Trade deficits are ALWAYS detrimental to their nations’ GDPs.

[Wiseacre]

I don't think that's true, that trade deficits are always detrimental. You could run a deficit with another country for a commodity that you can then use to manufacture and profit from seeling your product.

Say you purchase the foreign resource for $100 and sell it domestically for $250. Don't we have a net increase in GDP, even though we also have a trade deficit?

Concerning a trade deficit of goods vital to the nation’s production of other goods or service products:
That deficit is a component of the nations’ entire balance of global trade;
thus that deficit fully participates in the nation’s trade balance’s affect upon their GDP.

Regardless of an imported good’s extent of national economic benefit, ALL trade deficits are ALWAYS detrimental to their nations’ GDPs.

GDP is non-judgmental; it’s an objective aggregate of expenses or prices to create all goods and service products produce throughout the nation during the reporting period.
GDP is dumb; it’s unable to recognize any advantage between spending for education or for lap dancers.

I have greater confidence in the more arbitrary GDP statistic rather than depending upon bureaucrats’ discretionary powers and judgments.

Respectfully, Supposn

I invite you to check out this link. It shows the correlation between the US trade deficits and GDP from 1980 - 2007. We had some big deficits in there but equally big increases in GDP. Doesn't square with your assertion.

LOL, I have no confidence at all in bureaucrats either.

In Praise Of Trade Deficits

 

[Supposn]

I invite you to check out this link. It shows the correlation between the US trade deficits and GDP from 1980 - 2007. We had some big deficits in there but equally big increases in GDP. Doesn't square with your assertion.
LOL, I have no confidence at all in bureaucrats either.

In Praise Of Trade Deficits

Excerpted from message #2:

[” Toro, don’t confuse cause and effect.
A nation’s faster economic growth is certainly not due to its increased trade deficit.

A nation’s domestic markets sales volumes are likely to increase when the nation is enjoying a more robust economy. The converse is likely to occur during unfavorable economic durations”].
////////////////////////////////

ExPat_Panama within message #4 and again in #17 provided the same graph which begins @ 2007 and extends to predictions into 2012.

The speculated narrative of message #2, (i.e. what the Germans describe as a “thinking experiments”, conforms to the graph provided by ExPat_Panama.

Respectfully, Supposn

 

[Supposn]

I invite you to check out this link. It shows the correlation between the US trade deficits and GDP from 1980 - 2007. We had some big deficits in there but equally big increases in GDP. Doesn't square with your assertion.
LOL, I have no confidence at all in bureaucrats either.

In Praise Of Trade Deficits

WiseAcre, economies are similar to facets of a large environment populated by many creatures that are even more diverse that the facets they function upon. Some of those creatures are equally or more complex as the facets they inhabit. Trade balances are only one of the many factors that affect nation’s GDPs and the raw GDPs require adjustment to be compared over longer durations of time.

A nation’s annual GDPs comparisons are less meaningful over time unless they’re expressed in per capita and dollars amounts adjusted to reflect more constant purchasing powers.
Annual modifications of tax revenues and spending by all levels of U.S. governments, rates of unemployment, the numbers qualities of our school graduates, numbers of people serving in our armed services or imprisoned, or disabled, affect our nation’s GDP. The costs of natural and great industrial accidents, our median wage all affect the GDP. Just heard another radio mention of Gingrich’s proposing the undermining of child labor laws. To the extent that would change the level of U.S. education, that would affect the GDP.

The nature of matter and the existence of atoms were speculated upon long before the atomic bomb was created. A great deal about our studies of matter are still being speculated upon because we’ve not yet been able to actually test our theories.

Similarly our discussion of trade balances’ affects upon the GDP and our entire economy cannot currently be proven or disproven by historic statistics.

We are still dependent upon what the Germans describe as “thinking experiments”, (i.e. speculating upon the answers to questions that are prefixed with the words “What if”).

Respectfully, Supposn

 

[expat_panama]

...our discussion of trade balances’ affects upon the GDP and our entire economy cannot currently be proven or disproven by historic statistics. We are still dependent upon what the Germans describe as “thinking experiments”...

