Every Day Should Be Buy American

[likeabird03]

Why does anyone want to reduce the 'trade deficit'?

ExPat¬_Panama, because a trade deficit is ALWAYS detrimental to the GDP; the GDP bolsters the median wage; the median wage is indicative of the nations’ quality of life.

The topic “Trade deficits are ALWAYS detrimental to their nations’ GDPs” provides further explanation. It has just been posted.

Respectfully, Supposn

No it's not. A trade deficit can often be a sign of strength, and a trade surplus can be a sign of weakness.

If two countries trade with one another, and one is growing faster than the other, the faster growing economy can run a trade deficit with the slower economy because it's demand for imports is relatively higher.

That may be true in some situations, but that's assuming that the economy is strong in the first place - which it's not, as we all know. Our trade deficit subtracts from GDP growth, so in times that the economy is strong with a deficit, it means that the economy is only growing at a decent rate despite the trade deficit.

And if you need proof - here's what GDP is made of:


GDP = private consumption + gross investment + government spending + (exports − imports)

Gross domestic product - Wikipedia, the free encyclopedia

What this means is that during times when our imports are more than our exports - trade as a whole subtracts from our GDP.

 

[expat_panama]

...reduce USA's trade deficit...

Why does anyone want to reduce the 'trade deficit'?

...a trade deficit is ALWAYS detrimental to the GDP...

We hear that being said a lot but what happens in real life, recorded data, and historical fact is that trade deficits can get worse while the GDP gets better, and the trade deficit can get better while the GDP gets worse.

...here's what GDP is made of: GDP = private consumption + gross investment + government spending + (exports − imports)

...trade as a whole subtracts from our GDP.

Left at that makes it sound like a contradiction, but there's more. Namely, the fact that a trade deficit is always equal to a capital surplus, and the components of a capital surplus are also already "what the GDP is made of". What's important here is to first see what is, and then decide how it works second. If we decide first what we like and second look for what agrees with us, we can end up with some pretty goofy ideas.

 

[Toro]

ExPat¬_Panama, because a trade deficit is ALWAYS detrimental to the GDP; the GDP bolsters the median wage; the median wage is indicative of the nations’ quality of life.

The topic “Trade deficits are ALWAYS detrimental to their nations’ GDPs” provides further explanation. It has just been posted.

Respectfully, Supposn

No it's not. A trade deficit can often be a sign of strength, and a trade surplus can be a sign of weakness.

If two countries trade with one another, and one is growing faster than the other, the faster growing economy can run a trade deficit with the slower economy because it's demand for imports is relatively higher.

That may be true in some situations, but that's assuming that the economy is strong in the first place - which it's not, as we all know. Our trade deficit subtracts from GDP growth, so in times that the economy is strong with a deficit, it means that the economy is only growing at a decent rate despite the trade deficit.

And if you need proof - here's what GDP is made of:


GDP = private consumption + gross investment + government spending + (exports − imports)

Gross domestic product - Wikipedia, the free encyclopedia

What this means is that during times when our imports are more than our exports - trade as a whole subtracts from our GDP.

I'm aware of that. You learn the national accounting identity the first day of Macroeconomics 101.

You also learn in macroeconomics that a trade deficit is neither good nor bad. It often is merely a representation of the dynamics of the economy. There are a number of ways that the US could have a trade surplus currently.

1. Collapse the currency. This would lead to capital flight and a spike in interest rates. This would push the US into a recession.

2. Extremely high tariffs. This would be a large tax on the economy and would make goods more expensive, which would hit consumption, the "C" in your equation, and lead to lower GDP. It would also lead to inflation and reduce the purchasing power of Americans.

3. Engineer a depression and collapse demand. Well, obviously a bad idea.

4. Stop importing oil. Much of our trade deficit is because the US is a net consumer of unrefined oil. We consume about 21 millions barrels of oil a day and produce 12 million, meaning we import about 9 million barrels of oil a day. To get oil consumption down to 12 million barrels a day, gas would be $15-$20 a gallon. Clearly, we would also be in a deep recession.

So, as you can see, creating a trade surplus in the US given the current configuration of the economy would only be net negative, even if the NX function would turn positive.

 

[EdwardBaiamonte]

buy as much as you can at local based stores.

that will move the economy

Always buy the the highest quality and lowest price regardless of where it is produced, that will keep America competitive and a world class country.

 

[likeabird03]

Why does anyone want to reduce the 'trade deficit'?

...a trade deficit is ALWAYS detrimental to the GDP...

We hear that being said a lot but what happens in real life, recorded data, and historical fact is that trade deficits can get worse while the GDP gets better, and the trade deficit can get better while the GDP gets worse.

...here's what GDP is made of: GDP = private consumption + gross investment + government spending + (exports − imports)

...trade as a whole subtracts from our GDP.

