Nailing Malarkey Too

How to solve the trade deficit

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When a country exports a product to the US. The US importer pays the US government 100% of the amount owed the exporter. The US government forwards a percentage theyt estimate will result in a balanced trade ledger for that fiscal year. The remainder is held in escrow for the foreign exporter to spend on US products and services other than real estate. 

The foreign exporter can buy American products directly or sell the escrow balance to a third party, possible a country with a reverse trade balance with the US. 

Every month the US government deducts a 1% fee from all escrowed funds as an inducement to spend it. 

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There are many who contend that unbalanced trade is only an indication of the strength of a currency in foreign markets.  The imbalance of trade acts as an analog to a " chemical buffer" to the currency on a world market.  For this reason a lot of economists are not really concerned with a trade imbalance.  The escrow that you refer to just created more dead capital.  Not a good thing.

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Shouldn't take more than another 20K government employees managing a 100K contractors or so.

 

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There is no problem to solve. Foreign countries want to give US consumers hard goods in return for paper? What’s the problem?

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Just another conservative who wants to have a smaller government by creating a larger one.  The hits just keep on coming.

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Trumpy somehow believes that trade deficits are a bad thing. Some small minded followers believe him. Sad.

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3 hours ago, Laker said:

There are many who contend that unbalanced trade is only an indication of the strength of a currency in foreign markets.  The imbalance of trade acts as an analog to a " chemical buffer" to the currency on a world market.  For this reason a lot of economists are not really concerned with a trade imbalance.  The escrow that you refer to just created more dead capital.  Not a good thing.

There has never been a shortage of economists to tell you what you want to believe and since you used the generic "A Lot" instead of a specific person or group or list of economists I can't evaluate your comment. 

You could quote Milton Frieman who has made the same argument. However common sense is smarter than  either of you. 

Frieman argued that the surplus is always returned in the form of investment and combined with currency devaluation eventually balances the account. 

It is that investment that bothers sane Americans. Because investments is not exactly the right word. Assets is the right word. Unchecked eventually all the assets of a country will belong to the surplus exporter. 

It is not sustainable. It may seen fine for a long time but eventually it will all come down on our heads, 

 

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@Nice!  I realize trade deficits may not consider services, salaries from the home country spent in the work country, or remittances.   The last two likely understate the wealth transfer, especially with military contractors and servicemen spending US dollars abroad.  Why is this not bad?   It seems like a slow hemorrhage of American wealth traded for debt and inflation.   

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3 minutes ago, Lark said:

@Nice!  I realize trade deficits may not consider services, salaries from the home country spent in the work country, or remittances.   The last two likely understate the wealth transfer, especially with military contractors and servicemen spending US dollars abroad.  Why is this not bad?   It seems like a slow hemorrhage of American wealth traded for debt and inflation.   

It WILL come back. It's how trade works. At some point, US $s have to be used to buy US product, services or assets.

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4 minutes ago, Raz'r said:

It WILL come back. It's how trade works. At some point, US $s have to be used to buy US product, services or assets.

Not as long as we remain a currency of choice for international trade. https://www.npr.org/templates/transcript/transcript.php?storyId=526051566

As long as international trade flourishes and the worlds’ ledgers use $ as their marker the money has little need to return home.  After the trade war ends, who knows?

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2 minutes ago, Lark said:

Not as long as we remain a currency of choice for international trade. https://www.npr.org/templates/transcript/transcript.php?storyId=526051566

As long as international trade flourishes and the worlds’ ledgers use $ as their marker the money has little need to return home.  After the trade war ends, who knows?

Even better. I trade paper for goods & services. nothing wrong with that.

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Agreed.  For a while.   It’s been a long while already.    60% of us currency is overseas.  https://www.stlouisfed.org/publications/central-banker/spring-2007/how-us-currency-stacks-upat-home-and-abroad.   Is this a consequence of the trade deficit?    What is the ramification?   Does it protect us forever or is it a house of cards?

edit.   That’s an old cite.  I’ll look for modern.  

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Damn.  Currency as in cotton green things vs US dollars as virtual representation.   Percent of paper things may be unchanged but who uses paper anymore?  I’m getting a headache.   

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6 minutes ago, Lark said:

Agreed.  For a while.   It’s been a long while already.    60% of us currency is overseas.  https://www.stlouisfed.org/publications/central-banker/spring-2007/how-us-currency-stacks-upat-home-and-abroad.   Is this a consequence of the trade deficit?    What is the ramification?   Does it protect us forever or is it a house of cards?

edit.   That’s an old cite.  I’ll look for modern.  

Is it a consequence of the trade deficit? Well, yes, but the trade deficit is a consequence of the demand for $s - which is still the global reserve currency.  I'm China, I want to buy energy on the global market, I need $s to do it. I'll trade my people's labor for those $s.

 

Trade is not a bad thing

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I agree trade is genarally good and the trade war is stupid.  I’m at a loss how trading Chinese labor in the form of Walmart junk paid for by dollars in the form of data bits moved around on a Chase bank computer from the American side to the Chinese side doesn’t leave me poorer?    My product breaks, gets used up, or becomes obsolete.   My money is spent by China to improve their competitiveness and infrastructure.   Some is lent back to my government to be theoretically repaid with interest (in the form of even more debt).   China benefits.  The us day of reckoning is postponed.  Landfills grow.  Doesn’t America shrink, hidden by inflation as we devalue our currency at 2% a year?

