Trade deficits are ALWAYS detrimental to their nations’ GDPs.

I'm a manual laborer. I build stuff. Currently I'm working for a company that manufactures Printers. Before that I worked for a company that made power systems for health care units. Before that I made power systems for hybrid vehicles and commercial vehicles.

All three companies, made their products from imported raw materials. All three exported finished goods worldwide.

If you engage in protectionism, the result would be that the cost of materials to make those products would increase. Meanwhile the exact same product could be made in another country, that didn't have protectionism, at a cheaper cost. That effect alone would drive all three companies out of business.

But protectionism, also consistently results in retaliatory protectionism. Meaning that not only would the cost of material go up from tariffs on our imported materials, but also exported products would have retaliatory tariffs placed on them, killing our exports. This would also harm our companies, and employment.

Protectionism always harms the country that engages in it.

As for how can trade deficits continue forever....... Why wouldn't it?

A trade deficit is merely a sign of wealth. When you look at trade deficits compared to economic growth, the trade deficit almost always becomes larger when economic growth is high. Trade deficits almost always shrink when the economy falters.

The reason is fairly simple. Assume you and I engage in trade. Now we also trade with other people, but we trade between ourselves too.

Now let us say that you are a brilliant engineer. You make $100,000 a year. I on the other hand, am myself. A born loser that makes $10 an hour, for $20,000. Now how much can you buy from me? You can buy $100,000 worth of stuff from me in a year. How much can I buy from you? $20,000 worth at most.

Obviously between the two of us, you are going to have a trade deficit. Now let's say you are an America, and I'm Chinese. What changed? Nothing. There is going to be a trade deficit, simply because the Chinese average wage, is a tiny fraction of the American average wage.

Because we earn more, we can afford to buy more from China, than the Chinese can afford to buy from America.

A trade deficit is nothing more than a sign we are wealthy. And this is exactly why when the US economy crashes, the trade deficit drops. When we have less money to buy stuff from China, our trade deficit sharply declines. If you really want to eliminate the trade deficit, just ruin the economy, and it will disappear.

 

But I bet the countries you imported raw materials from were not the same type of countries you were exporting to.
And more likely than not, the production of those printers will be shifted to China, were factory workers are willing to work for barely anything, and then you will be looking for another job.

What you seem unable to recognize is that most of this trade is not "equal" trade.

True, but maybe that would mean there would be more jobs in your country making those materials.

Yes, it could be. But those cheap printers could not be imported into your country. Your printing company would not have to compete with low wage labor.

I think you make the mistake that protectionism means no outside trade. That is not true. It just means open trade only with other countries that have similar wage levels, and tariffs on those that do not. Most of your printers being exported no doubt go to these other countries with similarly high standards of living, so there would not be any problem.

In other words, if you put tariffs on imports from China, what retaliatory action exactly would you have to worry about? China may be a "big market", but most of the people do not have the disposable income to import more expensive Western products. Your printers are not being sold to China.

 

It necessarily means an increase in deadweight loss, coupled with higher prices and reduced consumer choice

 

Andelusion, USA manufacturers are hard pressed to compete with cheaper Asian labor. In a nation of cheap labor, all of their direct labor costs and almost their supporting goods and services are cheaper than that of an attempt to produce similar products in the USA.

Possibly the products or unique production tools for those products are patented and cannot be imported into the USA unless they first cut a deal with the patent holders? Possibly the USA manufacturer has thus far retained the confidentially their enterprises unique advantageous production method?

If these are the cases, it’s common in time the USA enterprise can be bought out or the product in its present state can be made obsolete due to another production method or product design. Such products under our present policy of seeking pure free trade are then no longer produced in the USA.

Andelusion, I specifically responded to your example of USA producers using imported materials and exporting their goods globally. Refer to post #32 of the discussion thread “http://www.politicalforum.com/econo...ncrease-gdp-median-wage-4.html#post1062847213 “.

The post is entitled “USA producers using imported components and materials”.