Left at that makes it sound like a contradiction, but there's more. Namely, the fact that a trade deficit is always equal to a capital surplus, and the components of a capital surplus are also already "what the GDP is made of". What's important here is to first see what is, and then decide how it works second. If we decide first what we like and second look for what agrees with us, we can end up with some pretty goofy ideas.

Nonsense, the capital surplus is foreign entities buying US securities to balance out the trade deficits, most of that buying is of TBills. So we have twin deficits that are offsetting eachother, the end result of this is debt, and more debt.

You could try and argue that the trade deficit is a biproduct of consumer spending (which does fuel GDP in a positive way) but given that demand is there anyway, it could just as easily be satisfied by the purchase of American products, and then we won't have the deficit subtracting from our GDP growth. Everyone who has ever tried to make the argument that deficits don't matter has been proven wrong, especially when that deficit is about 6% of our gdp each year.

 

[likeabird03]

No it's not. A trade deficit can often be a sign of strength, and a trade surplus can be a sign of weakness.

If two countries trade with one another, and one is growing faster than the other, the faster growing economy can run a trade deficit with the slower economy because it's demand for imports is relatively higher.

That may be true in some situations, but that's assuming that the economy is strong in the first place - which it's not, as we all know. Our trade deficit subtracts from GDP growth, so in times that the economy is strong with a deficit, it means that the economy is only growing at a decent rate despite the trade deficit.

And if you need proof - here's what GDP is made of:


GDP = private consumption + gross investment + government spending + (exports − imports)

Gross domestic product - Wikipedia, the free encyclopedia

What this means is that during times when our imports are more than our exports - trade as a whole subtracts from our GDP.

I'm aware of that. You learn the national accounting identity the first day of Macroeconomics 101.

You also learn in macroeconomics that a trade deficit is neither good nor bad. It often is merely a representation of the dynamics of the economy. There are a number of ways that the US could have a trade surplus currently.

Look at the quarterly releases of GDP, and they will usually say that the growing trade deficit subtracts from our GDP growth. You can't argue that this is positive, because higher GDP is a good thing. Net capital outflows caused by the trade deficit does not add to our GDP, it subtracts. It also costs us jobs here at home, because if that extra 50 billion dollars per month was spent on US products vs foreign products, that would increase production here at home and have a higher multiplier effect.

1. Collapse the currency. This would lead to capital flight and a spike in interest rates. This would push the US into a recession.

2. Extremely high tariffs. This would be a large tax on the economy and would make goods more expensive, which would hit consumption, the "C" in your equation, and lead to lower GDP. It would also lead to inflation and reduce the purchasing power of Americans.

3. Engineer a depression and collapse demand. Well, obviously a bad idea.

I'm in no way arguing that collapsing our currency or harming our own economy would be beneficial in order to bring the trade deficit down. I'm advocating for a more level playing field so trade can be more balanced in our favor. We need to ease the regulatory environment, we need to admit that China's currency manipulation gives them an unfair advantage. And we need to admit that many of the countries who have access to our markets put tariffs on US products entering their own markets.

I'm not simply saying that we need to penalize foreign products, or put tariffs on goods from other nations, I'm saying that we need to stop them from continuing to doing it.

4. Stop importing oil. Much of our trade deficit is because the US is a net consumer of unrefined oil. We consume about 21 millions barrels of oil a day and produce 12 million, meaning we import about 9 million barrels of oil a day. To get oil consumption down to 12 million barrels a day, gas would be $15-$20 a gallon. Clearly, we would also be in a deep recession.

So, as you can see, creating a trade surplus in the US given the current configuration of the economy would only be net negative, even if the NX function would turn positive.

You're right, oil imports are a pretty large chunk of our trade deficit. We could reduce this problem without having to have $20/gallon gasoline. Scale back the EPA, allow for more resource development in this country in order to satisfy domestic demand, you will see that deficit go down, and we will no longer be building up the economies of the middle east.

I actually saw some good news relating to this today; Thanks to rising shale production in North Dakota, we are on our way to becoming a net energy exporter for the first time in years. There's a lot more work to be done though.

 

[Toro]

Look at the quarterly releases of GDP, and they will usually say that the growing trade deficit subtracts from our GDP growth. You can't argue that this is positive, because higher GDP is a good thing. Net capital outflows caused by the trade deficit does not add to our GDP, it subtracts. It also costs us jobs here at home, because if that extra 50 billion dollars per month was spent on US products vs foreign products, that would increase production here at home and have a higher multiplier effect.

You miss the point.

NX does not occur in isolation. Right now, there is a negative correlation between C and NX (net exports) in the American economy (all else being equal). Usually, when NX falls, C rises, and vice versa. NX is, at least partially, an outcome. It is not a driver of GDP. When consumption and income are rising, imports are rising because demand is rising and NX is falling.