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6 minutes ago, Lark said:

I agree trade is genarally good and the trade war is stupid.  I’m at a loss how trading Chinese labor in the form of Walmart junk paid for by dollars in the form of data bits moved around on a Chase bank computer from the American side to the Chinese side doesn’t leave me poorer?    My product breaks, gets used up, or becomes obsolete.   My money is spent by China to improve their competitiveness and infrastructure.   Some is lent back to my government to be theoretically repaid with interest (in the form of even more debt).   China benefits.  The us day of reckoning is postponed.  Landfills grow.  Doesn’t America shrink, hidden by inflation as we devalue our currency at 2% a year?

You don't have to buy the chinese junk. I agree that buying junk is probably not the best use of funds - but it's hard to argue that the living standards of the stagnant middle class have been propped up by cheap & exploited chinese labor and a destroyed environment. Now, we can debate WHY the middle class is stagnant, but I believe it's got nothing to do with china.

 

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1 minute ago, Raz'r said:

You don't have to buy the chinese junk. I agree that buying junk is probably not the best use of funds - but it's hard to argue that the living standards of the stagnant middle class have been propped up by cheap & exploited chinese labor and a destroyed environment. Now, we can debate WHY the middle class is stagnant, but I believe it's got nothing to do with china.

 

But on topic. What is the ramification of $ being spent overseas far more then ¥ € or £ are spent here?   How could there not be one?    Loaning it back to us is just a game, each side gambling the other will be holding the bag when the music stops.   I’m convinced it’s a wealth transfer until somebody can explain why it isn’t.   Low cost non durable goods are a temporary benefit for a permanent transfer.   Printing more money and inflation help hide the consequences.   If money has any meaning, what I’ll call the spending deficit has to be bad.  Doesn’t it?  

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13 minutes ago, Lark said:

But on topic. What is the ramification of $ being spent overseas far more then ¥ € or £ are spent here?   How could there not be one?  

The US consumer gets a bonus from an inflated dollar. It's a wealth transfer to the US.

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10 minutes ago, Mismoyled Jiblet. said:

The US consumer gets a bonus from an inflated dollar. It's a wealth transfer to the US.

Yep

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And the merry-go-round doesn’t stop. Well, unless we have a breakdown like 2007 and end up with a Republican president who wants to punish debtors.

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11 minutes ago, Raz'r said:

And the merry-go-round doesn’t stop. Well, unless we have a breakdown like 2007 and end up with a Republican president who wants to punish debtors.

Republicans only want to punish poor debtors.

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31 minutes ago, Mismoyled Jiblet. said:

The US consumer gets a bonus from an inflated dollar. It's a wealth transfer to the US.

How so?  It devalues my IRA, salary and house.   It makes foreign travel expensive.   It’s nice if I sell my house to a Chinese investor I suppose.   

 

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Just now, Mismoyled Jiblet. said:

It doesn't do any of those. It does make foreign travel more expensive.

So is the foreign car, the foreign content in the American car, the Mexican made Carrier air conditioner.   

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37 minutes ago, Mismoyled Jiblet. said:

Republicans only want to punish poor debtors.

Excellent point 

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10 minutes ago, Lark said:

So is the foreign car, the foreign content in the American car, the Mexican made Carrier air conditioner.   

Evidence suggests otherwise, or those foreign goods would be more expensive. Right?

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42 minutes ago, Raz'r said:

Evidence suggests otherwise, or those foreign goods would be more expensive. Right?

An inflated dollar is a weak dollar, correct?   So it takes fewer £¥€ to buy a $.    So a widget that takes 10 boat bucks to produce in Boatland is now worth $15 instead of $10.   (I’ll make up a currency to avoid messing with real exchange rates)    That means my IRA will buy fewer widgets in my retirement.    Technology and low labor costs have protected the consumer from this, by reducing the cost of the widget faster then buying power falls.   But the buying power is falling as well, year after year, due to inflation and wealth being offshored.    I’m ignoring income inequality and shareholder bonuses for the moment, and looking at the total wealth not just who gets a cut.   

https://www.forbes.com/sites/johntamny/2017/01/19/are-donald-trumps-voters-aware-of-his-desire-to-devalue-the-dollars-they-earn/.   I tried to understand this opinion peace.   “We trade products for products....money just facilitates our getting”.     Ok.   So I am trading work for money, which I trade for widgets.    With an inflated dollar it takes more work in America to buy the same widget.    So they find somewhere even cheaper to make it,  a shell game.   I trade my labor for Jetskiland labor as Boatland labor is now beyond my ability to afford.   This only works for a while as the world flattens.

Meanwhile if America sells beans to boatland we get to charge more (in inflated dollars) to get the same boat bucks worth of purchasing power.   Domestic bean prices rise as well (inflation if beans are on the consumer price index).  So everything costs more, and my IRA’s growth is partially lost to inflation.  

Over the long time frame my dollar buys less and less.   Although I have more dollars I have less purchasing power.   Boatland has accumulated a lot of dollars.   They  may decide to buy American real estate and let me rent since I can no longer afford a home at the inflated dollar value.   They may loan me money to buy even more widgets since I can no longer afford them.   Or maybe they build a widget factory in my neighborhood and employ me to make widgets for export, since my labor has been devalued by inflation and the continueal export of American assets for replacement widgets has reduced me from a widget consumer to a widget maker.   

