Mr. Trump, Here's Why Trade Deficits Are Good

[expat_panama]

[from Mr. Trump, Here's Why Trade Deficits Are Good ]

Feb 27, 2017

Simon Constable


President Trump seems to have the wrong end of the stick when it comes to trade deficits.

He seems to think big trade deficits mean the U.S. is losing in the game of international trade...

...It's easy to see why most people view that massive sum as a failure. On the face of it, a trade deficit between two countries means that one country exported way more goods than the other...

...a big trade deficit shows that you got more for your exports than did the other country. The bigger the deficit, the better your country came out in the trade deal...

...China funds the U.S.

The deficit itself ends up being financed by the country with the trade surplus...

...if the U.S. had a trade surplus with China, then its economy would be financed by the U.S., which wouldn't be nearly as good.​

===================

Many will say that the author's a twit and doesn't really know what he's talking about. I tend to agree.

The big problem w/ the trade deficit imho is that most folks that rant about it just don't know what it is. People like to say the trade defict's the same as the national budget deficit, that we're going broke into default and that all our factories are being shipped overseas so that's why the U.S. doesn't manufacture anything 'cause all the manufacturing jobs were stolen by China using NAFTA against the U.S.

imho this ignorance is by choice; the facts are open to all. Problem is the facts involve that number stuff that party hacks hate --and they show how manufacturing jobs increase w/ a growing trade deficit---

---that U.S. factories close w/ a shrinking trade deficit, while trade deficits mean more jobs for all and more wealth. Don't believe it? Can't understand how that can be possible? Beliefs and understandings are all well and good but step number one is to know what's going on and understanding why is impossible w/o first facing reality.

Only then can we understand what a Trade Deficit is --namely we sell capital and buy goods.

Long ago that used to be a bad thing --selling our farms to buy food. Now we sell designs, we sell patents, we sell stocks'n'bonds and we use the profits to buy goods'n'services. Don't look now but we live in the info age and Americans can crank out designs, patents, stocks'n'bonds all day long.

The big problem now is too many people only care about their feelings and to them it just doesn't feel right to have a trade deficit. All I can tell them is go ahead and enjoy all those feelings all day long but please do it elsewhere alone. That, and to remember if you feel it by yourself for too long it can make you blind.

 

[usmbguest5318]

Now we sell designs, we sell patents, we sell stocks'n'bonds and we use the profits to buy goods'n'services. Don't look now but we live in the info age and Americans can crank out designs, patents, stocks'n'bonds all day long.

Simply put, the U.S.' comparative advantage is now in intellectual capital rather than physical capital. To get a good job, one must work in disciplines where there are good jobs offered. That's no different now than it was 20+ years ago and before. What's different was that our comparative advantage then was in the production of tangible goods, and a wide array of them no less.

Information technology has changed that just as surely as mechanical technology wrought large scale change in the job market in eras long ago. The defining difference between the two is that the technological advances that powered the industrial revolution merely increased the efficiency of human physical labor and it was easy for individuals to move from, say, driving horse drawn carriages to driving cars. The IT Revolution increased the efficiency of human mental labors and enabled a way to more efficiently perform physical labor than humans can.

In both revolutions, some people were put out of work and others obtained work, often at higher wages, that didn't before exist. The key to thriving in the wake of major technology-driven change is to "board the train" not "stand on the tracks hoping to stop the it." Clark Kent may be able to pull off that feat, but for the rest of us, there's only one outcome to that move, and it's not pretty.

 

[expat_panama]

... the U.S.' comparative advantage is now in intellectual capital rather than physical capital. To get a good job, one must work in disciplines where there are good jobs offered... ...The key to thriving in the wake of major technology-driven change is to "board the train" not "stand on the tracks hoping to stop the it." ....

That's a very good way of putting it. My take is that our econ models we've been using for a couple centuries just don't work very well now. You and I know it. The rest I supposed will have to be dragged screaming and kicking into the twentieth century --oops, the new millennium.

