Trade deficits are ALWAYS detrimental to their nations’ GDPs.

...Let me see if I have this straight. If we trade with China, and they buy more form us than we buy from them, that is bad for our GDP. Can you give numbers to back that up, or am I just supposed to assume you are a complete idiot?
The blunder is thinking China can possibly buy more from the US then we can buy from them. Payments balance, and what we buy from foreigners always equals what we sell them. This so-called 'trade deficit' is from the Marxist idea of deciding that selling one thing can be 'good' and selling something else is somehow bad.

Free poeple decide for themselves what to buy and sell while Marxists want the collective to decide.
 
...Let me see if I have this straight. If we trade with China, and they buy more form us than we buy from them, that is bad for our GDP. Can you give numbers to back that up, or am I just supposed to assume you are a complete idiot?
The blunder is thinking China can possibly buy more from the US then we can buy from them. Payments balance, and what we buy from foreigners always equals what we sell them. This so-called 'trade deficit' is from the Marxist idea of deciding that selling one thing can be 'good' and selling something else is somehow bad.

Free poeple decide for themselves what to buy and sell while Marxists want the collective to decide.

seriously blaming it on marxism? That is ridiculous. I guess Karl Marx invented it sometime before 1630 and Thomas Mun. Ya know, like 300 years before he was alive.
Here from wikipedia
Balance of payments - Wikipedia, the free encyclopedia
While the BOP has to balance overall,[7] surpluses or deficits on its individual elements can lead to imbalances between countries. In general there is concern over deficits in the current account.[8] Countries with deficits in their current accounts will build up increasing debt and/or see increased foreign ownership of their assets. The types of deficits that typically raise concern are[1]:
A visible trade deficit where a nation is importing more physical goods than it exports (even if this is balanced by the other components of the current account.) Sort of like China owning 2 Trillion worth of American tresuries, and hundreds of billions of dollars worth of our companies.
 
Trade deficits are ALWAYS detrimental to their nations’ GDPs.

Nations’ entire production of goods and service products contribute to their GDPs but prices of individual products do not always reflect the entire goods and services that supported the production of those products. Also individual product prices certainly do not reflect their productions’ inducement of additional goods or services productions.

All production contributes to producing nations’ gross domestic product, (GDP). The production is not statistically lost; but to the extent that production costs of globally traded goods are understated, nations’ global trade imbalances’ affects upon their GDPs are not fully attributed to global trade.

////////////////////////////////// Further Explanations ///////////////////////
For example governments often induce producers to establish their factories within their jurisdictions by granting them favorable tax considerations or providing infrastructure that’s particularly favorable to targeted enterprises. Governments and other non–profits often co-operate by favoring enterprises with research, loans of equipment, or access to their expertise. These production supports are of lesser or no cost to the favored enterprises and thus those enterprises products are lesser priced.

All of a nation’s production, (including production support that’s not reflected within produced products prices), are included within the producing nations’ GDPs. But domestic production support not included within the supported export products are not to that extent attributed as exports’ contributions to the producing nation’s GDP.

Production of products can support or induce the production of other unrelated products.
For example increasing the production rate of export goods can increase the factory’s payroll and induce increasing revenues for local beauty parlor service products. This is an additional example of exports additionally increasing the nation’s GDP but the addition is not attributed to the nation’s global trade.

[We cannot spend the same money twice. That’s why the GDP calculation formulas are reduced by the amount of the nation’s imports. When U.S. purchasers perceiving their own individual benefits chose to purchase imported products their transaction reduces their nations’ GDPs. Trade surpluses increase their nations’ GDPs.]

Trade surpluses ALWAYS contribute and trade deficits are ALWAYS detrimental to their nations’ GDPs.
This is baked into the formula defining and calculating GDP; it is not matters of opinion.

Respectfully, Supposn

Let me see if I have this straight.

If we trade with China, and they buy more form us than we buy from them, that is bad for our GDP. Can you give numbers to back that up, or am I just supposed to assume you are a complete idiot?

This is called a trade surplus, not deficit, and it is a good thing.
 
ExPan_Panama, nations’ balances of trade, (i.e. current accounts) track international trade of goods and service products; which is a factor within the calculation of nations’ GDPs.
Somewhat similarly, the capital accounts track international transfers of wealth.

