Warren Buffett's concept to significantly reduce USA's trade deficit

[Supposn]

You state that “US exports are not as direly necessary to the world ” but they are of critical importance to foreign producers of goods that are destined or could be destined for USA’s domestic market.

What do you mean by “the real focus should be about domestic business, not just exporters”? USA’s imports and exports certainly do affect USA’s economy. Our trade deficit has caused our effective loss of some segments or entire USA industries.

Respectfully, Supposn

Typographical error. Message #56; my (Supposn’s) response to Antagone. My response should have been that you, (Antagone) stated “US exports are not as direly necessary to the world” but USA’s purchases of foreign goods, (aka USA imports) are of critical importance to foreign producers’ of goods.

Global trade is a “buyers’ market”; buyers being importers and sellers being exporters. Advantages are not given but must be taken. Because the USA does not take advantage of the fact that we’re net buyers, then it is the producers of USA’s imports that have the advantage over us.

Respectfully, Supposn

 

[Supposn]

imports are not detrimental to the GDP for the reasons which I've put forward earlier. exports do not constitute as dominant a source of employment or commerce than does retail and its relationship to improts. what you are contending is not accurate, and the proposal to support an inaccurate premise is flawed for that reason.

You state that “US exports are not as direly necessary to the world ” but they are of critical importance to foreign producers of goods that are destined or could be destined for USA’s domestic market.

Typographical error. Message #56; my (Supposn’s) response to Antagone. My response should have been that you, (Antagone) stated “US exports are not as directly necessary to the world” but USA’s purchases of foreign goods, (aka USA imports) are of critical importance to foreign producers’ of goods.
Global trade is a “buyers’ market”; buyers being importers and sellers being exporters. Advantages are not given but must be taken. Because the USA does not take advantage of the fact that we’re net buyers, then it is the producers of USA’s imports that have the advantage over us.
///////////////////////////////////////////////////////////////////

Antagone, the expenditure method of calculating GDP is the simplest and most common method for calculating a nation’s gross domestic product, (i.e. GDP).
Imports are detrimental and exports contribute to a nation’s GDP. This is not an opinion but is true by all defining mathematical formulas accepted by the global community of economists and statisticians. Why would you believe that imports are not detrimental to the GDP?

After USA products reach their factories’ shipping platform or after imported goods are unloaded dockside at their USA ports of entry, there’s no economic difference between them. From those moments forward they will both equally contribute to USA’s economy.

Prior to reaching the shipping platform the USA labor, materials, services and components that are integral to the domestic goods all contributed to USA’s GDP. These are included within the goods prices.

There are often many things which support domestic producers and contribute to the USA GDP but are not included within the prices of domestic goods; infrastructure such as highways, railroads, bridges utility lines; local high schools and community colleges may offer specialized technical courses to better feed domestic producers’ labor pools. These all support production of goods, contribute to USA’s GDP but are not included within the prices of the goods.

When production volume increases often induce economies of scale; this is particularly true of manufacturing mass production. This is reflected into lower per unit costs of goods which is economically beneficial and (due to greater volumes of sales) it also contributes to the GDP. One producer’s increased production often increases production of unrelated goods or service products. A factory’s increased production may increase production of local beauty parlor services which contribute to the nation’s GDP but are not included within the prices of the manufactured goods.

All domestic production contributes to the nation’s GDP but only production that’s included within the prices of USA’s exported goods are attributable to global trade. Economist argue as to the extent of this “secondary production” or production multiplier factor but its generally agreed that exports contribution to the GDP well exceeds double the value of the exports themselves. That’s why the GDP formula always understates trade surpluses’ contribution to the GDP.

The GDP formulas deduct the value of the natiion's trade deficit from or the value of the nation's trade surplus to the nation’s GDP. The GDP formula always understates global trades' affects upon their nations' GDPs.

Respectfully, Supposn

 

[Supposn]

Antagon, by the formulas (that mathematically defines nations' GDPs), nations’ exports contribute to their GDP and their imports are detrimental to their GDP.

Thus nation’s that have a positive balance of trade, (i.e. a trade surplus) contributing to the nation’s GDP and those nations’ with a negative balance, (i.e. a trade deficit) are economically harmed due to their global trade deficit's detriment to their GDPs.