 

[Slashsnake]

[from Mr. Trump, Here's Why Trade Deficits Are Good ]

Feb 27, 2017

Simon Constable


President Trump seems to have the wrong end of the stick when it comes to trade deficits.

He seems to think big trade deficits mean the U.S. is losing in the game of international trade...

...It's easy to see why most people view that massive sum as a failure. On the face of it, a trade deficit between two countries means that one country exported way more goods than the other...

...a big trade deficit shows that you got more for your exports than did the other country. The bigger the deficit, the better your country came out in the trade deal...

...China funds the U.S.

The deficit itself ends up being financed by the country with the trade surplus...

...if the U.S. had a trade surplus with China, then its economy would be financed by the U.S., which wouldn't be nearly as good.​

===================

Many will say that the author's a twit and doesn't really know what he's talking about. I tend to agree.

The big problem w/ the trade deficit imho is that most folks that rant about it just don't know what it is. People like to say the trade defict's the same as the national budget deficit, that we're going broke into default and that all our factories are being shipped overseas so that's why the U.S. doesn't manufacture anything 'cause all the manufacturing jobs were stolen by China using NAFTA against the U.S.

imho this ignorance is by choice; the facts are open to all. Problem is the facts involve that number stuff that party hacks hate --and they show how manufacturing jobs increase w/ a growing trade deficit---

---that U.S. factories close w/ a shrinking trade deficit, while trade deficits mean more jobs for all and more wealth. Don't believe it? Can't understand how that can be possible? Beliefs and understandings are all well and good but step number one is to know what's going on and understanding why is impossible w/o first facing reality.

Only then can we understand what a Trade Deficit is --namely we sell capital and buy goods.

Long ago that used to be a bad thing --selling our farms to buy food. Now we sell designs, we sell patents, we sell stocks'n'bonds and we use the profits to buy goods'n'services. Don't look now but we live in the info age and Americans can crank out designs, patents, stocks'n'bonds all day long.

The big problem now is too many people only care about their feelings and to them it just doesn't feel right to have a trade deficit. All I can tell them is go ahead and enjoy all those feelings all day long but please do it elsewhere alone. That, and to remember if you feel it by yourself for too long it can make you blind.

The author is a twit. There's a reason many jobs go overseas and why most jobs available today are in retail or fast food.

If manufacturing jobs increased with a larger trade deficit then where are they? Sometimes people focus on data so much that common sense goes out the door.

Over the last 15 years, Bristol Myers Squibb has been cut in 1/3 in my area, New Venture gear has left, Carrier is 1/10th what it was, and Lockheed Martin has said they'll pull out of the area many times.

 

[william the wie]

... the U.S.' comparative advantage is now in intellectual capital rather than physical capital. To get a good job, one must work in disciplines where there are good jobs offered... ...The key to thriving in the wake of major technology-driven change is to "board the train" not "stand on the tracks hoping to stop the it." ....

That's a very good way of putting it. My take is that our econ models we've been using for a couple centuries just don't work very well now. You and I know it. The rest I supposed will have to be dragged screaming and kicking into the twentieth century --oops, the new millennium.

Yeah the models are screwed up. A much better case be made that the knock on effects of the floods and then dustbowl caused the great depression than any economic theory I've seen. Economics is about where history was before "Plagues and Peoples" and "The Columbian Exchange" i. e. The stuff being published is generally not good enough to be wrong.

 

[expat_panama]

... jobs go overseas...

We keep hearing folks talk about that, it's kind of like the idea of U.S. factories being shipped offshore. What, it can't be like this:

Yeah, I know it happens all the time in the funny papers but seriously we understand that when an American starts a business it doesn't mean some foreign business has to shut down, and won't happen the other way either. Let's face it, this is moron talk.

