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To: Jim 0216

>> The MAIN reason for our failure to compete in the marketplace are federally protected unions, high taxes, regulations, minimum wage, subsidies, and a weak dollar all converging to “bind and gag” American business and drive industry from our shores <<

Yes, yes, yes, yes and yes to all that.

BUT:

Merely alleviating all those problems — so as to make the USA more competitive in the world marketplace — will not eliminate the so-called “trade deficit.”

Now to be sure, if we could fix most or all of your problems, the American economy could boom like never before. Moreover, our rate of return on invested capital would probably be the highest in the world, bar none. I’m all for those outcomes. No question about it.

On the other hand, a booming American economy and the concomittant increased profitability of American firms is likely to attract hugely increased amounts of foreign investment. Foreigners already love to invest in the USA. They’d love to invest even more over here if we could take all of the steps you suggest.

Still, as long as our domestic savings rate stays low, that new investment would just add to our existing “capital account” surplus. And if you understand the double-entry bookkeeping used in National Income statistics, you’ll know that the “merchandise trade deficit” is simply the mirror image of the capital account surplus.

Therefore, a booming economy is more likely to lead to an INCREASED merchandise trade deficit, than to a decreased deficit.

This is not theory. It’s not hypothesis or speculation. It’s not the result of some evil plot by foreign countries. It’s just a matter of the way things like “deficit” and “surplus” are defined in National Income accounting statistics.


94 posted on 03/08/2018 12:49:48 PM PST by Hawthorn
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To: Hawthorn

Well, I agree with Milton Friedman about not getting heartburn over so-called “trade deficits”. Having more imports than exports is not on its face a bad thing necessarily. Shoot, look at Hong Kong’s history - an investment and economic giant on a rocky precipice - they didn’t have any natural resources, imported everything, and the free market with no tax turned them into an economic powerhouse.

I think if we take care of business by kicking our mostly unconstitutional government out of our marketplace affairs, we’ll soon be back humming as the greatest economic power in the world.

There’ll probably always be those who will have the Pavlovian reactions to inflammatory terms like “trade deficits” and “unfair trade practices” thinking we need government “solutions” like tariffs, but I think countries who have the freest market come out on top regardless of what other nations do. Let the supply and demand of the free market in the voluntary self interested cooperation between buyers and sellers set the price points You’ll come out ahead in the long run.


103 posted on 03/08/2018 1:47:41 PM PST by Jim W N
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