GDP is about domestic production which is positively related to job creation.
Conservatives prefer writing of wealth transfers in terms of providing additional investment capital that funds additional research, development and production. We agree that such funding is certainly beneficial to their nations.

When the transfer of wealth is the purchase of a new issue, (the issuing entity selling stocks or, bonds to acquire additional capital), that conforms to the conservative ideal.

But the vast majority of wealth transfers are simply the exercise of stock and bond markets’ financial liquidity. (Someone that had purchased a previously issued financial instrument is selling it to someone else).
The liquidity of our markets is of economic benefit to our nation but I don’t elevate that to the level of goods and services production. The liquidity of our financial markets, (i.e. transfers of wealth) does not generally create jobs.

Respectfully, Supposn
 
ExPan_Panama, nations’ balances of trade, (i.e. current accounts) track international trade of goods and service products. Balance of trade is a factor within the calculation of nations’ GDPs.
The GDP reports upon what spending and labor, (i.e. jobs) have actually done within the reporting period.

The extent of a product’s nationality is dependent upon the sources of the products’ labor, materials, components and anything else that supported the production of each product.
Profits are of no consideration within GDPs but obviously GDP affects profits and jobs. Due to balance of trades’ effects upon GDP, trade balance also affects profits and jobs.

GDP attributes production of all products to the producing nation, but to the extent that domestic production supporting the production of globally traded products but not reflected within the prices of the globally traded products, understates global trades’ affect upon GDPs.
[I.e. global trade’s contributions to exporting nation’s GDPs and determent to importing nations’ GDPs are understated].

Trade deficits are ALWAYS detrimental to their nation’s GDP but it alone does not determine if GDP rises or falls.
Trade balance is only one of the factors that affect GDPs. It is the net effect of all factors that determine the increase or decrease of a nation’s GDP.

Respectfully, Supposn
 
...
...Canadians gave me that thousand dollars worth of Apple stock (about 120 shares) because I gave them the 4k board feet of lumber I'd grown that year...
...this is a push, no trade gap, you sent them $1k worth of stuff they sent you $1k worth of stuff...
That's why all this 'trade gap' dribble is nonsense. All foreign trade balances becuase we sell stuff and they sell an amount of stuff that's always equal to what we sold. Saying that some how my swapping stocks for lumber is a trade gap is crazy!
 
...nations’ balances of trade, (i.e. current accounts) track international trade of goods and service products; which is a factor within the calculation of nations’ GDPs. Somewhat similarly, the capital accounts track international transfers of wealth...
The balance of trade doesn't work that way. The way it works is the current account (AKA 'trade balance') is equal to both the capital account plus the total of the financial account, and those two accounts are much more than mere 'transfers of wealth'. If I make up a song and a foreigner pays me to sing for him then it's called an 'export'. If he pays me to let him sing it to me, then it's a 'capital transfer'. I sell a foreigner wood and concrete it's an export, but if I assemble it into a building first it's a 'financial transfer'.


Maybe this would explain it better:

The Capital Account
The capital account is where all international capital transfers are recorded. This refers to the acquisition or disposal of non-financial assets (for example, a physical asset such as land) and non-produced assets, which are needed for production but have not been produced, like a mine used for the extraction of diamonds.

The capital account is broken down into the monetary flows branching from debt forgiveness, the transfer of goods, and financial assets by migrants leaving or entering a country, the transfer of ownership on fixed assets (assets such as equipment used in the production process to generate income), the transfer of funds received to the sale or acquisition of fixed assets, gift and inheritance taxes, death levies, and, finally, uninsured damage to fixed assets.

The Financial Account
In the financial account, international monetary flows related to investment in business, real estate, bonds and stocks are documented.

Also included are government-owned assets such as foreign reserves, gold, special drawing rights (SDRs) held with the International Monetary Fund, private assets held abroad, and direct foreign investment. Assets owned by foreigners, private and official, are also recorded in the financial account.

The Balancing Act
The current account should be balanced against the combined-capital and financial accounts.

Read more: What Is The Balance Of Payments?


