Another US Tech Trade Deficit 498
eldavojohn writes "The United States is suffering again from a massive trade deficit — $38.3 billion in 2006. And it's been going on since 2002. From the press release: 'In 2006, Asia supplied 60 percent of all US imports of advanced technology products. Europe supplied more than 20 percent, and North America more than 15 percent.'"
How long (Score:5, Insightful)
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Why? (Score:4, Insightful)
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What do you mean with that, I thought the only way to have a trade deficit was to buy more from abroad than locally. So if we have a trade deficit it doesn't seem like we are having a problem affording stuff.
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Short term vs long term viewpoint. If we have a trade deficit today- and it's large enough- it means that comparative advantage rules have broken down, and that the nation that no longer produces ANYTHING will start losing high-paying manufacturing jobs (gee, kind of like what we've been doing for 40
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Re:Why? (Score:4, Interesting)
No, I'm saying that the options to high paying manufacturing jobs pay less than a living wage.
not even 20 years from now?
Unless something comes along that pays a living wage, not even 20 years from now. The race for cheap labor is a race to the bottom, not to the top.
It's a local hiccup to lose a local industry to foreign competition, it doesn't make the next generation (next 4 year class of college students even) of workers immune to finding jobs.
It just means that the next generation only has burger flipping available- because nobody can afford anything else.
It's those high paying jobs anyway that make American companies unable to compete with foreign companies who don't pay them as much.
And we want to compete with them exactly why? Why not just lock them out of our market so that we don't have to compete with them?
So you're basically saying that we should somehow tell the other countries that they have to be fair and pay them as much as we'd like to make, because.. it's only fair that way... right?
No, I'm saying that if they want to sell goods here, then they have to pay equal to American wages. If they don't want to pay equal to American wages, then I see NO reason why we should allow their imports AT ALL.
I don't think they'll buy it. And you will be left behind whining about how life isn't fair, while the people who adapt will be moving on buying more plasma screen tv's they shouldn't be able to afford.
At least until China realizes that all they're getting for those plasma screens are IOUs that will never be paid off. I don't see any reason why we can't just sink the Chinese ships trying to cross our borders, and make the plasma screens here. But hey- if you like selling out your nationality for cheap labor, so be it. There's a name for that: treason. And someday, patriots like me will be handing out the proper punishment for that crime.
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Your economic theory is interesting but baseless. If you get out a map you can draw arbitrary lines on it and make any silly economic point that you please. Suppose you draw a line around downtown San Francisco, and you notice that goods and services come in while only trash goes out. You haven't made an economic point about downtown San Francisco; you've just found where some rich pe
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That's all if you are only thinking in the short term. But in the long term, this destroys our manufacturing industry to the point that we can't afford to keep paying Americans a high enough wage to have houses, let
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Re:How long (Score:5, Funny)
What are you talking about? You do what the rest of us do and put it on your credit card [brillig.com]
Feudalism is the answer (Score:2)
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On that note, perhaps you or someone else understands enough economics to explain something to me.
The US has a trade deficit with (say) Japan of $80 billion, if I am not mistaken. Now, assuming 1 PC per Japanese citizen (sure, not all have one, but some have more than one), that is over 100 million PCs. Say each PC pays Microsoft $200 (for Windows + Of
Re:How long (Score:4, Informative)
Is this $20 billion included in the $80 billion trade deficit? That is, would it be $100 billion without Microsoft?
Yes, this is included in the trade deficit calculation so yes, if your numbers were correct then the deficit would be $100 billion without Microsoft. Washington state is one of the very few states with an international trade surplus in large part due to Microsoft and Boeing. Other companies with a trade surplus are restaurant chains that sell franchises overseas (such as Starbucks, McDonalds, and KFC).
On the other hand, is perhaps this money not arriving to the US, but rather received only by "Microsoft Japan"
The money is funneled through Microsoft Japan. Microsoft in Redmond still gets a slice of every license sold there (or at least for the great majority of licenses). In the case of restaurant chains usually the franchises are locally owned and operated so the American company only profits from the initial franchise sale and (sometimes) from the ingredients sold.
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And then, when you buy foreign made goods, that recycled money leaves the country, leaving you with less to purchase with. It is an entropic cycle, and will eventually fail.