 

[usmbguest5318]

... the U.S.' comparative advantage is now in intellectual capital rather than physical capital. To get a good job, one must work in disciplines where there are good jobs offered... ...The key to thriving in the wake of major technology-driven change is to "board the train" not "stand on the tracks hoping to stop the it." ....

That's a very good way of putting it.

Thank you.

It would seem, given your comments below, I should have noted the remainder of my "train" analogy (the examples provided to be illustrative, not all inclusive):

1. On board --> These people are the ones who behave in accordance with the three assumptions above and do so in a timely manner.
   • E.g., people who have decent to excellent jobs (self-employed or not)
2. Getting on board --> These are the people who didn't board the "train" at the originating station, but who "ran" to catch up to it and are about to "get on board."
   • E.g., people obtaining the skills to get a decent to excellent job; people who have highly demanded skills and who are aligning their skills with the market that demands them....one way of doing that is moving from a place that doesn't have good jobs on offer to a place that does...there are other ways as well.
3. Not on board --> These people may be:

• the ones trying to "stand in front of the train to stop it as it approaches them," or
• the ones watching it go by but not not interested in getting on board
  • E.g., Retired people; people who have (not want) satisfactory "pre-revolution" jobs and no current or impending need to abandon them; people who refuse to "get on board" and are content performing the remaining low-wage jobs.

My take is that our econ models we've been using for a couple centuries just don't work very well now. You and I know it. The rest I supposed will have to be dragged screaming and kicking into the twentieth century --oops, the new millennium.

Au contraire. It's my observation that the economic models, most especially those related to international trade, work precisely as advertised. If, as goes the principles of economics, there is anything that behaves oddly, it is humans, not economic principles.

You will recall that neoclassical economics has three basic assumptions that pertain to people:

1. People have rational preferences among outcomes that can be identified and associated with a value.
   • Outcomes --> different types of jobs
   • Value --> the pay those jobs offer
2. Individuals (acting for themselves) maximize utility (as consumers) and firms (the people who own them and/or run them) maximize profit (as producers).
   • When discussing labor, the producers are the workers and consumers are the employers.
3. People act independently on the basis of relevant information.

Those assumptions are called "basic" because they apply to both types of exchange: goods and services.

The fact is that some people behave in accordance with those assumptions. Indeed, most do; however, there are a lot of people who don't. They aren't the majority of people but their numbers can be yet many. The central question, as goes governance, is what do about those people who fail to obtain relevant information and use it to act rationally to maximize their utility with regard to the range of possible and most likely outcomes people may and effect for themselves. The range of possible choices falls on a continuum that has as its endpoints "Horatio Algerism/Social Darwinism" and "Nanny Statism." Few are the governments and leaders who pursue "endpoint" policies.

 

[usmbguest5318]

... the U.S.' comparative advantage is now in intellectual capital rather than physical capital. To get a good job, one must work in disciplines where there are good jobs offered... ...The key to thriving in the wake of major technology-driven change is to "board the train" not "stand on the tracks hoping to stop the it." ....

That's a very good way of putting it. My take is that our econ models we've been using for a couple centuries just don't work very well now. You and I know it. The rest I supposed will have to be dragged screaming and kicking into the twentieth century --oops, the new millennium.

Yeah the models are screwed up. A much better case be made that the knock on effects of the floods and then dustbowl caused the great depression than any economic theory I've seen. Economics is about where history was before "Plagues and Peoples" and "The Columbian Exchange" i. e. The stuff being published is generally not good enough to be wrong.

I think not. That said, I'm not about to try to defend the quality of economic theory and practice in the 21st century. That would require discussing the whole of an academic discipline. Even I won't pen that much here.

 

[EdwardBaiamonte]

... the U.S.' comparative advantage is now in intellectual capital rather than physical capital. To get a good job, one must work in disciplines where there are good jobs offered... ...The key to thriving in the wake of major technology-driven change is to "board the train" not "stand on the tracks hoping to stop the it." ....

