FW: Politics, religion
California just has the most emotional people of any other state
How do you determine this?
And after some more research, I come to find out there are very mixed views on trade deficits.
Yes, there are some pitfalls, although most of them do not apply in the case of CA. E.g., one concern about trade deficits is that they can result in foreign control of domestic capital, but CA FDI has been reasonable and the bulk of it comes from Europe (
https://static.business.ca.gov/wp-content/uploads/2021/06/FINAL-FDI-Report.pdf). Plus we're the a developed post-industrial service economy, not some developing resource-extraction economy where someone else can swoop in and own all our factories.
A few finance people I know and I think it's a bad thing.
Great; however, this is not the consensus among economists. The concern about trade deficits is far more political than it is economic.
You think it's a good thing.
I never said it was good, just that I'd rather have a stronger economy with a trade deficit than a weaker economy with a surplus. The American trade deficit correlates positively with American relative prosperity; importing more than we export is just what makes sense for our post-industrial economy given its present comparative advantages.
In the US case, the trade deficit is arguably great for us because we benefit from increased investments in American capital (e.g., our factories), save consumers money through economic optimization (I'm not paying extra to have my phone inefficiently manufactured by West Virginia r*rals who can't provide competitive labor and demand protectionism instead), and have our stocks go up because of increased buying. When we import, we trade US currency for foreign goods & services. They've got to do
something with the US currency, and ultimately it comes back in the form of investment in US assets. Keep in mind that all this trade between countries is just trade
between people. It's not the US importing maple syrup and Canada buying US securities; it's US residents choosing to buy Canadian-produced maple syrup instead of that Vermont swill and then Canadian residents yolo'ing on $GME because their socialist school system failed them.
I don't see how losing money all the time is good. $300+ billion lost every year is actually very bad.
It's not "losing" money. We exchange it for goods and services (and get it back in the form of a capital account surplus). Trade deficits simply mean that we import more than we export, not that we're throwing away money.
Here, just read this to get an understanding of what trade deficits are:
https://www.cato.org/commentary/are-trade-deficits-really-bad-news (this is Cato, so hopefully a source you'll be willing to take seriously).
As Griswold put it:
America’s trade deficit with the rest of the world is only the sum of the individual choices made by American citizens. Those choices, to buy an import or to sell an export, only take place if both parties to the transaction believe it will make them better off. In this way, the “balance of trade” is always positive.
The only reason the U.S. trade deficit is bad news is that so many people believe it is bad news.
If you would like a reading list for basic macroeconomic concepts, I think Kenghis could point you in the right direction. Barring that, I recommend Mankiw's
Macroeconomics.
Here's a concrete example from a lecture around that book (
http://class.povertylectures.com/MankiwChapter18InternationalTrade%26CapitalFlows.pdf) that illustrates why getting obsessed with trade deficits is a waste of time:
The wild success of iPhones (on paper)
added to our trade deficit. Or as you put it, we "lost" $2B dollars because of iPhones doing so well.
Perhaps you're thrown off by the word "deficit"; a trade deficit is not actually a deficit, and its labeling as a deficit is arbitrary. We get more goods and services from abroad than we send abroad- from that angle, you could call it a surplus. The trade deficit is a deficit only in the balance of trade sense, not in a sense where we lose money or add to our debt.
Or, as Reagan put it:
During the first 100 years of our nation's history, while we were developing from an agricultural colony to the industrial leader of the world, the United States ran a trade deficit. And now, as we're leading a global movement from the industrial age to the information age, we continue to attract investment from around the world. Now, some people call this debt. By that way of thinking, every time a company sold stock it would be a sign of weakness, and it would be much better to be a company nobody wanted to invest in rather than one everybody wanted to invest in…. Historically, fast-growing economies often run deficits in the trade of goods and services, experiencing net capital investment from abroad.
Edited 9/13/2021 02:48:56