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I think you are complaining about asset bubbles and negligible wage growth, rather than anything to do with the trade imbalance.

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47 minutes ago, Raz'r said:

Evidence suggests otherwise, or those foreign goods would be more expensive. Right?

 

1 hour ago, Lark said:

How so?  It devalues my IRA, salary and house.   It makes foreign travel expensive.   It’s nice if I sell my house to a Chinese investor I suppose.   

 

It does not devalue internal capital.  Piketty does a good explanation if you need a cite.

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3 minutes ago, Laker said:

 

It does not devalue internal capital.  Piketty does a good explanation if you need a cite.

https://www.quora.com/Can-the-devaluation-of-a-currency-increase-the-inflation-rate

so this isn’t true?   

A devaluation leads to a decline in the value of a currency making exports more competitive and imports more expensive. Inflation occurs when there is an increase in the general price level. Generally, a devaluation is likely to contribute to inflationary pressures because of higher import prices and rising demand for exports. However, the overall impact depends on the state of the economy and other factors affecting inflation.   
 

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Lark, I wish you would not use the term 'inflated dollar' when you mean 'weak dollar' It is entirely possible to have an inflated dollar that is also a strong dollar. To speak to the issue of a weak/strong dollar, the US suffers from being the world's most important reserve currency and also the currency of the country. If it were only the latter it would go up and down in response to the relative health of the US economy. A weak dollar would be quite useful since it would make imports more expensive which would encourage domestic production. It would also make US exports cheaper which is again a good thing. And yes it would make foreign travel more expensive but it would make travel to US cheaper which also help the economy. The problem for places like Greece is that they have a weak economy and a relatively strong currency. There have been discussions about the use of a basket of major currencies as the world reserve currency - see 'Special Drawing Rights' for more on this. It is beyond on my Economics 201 pay grade. 

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14 minutes ago, Bristol-Cruiser said:

Lark, I wish you would not use the term 'inflated dollar' when you mean 'weak dollar' It is entirely possible to have an inflated dollar that is also a strong dollar. To speak to the issue of a weak/strong dollar, the US suffers from being the world's most important reserve currency and also the currency of the country. If it were only the latter it would go up and down in response to the relative health of the US economy. A weak dollar would be quite useful since it would make imports more expensive which would encourage domestic production. It would also make US exports cheaper which is again a good thing. And yes it would make foreign travel more expensive but it would make travel to US cheaper which also help the economy. The problem for places like Greece is that they have a weak economy and a relatively strong currency. There have been discussions about the use of a basket of major currencies as the world reserve currency - see 'Special Drawing Rights' for more on this. It is beyond on my Economics 201 pay grade. 

I appreciate your points.   In science it’s all about agreed upon definitions.   The dismal science needs them as well.   But I don’t know them.

The $ as a reserve currency and the meter of trade between other currencies that may change in value more quickly is a huge variable.   I think it allows us to export dollars with less immediate consequence.   

I cannot wrap my mind around the idea there are / will be no consequence to trade deficits or what I called spending deficits, a more comprehensive measure of US spending our money abroad vs US earning foreign money.   The inevitable consequence has to be the selling of US assets faster then the US buying of foreign assets, a wealth drain.

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Also remember that Friedman lived in a time of slow money (effect = mass of money x it's velocity) and low ratios of rogue (dead) capital.

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9 minutes ago, Lark said:

I cannot wrap my mind around the idea there are / will be no consequence to trade deficits 

Trade deficit = trade balance = the difference between national savings and spending/investment.  Investing now for the future is not inherently a bad thing, it could be a very good thing, it depends what you are investing in (WW2 spending?).

The consequence is the money needs to be paid back. As our debt is denominated in our currency, we aren't quite as fucked as some other country's have been.

My personal experience is consumer prices tend to equilize over the medium term. e.g. Argentine tourism was ridiculously cheap in the few years following their currency devaluation in 2001 - like a fantastic steak dinner with good wine for <$15/pp - and increased steadily every year after 2001. We could go with other things, but as with every market the question is - when will or did you pay what?

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1 minute ago, Mismoyled Jiblet. said:

Trade deficit = trade balance = the difference between national savings & investment.  Investing now for the future is not inherently be a bad thing, it could be a very good thing, it depends what you are investing in (WW2 spending?). The only consequence is the money needs to be paid back. As our debt is denominated in our currency, we aren't quite as fucked as some other country's have been.

Please say this again,    I get investing with the expectation of a greater return, vs spending.    Infrastructure improvements vs military for example.       “Our debt is denominated in our currency,”....    ?    Is it that different then a Greek debt in €?   

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14 minutes ago, Lark said:

Is it that different then a Greek debt in €?   

yes. the us has sole control over the $. we raise money in $ to pay for debt denominated in $.