A product is deemed to be a domestic product to the extent that it is produced by the nation’s labor and/or with the nation’s materials, and/or with components that are products of the nation. All domestic production of goods and services contribute to the nation’s GDP; that’s the definition of what is GDP.
To any extent a product is not domestically produced, it is a foreign produced and to that same extent its production contributed absolutely nothing to the nation’s GDP. Why would you believe otherwise?

Respectfully, Supposn

 

[B. Kidd]

FREE TRADE is not free, folks.

We pay for it in the form of diminishing wages and higher unemployment.

What free trade really is is the liberation of CAPITAL from nationalist restrictions.

Note that the world's workers do NOT have such freedom of movement to take advantage of differences in economies?

ONLY capital has the ability to pass through national borders to take advantage of differences in economies.

We have liberated capital from nationalism but the workers remain serfs in their respective nations, folks.

Bingo!
The real intent of our free trade policies that picked up steam in the mid to late '80's and which have continued since, were carrots for other countries to allow U.S. based multi-national banks and investment houses to market their financial products in other countries in a basically unfettered manner.

 

[Supposn]

Antagon,
. . . Producers generally require production support from other producers of goods and/or services. In many of such cases the majority but often not the entire production support is reflected within the prices of the supported products. I’ll describe such support (to the extent that it’s not fully reflected within the prices of the supported products) as “secondary” production.

Rather than supporting production of goods, some secondary production of goods or services may have been induced by the production of those goods. (For example increased factory production could induce increased production of local beauty parlor services). The additional beauty parlor services in such cases can be described as the factory’s “secondary” production

Purchasers can only spend their dollars once. Imported goods contribute nothing to USA’s GDP. Their prices and the prices of their “secondary” production all contribute to the producing nations’ GDPs.

Purchasers can only spend their dollars once.
Prices of exports and their “secondary” goods and services contribute to the nation’s GDP.

Imported goods contribute nothing to USA’s GDP. Their prices and the prices of their “secondary” production all contribute to the producing nations’ GDPs.

Purchasers can only spend their dollars once. To the extent that the USA continues to be a net goods purchaser, we’re denying ourselves of our trade deficit of goods amount that could be contributed to our GDP.

Generally, (due to “secondary” production), unbalanced trade’s affect upon the nation’s GDP is understated. Trade surpluses always contribute and deficits always are detrimental to the nation’s GDP.

Respectfully, Supposn

 

[Mr. H.]

Petroleum and petroleum products account for over half the trade deficit. Can't we just produce more and import less?

Mr. H, no, we cannot “produce” natural crude oil or natural gas.

“Fossil fuels” occurred naturally from prehistoric biological materials subject to very favourable natural circumstances and are difficult to find. As we exhaust the more easily and less expensive known resources of petroleum, we search for additional petroleum. As often as not the additional petroleum that we have found is of lesser quality and/or is more expensive to harvest.

[For example it is only due to technological advances that we are able to find and extract petroleum from the bottom of the sea. It is only the increased value of the scarcer materials that justifies the increased harvesting costs. Similarly we can synthesize petroleum from the fossil fuel coal which we have in greater (but not unlimited) natural reserve and/or from other materials. We can also synthesize petroleum from other materials and using other methods].

Similar to the adage “We often must spend more money to earn additional money”; we must increasingly consume more energy to create more energy producing fuels which in turn increases the cost of the additional energy we are producing. That’s why a more feasible national energy policy and the development of renewable energy fuels and sources are so critical to our nation and our planet.

Respectfully, Supposn

I've not followed this thread and have just now seen this response.

I'm talking about getting oil out of the ground- in this country, and introducing it into the marketing stream as opposed to importing the product. Surely there is a greater domestic economic impact to generating a commodity internally than there is from importing that commodity.

The "lesser quality" petroleum may have less BTU content and higher sulpher content, but, imported crude (on average) is still of inferior quality. I refer you to West Texas "intermediate" and Illinois Basin "'Sweet" crudes, among others.

And I would argue that technological advances, improvements in drilling and refining practices, and more efficient business models have over time reduced exploration and production costs- not only offshore but onshore as well.

I'm curious as to what you consider a "more feasible" national energy policy? Would it be centered around the development of renewables? Renewables being not only more expensive but, without considerable government support, "prohibitively" expensive?

You also refer to energy sources that are "critical to our nation and our planet" yet you refer to petroleum synthesis from coal - an even more expensive and more polluting process. Because a certain natural resource exists in greater abundance does not in itself make it a more economical source of energy.

 

[editec]

What we see in this debate is obvious to some of us and obscure to others.