Respectfully, Supposn

 

Not likely for several reasons. Most important, the number of printer we sell is low volume. These are highly customized to specific customer requirements. Not your Average HP, desktop ink jet printer. The stuff that gets shifted to China, or other lower manufacturing cost areas, is typically your high volume products.

Domestic manufacturing has an inherent advantage over foreign manufacturing, namely distribution cost, multiple country taxes, and of course distance related costs. Such as sending a delegation to the US to meet with distributors, or having a shipment of product sent around the world, found defective, and paying for it to be shipped back. Many other such problems and issue.

All things being equal, the cost to outsource is exceptionally high. So the only time that outsource production really works, is when the volume of product is also exceptionally high. Our company would not fall under that banner.

Also we have contracts with big companies, such as Delta, IBM, and even the USPS. The main reason they use us, is because we can change, modify and update their customized configurations on the fly, in real time. You simply can't do that with Chinese companies, if for no other reason than because the next month plus of product is already built, already on the boat, floating across the ocean. Whatever emergency changes you need, won't show up for another 2 months at the earliest. Not to mention communication issues, and problems getting the corrections sent through translation channels.

Again, great if you are making high volume production. But when it's 50 a month, and they need to be up to spec on the fly, not such a good plan.

No, I recognize this, I just don't see it as an issue. Who said trade had to be "equal"? If you make $100K, and I make $20K, the trade between us is going to be anything but equal. If it was equal, that would be either exceptionally bad for you, or incredibly good for me. There is no logical reason trade must be equal.

That has never been the case. When Venezuela started engaging in protectionism, the result was businesses which relied on those imported products moved out of the country. Instead of more jobs to create those products being made, jobs that did exist, left. You can read up on the brain drain in Venezuela. Or you can look at Jamaica in the 1970s, when the government passed protectionism, the result was that companies moved to the US, and closed all their Jamaican production facilities. Even business that couldn't be moved, simply closed, most notably the Bauxite industry.

If you are interested in Jamaican protectionism, EconTalk had podcast on it with Henry Peter, whose parents were from Jamaica, and moved here after protectionism was enacted.
http://www.econtalk.org/archives/2009/07/peter_henry_on.html

Well why would the business close, because of protectionism? Again, other countries are going to retaliate to tariffs. The result was tariffs on Jamaican Bauxite made them uncompetitive on the global market. So those jobs were just lost. The rich company owners simply closed shop and left the country.

Right, but with drastically increased price, no one would buy them. You are assuming that purchases would be static, under increasing prices. That's false. The only reason the auto industry is as large as it is, and employs how many they do, is because Ford found a way to drastically cut the cost of making automobiles.

If the cost of automobiles had been driven back up by government somehow, none of what exist today, would have ever happened.

Point being, that when costs go up, people look for alternatives. Driving up the cost of our product, even with the removal of cheap imports, won't result in us winning. The value of the product to the customer, doesn't change just because you drive up costs through protectionism, anymore than the value of a cheap Wendy's burger is worth $20, just because you pass a new minimum wage law. Customers are not going to pay that much for a cheap Wendy's burger, no matter what the labor cost is. If the cost to produce the product is too high, customers won't buy, and the company closes.

So you pass protectionism, and the cost to build our product doubles. Our customers will simply find a cheaper alternative. But there is no alternative! No imports! False, there are always alternatives. Perhaps they will find a smaller company inside the US that employees Mexicans for minimum wage. Perhaps they will build the product themselves. Perhaps they will simply buy a stock printer off the shelf, and make due without customization.

Regardless of how it happens, the result of protectionism, is always a loss of jobs. Smoot-Hawley 1930s. Jobs were everywhere during the great depression, right? Not so much.

Irrelevant. Unless you plan to only pass tariffs on products from specific countries, a tariff would effect all countries. Thus all countries would have retaliatory tariffs on us.

So if we pass protectionism, because of China, while we sell to Italy, Italy will place tariffs on us, just as much as China, because our tariffs would effect Italy just as much as China.