The value of the € is determined by the monetary policy of the EU/EU parliament, so not in the sole control of the Greeks. (this is one of the problems of the EU - their policy's drive them to tighter integration than the nations are willing to accept. of course few of the nations are willing to lose the benefits of free movement of goods/capital/labour/services

For my earlier Argentina example, most of their debt was denominated in US $. The Argentine Peso was pegged at 1=1, until they couldn't keep the peg and it officially fell to $US1~$AR4 (even better on the black market). Suddenly the Argentine debt quadrupled relative to their payment currency, i.e if your debt is denominated in a foreign currency and the rate changes, you can be fucked. Applies to individuals too, see people with CHF mortgages who don't earn CHF - https://www.bloomberg.com/news/articles/2017-06-02/woe-the-swiss-franc-mortgage-on-non-swiss-homes-quicktake-q-a

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1 minute ago, Mismoyled Jiblet. said:

yes. the us has sole control over the $. we raise money in $ to pay for debt denominated in $.

The value of the € is determined by the monetary policy of the EU/EU parliament, so not in the sole control of the Greeks.

For my earlier Argentina example, most of their debt was denominated in US $. The Argentine Peso was pegged at 1=1, until they couldn't keep the peg and it officially fell to $US1~$AR4 (even better on the black market). Suddenly the Argentine debt quadrupled relative to their payment current, i.e if your debt is denominated in a foreign currency and the rate changes, you can be fucked. Applies to individuals too, see people with CHF mortgages who don't earn CHF - https://www.bloomberg.com/news/articles/2017-06-02/woe-the-swiss-franc-mortgage-on-non-swiss-homes-quicktake-q-a

This I can understand.   Thanks.   So we are potentially less screwed by our national debt.   Cool.   

So apply this to the trade deficit and the affect of being a reserve currency?

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12 minutes ago, Lark said:

the affect of being a reserve currency?

when transactions are denominated in US $ we benefit from liquidity (ever tried to exchange an obscure foreign currency outside of it's home nation? that's the effect of no liquidity. I've got some Slovene tolars, somewhere in a drawer, if you want them. once I crossed the border no one would touch them.)

when Kyrgyz horde US dollars for their savings and transactions (real world personal experience, they did 10 years ago ) if these $s never return to the US benefits from seigniorage.

haven't been abroad for a few years, but the "advantage" of various currency's was easily viewable by the spread at money changers. the smaller the spread, the better the currency.

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59 minutes ago, Laker said:

 

It does not devalue internal capital.  Piketty does a good explanation if you need a cite.

Interesting

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1 hour ago, Lark said:

https://www.quora.com/Can-the-devaluation-of-a-currency-increase-the-inflation-rate

so this isn’t true?   

A devaluation leads to a decline in the value of a currency making exports more competitive and imports more expensive. Inflation occurs when there is an increase in the general price level. Generally, a devaluation is likely to contribute to inflationary pressures because of higher import prices and rising demand for exports. However, the overall impact depends on the state of the economy and other factors affecting inflation.   
 

But it’s not devaluating...

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1 hour ago, Mismoyled Jiblet. said:

when transactions are denominated in US $ we benefit from liquidity (ever tried to exchange an obscure foreign currency outside of it's home nation? that's the effect of no liquidity. I've got some Slovene tolars, somewhere in a drawer, if you want them. once I crossed the border no one would touch them.)

when Kyrgyz horde US dollars for their savings and transactions (real world personal experience, they did 10 years ago ) if these $s never return to the US benefits from seigniorage.

haven't been abroad for a few years, but the "advantage" of various currency's was easily viewable by the spread at money changers. the smaller the spread, the better the currency.

Making money is a good gig.  Making money for the world is a better gig, from the point of view of the treasury,    Do you agree with this part of the link?   https://www.quora.com/What-are-the-contributions-to-USA-GDP-from-her-worldwide-seigniorage  .” A substantial share of US dollars are held by overseas banks for reserve purposes. Similarly a lot of non-americans mainain US bank accounts or use US currency as a means of exchange. That means the US Fed can increase the money supply more without inflation than it might otherwise AND the US can maintain bigger trade deficits than it would otherwise without the value of the dollar decreasing.”     

Ignoring his claims regarding income inequality, he argues our hosting a reserve currency lets us minimize inflation in domestic markets  and the devaluation of the dollar of international markets, related but not quite identical phenomena.    Does this mean “trade deficits don’t have consequences if you are the US.”?    Or do they just drag us down more slowly and insidiously?    

 

 

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25 minutes ago, Raz'r said:

But it’s not devaluating...

We have a river current of reserve currency status pulling us against the tide of the trade deficit.   

Edit.  Better a river current going against the wind when traveling by canoe.  

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9 minutes ago, Lark said:

We have a river current of reserve currency status pulling us against the tide of the trade deficit.   

Maybe. Or you could say we’ve had a river since WW1

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9 minutes ago, Raz'r said:

Maybe. Or you could say we’ve had a river since WW1

At that time the US held 92% of the gold in the world.  There is a time when you can win too much.  The rest of the world wanted off the gold standard.

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16 minutes ago, Raz'r said:

Maybe. Or you could say we’ve had a river since WW1

So being a reserve currency props up the US dollar’s value relative to other currencies compared to where it would be based on the health of the US economy.  I can accept that.   It also prevents trade from equalizing as we lose wealth.   

 Our wealth is still traded away, and optionally used to purchase our assets.   Because we’re a reserve currency and much of our currency is overseas, it can be used anywhere but there is an opportunity cost for the US.  Some Americans prosper, most don’t.   Back to my initial thesis.   Chronic trade deficits have negative consequences, even for the United States.   Why wouldn’t they? 