--or the ancient Greeks that favored of pure reasoning and banished proponents of scientific observation. While that trend was finally reversed in the Renaissance we'll always have a faction that refuses to look at anything that disagrees with previously chosen beliefs.

 

[Supposn]

...our discussion of trade balances’ affects upon the GDP and our entire economy cannot currently be proven or disproven by historic statistics. We are still dependent upon what the Germans describe as “thinking experiments”...

--or the ancient Greeks that favored of pure reasoning and banished proponents of scientific observation. While that trend was finally reversed in the Renaissance we'll always have a faction that refuses to look at anything that disagrees with previously chosen beliefs.

ExPan_Panama, I am not criticizing empirical experiments or studies.

I’m stating that in these economic studies, we are dealing with more variables that are beyond our management or even our ability to monitor in an organized manner.

The historic data you provided was consistent with the predicted data that I provided. But even if they would not have been similar, one or both of us could logically argue that the conditions of relative factors differed and accounted for the difference. Then we argue regarding which factors are germane and how did they differ? There’s the old dilemma that we cannot step into the same river twice.

It’s for these reasons that I use the terms “physical sciences” and “social studies”. Economics is not a science. The study of economics is more subjective and less objective than the study of electronics.

Respectfully, Supposn

 

[Wiseacre]

I invite you to check out this link. It shows the correlation between the US trade deficits and GDP from 1980 - 2007. We had some big deficits in there but equally big increases in GDP. Doesn't square with your assertion.
LOL, I have no confidence at all in bureaucrats either.

In Praise Of Trade Deficits

WiseAcre, economies are similar to facets of a large environment populated by many creatures that are even more diverse that the facets they function upon. Some of those creatures are equally or more complex as the facets they inhabit. Trade balances are only one of the many factors that affect nation’s GDPs and the raw GDPs require adjustment to be compared over longer durations of time.

A nation’s annual GDPs comparisons are less meaningful over time unless they’re expressed in per capita and dollars amounts adjusted to reflect more constant purchasing powers.
Annual modifications of tax revenues and spending by all levels of U.S. governments, rates of unemployment, the numbers qualities of our school graduates, numbers of people serving in our armed services or imprisoned, or disabled, affect our nation’s GDP. The costs of natural and great industrial accidents, our median wage all affect the GDP. Just heard another radio mention of Gingrich’s proposing the undermining of child labor laws. To the extent that would change the level of U.S. education, that would affect the GDP.

The nature of matter and the existence of atoms were speculated upon long before the atomic bomb was created. A great deal about our studies of matter are still being speculated upon because we’ve not yet been able to actually test our theories.

Similarly our discussion of trade balances’ affects upon the GDP and our entire economy cannot currently be proven or disproven by historic statistics.

We are still dependent upon what the Germans describe as “thinking experiments”, (i.e. speculating upon the answers to questions that are prefixed with the words “What if”).

Respectfully, Supposn

I think maybe this discussion has about run it's course. Let me just say this: the things a country imports may either be productive or non-productive in terms of generative economic growth. IOW, if we can tke those imports and turn a profit, that's a productive use that IS good for the economy and GDP is increased. If the aggregate imports are determined to cost more than their productive value end results, then those imports are detrimental to the country's GDP irregardless of how much was exported and whether or not a trade deficit exists.

 

[EdwardBaiamonte]

I think maybe this discussion has about run it's course. Let me just say this: the things a country imports may either be productive or non-productive in terms of generative economic growth. IOW, if we can tke those imports and turn a profit, that's a productive use that IS good for the economy and GDP is increased. If the aggregate imports are determined to cost more than their productive value end results, then those imports are detrimental to the country's GDP irregardless of how much was exported and whether or not a trade deficit exists.

Wow was that convoluted. If you want to understand exports and imports between countries just think of exports and imports between states and you'll never go wrong. Its the same exact thing,..... unless of course liberals interfere with the free market process.

Don't forget our Commerce Clause was designed to promote free trade between states. Our founders understood free trade while modern liberals love to believe they can manipuate it for a superior result. They can't.

