Why the Trade Deficit Matters

Discussion in 'Economics & Trade' started by LafayetteBis, Oct 18, 2017.

  1. LafayetteBis

    LafayetteBis Well-Known Member Past Donor

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    NYT: Why the Trade Deficit Matters, and What Trump Can Do About It
    - excerpt:


    His prescription remedy is a classic non-starter - and yet he understands very well the problem. He just wont admit it.

    The jobs that have been lost aren't coming back. They are gone because higher US labor costs pushed them into the far-East; and those without the necessary advanced skills/competencies are being left behind. Worse yet, to obtain those skills companies are obliged to hire foreigners!

    What's happening? The post-secondary schooling costs to obtain the higher skills/qualifications are too effing expensive. So, our children are not able to obtain them.

    Last count I saw from the Dept. of Education stats, 45% of our secondary-school graduates are not obtaining an advanced degree. Thus guaranteeing them a lifetime of below the average individual wage existence (at $54K per year), and incarcerating 14% of them below the Poverty Threshold (at $24K per year for a family of four).

    And that's the fault of who?
    The Democrats, who's last candidate promised free post-secondary education for all families below the $100K earnings threshold?

    Yeah, right. We collectively shot ourselves in the foot on that one! The irony being that it was in those key states - of the Electoral College that Donald Dork won - that those jobs were most necessary.

    Only in America, could that have happened. It's the sole country on earth to have warped an honestly democratic presidential election by means of an Electoral College artifice ... !

     
    Last edited: Oct 18, 2017
  2. james M

    james M Banned

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    of course that's 100% absurd we see businesses moving out all the time because our corporate taxes are the highest in world. Trump knows this obviously!!!
     
  3. james M

    james M Banned

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    of course thats 100% absurd. Stem degrees are free on line and some schools now grant more stem degrees on line than on campus!!!
     
  4. james M

    james M Banned

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    Democrats promise free everything!! as if violent theft at gunpoint is a solution rather than the cause of our problems.
     
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  5. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    If a country runs trade deficits year after year, eventually the creditor nation will use all that currency to buy up the country's assets. Instead of buying shoes, for example, it will buy the shoe factory. Then all the business profits go to some other country. But it's not just equity in businesses, it's also real estate, and government debt too. That's going to mean your tax dollars are going to pay another country.

    The scariest thing, if a country holds enough of another country's debt they could use it as a political weapon. All the creditor country has to do is threaten to dump all the debt into the market place. Then no one will buy new debt being issued, and when debts are coming due the debtor country won't be able to find new lenders to buy them. Suddenly the cost of paying the interest on all that debt spikes.
     
    Last edited: Nov 12, 2017
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  6. LafayetteBis

    LafayetteBis Well-Known Member Past Donor

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    I frankly don't see any of the above happening, particularly in a country where the money is a "reserve currency". That is, "a strong currency widely used in international trade that a central bank is prepared to hold as part of its foreign exchange reserves."

    For as long as the Chinese hold T-notes, nothing happens. The currency remains stable, trade remains stable. Nothing happens.

    Yes, the national debt increases. So stop thinking that national-debt is like personal-debt and has to be paid-off at all cost or one's personal belongings are sequestered!

    No country is going to sequester Uncle Sam for debt-repayment* ... !

    NB:
    *There is a circumstance in which the US fails to make its payments on its National Debt (in Treasury Notes). And in this case, the notes are sold at way-below market value (deep, deep discount) and/or nobody buys them any more. They become worthless and so T-notes cannot be resold, the government cannot fund its budget and ... everything governmental stops that cannot be funded uniquely from tax-collections.
    *What are the chances of that happening in a producing nation of 325M souls actively consuming to sustain their existence? Nada, niente, zip, nichts, rien, tipota!
    *
    All that can happen is that there is a short-lived or even longer recession and the country's economy starts ticking again producing taxable revenue. Which is then employed to buy-back the bad-debt. And international trade starts rolling again!
    *Which is why, as countries go, economically "Bigger Is Indeed Better!"
     
    Last edited: Nov 13, 2017
  7. james M

    james M Banned

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    100% wrong of course. If they buy the show factory then they must export shoes that nobody wanted to buy which caused the trade deficit in first place!!
     
  8. james M

    james M Banned

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    100% wrong of course, as always. If they threatened to dump that would cause value to decline quickly so it is last thing they would do. Econ 101.
     

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