Trade Wars versus Trade Deficits

If trade deficits don't matter why has the Chinese government been making every attempt in the world to maintain a net positive trade surplus?

 

The flipside of that is that trade deficits reflect lower savings rates. Savings carry interest rates because they are reflective of capital equity.
It's easier to get more money to save if you already have a large amount of savings.

This is the same reason that financial advisors often recommend to their clients that they begin saving for retirement early. The earlier they start the easier it will be.

 

I'm really not interested in your ignorance of economics. You've been informed of the reality (exchange rate or consumption correction). You can of course continue, if you want, to support far right nonsense.

 

Here's an article in a more Left-leaning publication titled "Why Trade Deficits Matter":
https://www.theatlantic.com/business/archive/2016/12/trump-trade-deficit/509912/

If this was just a "far right" issue like you falsely and absurdly claim, Reiver, then it would not have appeared in this media outlet, now would it, Reiver?

The fact is Reiver, you are a Neoliberal.

 

Copy and pasting, just without support for any far right economics. Is there any?

 

What do you mean 'low priced'? We import cars and computers and iPhones and airplanes and trains, etc.? Our strong currency makes imports seem less expensive, which can lead to more imports, which can lead to trade deficits...

 

Trade is done by consumers, which can be individuals or businesses or government, and again, unless there is some duress, we can assume all parties involved in a trade are satisfied...

 

You're ignoring the earner part of the equation.

People like younger workers are earners to an even greater degree than they are consumers, so this will affect them more than the older wealthier generation.

 

Even kids or young adults earning low pay become consumers the moment they have the cash. Everyone involved in a trade should be satisfied with the trade...this is like contract law in which all parties are in agreement. In free enterprise, a seller can sell to any buyer and a buyer can buy from any seller...both do what is needed to be satisfied. This is why I say that in trade the buyers and sellers will find equilibrium. There are always going to be trade imbalances due to cost issues or materials or environment, etc. and if one nation imports more than they can export, so what. A nation like the US is capable of exporting more so why not focus on exports? I would much rather increase exports than I would to place tariffs, etc. on imports! Tariffs on imports...we all lose! Increase exports...we all win...

 

Yes, but I'm just pointing out that the earning side of the equation is more important for them than the consumer part of the equation.
They will benefit much more if their earnings go up 30%, for example, than if their consumer prices go down 30%.
Remember, young people are just starting out, don't have any money saved, and they're not spending everything they earn. (Certainly what they're spending their money on is not mostly foreign imports)

Do you also see that there's an inequality between how much foreign imports will affect domestic wages, and how much those foreign imports will reduce cost of living prices? (ignoring inherent efficiency increases from trade for just a moment here)

 

Then they lose their savings and all the interest that would automatically accrue to those savings.

It's basically a wealth drainage, on a national level.

The analogy would be selling the farm to buy cheap wheat.

 

And that's why those of the Neoliberal mindset have been focusing on immigration, to drive down wages in the U.S. hoping it will make it easier for U.S. exports to compete in other markets around the world where wages are low.
This type of idea is inherently flawed, however.

 

Yes, of course it would be more ideal to increase exports, if that were an option over decreasing imports.

One of the problems with increasing exports, however, is that most of those exports have ended up being agricultural products, where most of the profits just go to big agricultural corporations, and the low wage jobs that are created end up going to illegal aliens workers in the country who came from Mexico and Guatemala.

This isn't the type of thing that's good.
What I'm saying is that even if exports were able to match the same level as imports, there could still be a big fundamental problem.

(In such a case, yes, there would be an immediate net benefit from trade to the country, but that benefit would mostly go to those at the top, or end up being sent out of the country in foreign remittances, not to mention not being a good job creator for Americans)

 

Well...people cannot exist if they don't consume.

If their earnings go up 30% or their costs go down 30% leaves them in the same position.

Makes no difference how much people spend...all that's important is that spending is happening.

If young people spend on clothing, shoes, furniture, phones, electronics, jewelry, sports, cars, etc. they are more than likely buying imports.

How do you believe imports affect domestic wages?

 

The US is not the only nation with a trade deficit? https://en.wikipedia.org/wiki/List_of_countries_by_current_account_balance
There are lots of good reasons to have a trade deficit.

Don't see how a trade deficit is 'wealth drainage'?

 

This is 100% conspiracy theory...

 

The US can export anything that is viable business...this is always an option...a great option.

Agricultural products not even mentioned here;

America's Top 10 Exports

1. Machinery – $206 billion. ...
2. Electronic equipment (including computers) – $170 billion. ...
3. Spacecraft and aircraft – $131 billion. ...
4. Cars – $127 billion. ...
5. Petroleum – $106 billion. ...
6. Medical equipment – $83 billion. ...
7. Plastics – $60 billion. ...
8. Gems, precious metals, and coins – $58 billion.

I think you need better facts...

 

That petroleum is kind of irrelevant since the U.S. imports far more petroleum than they export.
Stopping the exports of petroleum would hardly affect the U.S. economy, since the domestic market would quickly take up the slack.

Anyway it's interesting to point out that even the value of America's top 10 export categories is still smaller than the federal budget deficit.

Just from that alone I think we could infer that the issue of low American savings rates is a bigger issue than any worries about a trade war.

 

No it isn't, they've been openly admitting it (more so in the early 2000s). It wasn't any big secret.
One had only to look at publications like The Economist to see this type of argument being made.
Yes, politicians were a little reluctant to openly bring up the issue with voters, but in business circles there was plenty of propaganda going around.
And yes, this was coming from both plenty of Republicans and Democrats.

The Neoliberal theory was that, yes, there would be more low wage workers in the country, but that the benefit to exports they expected would create more opportunities for more educated workers, and more wealth overall, with some suggesting that some of that new wealth could be redistributed down to those at the bottom, or to "retrain" workers who would lose their jobs.
Many of them also believed that more wealth would also mean the tax rates could be lower, which would end up benefitting everyone, including those at the bottom.

(Probably neoliberals wouldn't describe their beliefs exactly like that, but that's basically what they believe)

 

Just because the U.S. currency is still strong compared to other currencies (and it's the Third World we're talking about here) does not mean there has not been a tremendous amount of inflation.

Were you aware that China has been manipulating their currency to intentionally keep exchange rates low, with the aim to benefit their industries and increase exports?

 

Trade happens. Period.

The deficits arise when any given country exports less than it imports. Which is unforeseeable due to the complexity of trade-patterns. No country decided unilaterally to "increase exports" or "decrease imports" - that just happens arbitrarily ...

 

And who-in-hell-really-cares what Buffet has to say ... ?

 

And are you aware that that tactic didn't work and China is just beginning to come out of its worst economic period in decades ... ?

 

What you are suggesting seems like a big logical stretch. I don't think there's a connection between those two things.

It would be very difficult to argue that China has done worse for trying to increase its exports.

I think your theory here is so incredible it's probably not even worth responding to.

Trying to claim trade deficits are good because only wealthy countries have them is sort of one of those "correlation does not imply causation" things. The country has a trade deficit because its consumers are wealthier, not the other way around.
As for China, you might say China has economic problems now but just look at how things in the country were before.

What you suggested in your argument just seemed completely thoughtless.

 

That in no way is an argument.

Yes, obviously exports can't be expected to exactly match imports.
You know that's not what I'm talking about.

Again, not really a relevant argument.

If you knew anything about economics, which I know you do, you know that isn't true.
Governments, especially in Asia, are concerned about exports and trade deficits all the time.

Oh, it's not like he's a financial genius or knows anything about economics, does he?

You must be off balance today. Your arguments seem to have involved less thought than usual.