U.S. dollars only have value because they can be spent on U.S. goods. When the U.S. has a 'trade deficit', it means that those foreign countries are sitting on those dollars we send them (or, more likely, purchasing U.S. government bonds). We give them peices of paper (or nowadays, bits on a computer), and they send us DVD players and Barney toys.
Eventually, they will spend those dollars on U.S. goods, as that is the only thing they are good for, or sell them to someone else who will spend those dollars on
Intl. trade takes place in black gold: Oil! (Score:3, Informative)
In other words, there was an artificially-maintained relatio
Re:What are you talking about? (Score:5, Informative)
But they can't use that U.S. currency to purchase things in France, or to purchase things in the UK, or to purchase things in Japan, unless they find a bank that will be willing to trade them a corresponding amount of those currencies... and to do that, there have to be people in France, or the UK, or Japan, who want to buy U.S. goods and so are willing to trade their own currency for U.S. dollars.
There is no gold standard... The dollar isn't backed by any commodity. The only value that the U.S. dollar has is that it can be used to purchase U.S. goods. For every dollar the U.S. spends on foreign goods, those foreign traders need to spend a dollar on U.S. goods (or on U.S. stocks or bonds or property).
Government bonds are to blame. (Score:3, Informative)
When that money leaves th
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But that doesn't mean they want to stop doing production runs of American designs for the American markets. Not when there's still a pile of cash to be made from factories that would otherwise sit idle. As their own market becomes larger and larger it'll naturally be less and less advantageous for both of us to continue the relationship - and we'll amicably part ways and our manufactur
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Until no-one is making any money because all the jobs have been exported too... Is this one of those #3 profit moments?
Re:How long (Score:4, Insightful)
But what if they don't care? The Chinese don't have a history of being enamored of the global free market. They might be willing to cut of their nose to spite their face, especially if their new middle class gets too uppity for the party's taste.
Our massive debt that the Chinese control means that they could sink their economy and ours with a single move. It's like a financial nuclear bomb, only the Chinese have the only trigger.
I'm all for globalism, but the massive amount of debt the U.S. government is creating isn't going to go away, and there will be consequences eventually.
Trivial to do (Score:2)
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We don't "owe" anyone that money. That's the imbalance between what we export vs. what we import, i.e., we import that much more. A trade defecit - and some would argue any large trade imbalance - is unhealthy for the economy as a whole.
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We're importing - and buying - that much more of their products than foreign nations (in this example, Asia) are of ours. We don't "owe" them anything.
Re:How long (Score:5, Insightful)
You see this all the time now with Chinese produced goods. They copy whatever it is they were manufacturing for American company X, then produce it for themselves and ship it into the US. Basically, all they need is someone in the US to handle sales and distribution (Walmart, for example).
- Roach
Re:How long (Score:5, Interesting)
There is an amazing amount of gadgetry out there now days, but I wonder how many products never come to life because people (in the U.S.) understand that there is no way to really make any money on it.
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Wow.,.. Just when I was thinking about putting the laptop down, having some breakfast and taking a shower, you removed my last piece of motivation for getting out of bed today - altogether.
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jk....
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Sure they could, but they need customers. The loop that the US needs to be worried about getting cut out of is the profit loop. Sure there are lots of manufacturers in China and the rest of Asia, but they're in killer competition to underbid each other to manufacture stuff designed in the US or Japan and
Re:How long (Score:4, Insightful)
The main problem for the U.S. is that wages are relatively high, while they are low in these rapidly developing countries. And we're apparently on a generally downward spiral while they're on a generally upward spiral. The competition you mention is going to keep wages in these countries from rising quickly, so the "floor" is going to be lower, and workers in the U.S. are going to be in for some long term pain.
There are a lot of other factors involved, such as the lack of effective regulation (for product safety, working conditions, environmental issues, etc.) that play into this in complicated ways. But the bottom line is that we're in for some belt tightening here in the U.S., barring some major technological breakthrough.
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Wages are even higher in Europe, yet according to the story you import more electronics from Europe than you produce yourself.
WRONG! According to the article, the U.S. imports more tech products from Europe than it does from Canada and Mexico (i.e. North America). It doesn't say anything about more tech goods being produced in Europe than the U.S..