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4 minutes ago, Laker said:

At that time the US held 92% of the gold in the world.  There is a time when you can win too much.  The rest of the world wanted off the gold standard.

Oh. yeah, gold's just an element. It's no more real than anything else.

our wealth isn't traded away, necessarily. it's accounting.

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Posted (edited)
21 minutes ago, Laker said:

At that time the US held 92% of the gold in the world.  There is a time when you can win too much.  The rest of the world wanted off the gold standard.

Actually, the world was super-happy with it. But there started to be a bit of a run on countries swapping their dollars for gold (there was not even nearly enough gold to pay back everyone), so america defaulted.

Edited by Battlecheese
clarified meaning

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51 minutes ago, Lark said:

So being a reserve currency props up the US dollar’s value relative to other currencies compared to where it would be based on the health of the US economy.  I can accept that.   It also prevents trade from equalizing as we lose wealth.   

 Our wealth is still traded away, and optionally used to purchase our assets.   Because we’re a reserve currency and much of our currency is overseas, it can be used anywhere but there is an opportunity cost for the US.  Some Americans prosper, most don’t.   Back to my initial thesis.   Chronic trade deficits have negative consequences, even for the United States.   Why wouldn’t they?

 

 

Yes, negative and positive because it is the reserve currency.  I get back to it being a buffer that doesn't allow it to run away in either direction.  The same could not be said of the rupee.

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14 hours ago, Nailing Malarkey Too said:

When a country exports a product to the US. The US importer pays the US government 100% of the amount owed the exporter. The US government forwards a percentage theyt estimate will result in a balanced trade ledger for that fiscal year. The remainder is held in escrow for the foreign exporter to spend on US products and services other than real estate. 

The foreign exporter can buy American products directly or sell the escrow balance to a third party, possible a country with a reverse trade balance with the US. 

Every month the US government deducts a 1% fee from all escrowed funds as an inducement to spend it. 

Perhaps this OP is the singular most irrefutable and clear demonstration of your ignorance ever published in these forums.

and 

a perfect example of the hypocracy of your claims about wanting a smaller less intrusive government 

and

deserving of a downvote ( which I did)

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7 hours ago, Lark said:

Not as long as we remain a currency of choice for international trade. https://www.npr.org/templates/transcript/transcript.php?storyId=526051566

As long as international trade flourishes and the worlds’ ledgers use $ as their marker the money has little need to return home.  After the trade war ends, who knows?

kRist , you do not want to see your economy should all the offshore greenbacks return ...............................

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16 hours ago, Nailing Malarkey Too said:

When a country exports a product to the US. The US importer pays the US government 100% of the amount owed the exporter. The US government forwards a percentage theyt estimate will result in a balanced trade ledger for that fiscal year. The remainder is held in escrow for the foreign exporter to spend on US products and services other than real estate. 

....

That works if they're as wealthy as we are.

Rich nations have trade deficits because we can buy stuff. Poor nations have trade surpluses because they can't.

Given that you create the problem by being rich and solve it by being poor, a better question would seem to me to be: WHY to solve the trade deficit?

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10 hours ago, Lark said:

So being a reserve currency props up the US dollar’s value relative to other currencies compared to where it would be based on the health of the US economy.  I can accept that.   It also prevents trade from equalizing as we lose wealth.   

 Our wealth is still traded away, and optionally used to purchase our assets.   Because we’re a reserve currency and much of our currency is overseas, it can be used anywhere but there is an opportunity cost for the US.  Some Americans prosper, most don’t.   Back to my initial thesis.   Chronic trade deficits have negative consequences, even for the United States.   Why wouldn’t they? 

Hard to disagree with this but only if be considers all foreign transactions. The most obvious one is trade in services, but there are others. The US trade deficit is not that bad when you consider everything. The US dollar should go down to allow the US to compete better internationally (trade in goods and services), but the fact that the dollar is the world's currency in many ways gets in the way. Consider how happy the Chinese would be if the US dollar went down 10%, not only would their import/export balance be affected but the treasuries and other US debt they hold would be less valuable.

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44 minutes ago, Bristol-Cruiser said:

Hard to disagree with this but only if be considers all foreign transactions. The most obvious one is trade in services, but there are others. The US trade deficit is not that bad when you consider everything. The US dollar should go down to allow the US to compete better internationally (trade in goods and services), but the fact that the dollar is the world's currency in many ways gets in the way. Consider how happy the Chinese would be if the US dollar went down 10%, not only would their import/export balance be affected but the treasuries and other US debt they hold would be less valuable.

I understand the limits of the trade deficit as a measure.   I made up “spending deficit” yesterday as a correction.   Is there a real measure of goods, services,  remitences, vacation, international second and third homes, spending by US defense workers overseas, the whole picture of wealth coming into and leaving the country?    Like using the Dow instead of the SP 500, it’s always the one reported but gives tiny picture.   I think GDP calculations try to take a more total view?   

Im not arguing for Trump’s trade war.   I do think a reasoned and targeted approach to intellectual theft and specific unfair trade practices makes sense.   Obama lacked the balls to go after intellectual theft and moved too slow for my liking, but had a great win loss ratio in the WTO courts.  Trump could have led an international dispute with China regarding dumping and intellectual theft as a national policy.   He could have done this while working on imigration reform so the US could produce more efficiently.   He shouldn’t have bullied the world and claimed Canada was a threat to our security.   He could have had widespread support, including mine.   He shouldn’t have picked his next battle until he actually won that one.

