chinese market as they have here? Heck I'd settle to the same access to our own market as they have.
I take it you know little about manufacturing.
I think you meant to say that "A persistend multi year trade deficit that is an appreciable fraction of GNP is definitely not something you want to have.
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