And further, you could *NOT* make a country specific tariff work. China would simply open a subsidiary in Italy, and ship the product there, and then sell internationally from Italy (or some other country). This is why the Oil Embargo didn't work in the 1970s. OPEC banned oil exports to the USA. So they sold a shipment to Russia, who then sold it to the USA, for a profit. The oil still got here either way.

So you would have to have a general tariff on all imports, and every country would have retaliatory tariffs, so our exports to all countries would be wiped out, harming, possibly closing our company.

The premise is false anyway. All three companies sold to China. The commercial vehicle power system company, sold power systems for Chinese buses. The health care power system company, built units for a company that had extensive contracts with China. Our company right now, is in the process of signing a large contract with a Chinese firm. If the contract ever goes through, it would increase our company sales by 25% alone.

But our sales to Israel would die. Our Sales to Egypt would die. Our sales to the EU would die. You seem to assume that retaliatory action would only come from China. Wrong. Tarffs would harm all imports from all countries, and all countries would retaliate. And again, you can't just single out 1 country for tariffs. That would never work. They would simply ship product to a zombie company in a free-trade country, and then ship internationally from there.

It would be absolutely nothing for a Chinese company to setup a tiny three-person office in Taiwan, S Korea, even Malaysia, or Singapore, I think all of whom we have free-trade agreements, and have the products shipped there, stamp "Korea" on it and ship it internationally, back to the US.

And by the way, Google does this all the time. So it's not a big difficult thing.

 

Patents won't help. Once you build something, someone somewhere, will copy it, modify it slightly, and sell it. There is nothing you can do about that.

However, getting to the meat of your position, that USA Manufactures simply can't compete with cheaper Asian labor...... that is so incredibly wrong, it's unbelievable.

The US Manufacturing sector has competed with cheaper labor markets since it was created. Do you realize that 2007 was a RECORD YEAR in manufacturing? Record meaning, the largest year in manufacturing production in US history. Were we not competing with Asia between 2003 and 2007? Were we not competing with cheaper labor markets during the 1990s?



Yes we were, just as we were during the 80s, 60s, 50s.

The only time we have problems in our economy is when we the US citizens elect idiots in government, who pass harmful, bad, destructive economic policies. When are government isn't passing taxes, health care costs, and regulations on our economy, we have always been able to compete with cheap labor markets effectively.

The only people that can hurt us, is us. We harm ourselves, with leftist, interventionist politicians who promise us a free lunch, and instead give us a wrecked economy. It's not China. China is simply taking advantage of us, ruining ourselves.

 

Andelusion, I certainly have some familiarity with the concept of value added as it’s applied to sales taxes. Value added tax is the most superior method of sales tax administration.
[I’m an advocate of a greater income tax credit, rather than a deduction from taxable income), per income taxpayers’ and their dependents that would be replaced by a federal Value added tax, (i.e. VAT); an incremental beginning to enact a Fair Tax. Many fewer people should actually be paying income taxes. The per capita tax credit should be annually updated to keep abreast with the cost-price index].

This is the first time I’ve encountered national statistic of value added rater than GDP. Although I haven’t devoted any effort to determine if there’s any significance between the two types of statistics, it seems to me that they should be similar.

I’m not at all familiar with the UN’s Statistical Division and I’m vaguely aware of difficulties in obtaining authoritive and accurate statistics regarding many nations and I suppose if the UN attempts to be accurate, their problem is to standardize statistic methods or rectify inconsistencies between nations’ statistics.

I’m among the advocates of a USA unilateral global trade policy of Import Certificates. It does not differentiate between foreign nations. Other than excluding the values of specifically listed scarce or precious minerals integral within any goods’ assessed values, the policy does not differentiate between any goods.
It certainly does not differentiate between manufactured goods and other goods. The UN graph you provided is limited to manufacturing. Does the UN consider infrastructure as manufacturing?

Farmers, ranchers, butchers all have access to participate within this trade policy. The U.S. Department of Agriculture currently subsidizes the export of U.S. price supported goods. Since this trade policy indirectly but effectively subsidizes U.S. exported goods at the entire eventual costs to U.S. purchasers and users of imported goods, the Department of agriculture could reduce federal budget’s expenditures of such exports that then will no longer be eventually paid for by all U.S. taxpayers.

