Trade deficits are net detrimental to their nation's GDP

[Toddsterpatriot]

This:
"Gross expenditures are not the manner by which production is defined."

It certainly is when you are using the Expenditure Equation to define GDP!

G+C+I+(x-m)=Y

This equation says GDP (Y) is the sum of those 4 values. That is a definition, because it tells you what numbers you have to have, in order to calculate the value of your GDP.

G is not net government spending, it is gross spending. It does not consider revenue. (The net number is reflected as the budget deficit or surplus)

C is gross consumption, I is gross private investments.

(x-m) is the only net number, because it's how you have to separate out the domestic component of trade to maintain the D in GDP.

Added together, they are the Gross Domestic Production. (x-m) is a gross number in the eyes of the equation- the total contribution of trade to the GDP.

"a trade deficit indicates the nation imported a greater value of products than it exported."

Yes, that's what it means.

"Consequentially it also indicates the nation's entire net expenditures for producing and consuming products exceeded the values of all of the products the nation produced."

No, it does not mean that. How are you deriving the net expenditure for producing and consuming something? They are not the same thing. The equation assumes all consumption is production.

There is no "net expenditure" for producing something. There is only the cost of producing it. Profit or loss is the net result, and the equation does not care about profit or loss. It only cares how much it sold for.

"That's why imports reduce and exports increase their nation's calculated GDP."

Because imports can't be called domestic production. It's just a math equation. You attribute far more importance to the trade deficit than it deserves. 100% of M is hidden inside C or G or I or X.

G+C+I+(x-m)=Y

Because imports can't be called domestic production. It's just a math equation. You attribute far more importance to the trade deficit than it deserves. 100% of M is hidden inside C or G or I or X.

Exactly!

He's hung up on the math, but still misunderstands it.
That's why he won't answer my beer question in his other thread.

Illogical proponents of pure "free trade".

Illogical proponents of pure "free trade": Annual trade deficits were, and in the future will always continue to be (more than otherwise), always net detrimental to their nation's annual gross domestic products, (ie. GDPs). I'm among the proponents of the proposed unilateral policy of Import...

www.usmessageboard.com

He can feel it's a trap, so runs away.

 

[para bellum]

He's hung up on the math, but still misunderstands it.

The expenditure equation is a really simplistic picture of the economy. But it's easy to understand.

If I import 100 widgets for $1 ea. and sell them for $2 ea, I add $200 to C and $100 to M.

I ran a $100 trade deficit, but the net effect on GDP as per the equation is +$100.

 

[Toddsterpatriot]

The expenditure equation is a really simplistic picture of the economy. But it's easy to understand.

If I import 100 widgets for $1 ea. and sell them for $2 ea, I add $200 to C and $100 to M.

I ran a $100 trade deficit, but the net effect on GDP as per the equation is +$100.

Yes.

But he thinks you reduced GDP by $100.

 

[Supposn]

... G +C+I+(x-m)=Y
This equation says GDP (Y) is the sum of those 4 values. That is a definition, because it tells you what numbers you have to have, in order to calculate the value of your GDP.
... That's why imports reduce and exports increase their nation's calculated GDP." ...

Para Bellum, "a trade deficit indicates the nation imported a greater value of products than it exported. Yes, that's what it means”. And consequentially it also means trade deficit nation's expenditures, spent by their governments, domestic producers and consumers were reduced by their negative balances of international trade within the calculations of their nation's GDP.

How many different ways must I word it so that you accept our both posting a description of the same concept. Balance of trade, (X-M) is positive for surplus nations, and it's a negative value for trade deficit nations. Respectfully, Supposn

 

[para bellum]

Para Bellum, "a trade deficit indicates the nation imported a greater value of products than it exported. Yes, that's what it means”. And consequentially it also means trade deficit nation's expenditures, spent by their governments, domestic producers and consumers were reduced by their negative balances of international trade within the calculations of their nation's GDP.