The U.S. actually maintains a trade surplus in tech good with Europe, to the tune of $13 billion... Europeans buy far more U.S. tech products than the U.S. buys European tech products. http://www.aeanet.org/PressRoom/prac_TCS_2007.asp [aeanet.org]
China, and their cheap consumer electronics is where
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LOL, and many of those "US" products the Europeans are buying were produced in China.
None. Most of those tech products European are buying from the U.S. are software, biotech and pharmaceuticals, aerospace technology, industrial electronics and robotics, etc., things that China doesn't export.
China exports low cost consumer electronics, such as DVD players. That is because the cost of labor is the biggest single cost of consumer electronics. However, the cost of labor on a 787 is negligible, the cost of labor on an industrial CNC mill is negligible, the cost of labor on Adobe InDesign in n
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Something like this:
http://finance.yahoo.com/currency/convert?from=US
http://finance.yahoo.com/currency/convert?from=US
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The only reason I could possibly see is if the US dollar were to become worthless, and better profits can be made elsewhere. But until that happens, there is no worry about countries deciding to *not* ship to the US.
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Cheers.
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If this keeps on... (Score:3, Insightful)
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and that's why i'm getting used to eating tofu now, so that i won't have to later...
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It's true (Score:5, Funny)
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Re: [AC] It's true (Score:2)
beyond the boundaries of one's country. No implication of overseas.
Of course, you might not be an American, and it is rather public knowledge that you will skew information to try and bring us down to your level.
We do it to ourselves (Score:3, Interesting)
Well, yeah.... (Score:5, Insightful)
Yay, so the markets are hiccuping because people didn't understand the risk associated with the debt securities they were buying. let's get scared about the trade deficit by posting scary-looking numbers when most people don't understand any of the concepts behind them, oooooooooooooooooh. scary! :P
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Perhaps the US simply has a surplus of wealth and an industrial production deficit?
As far as the sub prime mortgage backed securities, nobody understood the risks. And the m
Lobbying screws us again (Score:2)
Are "they" naive or lying with math for taking us down this road? I suspect the latter. Thi
Not just technology which is coming from elsewhere (Score:2)
Just means bigger bonuses for the guys at the top because it makes them look good at cutting costs, while the folks at the bottom continue to slog along getting 2 - 3% raises.
It's the way the free market works. Except if you're a big Wall Street brokerage firm or hedge fund in which case when the free market means you're about to go under the Fed will step in and save your asses with a bailout. But I digress.
Did the NAFTA authors submit the FP? (Score:2)
Nice tactful way to say "Mexico", guys...
And I have nothing against that. "Grape-pickers" and all that - Thanks for the cheap stuff you've destroyed your bodies and your local environment to produce for us; enjoy the increasingly less valuable paper we traded it for (and to think, we laugh in school when we first learn the price of Manhattan...).
Canada (Score:2)
Yup. North America contains the United States and Mexico. We're certainly not forgetting anyone, eh? [bts.gov]
Feh. (Score:2)
Trade deficit a problem for many countries (Score:2)
A better academic read on this subject.. (Score:2, Informative)
http://www.bis.org/publ/work223.pdf [bis.org]
And a great mystery for the uninitated.
http://en.wikipedia.org/wiki/Federal_Reserve_Board [wikipedia.org]
http://en.wikipedia.org/wiki/Fractional-reserve_ba nking [wikipedia.org]
http://en.wikipedia.org/wiki/Money_multiplier [wikipedia.org]
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Submitter is fear mongering (Score:2, Informative)
"U.S. technology product imports exceeded exports for the first time in 2002 starting a trend that left a $38.3 billion trade deficit in 2006 after reaching a high of $44.4 billion in 2005."
So it actually went down.
Also
"in 2006, the United States continued to export considerably more than it imported in two technology areas: aerospace and electronics."
Oh, the horror.
Maybe there's a reason ... (Score:3, Insightful)
Trade Deficit: So What (Score:2, Insightful)
a) Jobs where things like iPods and iPhones are conceived from ingenuity, designed, and perfected (ie, the way things are now) OR
b) Jobs where things like iPods and iPhones are assembled
The fact that our economy and employment are pretty strong proves that the trade deficit is meaningless.
News? (Score:2)
Economics and slashdot (Score:3, Informative)
I read through a few of the posts here, and I think some of the posters are not experts in econ despite their claims.
Although I'm not an economist, I am interested in the topic and have read some books about it.