For the life of me I cannot figure out how so many of you cannot see something as obvious as the pernicious effects of the imbalance we have in trade.

I can only conclude that some of you are not remotely interested in the well being of this society as a whole, and that many of you are merely interested in how trade effects your own rice bowls.

Now if you are one of those people for whom the current system is working (say for example you work for GE and help them sell jet engine to china) then I can understand why YOU would support this system.

OTOH, many of you do not directely or even indicrectly benefit from this policy.

Now you guys are just dupes.

I'll leave it to you folks to decide which of those two different supporters of FREE TRADE you are.

You know bar better than I ever will where your money comes from, I suppose.

 

[Mr. H.]

Didn't mean to stray by digging up a month old post. Rice is nice, but oil does grease a lot of wheels in this country.

 

[Supposn]

Mr. H, for economic reasons this Import Certificate, (IC) proposal excludes the values of specifically listed scarce or precious minerals or materials integral to any goods from the assessed values of such goods. Petroleum should be considered as such a material.

We should for both political and economic reasons refrain from involving this proposal within any additional controversy.

To the extent that a product’s made from or contains petroleum, this proposal doesn’t encourage the export or discourage the import of such goods. The U.S. Congress can deal with energy policy as a separate political issue.

Refer to: www.USA-Trade-Deficit.Blogspot.com and
Import Certificates - Wikipedia, the free encyclopedia
Respectfully, Supposn

 

[Supposn]

What we see in this debate is obvious to some of us and obscure to others.

For the life of me I cannot figure out how so many of you cannot see something as obvious as the pernicious effects of the imbalance we have in trade.
I can only conclude that some of you are not remotely interested in the well being of this society as a whole, and that many of you are merely interested in how trade effects your own rice bowls.
Now if you are one of those people for whom the current system is working (say for example you work for GE and help them sell jet engine to china) then I can understand why YOU would support this system
OTOH, many of you do not directely or even indicrectly benefit from this policy.

Now you guys are just dupes.
I'll leave it to you folks to decide which of those two different supporters of FREE TRADE you are.
You know bar better than I ever will where your money comes from, I suppose.

Editec, this proposal would be of advantage to every U.S. entity that competes or aspires to compete with foreign goods within and beyond our borders. It would certainly be of advantage to companies such as General Electric Corporation.

Respectfully, Supposn

 

[Supposn]

..................................................................I'm curious as to what you consider a "more feasible" national energy policy? Would it be centered around the development of renewables? Renewables being not only more expensive but, without considerable government support, "prohibitively" expensive?

You also refer to energy sources that are "critical to our nation and our planet" yet you refer to petroleum synthesis from coal - an even more expensive and more polluting process. Because a certain natural resource exists in greater abundance does not in itself make it a more economical source of energy.

Mr. H, upon reading this thread I find my neglect of this among your intelligent messages.

Similar to most people, my litmus test is determining to what extent opinions aline with my own; obviously on some points your messages are very intelligent.

All that you wrote of more expensive renewable energy and prohibitively expensive energy is true; but because energy costs have risen so much higher, the greater cost remains true to a lesser extent.

We must continue striving for lower cost energy because on some future day our possibly political and/or military strategic cost of energy will justify overpaying for renewable energy sources.

Respectfully, Supposn

 

[expat_panama]

...We must continue striving for lower cost energy because on some future day our possibly political and/or military strategic...

True, but when the vast majority of us do our "striving for lower cost energy", our first thought is that we don't want to waste our own hard earned money. That's what we think of when we buy gas at the gas station with the lower pump price. The fact that we buy the most economically efficient car means the vast majority of us don't own a Volt or a Prius. We live in a home that lowers our energy costs as much as it can while meeting our needs.

Most of us don't need others to tell us how to buy energy so we don't vote for lawmakers that want to tell us how to spend our hard earned energy dollars.

 

[Supposn]

...We must continue striving for lower cost energy because on some future day our possibly political and/or military strategic...

True, but when the vast majority of us do our "striving for lower cost energy", our first thought is that we don't want to waste our own hard earned money. That's what we think of when we buy gas at the gas station with the lower pump price. The fact that we buy the most economically efficient car means the vast majority of us don't own a Volt or a Prius. We live in a home that lowers our energy costs as much as it can while meeting our needs.

Most of us don't need others to tell us how to buy energy so we don't vote for lawmakers that want to tell us how to spend our hard earned energy dollars.