And you mistake capital for trade flows. We have capital inflows. We have goods and services outflows. This must happen. They are directly related. This is another problem with this argument. If the current account is negative (i.e. we have a trade deficit), the capital account must be positive (i.e., we are importing capital). IOW, current and capital accounts were perfectly balanced, and a foreigner decides to invest in a plant in America to invest in a plant, we will - by definition - have a trade deficit. Capital coming into the country without an equal amount of capital going out requires that we will have a trade deficit. This is another reason why it is wrong to say a trade deficit is always bad. A trade deficit can arise if investors think America is a really good place to invest.

 

[likeabird03]

Look at the quarterly releases of GDP, and they will usually say that the growing trade deficit subtracts from our GDP growth. You can't argue that this is positive, because higher GDP is a good thing. Net capital outflows caused by the trade deficit does not add to our GDP, it subtracts. It also costs us jobs here at home, because if that extra 50 billion dollars per month was spent on US products vs foreign products, that would increase production here at home and have a higher multiplier effect.

You miss the point.

NX does not occur in isolation. Right now, there is a negative correlation between C and NX (net exports) in the American economy (all else being equal). Usually, when NX falls, C rises, and vice versa. NX is, at least partially, an outcome. It is not a driver of GDP. When consumption and income are rising, imports are rising because demand is rising and NX is falling.

And you mistake capital for trade flows. We have capital inflows. We have goods and services outflows. This must happen. They are directly related. This is another problem with this argument. If the current account is negative (i.e. we have a trade deficit), the capital account must be positive (i.e., we are importing capital). IOW, current and capital accounts were perfectly balanced, and a foreigner decides to invest in a plant in America to invest in a plant, we will - by definition - have a trade deficit. Capital coming into the country without an equal amount of capital going out requires that we will have a trade deficit. This is another reason why it is wrong to say a trade deficit is always bad. A trade deficit can arise if investors think America is a really good place to invest.

Yes I understand what you're saying. A rising economy/consumption does often cause a rising trade deficit, especially in recent years now that less and less products are made here. That money spent consuming however would have a far higher net positive on the economy if more of it filtered into manufacturing here instead of adding to our import bill though. My argument about capital inflows balancing out trade is that it's the only thing that's stopping the dollar from declining. If the foreign entities that we send our US dollars to cashed them all out for their local currencies instead of using those US dollars to buy US dollar financial assets, the demand for the dollar would go down, resulting in a decline in it's value.

 

[Supposn]

ExPat_Panama & Toro, the first message of the topic “Trade deficits are ALWAYS detrimental to their nations’ GDPs” deals with explanations of why and how trade surpluses increase and trade deficits decrease a nation’s GDP more than otherwise.

I’ll try to respond to whatever you may determine to be faults within that message.

A trade deficit is always a detriment to the nation’s GDP. There are no circumstances or incidence of a trade deficit behaving otherwise.

Respectfully, Supposn

 

[Intense]

Re: 'Shop Small' November 26Th - a good idea but why not extend it a bit. https://www.facebook.com/SmallBusinessSaturday?extlink=ps-gabmd-2011SBS and Shop Small

I've always felt Americans could solve the jobs problem if they had the will and realized you sometimes need to pay more for a product made by someone who has a decent life. Most people would like a decent life. Instead, you hear whining about taxes and regulation and both have been higher and more stringent in the past. So why do we not ask ourselves why?

So what have you done for America? Lots of whining but do you buy made in the USA? Do you drive a made in the America automobile? Do you support small and large businesses who build here? Do you support a fair wage? Scapegoating is heard too often, it is their fault: government, unions, immigrants, take your pick, history is full of examples, but what do you do for America? Do you support legislation that supports the America worker? The only thing I have seen worked since the 2008 election is talk, running your mouth is easy. Talk is cheap, but what do you do for America and its people? Ideas have power, but ideas should be about people. Time to put up or shut-up, Taxes have been reduced since John F. Kennedy and the economy has oddly performed the miracle many preach. Now is the time to fulfill your pledge given to the America people and to do something meaningful and stop pointing fingers. What have you done for America?

Every day of the year buy American. Google 'made in America.'

A few links:

MadeInUSA - Home- Recycling American Dollars Through Patriotic Spending
How Americans Can Buy American
American Made Products Directory - Made in USA, United States Manufacturers
THE AMERICAN LIST | A Continuous Lean.
Shirts Made in USA : All American Clothing
American and Unionmade Clothing by All USA Clothing


Buy American = "Because Ford, GM and Chrysler conduct far more of their research, design, engineering, manufacturing and assembly work in the U.S. than foreign automakers do, buying a Ford, GM, or Chrysler supports almost three times as many jobs as buying the average foreign automobile. Some comparisons are even more striking. Buying a Ford supports 3.5 times more jobs than buying a Hyundai. Comparing a Honda and a Hyundai? Buying a Honda supports more than 2 times more jobs." The Level Field Institute


Bumper stickers I'd like to see.