That's a very good way of putting it. My take is that our econ models we've been using for a couple centuries just don't work very well now. You and I know it. The rest I supposed will have to be dragged screaming and kicking into the twentieth century --oops, the new millennium.

Yeah the models are screwed up. A much better case be made that the knock on effects of the floods and then dustbowl caused the great depression than any economic theory I've seen. Economics is about where history was before "Plagues and Peoples" and "The Columbian Exchange" i. e. The stuff being published is generally not good enough to be wrong.

I think not. That said, I'm not about to try to defend the quality of economic theory and practice in the 21st century. That would require discussing the whole of an academic discipline. Even I won't pen that much here.

Germany, for example, is great at manufacturing and thus has a trade surplus because people badly what their stuff. They are in a good position, actually.

 

[EdwardBaiamonte]

... the U.S.' comparative advantage is now in intellectual capital rather than physical capital. To get a good job, one must work in disciplines where there are good jobs offered... ...The key to thriving in the wake of major technology-driven change is to "board the train" not "stand on the tracks hoping to stop the it." ....

That's a very good way of putting it. My take is that our econ models we've been using for a couple centuries just don't work very well now. You and I know it. The rest I supposed will have to be dragged screaming and kicking into the twentieth century --oops, the new millennium.

Yeah the models are screwed up. A much better case be made that the knock on effects of the floods and then dustbowl caused the great depression than any economic theory I've seen. Economics is about where history was before "Plagues and Peoples" and "The Columbian Exchange" i. e. The stuff being published is generally not good enough to be wrong.

I think not. That said, I'm not about to try to defend the quality of economic theory and practice in the 21st century. That would require discussing the whole of an academic discipline. Even I won't pen that much here.

Germany, for example, is great at manufacturing and thus has a trade surplus because people badly want their stuff. They are in a good position, actually.

 

[usmbguest5318]

... the U.S.' comparative advantage is now in intellectual capital rather than physical capital. To get a good job, one must work in disciplines where there are good jobs offered... ...The key to thriving in the wake of major technology-driven change is to "board the train" not "stand on the tracks hoping to stop the it." ....

That's a very good way of putting it. My take is that our econ models we've been using for a couple centuries just don't work very well now. You and I know it. The rest I supposed will have to be dragged screaming and kicking into the twentieth century --oops, the new millennium.

Yeah the models are screwed up. A much better case be made that the knock on effects of the floods and then dustbowl caused the great depression than any economic theory I've seen. Economics is about where history was before "Plagues and Peoples" and "The Columbian Exchange" i. e. The stuff being published is generally not good enough to be wrong.

I think not. That said, I'm not about to try to defend the quality of economic theory and practice in the 21st century. That would require discussing the whole of an academic discipline. Even I won't pen that much here.

Germany, for example, is great at manufacturing and thus has a trade surplus because people badly what their stuff. They are in a good position, actually.

Germany’s trade surplus is a problem | Brookings Institution

 

[Slyhunter]

[from Mr. Trump, Here's Why Trade Deficits Are Good ]

Feb 27, 2017

Simon Constable


President Trump seems to have the wrong end of the stick when it comes to trade deficits.

He seems to think big trade deficits mean the U.S. is losing in the game of international trade...

...It's easy to see why most people view that massive sum as a failure. On the face of it, a trade deficit between two countries means that one country exported way more goods than the other...

...a big trade deficit shows that you got more for your exports than did the other country. The bigger the deficit, the better your country came out in the trade deal...

...China funds the U.S.

The deficit itself ends up being financed by the country with the trade surplus...

...if the U.S. had a trade surplus with China, then its economy would be financed by the U.S., which wouldn't be nearly as good.​

===================

Many will say that the author's a twit and doesn't really know what he's talking about. I tend to agree.