My initial post was response to claims made recently and in the past that the trade deficit doesn’t matter, cheap goods outweigh the slow hemorrhage.     I am unconvinced increased efficiency of procurement of mostly non durable goods is a benefit that outweighs the long term transfer of employment, assets and wealth to our suppliers.    Whether it is a necessary evil to avoid inefficient industry, the equivalent of Soviet era shipyards and mills, is another question.   First I was trying to determine to my satisfaction it is bad for the nation though economists seem to claim otherwise at first glance.

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China making serious BANK on Trump trade war!!!

https://www.bloomberg.com/news/articles/2018-07-13/tesla-bmw-bypass-trump-s-trade-war-and-score-a-win-for-china

Tesla, BMW Bypass Trump’s Trade War and Score a Win for China

By
and
‎July‎ ‎13‎, ‎2018‎ ‎5‎:‎34‎ ‎AM
  • Beijing says Tesla plant an ‘achievement’ of its opening-up
  • Germany, China strike deal that’s sweet for German automakers
  • Less than a week into President Donald Trump’s trade war with China, global automakers have shown there are ways to bypass the battle -- and scoring a win for Beijing in the process.

    Tesla Inc. and BMW AG are among the biggest potential losers from Beijing’s retaliatory tariffs on car imports from the U.S. because much of their production is centered in America. They’re now doubling down in China: this week, Tesla announced its first factory outside the U.S. while BMW is poised to become the first foreign manufacturer to own majority control of a Chinese automobile venture. Cars made locally by foreign brands will dodge import levies.
    While those deals have taken months -- if not longer -- to come together, the investments by Munich-based BMW and Palo Alto, California-based Tesla back up Beijing’s claim to be continually opening up its economy and help rebut allegations of protectionism by the Trump administration.
    “China is not backtracking, which is China’s most clever response to the trade war,” said Alicia Garcia Herrero, chief Asia-Pacific economist at Natixis SA in Hong Kong.  China and the U.S. imposed 25 percent tariffs on $34 billion of the others’ imports on July 6, and Beijing has vowed to fight back against proposed tariffs on an additional $200 billion in Chinese goods in the tit-for-tat proposals between the world’s two largest economies.

    It’s against that background that Tesla announced its China plant.

    "This is not only an achievement of China’s self-initiated opening up, it is also an embodiment of win-win economic cooperation between China and the U.S.,” Gao Feng, a spokesman for the Ministry of Commerce in Beijing said this week.

    Trump has criticized Harley-Davidson Inc. since the motorcycle maker said it would move some production overseas as a result of retaliatory levies by the European Union. Encouraging U.S. producers like Tesla and BMW to increase domestic investment can be seen as a notch in China’s favor in the trade war.BMW is set to be the first foreign car company to take control of its Chinese enterprise under an agreement between China and Germany, China’s Foreign Ministry said. The luxury automaker will soon reveal a new ownership structure of its joint venture with Brilliance China Automotive Holdings Ltd., according to a person familiar with the plan.No such deal with the U.S. has been announced, although China plans to eventually scrap the joint venture rule in the automotive industry by 2022.

    Tesla, the biggest name in electric cars, sealed a crucial agreement to build a fully owned plant in China, only the company’s second assembly line anywhere in the world. The first car will be locally produced in about two years, and the factory will eventually have an annual capacity of 500,000 cars.

    “Going forward, I expect China to open more selectively to EU companies than to U.S. ones," said Natixis’s Herrero.

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MAGA

Trump is doing to the USA what he has done to his companies.

And the faithful are too fucking ignorant to know about it.

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44 minutes ago, SloopJonB said:

MAGA

Trump is doing to the USA what he has done to his companies.

And the faithful are too fucking ignorant to know about it.

 

He is Making China Great Again!!!

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Just now, billy backstay said:

He is Making China Great Again!!!

China's view on this matter is more that Trump wants to tear them down -  analogous to how the British tore down China in the Opium War. They ain't going to let that happen again.

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1 hour ago, billy backstay said:

China making serious BANK on Trump trade war!!!

https://www.bloomberg.com/news/articles/2018-07-13/tesla-bmw-bypass-trump-s-trade-war-and-score-a-win-for-china

Tesla, BMW Bypass Trump’s Trade War and Score a Win for China

By

and

‎July‎ ‎13‎, ‎2018‎ ‎5‎:‎34‎ ‎AM
  • Beijing says Tesla plant an ‘achievement’ of its opening-up
  • Germany, China strike deal that’s sweet for German automakers
  • Less than a week into President Donald Trump’s trade war with China, global automakers have shown there are ways to bypass the battle -- and scoring a win for Beijing in the process.