Some facts accepted by all trade economists:
1. When the United States has a "trade deficit", it means that foreigners are buying US bonds (typically treasuries), or are increasing their reserves of dollars. (If you count selling bonds and sending currency as exports then the trade deficit is always 0).
2.At some point in the future, foreigners will want their money back or will want to spend their dollar reserves, at which point the US will have to export more than it imports. Then the trade deficit will run the other way. There is no chance of other countries "cutting out" the US, because that would mean they sent us products and lent us money while getting nothing in return.
3. The trade deficit increases the standard of living for Americans in the short term. It means that we can buy more things at Wal-Mart and other places than we otherwise could. It does not affect our overall unemployment rate. The only problem with the trade deficit is that it can't be extended indefinitely, which means that at some point we will have to export more than we import, which will be unfortunate for us.
4. Although China accounts for a larger share of the trade deficit than any other single country, it accounts for much less than Europe and Japan combined.
5. The reason Europe and Japan export things to the US is because they want to pay for imports from the US, either now or in the future.
6. The trade deficit by itself is not necessarily a problem. The only problem is if there's a "hard landing" which means that Europe, Japan, and China demand their money back more quickly than the US economy can adjust, which would harm all parties.
Trade Deficit and Currency (Score:3, Insightful)
If you buy more stuff than you sell, then you have a net flow of dollars out. Whoever receives these dollars can do one of 3 things: (1) use the dollars (directly or indirectly) to buy US products, (2) lend the dollars back to the US (US bonds, treasury bills), expecting to get even more dollars back, or (3) buy stuff in the US (stocks, equity, real estate), again in the hope to make even more dollars from his investment. Since, for one reason or another, the US economy fails to offer enough products anyone outside the US wants to buy (1) (hence the trade deficit), we're taking about debt (2) and sell-out (3).
A "normal" country wouldn't be able to do this for very long; as he would quickly (a) have its currecy devalued (if you have nothing to sell, no one outside needs your currency), (b) run out lenders (most countries dont have the luxury to indept itself abroad in their own currency to begin with) and (c) local assets to sell. Depending on whether you do or do not fire up the printing press you either end up in bancruptcy or hyperinflation.
A super power like the US which is able to strongarm or otherwise convince the producers of some key commodities to trade exclusively in their own currency, can get away with it considerably longer as their are alway products to buy for dollars (most prominently oil) even if those are not made in the USA by US labour. This gives the dollar the liquidity which is necessary so that it even makes sense to lend back dollars to the US (instead of demanding real goods right away).
It is even more helpful, if you can convice some producers of said key commodities (as e.g. Saudi Arabia), to set a good example by putting most of the money into US treasury bills and US assets (petro dollar recycling), as this postpones inflation and the devaluation of the dollar which in turn allows to keep the interest rates in a sane range as long as those bills are kept in the vault and are constantly renewed.
Of course, not even the US can live on credit alone, eventually the lenders will want something "tangible", and if you cannot or don't want to provide goods, at least you can provide them "assets". Of course, there is only so much you can sell, so the trick is to invent more things to sell (e.g. "intellecual property") and to inflate the prices of existing investments. Since the inflation is in assets and not in consumer goods, this is not called inflation but a "boom" (after all, inverstors want prices to rise) before and a "bubble" after people realize that a high price dose not imply a sound and profitable investment (as happend in the dot-com crash and is happening right now in the real estate and mortage sector).
You can, as some in this thread do, consider this a good thing for the US, after all, it basically means converting paper into Mercedes' and BMWs, and they would be correct if this games can be played infinitely - if you happen to be in the group that actually profits (that is, if you work in or close to the finance sector - if you're a production worker, well, too bad - maybe you can get a job as buttler or bodguard by those with better luck). Then it would make sense to deindutrialize your country and neither do you need an efficient education system as the rest of the world is supplying you with consumer goods basically for free.
It won't work infinitely, though. The non-US world sits on an ever increasing pile of trillions of dollars in US-dept and overvalued assets. Ever
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I'm wondering if it could reach a point where our best course would be nationalization of foreign-owned assets.
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It's just like when you inflate a balloon and bad stuff happens.
Re:Lots of trade defecits! (Score:5, Insightful)
In practice, things are not that simple.