ExPat_Panama, within all levels of U.S. governments, from federal down to villages, there exist some examples of legislatures or administrators having identified and regulated or prohibited practices they deemed to be contrary to our society.

In these cases they recognized and considered individuals preferences before they enacted what you may consider as unjustified restrictions upon individuals’ rights.

Apparently you’re often not speaking for the majority when you wrote,”We don't vote for lawmakers that want to tell us how to spend our hard earned energy dollars”.
//////////////////////////////////////////////////

If this transferable Import Certificate policy is enacted, it would not prevent individuals from purchasing any foreign product.

Imports increased prices to U.S. purchasers and reduction of U.S. products prices to foreign purchasers would be dependent upon the global IC market rather than any particular government or other entities. Tariffs are generally a source of government revenue rather than inducing an increased sum of USA’s aggregate imports plus exports.

Regardless of ICs’ global market prices, this policy would prevent U.S. aggregate assessed imports from exceeding our assessed exports. Tariffs can only do the same if the tariffs are set at extremely drastic rates.

The net expenses of this proposal are eventually and entirely funded by the increased prices of imports purchased by U.S. customers.

Respectfully, Supposn

 

[expat_panama]

...you’re often not speaking for the majority when you wrote,”We don't vote for lawmakers that want to tell us how to spend our hard earned energy dollars”...

We've both just made statements that we believe and are hard to prove to others.

I said the majority of voters don't vote for candidates that say they're going to manage voters' energy purchases, and you said they do. My reasoning is based on the fact that when I chat with people about how they buy energy with their own money, they always want to make their own decisions and not be told what they should do. Sounds like you say most want lawmakers making the choices.

It also sounds like you don't know how to buy energy for your needs because you yourself want the government to do it for you. Please confirm the impression I'm getting because it's hard for me to believe and if it's true then it's a first.

 

[editec]

As proposed to the U.S. Senate, goods leaving the USA would be assessed and transferable IMPORT certificates for their assessed value would be issued to the exporter.

Importers would be required to surrender transferable IMPORT certificates for the assessed value of their goods entering the USA. Surrendered certificates are cancelled. This would significantly reduce our trade deficit and induce the sum of our imports plus exports to increase.

There is one problem, I think, with this.

It gives a huge windfall profit to companies that export without really doing much to increase their exports.

Since they'll be free to sell those certificates, it also give them enormous power to pick the winners and losers who IMPORT.

I'm not really convinced this is a good way to make market forces solve this trade imbalance problem.

 

[expat_panama]

...As proposed to the U.S. Senate, goods leaving the USA would be assessed and transferable IMPORT certificates for their assessed value would be issued to the exporter.

Importers would be required to surrender transferable IMPORT certificates for the assessed value of their goods entering the USA. Surrendered certificates are cancelled. This would significantly reduce our trade deficit and induce the sum of our imports plus exports to increase...

The two assumptions here are first that domestic production increases when the trade deficit falls, and second is that governments can control economic activity in detail. Both assumptions are wrong.

First, the GDP increases with falling trade balances and they both reverse together--

Some point to one of the GDP's basic formula's having net exports subtracted from the total (GDP = Consumption + Investment + Government spending + eXports – iMports), and the imagined model never makes it to real life where the two move together. It's like thinking we can make the GDP bigger with more government spending, or like thinking a car can go faster by pushing the brake pedal forward.

Second, governments control our social environment, and businesses control economic activity. Attempts by either to extend control into the other's realm result in disaster.

 

[Supposn]

...you’re often not speaking for the majority when you wrote,”We don't vote for lawmakers that want to tell us how to spend our hard earned energy dollars”...

We've both just made statements that we believe and are hard to prove to others.

I said the majority of voters don't vote for candidates that say they're going to manage voters' energy purchases, and you said they do. My reasoning is based on the fact that when I chat with people about how they buy energy with their own money, they always want to make their own decisions and not be told what they should do. Sounds like you say most want lawmakers making the choices.

It also sounds like you don't know how to buy energy for your needs because you yourself want the government to do it for you. Please confirm the impression I'm getting because it's hard for me to believe and if it's true then it's a first.

ExPat_Panama, I try to compartmentize my life.
My behavior differs when I’m acting as a family member or employee or a voter.
No one can fully serve two masters simultaneously so my priorities are dependent upon which hat I’m wearing at the moment.