I believe that USA’s manufacturing is of the greatest importance and would be the greatest beneficiary of the Import Certificate trade policy. But beyond the explicitly drafted congressional act that would establish the new trade policy, it denies all entities, (including the federal government itself) with any additional policy determination in regard to this trade policy.

Regarding the UN’s comparative graph of USA’s and China’s manufacturing value added, within the reported 39 year duration between 1970 and 2009 the USA’s compounded manufacturing values added was LESS than 2.3% per year while China’s was MORE than 10.7% per year.
Your point is?

Respectfully, Supposn

 

While I am in no way opposed to debating VAT and Fair Tax, that was not the point of the graph. The point of the graph was that as much as people scream about how we can't compete with low wage countries, the truth is, our manufacturing industry has been successfully competing for ages. Again, 2007 was a record year in manufacturing output, in US history. We have competed with low wage countries for literally a century.

If you wish to have GDP figures instead of Value Added, that's fine.

Either one shows basically the same thing.

Yes, China should be growing fast than the US, simply because they started a lower point. Any time you have a system that is artificially held down by bad government policy, and you release those shackles, that system is going to grow faster, than it would if it had been growing steadily the whole time. If I make $20,000 a year, and you make $150,000 a year, it's going to be a heck of a lot easier for me to double my income, than you. I could even triple my income by driving team truck, and you are not going to triple your income nearly that easy.

To your post....

One issue I have is that you think fewer people should pay income tax. Almost half of the public does not pay income tax now. Why should fewer pay? If anything, more should pay, or no one should pay.

The morality of income tax is dubious to start with, but *IF* we intend to have an income tax, then fairness and equality says we should all be paying. Either no one pays, or everyone pays. Where people get this idea that it's fair to force one group of people to pay tax, while excusing others, is not right, moral, equal or fair.

As to Fair Tax.

Generally I would be in favor of a Fair Tax, assuming it is implemented exactly as intended. Problem is, it never is. Every country that has tried to implement a fair tax, has ended up with both an income tax, and a sales tax, making it even less fair than it ever was before. The only country I know of that really tried it, ended up reinstating the income tax, the moment tax revenue fell. (if I remember right) That's exactly what will happen here in the US. Our government almost enacted a sales tax, with no intention of repealing the income tax, when deficits spiked in 2010. If you remove the income tax, and pass a sales tax, the moment revenue falls for any reason, they will reinstate the income tax, and keep the sales tax.

How do I know this? Well.... remember the temporary luxury tax on phones? You know, the temporary tax to pay for the Spanish-American war that was only phased out in 2006? My faith in government making a 'fair' fair tax, is very low.

As to a VAT.

The problem with a VAT, is that it makes us inherently uncompetitive with other countries. Each manufacture, has to pay the VAT, even when the finished products are being shipped out of the country, whereas imported products are not. The last thing I want to do, is hinder ourselves even more.

As to Import Certificates

You had me at a loss before, because I never heard of this plan. So this is the Warren Buffet plan, where the government freely gives an Import Certificate (IC) to an exporter, for the value of the export.

So he exports $1,000 worth of stuff, and gets an IC worth $1,000. He then can do anything he wants with that IC. He can burn it, or he can sell it, or he can trade the IC for something. He owns the IC.

Then if someone wants to import something into the US, he must have an IC of the value of his import. So if he wants to import $1,000 worth of goods, he has to get an IC for $1,000.

Thus, imports and exports, will always be in perfect balance.

No they won't. Warren Buffet is a brilliant investor, and an economic moron.

Here's exactly what is going to happen. Since the demand to import goods, is drastically higher than the demand for exported goods, the results are that there will be far too few ICs to fill the number of importers.

The result will be that with a low supply and a high demand, the ICs will become very very valuable, drastically driving up their market price.

This will massively harm companies that import into the US, and those companies will complain to their respective government. Those governments will do something in retaliation. Likely they will simply impose massive tariffs on US goods, which will harm the US economy, as exports die, which will make ICs even more rare. Causing more harm to importers, causing more governments to take retaliatory action against the US.