That's a bunch of word salad, but yes- adding a negative number is the same thing as subtracting.

How many different ways must I word it so that you accept our both posting a description of the same concept. Balance of trade, (X-M) is positive for surplus nations, and it's a negative value for trade deficit nations. Respectfully, Supposn

Yes, net exports are part of the equation, and trade deficits are a negative number.

That is very different than:

"the NET EXPEDITURES OF THE ENTIRE NATION, (i.e. the net expenditures of its governments', population, and enterprises) exceeded their entire annual production."

This is nonsensical, because the goods and services represented by M are incorporated in C or G or I or X, and expenditures are the same thing as production in the context of the equation.

My super dumbed-down example of the 100 widgets should make that clear. The mere existence of the trade deficit cannot be interpreted that way.

 

[para bellum]

Yes.

But he thinks you reduced GDP by $100.

If I could have purchased the widgets from a domestic supplier for the same price and sold them domestically for the same price, then my decision to import the widgets has an "opportunity cost" to the GDP of $100.

I only added $100 when I could have added $200.

The only way I could reduce GDP is if I was already purchasing them domestically for $1, and chose to import them for the same price. That would reduce GDP by $100 because I would be adding $100 to M without offsetting it elsewhere.

If I could purchase them domestically for $1.50 I could still add $200 to the GDP, but my profit would be cut in half. For capital to do that, it has to have some other incentive than ROI.

In the real world, that incentive comes in the form of trade protections.

 

[para bellum]

And the other thing I mentioned should not be ignored. That is, having the dollar as the world's reserve currency gives the US a lot of leverage.

If you want to be the world's reserve currency, your currency has to be in central bank reserves around the world.

Trade deficits are one easy way do that. When a US company pays in dollars, the vendor deposits the money and it's converted it to local currency. The dollars go into the central bank's dollar reserves, and it's used to facilitate trade, pay sovereign debt, etc.

 

[Supposn]

The expenditure equation is a really simplistic picture of the economy. But it's easy to understand.

If I import 100 widgets for $1 ea. and sell them for $2 ea, I add $200 to C and $100 to M.

I ran a $100 trade deficit, but the net effect on GDP as per the equation is +$100.

Para Bellum, referring to your post's example of $100 imports, $200 paid by final purchasers, (that include all of the intermediate service products such as distribution and other handling costs, but excludes transfers of wealth such as taxes which are not items factored into calculations of GDP), those describes aggregate transactions you described would have, (as you stated), generated an additional net $100 to USA's annual GDP.

USA's annual balances of trade are our NET annual balances of international trade, and we are generally among the world's trade deficit nations with the greatest negative balances of international trade.
What's your point? Who's arguing otherwise? Where do you believe we disagree?
Respectfully, Supposn

 

[Supposn]

... "the NET EXPEDITURES OF THE ENTIRE NATION, (i.e. the net expenditures of its governments', population, and enterprises) exceeded their entire annual production."

This is nonsensical, because the goods and services represented by M are incorporated in C or G or I or X, and expenditures are the same thing as production in the context of the equation.
My super dumbed-down example of the 100 widgets should make that clear. The mere existence of the trade deficit cannot be interpreted that way.

Para Bellum, you're playing games with words.
In the example you provided, net expenditure sum of (C + G +I) = $200; that $200 excluded any taxes. (Sales taxes are transfers of wealth. They're not goods or services, but rather they're permissions or legal rights to enter into sales transactions).

What's meant by trade deficits reducing GDP is the trade deficit nation's annual negative balance of trade reduced their annual GDP to be less than otherwise; (otherwise being if the nation's annual trade balance not being negative). For any given annual sum of a nations' (C + G +I), the annual net international trade balances of trade surplus nations' increased, and trade deficit nations' decreased their annual GDP's more than otherwise. Respectfully, Supposn

 

[para bellum]

In the example you provided, net expenditure sum of (C + G +I) = $200; that $200 excluded any taxes.