Buy American - support all Americans, including yourself.

Our children, our grandchildren, ourselves require we support each other, buy American.

Quality! our Buick is number one.

Buy American and Thumbs up! http://www.usmessageboard.com/economy/128477-did-obama-save-gm-3.html#post2607852

Yep. I do as much as I can.

 

[expat_panama]

...A trade deficit is always a detriment to the nation’s GDP. There are no circumstances or incidence of a trade deficit behaving otherwise...

Except in real life, as in '07 with the falling GDP with a shrinking trade deficit followed by two years of increasing trade deficit and increasing GDP.

 

[Douger]

Awesome ! According to the chart, the recession is over !

 

[expat_panama]

...the capital surplus is foreign entities buying US securities to balance out the trade deficits...

That's what people thought hundreds of years ago. It made sense, selling our crops is good and selling our farms is bad. We've come a long way since then.

These days I can buy a few acres of grass land in Hawaii from a Japanese businessman, build a dozen high end homes, and sell them to Koreans for a ten fold profit. Pure capital surplus. Or right after the dotcom bust I bought Apple from a Canadian mutual fund and today I sell them back at a 6,000% profit. Pure capital surplus.

Sure, building houses and studying markets is hard work, but if it feeds the family then I'm not going to worry about someone's silly trade deficit.

 

[expat_panama]

Awesome ! According to the chart, the recession is over !

LOL!! That's what people have been saying for years, that the recession ended in '09!! In real life we know that contractions begin at the peaks and expansions begin when we're at our worst. Ofcourse the recession began at the end of GW's term, and of course the expansion began with Obama.

 

[Douger]

Awesome ! According to the chart, the recession is over !

LOL!! That's what people have been saying for years, that the recession ended in '09!! In real life we know that contractions begin at the peaks and expansions begin when we're at our worst. Ofcourse the recession began at the end of GW's term, and of course the expansion began with Obama.

....and will continue with whomever is (s)Elected next. The pResident has nothing to do with anything other than mingling with the world elites for photo ops.
Congress needs to be given a different type of white powder than the current variety, obviously being used on a regular basis.

 

[expat_panama]

...The pResident has nothing to do with anything other than mingling with the world elites for photo ops...

Well, presidents can do enormous harm but they aren't' nearly as important as they or their fans say they are.

 

[likeabird03]

...the capital surplus is foreign entities buying US securities to balance out the trade deficits...

That's what people thought hundreds of years ago. It made sense, selling our crops is good and selling our farms is bad. We've come a long way since then.

These days I can buy a few acres of grass land in Hawaii from a Japanese businessman, build a dozen high end homes, and sell them to Koreans for a ten fold profit. Pure capital surplus. Or right after the dotcom bust I bought Apple from a Canadian mutual fund and today I sell them back at a 6,000% profit. Pure capital surplus.

Sure, building houses and studying markets is hard work, but if it feeds the family then I'm not going to worry about someone's silly trade deficit.

Buying a domestic product from a foreign person would probably be more like buying a Honda that is built in America, you're still sending some capital overseas but that doesn't count towards trade deficit.

That aside, I don't see how that relevant to the fact that our trade deficit subtracts from GDP. I think the facts are pretty clear.

 

[likeabird03]

Awesome ! According to the chart, the recession is over !

LOL!! That's what people have been saying for years, that the recession ended in '09!! In real life we know that contractions begin at the peaks and expansions begin when we're at our worst. Ofcourse the recession began at the end of GW's term, and of course the expansion began with Obama.

I think the Recession was well on it's way to being over before Obama took office, some indicators were already bottoming out at this time. That's why I get really frustrated when democrats try to give Obama credit for what little recovery we have had. Statistically I think he was just fortunate timing wise, and the economy has managed to grow despite him.

 

[expat_panama]

...our trade deficit subtracts from GDP. I think the facts are pretty clear.

Some people use that interpretation to support their chosen beliefs, and the rest of us first look at reality--

--and then choose beliefs that fit what is.

 

[expat_panama]

...the Recession was well on it's way to being over before Obama took office, some indicators were already bottoming out at this time. That's why I get really frustrated when democrats try to give Obama credit for what little recovery we have had...

We were just talking on another thread about how some people's entire outlook is hopelessly mired in political dogma. They say FDR ended the Depression but they don't say he started WWII. They say Obama killed Osama but they don't say--

--Nixon planted a flag on the moon.