Ultimately, this system would without any doubt, drive us into a great depression. No doubt in my mind.

 

Trade deficits are a good thing!
It means the nation gets more than it gives.

 

Of course they are! Absolutely they are good!

It's a sign that we are wealthy.

Think about this..... If you Vilhelmo, earned $250,000 a year, and I Andelusion earned only $20,000 (which I do), and we both sell stuff.

Who is going to be able to buy more from the other person? You are. You are more wealthy than I am. You can buy everything in my store. I can't buy very much from your store.

Between us, you are going to have a trade deficit. You bought a lot from me, while I bought very little from you.

We buy more from China, than China buys from us, because we make a lot of money! They do not! They are poor! They can't buy very much from us. We can buy a ton from them.

In fact, if you look at the trade deficit, the trade deficit always falls during an economic crash. Why? Because we have less money to buy stuff with.

If you really want to eliminate the trade deficit, cause the biggest depression in US history, and that trade deficit will almost disappear.

 

Nope! Trade is a good thing. It allows the maximisation of choice and minimisation of price. A trade deficit, if it becomes an imbalance, is a potential source of economic instability

 

Imported labor and materials are deducted from GDP so any trade deficit (imported labor and material) will lower the GDP. Remove the trade deficit and/or reduce imports, produce those items in the USA, and the GDP increases...

 

Absolute rubbish! Trade increases economic activity. That necessarily means all elements of the income accounting identity are affected. Those abusing the income identity, typically to peddle neo-mercantilist drivel, are merely hiding from the complex (and necessarily positive) effects from trade

 

wat?

International trade is healthy for the countries engaging in it.

 

No where did I mention or imply that trade is good or bad for nations?

Do you want to sell goods and services which are produced in the US or from other countries? Domestic production creates jobs. Imports create jobs in foreign nations. As long as you allow more and more imports you will lower the GDP unless the domestic production can outpace the growth of imports. I'm 100% for open trade and believe the US needs to greatly increase exports in order to grow the stagnate domestic economy. We need to maintain a balance of trade and not have trade deficits instead preferring trade surpluses. There is only so much money to be spent by Americans so spending it on domestic production is more beneficial than spending it on foreign production...

 

In calculating GDP, which does include exports, IMPORTS are deducted to arrive at net exports (which also defines the trade deficit/surplus). After all...GDP is the output of the DOMESTIC economy. Anything deducted from GDP makes GDP smaller...in this case imports are deducted. Perhaps this is the reason why 'trade deficits' are not a good thing...

 

The calculation is just used as part of income accounting. We can't use that to say "deficits are always bad for GDP" as trade impacts on consumption and investment levels.

You're spouting neo-mercantilist claptrap.

 

What have you read? This is fundamentally wrong on a number of levels.

 

It's not income accounting...it's GDP calculation.

Mathematically...trade deficits or imports are not great for domestic GDP. But we can't have exports without having imports so a trade balance is preferred. In the case of the USA with lackluster domestic spending, increasing exports is the key path to increasing GDP and the US economy...

 

A silly comment. GDP is calculated using the income accounting identity.

This is drivel. Mathematically you can't say anything about a deficit as all other variables are endogenous.

 

The US Balance of Payments deficit is almost entirely the result of foreign military spending, the private sector being almost in balance.

First, as my income is in Canadian dollars & your goods are sold in euros either you must accept CAD or I must go outside the bounds of your example to find someone to exchange my CAD for Euros.

Remaining within your example, you therefore will accept CAD & I will accept Euros.
If I buy $10 000CAD in goods from you and then you buy, using the CAD you just acquired, $10 000CAD from me, our trade is balanced & neither of us are stuck with foreign currency.
But if I buy $100 000CAD in goods & you buy $10 000CAD from me, you will end up with $90 000CAD.
This is money that you can't even use to pay your taxes in, let alone to buy goods with.

I can only buy what you are willing to sell for my CADs.