 

[Middleoftheroad]

...time trade deficits can get worse while the GDP gets better, and the trade deficit can get better while the GDP gets worse. This is baked into recorded data and historical fact...

...Trade deficits are ALWAYS detrimental to their nations’ GDPs...

--in spite of the fact that bigger trade deficits have come with increasing GDP. Right. Here's another example. In mid 2000 an American buys a thousand dollars worth of Apple stock from a Canadian mutual fund, and last week sells it back for $60,000 using the money to buy Canadian lumber to sell in Akron, Ohio.

Trade deficit. GDP increases. Why is that bad?

First off you do realize that your example had no trade deficits in it right? Ill break it down for you
American buyer sends $1000 to canada mutual fund
Canada mutual fund send $1000 to US stock exchange
American buyer recieves 60k from Canada mutual fund
American buyer send $60k back to Canada for lumber

so in the end there was never a trade deficit and the only thing that happened was that America swapped $60k in stock for $60k in lumber. It would have been the exact same had the buyer just used an american mutual fund.
But here is the real problem with trade gaps. Americans buys consumer good from China, China then buys American companies with that money.

 

[Supposn]

...Trade deficits are ALWAYS detrimental to their nations’ GDPs...

--in spite of the fact that bigger trade deficits have come with increasing GDP. Right.................................

................Trade deficit. GDP increases. Why is that bad?

ExPan_Panama, you continue to make notice of increased trade deficits accompanying their nation’s increased GDPs and the contrary, (i.e. decreased trade deficits accompanying their nation’s decreased GDPs) during unfavorable economic conditions.

Excerpted from message #7:

ExPat_Panama, you didn’t read or didn’t consider message #2? You’re confusing cause and effect.
There good reason to expect USA’s trade deficit to increase in response to an improving economy or to decrease when the economy goes south. That is a reasonably logical conclusion which I Suppose is a matter of opinion. .....................................
.......................................................................Respectfully, Supposn

Nations’ domestic market’s sales volumes are positively related to their GDPs. Within those markets, sales volumes of domestic and imported goods generally move in step with each other.
Unless there are special circumstances, why should we expect otherwise?

Trade deficits are always detrimental to their nation’s GDP but a nation’s trade balance is not the only factor that affects their GDPs.
It’s certainly possible for a nation to suffer a trade deficit while other factors are behavng more favorably. Trade deficits cause their nations’ GDPs to be less than otherwise; which does not necessarily mean the GDP will decrease.

Respectfully, Supposn

 

[editec]

Trade deficits are ALWAYS detrimental to their nations’ GDPs.

Not necessarily.

If the nation is at or near FULL EMPLOYMENT, and if local CAPITAL cannot find good investment opportunities on-shore?

Then sending that cash to cash starved economies IS a good thing.

Economies are dynamic things.

As the economy changes so too the policies needed to keep them healthy change.

 

[likeabird03]

Trade deficits are ALWAYS detrimental to their nations’ GDPs.

Not necessarily.

If the nation is at or near FULL EMPLOYMENT, and if local CAPITAL cannot find good investment opportunities on-shore?

Then sending that cash to cash starved economies IS a good thing.

Economies are dynamic things.

As the economy changes so too the policies needed to keep them healthy change.

It could be, but if the last several years are any evidence - the trade deficit has been detrimental.

 

[expat_panama]

...in these economic studies, we are dealing with more variables that are beyond our management or even our ability to monitor in an organized manner...

If that's true than the tread's topic is pointless as is any discussion of economics. The same could be said for sociology, medicine, and any applied science. The way the scientific method deals with infinite variables is by comparing models with clarifying assumptions to observations. It works, and if we were to connect our statements with what we can see, then--

--the thread would be titled "Trade deficits appear to be associated with increasing GDPs".

 

[Supposn]

.............................Here's another example. In mid 2000 an American buys a thousand dollars worth of Apple stock from a Canadian mutual fund, and last week sells it back for $60,000 using the money to buy Canadian lumber to sell in Akron, Ohio.

Trade deficit. GDP increases. Why is that bad?

ExPat_Panama, you’re describing four transactions.