The big problem w/ the trade deficit imho is that most folks that rant about it just don't know what it is. People like to say the trade defict's the same as the national budget deficit, that we're going broke into default and that all our factories are being shipped overseas so that's why the U.S. doesn't manufacture anything 'cause all the manufacturing jobs were stolen by China using NAFTA against the U.S.

imho this ignorance is by choice; the facts are open to all. Problem is the facts involve that number stuff that party hacks hate --and they show how manufacturing jobs increase w/ a growing trade deficit---

---that U.S. factories close w/ a shrinking trade deficit, while trade deficits mean more jobs for all and more wealth. Don't believe it? Can't understand how that can be possible? Beliefs and understandings are all well and good but step number one is to know what's going on and understanding why is impossible w/o first facing reality.

Only then can we understand what a Trade Deficit is --namely we sell capital and buy goods.

Long ago that used to be a bad thing --selling our farms to buy food. Now we sell designs, we sell patents, we sell stocks'n'bonds and we use the profits to buy goods'n'services. Don't look now but we live in the info age and Americans can crank out designs, patents, stocks'n'bonds all day long.

The big problem now is too many people only care about their feelings and to them it just doesn't feel right to have a trade deficit. All I can tell them is go ahead and enjoy all those feelings all day long but please do it elsewhere alone. That, and to remember if you feel it by yourself for too long it can make you blind.

I don't see how Honda and Yamaha given carte blanche to sell their bikes here and then charging 100% tax on Harley's does us any good. That is not fair trade. Trump will fix that.

 

[EdwardBaiamonte]

Germany’s trade surplus is a problem | Brookings Institution

so they should turn out junk to fix problem??????????

 

[EdwardBaiamonte]

I don't see how Honda and Yamaha given carte blanche to sell their bikes here and then charging 100% tax on Harley's does us any good. That is not fair trade. Trump will fix that.

I think on balance we are probably getting screwed with trade deals but they have been huge part of our foreign policy that, for example, made China a friend rather than an enemy we didn't need. And don't forget its not so simple. We have huge tariff on light trucks from Japan so their designs won't wipe out Ford completely!!
Hopefully Trump can fix a little but anyway without starting war. Disintegrating the world is a hard way to start after it took so long to integrate and become neighborly.

 

[usmbguest5318]

Germany’s trade surplus is a problem | Brookings Institution

so they should turn out junk to fix problem??????????

What are you talking about? DE would want to reduce or eliminate the trade surplus, not create a recession or see its producers go out of business. Dr. Bernanke offered three approaches for how DE might reduce its trade surplus and not one of them even remotely hints that DE might, has or will implement such a tactic/strategy for ameliorating the downsides of having a big trade surplus. Why have you posed the question you have?

 

[EdwardBaiamonte]

Germany’s trade surplus is a problem | Brookings Institution

so they should turn out junk to fix problem??????????

What are you talking about??

you said Germany's trade surplus was a problem and I asked if they should start making junkie products so they would not have the trade surplus you said was problematic.

 

[EdwardBaiamonte]

DE would want to reduce or eliminate the trade surplus, not create a recession or see its producers go out of business.

did I say they should create a recession or go out of business????????????i

 

[usmbguest5318]

Germany’s trade surplus is a problem | Brookings Institution

so they should turn out junk to fix problem??????????

What are you talking about??

you said Germany's trade surplus was a problem and I asked if they should start making junkie products so they would not have the trade surplus you said was problematic.

The/my answer is no. Instead they should pursue one or several of the tactics Dr. Bernanke suggests in the article.

 

[usmbguest5318]

DE would want to reduce or eliminate the trade surplus, not create a recession or see its producers go out of business.

did I say they should create a recession or go out of business????????????i

You didn't positively state anything. You asked a question. It appeared to me to be a rhetorical one, but I'm not totally sure whether it is/was or not. I'm fairly sure that you won't now attest to it's having been so.

 

[EdwardBaiamonte]

The/my answer is no. Instead they should pursue one or several of the tactics Dr. Bernanke suggests in the article.

which one and why not do nothing?????