The assertion that wealthy nations will run trade deficits against poorer nations is not born out in fact.
Most salient being the case of Germany

China runs trade surpluses, giving away real goods & services for worthless pieces of paper, not because it's stupid. but because it needed Western Technology.
The problem China now faces is how to extricate itself from this arrangement & to instead orient production toward the domestic market.

 

This is such a limited view of trade. Trade inherently benefits both people. And trade creates jobs for everyone.

You are looking very narrowly at just one thing... jobs. And, worse than that, you are looking at only specific jobs. Jobs directly created by the specific good sold.

But what if those goods that we buy, are creating jobs?

For example, we import Volvo. As far as I know, there are no domestic Volvo plants. If there are, substitute in any imported car you wish. The Volvo S40, is built in the Netherlands. It creates jobs there.

But.... who sells the cars? A US based dealership. The Dealership is likely owned by someone locally. It of course hires local people. Sales staff. Mechanics. Truck drivers to deliver the cars to the dealerships. They have advertising agents, who provide jobs to advertisers. They have parts that have to be built locally. Parts companies that sell those parts. And of course thousands of independent car repair shops that specialize in Volvos.

Preventing the importation of Volvos, would not create jobs. It would eliminate thousands of jobs. And then of course, you would lower the wealth of the country, and hundreds of thousands of people who love Volvos would not have their product.

And that's just one tiny example. I've been in manufacturing for 10 years. Every product I have ever built, has relied on imported parts. You deny those imports, all of those products would not be built. All the jobs would not exist. All those companies would not exist.

The belief that if we prevented those imports, would mean that domestic suppliers would pop into existence, is not true. That has never been the case in the history of the world. Every country that has tried to prevent trade, in hopes that imported goods would be produced domestically, has always ended up in ruin.

Smoot-Hawley in the 1930s, didn't result in domestic production, and millions of jobs. The result was economic destruction. In the 70s, Jamaica tried it, and the result was all the companies left the country, because they couldn't get the supply of goods they needed to operate. Venezuela tried that, and it resulted in nation wide shortages of everything, from Rice, all the way down to Toilet paper.

It never works.

The reason is very simple. The primary reason production of certain products ends up ceasing domestically, is because it's not profitable to do domestically. That doesn't change because you eliminate imports.

Take the Iphone. They showed that this Factory building Iphones in China, had 900 people, working for $2 an hour, assembling phones on a 10 hour shift. Are American's going to do that? No. So if you ban the import of Iphones, what is going to happen?

One of three things.
1. The Iphone will cease to be available domestically (Apple will continue very popular international sales, and American's will just be left out).
2. The Iphone will become a product for only the rich, made in limited numbers. (Apple will have them built by American Labor making them $1,000 a phone).
3. The most likely option, they will find a way to have robots build them.

In all three cases, very very few jobs will be created. 1, no jobs. 2, a few jobs. 3, one or two jobs, for the robot maintenance people. Additionally, in all three cases, far fewer people will be able to have and afford the Iphone, than currently, because the cost will be higher in all three situations.

The myth that if we stop importing goods, will somehow result in more jobs, is just simply not true. Not by a long shot. What it will do, is reduce the wealth of the nation, and destroy for more jobs than trade has ever harmed.

 

Everything you said is correct, except I would disagree with the last conclusion. I would suggest that all of this is not a reason trade deficit are not good, but rather why the GDP calculation is not good.

Let me ask you this. Let us say.... That you have $50,000, and you don't have a car. Then let us pretend that you see two cars, that both fit your needs perfectly, and let us even suggest that the two cars are perfectly identically except for one being made in the US, with a price of $40,000, and the other imported with a price of $20,000.

Which one would show up as higher GDP? Of course the $40,000 domestic would show a higher GDP. The import would actually show up as a negative GDP.

But which car would result in YOU PERSONALLY, being more wealthy? The $40,000 car, with you left with only $10,000? Or the identical car, but now you have $30,000 still in your pocket? (or bank account).?

Well obviously you are more wealthy, when you have the car and still have $30,000.