(1) An American enterprise buys a thousand dollars worth of Apple stock from a Canadian mutual fund.
This is not a sale of goods or servlce products. It’s a transfer of wealth. Transfers of wealth are not factors within the calculation of GDP. This transaction has no affect upon the GDP but I believe is factored into USA’s capital account.

(2) An American enterprise sells the Apple stock back to the Canadians for $60,000.
Again this is a transfer of wealth that has no affect upon the GDP but I believe is factored into USA’s capital account.

(3) An American enterprise buys $60,000 of lumber from the Canadians.
(3A) While the American purchased lumber sits in Canada, there’s no entry or affect upon USA’s GDP But I believe the transaction is entered into the capital account.

(3B) If and when an enterprise in the USA takes delivery of the lumber shipped from an enterprise in a foreign nation, the receiving enterprise’s investment is an addition to U.S. investments factored into USA’s GDP.
Also the purchase price of the trade products is a negative contribution to USA’s global trade balance within USA’s GDP.
Nation's global trade balances' are generally under stated and thus their effect upon their nations' GDPs are generally understated. I’ll explain this further within this message.

(4) If there’s a transaction between two entities within the USA, the net effect upon USA’s GDP is the entities net cost differences. GDP describes the nation’s total production of goods and service products; not the entire sum of each and every transaction.
////////////////////////////////////////////////////s//
Excerpted from message #1 of this discussion thread:
“…………………………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……….. “

When the prices of global trade goods are understated, global trade balances affects upon their nations GDPs are understated.
Trade deficits are ALWAYS detrimental to their nations' GDPs.

Respectfully, Supposn

 

[Supposn]

...in these economic studies, we are dealing with more variables that are beyond our management or even our ability to monitor in an organized manner...

If that's true than the tread's topic is pointless as is any discussion of economics. The same could be said for sociology, medicine, and any applied science. The way the scientific method deals with infinite variables is by comparing models with clarifying assumptions to observations. It works, and if we were to connect our statements with what we can see, then--

--the thread would be titled "Trade deficits appear to be associated with increasing GDPs".

ExPat_Panama, unlike most medical testing, there aren’t sufficient economic subjects sharing similar conditions and available for testing. This is very often a problem with some medical testing. With regard to national economics there are usually no voluntary subjects.

We agree upon observing trade deficits and GDP rise and fall in tandem but we disagree upon cause and effect.

If I applied your logic to other matters, I would arrive at some very strange conclusions.

The total losses due to burglaries are greater in wealthier neighborhoods. You conclude to improve our neighborhood we promote burglar activity?

If trade deficits are beneficial to our nation, why not prohibit or discourage production of goods and service products to whatever extent that’s feasible?

You don’t question your conclusions?

Respectfully, Supposn

 

[Supposn]

Trade deficits are ALWAYS detrimental to their nations’ GDPs.

Not necessarily.

If the nation is at or near FULL EMPLOYMENT, and if local CAPITAL cannot find good investment opportunities on-shore?

Then sending that cash to cash starved economies IS a good thing.

Economies are dynamic things.

As the economy changes so too the policies needed to keep them healthy change.

Editec, I’m of the opinion that a high per capita GDP expressed in cost of living adjusted dollars and a high median wage are the best indicators of a currently robust economy.

They indicate our current standard of living and the extent of that standard’s distribution throughout the nation.
Do you believe the robust economy you describe in your message would be sustainable if its commercial opportunities couldn’t attract investors?

A government enjoys a home court advantage. Unless others are putting themselves at extreme disadvantage, a competent government should be adopting and enacting policies that offer investors competitive commercial opportunities.

I’m a proponent of a trade policy based upon transferable Import Certificates.
Refer to the topic “Warren Buffett's concept to significantly reduce USA's trade deficit” begun @ 8:10 pm, Aug 30, 2009, last posted to @ 1:28 PM, Jun 15, 2011.

Respectfully, Supposn

 

[expat_panama]

...Here's another example. In mid 2000 an American buys a thousand dollars worth of Apple stock from a Canadian mutual fund, and last week sells it back for $60,000 using the money to buy Canadian lumber to sell in Akron, Ohio. Trade deficit. GDP increases. Why is that bad?