Also in the Capital account (from International Balance Of Payments (BOP): Current Account, Capital Account, Financial Account, Official Reserve Account ) --
* transactions of real assets, such as the rights to natural resources,
* intangible assets, such as patents, copyrights, trademarks, franchises, and leases.
 
expat_panama said:
...Free poeple decide for themselves what to buy and sell while Marxists want the collective to decide.
seriously blaming it on marxism? That is ridiculous...
What truly ridiculous is wanting the state control of this so-called 'trade deficit'. There's no way in hell that it can be good when a foreigner pays me to write his new book, and bad if the foreigner pays me for the rights to my new book.

Stupidity only a Marxist could love.
 
Money can flow across borders for a number of reasons. Foreigners may buy assets in America. Or Americans can goods and services from abroad.

Suppose China wants to purchase some foreign exchange: they buy dollars. China "prints" some yuan, and purchases dollars. They could put the dollars on pallets and fly them to China. More likely, the money shows up in an account at the Fed. (If they'd like to earn interest, they buy Treasuries - which is still an account at the Fed.)

China now owns American assets. Americans, on the other hand, own yuan. Americans could buy Chinese assets with the money - except that they can't. China limits the purchases of Chinese assets by foreigners. The other thing they can do is buy goods and services from China.

This is a pretty good deal for Americans, because China keeps the price of its currency artificially low. It maintains a "peg" to the US dollar: whenever the yuan starts to rise, China buys dollars, using newly "printed" yuan. The combination of constantly increasing the supply of yuan, purchasing dollars, and preventing foreigners from purchasing Chinese assets allows the Chinese to keep the dollar:yuan ratio wherever it wants - which is low, because China wants foreigners to buy stuff from China.

Since Chinese products are a relatively good deal for Americans, Americans buy Stuff from China.

The net result is that the yuan China sells to Americans flows back to China to purchase Chinese products. It shows up as a trade deficit that matches the increase in Chinese ownership of American assets (dollars or Treasuries).
 
ExPat-Panama, the balance of payment accounts are a zero sum of nations’ current and capital accounts. Every entry within all of these accounts is actually or converted to a common monetary currency.

The capital account tracks international transfers of wealth. The current account tracks the global trade of goods and services.

Nations’ capital accounts are NOT factored into the calculation of GDPs.
Nations’ global trade balances, (i.e. the essence of the nations’ current accounts) ARE ALWAYS factored into their GDPs.

Trade deficits are ALWAYS detrimental to their nations’ GDPs.

Respectfully, Supposn
 
...The capital account tracks international transfers of wealth. The current account tracks the global trade of goods and services.Nations’ capital accounts are NOT factored into the calculation of GDPs.Nations’ global trade balances, (i.e. the essence of the nations’ current accounts) ARE ALWAYS factored into their GDPs.Trade deficits are ALWAYS detrimental to their nations’ GDPs...
lol! deja vue all over again...
Trade deficits are ALWAYS detrimental to their nations’ GDPs
Trade deficits are ALWAYS detrimental to their nations’ GDPs; the extents of those detriments are generally understated...
...Trade surpluses ALWAYS contribute to their nations’ GDPs.
Trade deficits are ALWAYS detrimental to their nations’ GDPs...
We're not getting anywhere...
This is good in that we've verified trade deficits don't erode GDP's simply because they don't, that observable GDP's rise and fall only when trade deficits do the same. Sure, we've gone over the basic GDP formula's minus sign with net imports and we've shown how increasing net exports doesn't up the GDP anymore than pushing a brake pedal forward make a car go faster.

We've also seen that this is because trade deficits are by their nature an increase in economic activity; namely the purchase of goods and services such as homes and patents (Fin. & Cap. Accts.) in exchange for other goods and services such as building materials and laboratory research (Curr. Acct.).

This was fun and please ping me if you come across something new on this. Cheers!
 
expat_panama said:
...Free poeple decide for themselves what to buy and sell while Marxists want the collective to decide.
seriously blaming it on marxism? That is ridiculous...
What truly ridiculous is wanting the state control of this so-called 'trade deficit'. There's no way in hell that it can be good when a foreigner pays me to write his new book, and bad if the foreigner pays me for the rights to my new book.

Stupidity only a Marxist could love.