    Tesla Inc. and BMW AG are among the biggest potential losers from Beijing’s retaliatory tariffs on car imports from the U.S. because much of their production is centered in America. They’re now doubling down in China: this week, Tesla announced its first factory outside the U.S. while BMW is poised to become the first foreign manufacturer to own majority control of a Chinese automobile venture. Cars made locally by foreign brands will dodge import levies.
    While those deals have taken months -- if not longer -- to come together, the investments by Munich-based BMW and Palo Alto, California-based Tesla back up Beijing’s claim to be continually opening up its economy and help rebut allegations of protectionism by the Trump administration.
    “China is not backtracking, which is China’s most clever response to the trade war,” said Alicia Garcia Herrero, chief Asia-Pacific economist at Natixis SA in Hong Kong.  China and the U.S. imposed 25 percent tariffs on $34 billion of the others’ imports on July 6, and Beijing has vowed to fight back against proposed tariffs on an additional $200 billion in Chinese goods in the tit-for-tat proposals between the world’s two largest economies.

    It’s against that background that Tesla announced its China plant.

    "This is not only an achievement of China’s self-initiated opening up, it is also an embodiment of win-win economic cooperation between China and the U.S.,” Gao Feng, a spokesman for the Ministry of Commerce in Beijing said this week.

    Trump has criticized Harley-Davidson Inc. since the motorcycle maker said it would move some production overseas as a result of retaliatory levies by the European Union. Encouraging U.S. producers like Tesla and BMW to increase domestic investment can be seen as a notch in China’s favor in the trade war.BMW is set to be the first foreign car company to take control of its Chinese enterprise under an agreement between China and Germany, China’s Foreign Ministry said. The luxury automaker will soon reveal a new ownership structure of its joint venture with Brilliance China Automotive Holdings Ltd., according to a person familiar with the plan.No such deal with the U.S. has been announced, although China plans to eventually scrap the joint venture rule in the automotive industry by 2022.

    Tesla, the biggest name in electric cars, sealed a crucial agreement to build a fully owned plant in China, only the company’s second assembly line anywhere in the world. The first car will be locally produced in about two years, and the factory will eventually have an annual capacity of 500,000 cars.

    “Going forward, I expect China to open more selectively to EU companies than to U.S. ones," said Natixis’s Herrero.

The last sentence is the most important one. What Trump is doing is pulling the US back from an international trading system that works pretty well (note that there are things that need to be fixed - intellectual property thefts, non-tariff barriers etc, but these can be fixed by adult negotiation). China is realizing that they are being given a golden opportunity to advance their economy with less US competition to contend with.

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4 minutes ago, billy backstay said:

 

He is Making China Great Again!!!

One question I have always asked about MAGA is making America great again like it was when? No one seems to be able to answer the question. In the case of China, it is about MCGA. Historians contend that in the 1700s 40% of global GDP (would that be GGP?) was in China. Foreign interference in the 1800s, Opium wars etc made the country a mere shadow of what it had been. Mao moved the country in the right direction and those who followed Mao continued the process in a more market-oriented direction. Xi is just continuing the process and Trump is giving him a tremendous boost. We talk so much about Trump helping Russia. We should be wondering why he is doing so much for the Chinese.

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13 minutes ago, Bristol-Cruiser said:

 We should be wondering why he is doing so much for the Chinese.

Ignorance, arrogance and stupidity. The came up with Navarro their trade-czar quack by finding anti-china authors on Amazon

http://thehill.com/homenews/administration/328969-report-kushner-found-trump-economic-advisor-navarro-by-browsing

nobody in the admin knows much about china, few give a fuck, and like everything else they just make shit up for the rubes.

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13 hours ago, Uncooperative Tom said:

That works if they're as wealthy as we are.

Rich nations have trade deficits because we can buy stuff. Poor nations have trade surpluses because they can't.

Given that you create the problem by being rich and solve it by being poor, a better question would seem to me to be: WHY to solve the trade deficit?

I'm sorry but that is just not correct. We have deficits with rich and poor countries, 

Image result for trade deficit by country

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4 minutes ago, Nailing Malarkey Too said:

I'm sorry but that is just not correct. We have deficits with rich and poor countries, 

Image result for trade deficit by country

 

14 hours ago, Uncooperative Tom said:

That works if they're as wealthy as we are.

Rich nations have trade deficits because we can buy stuff. Poor nations have trade surpluses because they can't.

Given that you create the problem by being rich and solve it by being poor, a better question would seem to me to be: WHY to solve the trade deficit?

You didn't understand a fucking thing Tom said did you Happy Jack? If it helps - rich nations can run trade deficits because they are rich. They don't have to run a deficit, but they can. Poor nations can't run a deficit for very long because they are poor.

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2 hours ago, Mismoyled Jiblet. said:

 

You didn't understand a fucking thing Tom said did you Happy Jack? If it helps - rich nations can run trade deficits because they are rich. They don't have to run a deficit, but they can. Poor nations can't run a deficit for very long because they are poor.

But aren't France, Italy, Germany, etc......EU?  That graph can lead one in wrong directions.

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1 hour ago, Laker said:

But aren't France, Italy, Germany, etc......EU?  That graph can lead one in wrong directions.

And we run a trade surplus with Belgium, the Netherlands, and the Uk*, per most recent figures for 2018 year to date https://www.census.gov/foreign-trade/statistics/highlights/toppartners.html#sur

*and Trump is trying to fuck them over even harder.

 

regarding the "trade deficit" it's worth thinking about what that means. The iPhone 7 was $16 billion of the trade deficit: https://qz.com/1234437/the-iphone-alone-accounts-for-16-billion-of-the-us-trade-deficit-with-china/ which, given Apple accrues a vast majority of the profit from the iPhone doesn't sound like a problem at all.

