Posted on 04/02/2016 12:15:50 PM PDT by Kaslin
Donald Trump says the problem in the United States is that "we don't win anymore." Trade is his favorite example, based on our longstanding trade deficit. But in one big area, America is a big global winner, year after year. That little-known fact exposes the basic, fatal error in Trump's lament.
What he overlooks is that this country is one of the most inviting places for people abroad to invest their money. Since 2001, foreign direct investment in the United States has more than doubled. Last year, foreigners bought $11 trillion worth of stocks.
They also wanted other assets -- nearly $1.4 trillion in U.S. Treasury bonds and almost $1.2 trillion in corporate bonds. We may run a deficit on the trade side, but we consistently boast a surplus on the capital side. That's a good thing.
What explains it? One attraction is the strength of our institutions. We offer advanced financial markets, secure property rights, the rule of law, political stability and low levels of corruption in both the private and government sectors.
This year, the World Bank ranked the U.S. seventh in the world for "ease of doing business." That gives us a leg up on almost every other country, including such feared competitors as Germany (15), Japan (34), Mexico (38) and China (84). These indicators, the World Bank says, "have huge long-run implications for an economy's health, performance and growth."
Another lure is the comparative vigor of the U.S. economy. Since 2002, our GDP growth has consistently outpaced that of the European Union and Japan. Faster growth heightens the advantages of being located in the world's biggest market. The dominant role of the U.S. dollar also helps. It is the closest thing to a global reserve currency, held in large quantities by foreign governments.
People in much of the world save more of their income than we do, which means we buy more stuff than they do. That makes the U.S. a great place to sell cars, shoes, toys and computers.
One fact that Trump and Bernie Sander never mention is that our trade imbalance is all in goods. When it comes to services -- such as travel, banking services, royalties, legal advice and education of foreign students -- we export far more than we import. In each of the past five years, our surplus in services has exceeded $200 billion.
Services are important because they account for most of the world economy and are steadily growing. Since 2000, their share of global output has expanded from 67 percent to 71 percent, while industry and agriculture have shrunk. The same pattern is evident even in China.
The continuing stream of money from overseas keeps the U.S. capital account perpetually in surplus: Foreigners lend and invest more here than we lend and invest elsewhere. Americans benefit because foreign capital builds factories and stores, creates jobs and minimizes the cost of government borrowing.
Why is all this important? Because the inflow is a big and almost universally overlooked cause of the trade deficit. Think about it: If foreigners want to buy land or buildings or bonds in the U.S., they need dollars. To get dollars, they have to sell to Americans.
The little-known secret of international commerce is that foreigners can't invest more here than we invest abroad unless they also sell us more than we sell them. This is not a matter of academic theory. It's a matter of accounting.
The late economist Herbert Stein wrote the entry on "balance of payments" in "The Concise Encyclopedia of Economics." "A deficit in the current account is always" -- always -- "accompanied by an equal surplus in the capital account, and vice versa," he noted.
Confronting that simple fact means recognizing that the trade deficit is merely the flip side of a healthy phenomenon. If no one wanted to invest here, we'd be running a trade surplus -- and we'd regret it.
What economists at the Federal Reserve Bank of St. Louis noted in 2006 remains true today: "Capital account surpluses, and therefore current account deficits, are being driven primarily by foreign demand for U.S. assets" -- not by unfair trade practices, cheap foreign labor or currency manipulation.
Trump and Sanders see trade in terms that are simple, vivid and wrong -- as a competition in which exports are victories and imports are defeats. They think we are losing, but they don't know how to keep score.
Yes, and this is why we back a business man instead of a Hack writer or politician.
No problem, imported tech is so cheap you're still way better off. Ask any Free Traitor.
We certainly disagree. I do not believe that Trump has demonstrated an understanding of international trade and economics beyond the very limiting scope of his personal business. Trump produces goods in Mexico. Will he be the first to bring jobs back?
How will trade deals make corporations bring jobs back to the US? What wages will be offered by the corporations to US workers?
I said it was a start. If the cost of goods imported overseas remains absurdly low, US workers simply can’t compete.
Acknowledging there is a serious problem is essential. Republicans have lost many working class people because of it. Democrats at least give them something to chew on in their blissful unemployment.
We’re in the early period of liberal ascension and dominance that will last as long as it can, until we can’t afford it anymore. I figure at least well into the 2060s.
It doesn’t matter because they will shut him out at the convention. Not sure if he can run independent on several fronts, so don’t worry about Trump.
If we did have a chance to elect him, I was OK with him on a learning curve.
No candidate has been president before, they all have strengths and weaknesses.
What I trust in Trump is his intentions.
That would have been good enough for me.
Cruz won’t make it the nominee either, BTW.
In Donald’s history and business lesson today in Racine was currency manipulation. Oh wait, Donald doesn’t talk about specifics. This was only one topic he talked about and explained to his supporters. NATO and TPP hit on too besides many other topics for us uneducated supporters.
“Trump lacks a basic understanding of economics and trade.”
Howls, Sheila. Howls of derisive laughter.
“Building a casino and hiring a bunch of illegal aliens to work for you does not translate into managing a national economy.”
It translates a lot better than any amount of classroom time being taught by some drooling socialist idiot.
“He says he is going to bring overseas jobs home. How?”
Really? You can’t figure that out?
“Corporations look to give their shareholders value”
Corporations have used that excuse to operate with absolute freedom from honesty or ethics.
“Will Trump bring jobs back to have US citizens work for the same wages as they do overseas?”
Nope.
“He is unraveling and looked like a fool on the Chrissy Matthews interview.”
Trump is learning fast, but he has yet to come to terms with the utterly despicable character of his opposition.
“Matthews laughed in his face.”
Matthews has read his Alinsky.
Oh, how I wish Matthews would laugh in my face someday soon.
If Cruz or Trump is not the nominee, the GOPe and the party is over.
That makes us a colonial bank not an industrial or economic power.
You answered:"Really? You can’t figure that out?"
My point is that Trump can't figure it out and cannot do it without force. Are you claiming that you have a plan? LOL!
Corporations exist to make a profit- I guess you don't approve.
I think it is now a uniparty of elites all backing Hillary and the eventual globalization they have been pursuing for decades.
All of them have been signing the UN treaty crap since the first George Bush.
Mic drop!
So we buy cheap crap from China, and they buy up our assets? There’s a win-win if I ever heard one.
Get the US out of the UN and the UN out of the US, I always say.
Only the Hildabeast with the backing of the GOPe can save us.
You’re fired.
Stock rises.
Wall Street loves layoffs
Totally moronic since is does nothing for many Americans at all. Americans who would rather rejoin the workforce and do for themselves in jobs that pay decent wages. These types of jobs are leaving our shores in droves and all you can tout is this country is one of the most inviting places for people abroad to invest their money.
Well I guess it isn't the same usual lame claim that we get cheaper goods, which aren't really cheaper at all. Once you figure in the lack of quality requiring replacement sooner rather than later, and the additional taxes to support people without jobs those savings are quickly lost. Then when you calculate the erosion of buying power brought on by printing more and more money and adding to the national debt, those savings evaporate altogether.
“My point is that Trump can’t figure it out and cannot do it without force. Are you claiming that you have a plan? LOL!”
If I can figure it out, and it’s not hard, then Trump and his advisors have certainly figured it out.
“Corporations exist to make a profit- I guess you don’t approve.”
Corporations exist within our country and society. They are, therefore, *not* free to operate unethically and immorally. I guess you don’t approve.
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