As a family member or employee, my priority when purchasing is to obtain the most value for my money. That usually equates to the maximum immediate value, or less often the maximum medium term value, but I generally cannot afford to fully consider the long term consequences of my purchasing choices.

I do not consider the strategic implications of the petroleum's source when I gas up my vehicle. To behave otherwise is to betray those that I am then serving when making the purchase.

As a voter, if I fail to fully consider the political long term consequences of my votes, I’m betraying my civic responsibility.
It never occurred to me that this concept is unique only to myself.

Respectfully, Supposn

 

[Supposn]

...As proposed to the U.S. Senate, goods leaving the USA would be assessed and transferable IMPORT certificates for their assessed value would be issued to the exporter.

Importers would be required to surrender transferable IMPORT certificates for the assessed value of their goods entering the USA. Surrendered certificates are cancelled. This would significantly reduce our trade deficit and induce the sum of our imports plus exports to increase...

The two assumptions here are first that domestic production increases when the trade deficit falls, and second is that governments can control economic activity in detail. Both assumptions are wrong. .....................................
Second, governments control our social environment, and businesses control economic activity. Attempts by either to extend control into the other's realm result in disaster.

ExPat_Panama, almost every human endeavor is somewhat affected by government and/or business and a vast amount of endeavors affect government and/or business. I suppose we agree that the justification of any and every law or regulation should be justified upon their own merits.

This trade proposal does not micro-manage and should be drafted to minimize government intervention.
It mandates that importers surrender transferable Import Certificates with face values sufficient to cover their goods assessed values. It entitles, (not requires) exporters of U.S. goods willing to pay the federal assessment fees to acquire ICs with face values equal to the assessed values of their goods. Basically that’s the guts of this trade proposal.

The proposal does with very good reason assume that reducing our trade deficit and promoting our exports in this manner will increase our GDP.

You obviously haven’t accepted those reasons. I’ll try to reargue those points again but I must leave now.

Respectfully, Supposn

 

[expat_panama]

...I do not consider the strategic implications of the petroleum's source when I gas up my vehicle. To behave otherwise is to betray those that I am then serving when making the purchase. As a voter, if I fail to fully consider the political long term consequences of my votes, I’m betraying my civic responsibility. It never occurred to me that this concept is unique only to myself...

No, there are many that believe we can ignore our civic responsibility in our daily lives as long as we vote well. I concur with the majority that chose to integrate personal and public values because integrity is the essence of character. Furthermore, that's why congress rejected Buffet's goofy idea.

Most Americans would not kill, steal, or bear false witness if the law weren't there to punish them, because Americans are good and we don't want to do wrong. If everyone honestly believed that buying foreign goods was disloyal then most of us would quit chocolate, coffee, and watching Doctor House overnight. We don't because it isn't and the proposal is stupid.

 

[Supposn]

...I do not consider the strategic implications of the petroleum's source when I gas up my vehicle. To behave otherwise is to betray those that I am then serving when making the purchase. As a voter, if I fail to fully consider the political long term consequences of my votes, I’m betraying my civic responsibility. It never occurred to me that this concept is unique only to myself...

No, there are many that believe we can ignore our civic responsibility in our daily lives as long as we vote well. I concur with the majority that chose to integrate personal and public values because integrity is the essence of character. Furthermore, that's why congress rejected Buffet's goofy idea.

Most Americans would not kill, steal, or bear false witness if the law weren't there to punish them, because Americans are good and we don't want to do wrong. If everyone honestly believed that buying foreign goods was disloyal then most of us would quit chocolate, coffee, and watching Doctor House overnight. We don't because it isn't and the proposal is stupid.

ExPat_Panama, I regret that I unlike you self description, I’m a much less altruistic person. When I’m purchasing for my family or my employer, I believe it’s my duty to obtain the most value for the purchase prices and to do otherwise would be a betrayal of my duty to my family or employer.

Due to USA’s seeking a pure free trade policy, it’s easy for me to perform my duty. But the best interests of my family and myself diverge from what’s best for the nation.

I don’t share your altruistic characteristic. I’ll accept the advantage of absolutely minimal priced import products because my nation doesn’t enact a transferable Import Certificate policy that would increase my nations’ living standards.

Due to our nation’s legislatures’ seeking “pure” free trade, our GDP and median wage is less than otherwise.

Throughout your message #79 you attribute attitudes and beliefs to the actual or implied majority of USA’s population. If that were actually the opinions of our population's majority, we would have an extremely foolish population.

Respectfully, Supposn