Have you any idea how much the dollar is falling w.r.t. international currencies? The pound is more than 2 dollars now. Do you know what the implications of this are?
Hint: In the short term, a weak dollar might help local manufacturers, but it will devastate the middle class because inflation will follow shortly.
Magnus
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Yeah, except when someone craps where you sleep. Then we get laws to stop that.
(Go listen to Lenny Bruce's "Eat, Sleep, and Crap" sometime. It's great stuff)
It'd be nice actually, for my own country, the USA, to be taken down so many pegs that no one will harbor any more illusions about us being the emperors of the world, and maybe we'll all stop having to shoulder the cost of petty leaders, but I imagine we'll take the rest of the wo
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I agree that it's not been an issue. And I agree that protectionism solves nothing.
But I am concerned about productivity growth in the growing number of service jobs that are left here. The WSJ had a very interesting article [wsj.com] about how it may become more challenging to make things that you can export, like healthcare and food service, more and more productive every year. I'd guess we'd better hope that the productivity gains of overseas economies can be imported in that
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The US trade deficit is balanced by foreign entities collecting US dollars. Since they can't do anything else with those dollars they just loan th
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All fiat money is short-term debt, actually. If all debts were settled today, the money would vanish. When the debt gets held where it won't circulate here, we issue some more debt, and that devalues the currency.
Have you noticed where the dollar is? Yes, that helps us import more goods cheaply
> Trade deficit alarmism is pseudo-economics at its finest.
So is a hand-waving dismissal over their effects. Mercantilism is dead, but it doesn't mean defici
Re:Lots of trade defecits! (Score:5, Insightful)
Firstly the Us sends them dollars, they need dollars to buy oil, so they sell the US things in exchange for dollars which they exchange for oil. The oil producers then have lots of Dollars and are happy, they buy things from all over the world in dollars (because everyone needs dollars for oil).
The problem arises when the dollar becomes less stable and loses value, at that point the oil producers either take a hit and make less profits, increase the price of oil (which means people want dollars even more badly and may increase the dollars value thus solving the problem in the short term, but pushes up process of anything that needs transporting or oil in some other way...) or they can switch to a more stable currency.
If they switch to a more stable currency then the dollar sinks, the global economy takes a huge hit, but when the dust settles, the US is in a bad way because no one wants dollars anymore, as are all these countries that peg their currency to the dollar and whoever replaced the dollar as the currency of choice is sitting pretty.
People don't swap goods for useless paper, they swap goods for paper that they feel will get them the things that they need, the moment that stops that paper really does become worthless and no one will want it, bad news if you need to buy things from abroad because you don't have a manufacturing base anymore and no one wants to buy your services.
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No... Really...
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You don't understand. Other countries are proping up our economy so that they can continue to export like the dickens. You would probably say this is a good thing: if they want to subsidize us by buying our stocks, real-estate, etc., then let them. However, it creates huge risk of having that carpet
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Um, no -- YOU don't understand. The US has the leading economy in the world. To suggest other countries are "proping up our economy" is patently absurd.
A trade deficit measures money that is exchanged for goods. Whether or not it is a "good thing" or a "bad thing" is impossible to say without knowing what the goods are and whether their net value appreciates faster than the money that was tr
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I'm no economist, but I know there is a difference between investment [wikipedia.org] and consumption. [wikipedia.org]
And, (here's the kicker) consumption does not generally create wealth.
(Unless, of course, you can find someone to BUY your trash instead of having to PAY them to take it / bury it / what ever..)
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But what's truly worrying is not that we have a trade deficit, which isn't necessarily bad. What bothers people are the political implications of other countries owning massive quantities of the U.S. public debt. The real cause of this is the U.S. government inflating its currency to pay for expensive political projects and favors (like, say, wars, subsidies, social security, and medicare prescriptions); the trade deficit only exacerbates the probl
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By definition of trade, something is given away and something is received in exchange.
That would be true if, for example, the US and China were trading material goods in exchange for material goods, but international trade is the exchange of material goods for paper money. It's starting to appear to me that this fractional reserve currency is basically a shell game, or musical chairs, and every so often the system crashes, with winners and losers. So it may actually be a problem if you have an actual material trade imbalance in order to play a shell game. And China is starting to look like
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but international trade is the exchange of material goods for paper money.