Yet according to the GDP calculation, you are worse off.

Something that makes Americans more wealthy, the GDP is calculating as making us less wealthy.

But it doesn't end there. Some of the imports that the GDP shows as a negative, actually directly create other GDP, that are positives.

For example, the when you had the oil change done on your car that was imported. That service, is counted as part of the GDP. If you have a mechanic fix something on your car, that counts for GDP. The part you bought to fix your car, counts toward GDP. The car wash you paid to have done, counts towards GDP. The sale of the car at the dealership, counts toward GDP. Of course the transportation of the car to the dealership, and the parts to the mechanic, count toward GDP.

All of that GDP is counted as a positive. But none of it would exist, without the car.... which being imported, is counted as a negative.

So back to your post. Yes, imports are counted as a negative. I consider that to be a flaw of GDP calculations. Imports are a huge positive, and even contribute directly to other GDP figures.

 

Exports are a great way to boost the economy, I would agree.

Now I don't believe that it is the "key". You can grow the economy without exports. The Smoot-Hawley protectionism of the 1930s ruined the economy, and killed exports. But.... the economy did in fact stabilize and grow.

The problem most people have in this area, is that they seem to think in a vacuum. Meaning, imports are bad (which isn't true, but they believe it is), and thus we need to hinder imports.

The theory is that exports will remain steady, while we decrease imports, and thus we can balance trade.

But that is never how it works. The moment you do anything that intentionally harms imports, the other countries we trade with are going to do the exact same thing to us. So our exports will be harmed just as much, by our policy to harm imports.

This is why free-trade is the best policy.

The solution to our lackluster domestic economy, is to make our economy more competitive, not try and make other economies less competitive.

And you do this the same way you make anything economic, more competitive. Cut taxes, decrease regulations, and make business easier and more profitable. You do that, and economy will fly, no matter what China, or anyone else, does.

 

I have not looked into that specific aspect, to know either way. My position on that hasn't changed though. We should be in South Korea, because we agreed to support them, and we should support them if for no other reason, than because we agree to it, and gave our word.

As for the middle east, and any other non-agreement support, I think we should completely end that. We stopped supporting Egypt, and I think we should stay out of the middle east completely. Support for Israel, should be the discount window only, and we should not be giving them any money to purchase anything with. They want some hardware, they should buy it. I don't mind a blue light special, but I don't want any freebies. We don't have any money for that.

Well money exchange does not matter, because if your money wasn't worth it to me to get, then I wouldn't sell it to you.

All trade is inherently beneficial, or you wouldn't engage in it. I wouldn't buy anything from you, unless I knew I could do something with your CADs. Nor would you take my Euros, unless you could do something with the Euros.

What each of us does with the currency we trade for, doesn't matter. The fact remains, you'll be able to purchase far more from me, than I can from you, because you are more wealthy than me. Thus the trade deficit, is a sign that you are wealthy.

I didn't quite say "they will" run a deficit. I merely said that a deficit is a sign of wealth. I don't know any country running a large trade deficit, in which the people were very poor. I do know many countries running a trade surplus, in which the people were on average poor.

Germany is a special care for several reasons. First, the German people are culturally very frugal, and fiscally conservative. This could be due to the not distant past of East Berlin being destroyed by socialism. But regardless, the fact is they are natural savers, and don't buy nearly as much as American's typically do.

Additionally, Germany has a long history of being supportive of their Auto Manufacturing. Unlike Americans who tend to see big car companies as a blight on society, Germany sees those companies has beneficial. At the same time, auto ownership in Germany is lower than most of Europe, and a fraction of American levels. Meaning they make tons of high value goods, and yet don't purchase very much of those goods themselves. They tend to have extremely high exports of automobiles, which are high value goods.

Between these two forces, the natural result is a fairly consistent trade surplus.

All true. I don't think they planned it out quite that good, but that has been the result.

Many Chinese companies have been willing to allow foriegn companies access to Chinese markets, in exchange for technology instead of money. I don't know if the Chinese government actually intended that outcome, but that is in fact what has happened regardless of their intentions.