I think that would be all fine and dandy if what we were dealing with here was really free trade. The policies are actually balanced in the other countries favor. We strangle our own industry with regulation after tax, after regulation but then open our market up completely to other countries that don't have the same standards as we do. In addition to that, they hit US products with all sorts of tariffs. We have Hondas and toyotas all over the streets of San Francisco, and no Chevys or Fords in Tokyo. In order for us to business in China many of our companies have to hand over intellectual property rights to the Chinese govt. They also manipulate their currency to give themselves an unfair advantage over us. This isn't free trade, we're dealing with Communist China, and they're really rigging the game.

If the trade deficit were a result of a true free trade system I might be more comfortable with it, and have better hopes of it adjusting naturally. But it's big because we've turned ourselves into the worlds b****.
 
This is good in that we've verified trade deficits don't erode GDP's simply because they don't, that observable GDP's rise and fall only when trade deficits do the same. Sure, we've gone over the basic GDP formula's minus sign with net imports and we've shown how increasing net exports doesn't up the GDP anymore than pushing a brake pedal forward make a car go faster.

We've also seen that this is because trade deficits are by their nature an increase in economic activity; namely the purchase of goods and services such as homes and patents (Fin. & Cap. Accts.) in exchange for other goods and services such as building materials and laboratory research (Curr. Acct.).

This was fun and please ping me if you come across something new on this. Cheers!

It’s contended that ALWAYS trade surpluses contribute and deficits are detrimental to their nations’ GDPs. Responders to my messages point out historically its usual for USA’s trade deficits and GDPs the rise or fall simultaneously.

These are not contradictory concept. Nations’ net global trade balances are only one of the factors determining GDP. Trade balances alone do not determine their nations’ annual GDP changes; but trade surpluses contribute and deficits ALWAYS are detrimental to their nations’ GDPs.

Annual GDP and trade deficit are both statistical reports of what occurred within the same year. It’s logical that they should rise or fall almost simultaneously; they are both driven by the same economic forces at approximately the same time.

Within less than robust economic durations, sales volumes within USA’s domestic markets’ similarly decrease; they decrease for both our domestic goods and our imports. Economists have said when the U.S. has a cold; the remainder of the world suffers pneumonia. During such periods our trade deficits decrease. During such periods (while USA's GDP is Less than otherwise), our trade deficit's also decreases.

Trade deficits are ALWAYS detrimental to their nations’ GDPs.

Respectfully, Supposn
 
DSGE, the validity of my explanation is not dependent upon you or I.
You don’t, I do accept it.

Respectfully, Supposn

////////////////////////\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\
[Excerpted from “Obama wants to encourage manufacturing “
posted @ 1:11AM, February 19, 2012].

Quote: Originally Posted by Supposn:
Trade deficits are ALWAYS (more than otherwise) detrimental to their nation’s gross domestic production, (GDP).

Quote: Originally Posted by DSGE:
That's not true. You still haven't managed to explain why you think that's true].
 
The expenditure method is among the simplest and most common method for calculating gross domestic product, (i.e. GDP). Nations’ entire final expenditures for goods and service products are included within their GDP.

The total value of the nation’s imports are subtracted from the importing nations’ and added to the producing nations’ GDPs.

The prices of many specific products do not reflect the entire costs of goods and services that supported the production of those specific products. For example there’s research and development costs that were provided at lesser cost by universities or other non-profit entities or infrastructure contributed by local governments as an inducement to relocate facilities. All of those production supporting goods and services are included within the producing nations’ GDPs; but they cannot be statistically identified and attributed to foreign trade.

The production of globally traded products may sometimes directly or indirectly support or induce additional production of non-globally traded products. These are additional instances of goods and services that contributed to the producing nations’ GDPs but could not be statistically identified and attributed to foreign trade.

Nation’s net global balance of trade affects upon their GDPs are sometimes understated but they’re not overstated. Trade surpluses ALWAYs contribute and trade deficits are ALWAYS detrimental to their nation’s GDPs.

Respectfully, Supposn
 
"ALWAYS reduces the GDP" is, of course, a mistaken notion.

"Usually reduces the GDP" is the operative phrase to describe the effect of imports.
 
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