OK, this may be a nitpick, but it's most likely not paper money.
The relation of paper money to "book money" (currencies which are moved between accounts) is minuscule in the monetary system.
If everybody at the same time would appear at a bank teller and ask for their deposits in cash the entire monetary system would be fuxored.
Case in point: Compare the rates for paper money with the currency rates and you'll find a huge difference. This is because it's far more expensive to move and handle the physic
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Also, trade only occurs because that which is received is valued more than that which is given away in exchange. Thus, both parties *profit* from every instance of trade, at the moment of trade.
By your logic, no one ever is on the losing end of a trade. Reality is full of counter examples. You're making the implicit assumption that people (or businesses) are perfectly rational actors with complete knowledge. They aren't - see the last 50 years or research in the social sciences.
There is no deficit whatsoever that occurs from any single instance of trade, even if that trade involves promises to repay at a future time.
Just to give you one example of how this is wrong... Material goods may depreciate at a different (faster?) rate than currency does. So if I give you cash for a car, that car will be worth at lot less in 5 years than the
Re:No such thing as a Trade Deficit (Score:5, Informative)
...
Talk of "trade deficits" is political manipulation designed to bamboozle the uninformed. Anyone who believes "deficits" result from trade is as gullible as the Emperor's New Clothes.
My country buys 10 billion [currency] worth of widgets from your country
Your country buys 5 billion [currency] worth of widgets from mine
My country has a trade deficit of 5 billion [currency] in the widget sector.
It's imports vs exports.
When imports do not = exports, you have an imbalance.
For your nonsensical post to be correct, we would have to be buying and selling widgets in equal quantities. Hint: we aren't.
I really can't understand how anyone moderated you up.
This stuff isn't that hard.
Imports are paid for by exports (Score:2)
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Rubbish.
China lends money to the US in return for interest plus the capital repayment at some point in the future. The interest that the US has to pay is a reflection of how risky that investment is for the Chinese. The trade in this case is an exchange of risk for interest, NOT an exchange of risk plus capital for interest (unless you are presupposing that the US is going to renege on repaying it's T bills)
The US then uses those funds to buy _consumables
It isn't luck, it was *absolute genius* (Score:5, Interesting)
Nobody noticed or seemed to care. Which I have to admit I find a touch odd. But... at the same time, in 1972 and 1973 they managed to persuade the House of Saudi to denominate oil in US dollars so everyone had to buy dollars to buy oil. Perhaps you'll start to understand the close relationship between the US and Saudi now.
This genius has allowed the US to export it's inflation to the rest of the world for decades. It may have been desperation or genius, but whoever it was that thought it up should be given the highest medal by the US government and people. It's given the US a truly massive advantage over all of the other countries.
Of course, 40 years later, everyone is starting to wake up to the importance of currency, and the oil producers are starting to switch away from the US dollar as it's value dwindles.
"A nation-state taxes its own citizens, while an empire taxes other nation-states."
And inflation is just another form of taxation.
Brilliant.
Being a conservative without being a con (Score:2)
GWB and the rest of his administration are the golden boys of conservatism. It's pretty obvious to conclude that conservatives need to be thrown in prison and never, ever released.
Conservative is just another way of saying criminal.
By "conservative", you mean neoconservative [wikipedia.org], right? There was conservatism before the neo-cons [wikipedia.org].
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The trouble is, you're borrowing the dollars which you then trade.
"when everyone else decides they have enough of our dollars."
When everyone else decides they want their money back because the US, its banks and its citizens start defaulting on their loans you mean. The last weeks trouble at several European banks is a typical example; US banks have sold mortgage backed loans to European banks, which finances American consumption and trade deficit.
Sure, you ca
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Thus increasing the wages of American Workers, which would in turn allow us to afford those higher local prices, and encourage production of goods here at home to keep us safe from foreign wars and governments.
and foreign companies would kick the crap out of us abroad,
Only if you're stupid enough to tie your business to a foreign market instead of creating goods for your own nation's people ONLY. We've got 300 million people who, to
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You know it can never work nowadays, do you ?
Not that I wouldn't just love to see the USA shut the hell up already and keep its nose out of other people's bussiness, work out internal issues first... but that will and could never happend.
Second... fiat currency is insignificant compared to the "virtual money" in circulation nowadays, at least 90% of today's "money" doesn
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