Quote

But because of the way trade deficits are measured, almost all the value of those components is attributed to China, which exports the final product. Reuters reports that 61 million iPhones were shipped from China to the US in 2017 and suggests that just a single phone—the iPhone 7 model, released in 2016 and on sale for all of last year—accounted for $15.7 billion of the trade deficit, or 4.4%.

Louis Kuijs, head of Asia economics research at Oxford Economics, told Reuters if trade deficits were measured to account for the complex nature of global supply chains like the ones used by sophisticated consumer products like smartphones, the US-China trade deficit would be about 36% lower, or $239 billion.

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Yep. Due to accounting iPhone looks like an import. Let’s cut off dicks cause we’re ig’nant, shall we?

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3 hours ago, Mismoyled Jiblet. said:

 

You didn't understand a fucking thing Tom said did you Happy Jack? If it helps - rich nations can run trade deficits because they are rich. They don't have to run a deficit, but they can. Poor nations can't run a deficit for very long because they are poor.

Then maybe he should have said that but he didn't. Anyway you are both still wrong. Tom said "Poor nations have trade surpluses because they can't.(buy stuff)"

Most poor nations have very bad trade deficits. Just look at all the surplus current accounts these poor nations enjoy. 

image.thumb.png.fc03e710779d6aef3d505287ccd58b43.png

 

 

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Posted (edited)
9 minutes ago, Mismoyled Jiblet. said:

current account balance != trade balance, moron jack.

Fuck Off. A negative current account is largely from  running a trade deficit.  God you must be burden on someone. 

Edited by Nailing Malarkey Too
Edited for clarity
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19 minutes ago, Mismoyled Jiblet. said:

current account balance != trade balance, moron jack.

More poor countries that seem to buy stuff they can't afford. Own up and be a man. You and Tom are simply wrong. " Poor nations have trade surpluses because they can't.(buy stuff)" is almost universally false.

 

image.thumb.png.7f5cc518586088d269ee3b1a5ce8d84f.png

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25 minutes ago, Nailing Malarkey Too said:

Fuck Off. A negative current account is largely from  running a trade deficit.  God you must be burden on someone. 

 

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12 hours ago, Nailing Malarkey Too said:
On 7/13/2018 at 4:01 AM, Uncooperative Tom said:

That works if they're as wealthy as we are.

Rich nations have trade deficits because we can buy stuff. Poor nations have trade surpluses because they can't.

Given that you create the problem by being rich and solve it by being poor, a better question would seem to me to be: WHY to solve the trade deficit?

I'm sorry but that is just not correct. We have deficits with rich and poor countries, 

Image result for trade deficit by country

OK, so I overgeneralized. But we don't have a deficit with a country richer than ours, do we?

Which club do you like?

Quote

Many envy the prosperity of countries like Germany, China and South Korea that carry positive trade balances. Why then ignore the prosperity of countries like the United Kingdom, Canada, and France as well as the United States – prosperous countries that carry negative trade balances? In fact, the countries that import more than they export include four of the member countries of the G7 – a rich man’s club if there ever was one. There is no “poor man’s club.” If there were, it might well include Russia, Kazakhstan, Mongolia and Chad – all of which recorded trade surpluses last year. Meanwhile, dynamic economies like Australia, Belgium, and Luxembourg – as well as most of the G7 – all recorded trade deficits. To which club would you rather belong?

 

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4 hours ago, Uncooperative Tom said:

OK, so I overgeneralized. But we don't have a deficit with a country richer than ours, do we?

Which club do you like?

 

You are posing a new question. That is kinda like moving the goal post. 

China is single handedly cleaning everyone's clock. It is an asset outflow that can not be sustained long term. You either run out of assets, default or experience  hyperinflation. 

 

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1 minute ago, Nailing Malarkey Too said:

You are posing a new question. That is kinda like moving the goal post. 

China is single handedly cleaning everyone's clock. It is an asset outflow that can not be sustained long term. You either run out of assets, default or experience  hyperinflation. 

 

Trade is bad now I see. What do you have against business? I buy groceries every few days. According to you, I should be broke.

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16 hours ago, Uncooperative Tom said:

OK, so I overgeneralized. But we don't have a deficit with a country richer than ours, do we?

Which club do you like?

 

That is just it.  The US buys offshore because it can. It is a large economy that has a currency that is the world standard.  When it can't afford to buy offshore, it won't.  Rich countries can afford a deficit, poor can't. Notice I said afford.  Perhaps a good indicator of the strength of a currency is the amount of deficit it can handle.  This is textbook stuff, not cite.  A good example is the transfer of the British Pound after the First World War from being able to support a large deficit to controlling currency export after the Second World War.

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16 hours ago, Raz'r said:

Trade is bad now I see. What do you have against business? I buy groceries every few days. According to you, I should be broke.

Attempting to explain the kakistocracy is fruitless 

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18 hours ago, Nailing Malarkey Too said:
22 hours ago, Uncooperative Tom said:

OK, so I overgeneralized. But we don't have a deficit with a country richer than ours, do we?

Which club do you like?

 

You are posing a new question. That is kinda like moving the goal post. 

No, I'm posing a question that's directly related to the point I made above about rich countries and our trade deficits.

But even if it were new, it would still be valid and relevant. Good reasons for you to avoid it.

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