I will answer this one question, then we're done.

Taxes are not included because they are not part of the expenditure equation.

If you want taxes in the equation, you have to use the income formula.

Total National Income (wages+rent+interest+profits)+Sales Taxes+Depreciation+Net Foreign Factor Income=GDP

They are just two ways to arrive at (roughly) the same number.

That's the simple version, now I am finished because this is just getting silly.

 

[Supposn]

Across the spectrum of opinions regarding a nation's net balance of their global trades' consequential impact upon their individual nation's economy, all (or almost entirely all) credible economists without regard for their differing opinions, do generally concur upon some facts and some concepts they logically derived due to those facts;
[i.e. U.S. Senator P. Monahan said, “everyone's entitled to their own opinions, but not their own facts”].

Almost all, if not entirely all credible economists, regardless if they are or are not opposed to annual trade deficits for their nation, do not refute the following:

Nation's gross domestic product, (GDP) statistically represents their entire nation's net expenditures for consumption or production of goods and service products; . Their entire expenditures include their consumers', producers', governments', and net balance of international trade.

A greater per capita GDP is more, and a lesser is less economically desirable for their nation.

A positive, (i.e. a nation's surplus) net global trade balance was an additional term, or a negative, (i.e. a nation's global trade deficit) balance was a negative term their nation's calculated GDP.

A trade surplus nation, within their GDP's reporting duration, has produced products of greater value than that of their entire net expenditures for consumption and production.
A trade deficit nation within their GDP's reporting duration, has net spent more for consumption and production, than the value of all they produced within that duration.
Respectfully, Supposn

 

[Supposn]

Among both credible economists that are or not proponents of pure free trade, few, (if any of them) refute due to their nation's net balance of international trade, the nation's gross domestic product was increased for all trade surplus, and reduced for all trade deficit nations. In effect, the total value of a trade deficit nation's entire production was exceeded by their expenditures for production and consumption; (i.e. they spent more than they produced).

Trade deficits are net detrimental to their nation's economy; They're particularly detrimental to their nation's numbers of jobs and to enterprises more sensitive to the financial well-being of wage earners and their dependents. Respectfully, Supposn

 

[Toddsterpatriot]

Among both credible economists that are or not proponents of pure free trade, few, (if any of them) refute due to their nation's net balance of international trade, the nation's gross domestic product was increased for all trade surplus, and reduced for all trade deficit nations. In effect, the total value of a trade deficit nation's entire production was exceeded by their expenditures for production and consumption; (i.e. they spent more than they produced).

Trade deficits are net detrimental to their nation's economy; They're particularly detrimental to their nation's numbers of jobs and to enterprises more sensitive to the financial well-being of wage earners and their dependents. Respectfully, Supposn

No they aren't.

 

[Supposn]

No they aren't.

ToddsterPatriot, you're no longer whining?

Yet among both credible economists that are or not proponents of pure free trade, few, (if any of them) refute the FACT, RATHER THAN OPINION, due to their nation's net balance of international trade, the nation's gross domestic product was increased for all trade surplus and reduced for all trade deficit nations. Respectfully, Supposn

 

[Toddsterpatriot]

ToddsterPatriot, you're no longer whining?

Yet among both credible economists that are or not proponents of pure free trade, few, (if any of them) refute the FACT, RATHER THAN OPINION, due to their nation's net balance of international trade, the nation's gross domestic product was increased for all trade surplus and reduced for all trade deficit nations. Respectfully, Supposn

No whining needed to point out your errors.

 

[Supposn]

No whining needed to point out your errors.
Toddsterpatriot, no error was pointed out by your responding whining post.

 

[Toddsterpatriot]

No whining needed to point out your errors.
Toddsterpatriot, no error was pointed out by your responding whining post.

You've forgotten all the errors I've pointed out?

Is it Alzheimer's?