...four transactions. (1) An American enterprise buys a thousand dollars worth of Apple stock from a Canadian mutual fund...

That may be our disconnect-- while we're together on the fact that GDP is domestic production, let's also be clear on the fact that a trade deficit is not dollars going to foreigners. They don't use dollars, they got their own money. The trade deficit is the exchange of financial capital for merchandise.

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. A decade later the Canadians buy back my 120 shares with 240k board feet that I turned around and sold in Akron OH. Calculating the hit that the trade deficit takes is easy, it's the 4k export minus the 240k import, a $59,000 increase in the trade deficit. The domestic production that's added to the GDP begins with my original $1,000 worth of lumber. The average price/sales ratio of 2.4 over the decade means the average Apple sales caused by the 120 shares for a decade was over $50,000. Finally, my 240k bd.ft. of lumber are used to build a hundred 2,000 sf homes worth producing another $100k value added.

In this example there's no change in foreign control here because the evil Canadians have the same 120 shares they began with; the trade deficit grew by $59k, and the GDP grew by $151K.

...Trade deficits are ALWAYS detrimental to their nations' GDPs...

Here's the entire trade/gdp for the decade:

 

[Middleoftheroad]

Red bold is mine

...Here's another example. In mid 2000 an American buys a thousand dollars worth of Apple stock from a Canadian mutual fund, and last week sells it back for $60,000 using the money to buy Canadian lumber to sell in Akron, Ohio. Trade deficit. GDP increases. Why is that bad?

...four transactions. (1) An American enterprise buys a thousand dollars worth of Apple stock from a Canadian mutual fund...

That may be our disconnect-- while we're together on the fact that GDP is domestic production, let's also be clear on the fact that a trade deficit is not dollars going to foreigners. They don't use dollars, they got their own money. The trade deficit is the exchange of financial capital for merchandise.You are close here. Except that trade deficit is VALUE going to foreigners. The dollars don't go to foreign countries, at least not permanently, because of currency exchange. It is why trade deficits weaken the currency of that country and trade surpluses strengthen the currency of that country.

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.So far this is a push, no trade gap, you sent them $1k worth of stuff they sent you $1k worth of stuff. A decade later the Canadians buy back my 120 shares with 240k board feet that I turned around and sold in Akron OH. Calculating the hit that the trade deficit takes is easy, it's the 4k export minus the 240k import, a $59,000 increase in the trade deficit.You're calculating this wrong, trade deficits are not calculated across multiple years. The domestic production that's added to the GDP begins with my original $1,000 worth of lumber. The average price/sales ratio of 2.4 over the decade means the average Apple sales caused by the 120 shares for a decade was over $50,000. Finally, my 240k bd.ft. of lumber are used to build a hundred 2,000 sf homes worth producing another $100k value added.

In this example there's no change in foreign control here because the evil Canadians have the same 120 shares they began with; the trade deficit grew by $59k, and the GDP grew by $151K.You're are still wrong, that is not how trade deficits are calculated. You cannot compare the price of stock at one point and say that the value is the same at some point in the future, especially when you said you sold it for 50X as much.
Your example doesn't make sense because your not doing it right.

...Trade deficits are ALWAYS detrimental to their nations' GDPs...

Here's the entire trade/gdp for the decade:

 

[likeabird03]

Here's the entire trade/gdp for the decade:

Once again, you're pointing to data that shows that GDP grew despite our trade deficit, and you're trying to argue that either it grew BECAUSE of the trade deficit or that our growth was in no way negatively impacted by the deficit, which is nonsense. Was the trade deficit getting bigger because of the economy growing? Most likely, because we've relied more and more on imports in recent years to satisfy our consumption and as Americans demanded more goods with all that money they were borrowing against their homes the goods had to come from somewhere.

The rising trade deficit isn't always enough to wipe out our growth, but it ALWAYS mutes our growth.

 

[Quantum Windbag]

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?

 

[likeabird03]

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?

Because we buy far more of their stuff than they buy of ours. You try it.