Trade deficits are ALWAYS detrimental to their nations’ GDPs.

[Widdekind]

... Investments are factored into the calculation of and thus contribute to the gross domestic products, (i.e. GDPs).

Transfers of wealth do not create additional products and ARE NOT factored into the calculation of and thus ARE NOT contributors to the GDPs.

i.e. "investments" are purchases of "big products", e.g. "plant / property / equipment" (or partial purchases, i.e. "shares") ?

"transfers of wealth" are "compulsory gifts" (for the "needy-but-politically-powerful") ?

 

[itfitzme]

I can't believe that this issue is really under debate.

What a tangled web we weave when at first we practice to decieve.

Yeah, no kidding.

This is just this simple.

Imports cannot be detrimental to a nation's GDP when everyone is working. During all the times of full employment, imports are just more stuff to consume and not detrimental to production. We can't produce more stuff without more people to produce it. Imports are just some other nation producing that more stuff for us.

 

[itfitzme]

ItFitzMe, each year for over a half century, USA has experienced annual trade deficits of goods every year.

Respectfully Supposn

Except this is not true. A half a century would be 2012 - 50 = 1962. Net exports didn't go consistently negative until about 1976. Now perhaps you think it a bit nit picky, but that is 36 years, not fifty. I think, though, it speaks to a lack of precision.

It occurred to me that, to be more precise, this years trade deficit may be offset by next years trade surplus. So, to be certain about what we are looking at, we really need to examine the running balance. I have data going back to 1929. Perhaps 1928 was particularly significant but we may never know.

So starting with a balance of zero beginning in 1928, and running the total balance through the years and decades, the balance doesn't go negative until 1984. In real dollar terms, it doesn't go negative until 1986. Up until 1976, the US was such a major importer that we could afford to import more than we exported for the next decade.

So really, the concept that you have put forth only applies to the years since 1986, or the last 26 years. That is a quarter of a decade.

The concept could be extended to earlier years if, in fact, an increase in the trade "deficit" corresponded to a decrease in GDP and employment. Unfortunately, every single recession is accompanied by a decline in the "deficit".

 

[sealybobo]

For the first time ever, total U.S. exports to China have passed $100 billion with 30 states now counting China as one of their top three export markets. As these Chinese get richer, they are importing more goods from America.

China is the third-largest U.S. export market, trailing behind Canada and Mexico. Then again, China should be at the top. It’s the No. 2 economy in the world after the U.S., and a major trading partner. It’s hard to find anything in WalMart and Toys R Us that is not Made in China.

Moreover, the U.S. is in fifth place in terms of import markets for China. By comparison, China imported $211.2 billion worth of goods from the European Union, making the EU the No. 1 choice for imported goods, followed by Japan ($194 billion) and South Korea ($162 billion). Most of those imports are electronic components that are later assembled in China as iPad’s and laptops.

President Barack Obama’s National Export Initiative, announced in January 2010, aims to double total U.S. exports by 2014—a target that requires at least a 15 percent average growth rate per year for five years. China is among the countries for which U.S. exports have exceeded the global annual average growth rate of 18% in the initiative’s first two years. China is the only major American export market that consistently exceeds 15% growth. Good job Obama!

Where (And What) China Imports From U.S. - Forbes

 

[itfitzme]

In a closed system, like the world, the total balance of trade is zero because for one country to run a deficit it requires that other countries run a surplus equal to that deficit.

Well, apparently, this is not true. Someone totaled up all the world country's exports and imports and the total came to a total export that exceeded imports by 1%.

It is accounting which doesn't have errors, not like taking thermal measurements and the like. Even so, the random errors should just cancel out. Another explanation is that they products were not exactly legal imports.

I'm going with the extra-terrestial theory.

But individual countries can run deficits.

And they do run surpluses too, case in point.

 

[itfitzme]

ItFitzMe, each year for over a half century, USA has experienced annual trade deficits of goods every year.
When we exclude the values of precious or scarce minerals integral to those globally traded goods, there remains USA’s trade deficits of goods for each of those years.

The proposed Import Certificate, (IC) trade policy eliminates the possibility of USA’s imported goods exceeding the total assessed values of their exports.

Unless our nation’s willing and able to do with less of such goods, due to the enactment of an IC policy it is unreasonable not to expect a reduction of such a trade deficit. Furthermore it’s unreasonable not to expect that it would be a significant reduction of the trade deficit.

Respectfully Supposn

Another consideration is that any isolated year is not of significance as it is the running balance that matters more, if anything matters at all.

If last year the net export was -$5 million and then this year it is +$5 million, then the two years balance out and there is no real net export "debt".

Starting back at 1929 (that's what I've got) and doing a running total, in current dollars, the net export "debt" doesn't go below zero until 1984. In real dollars, actual value, the total balance didn't go negative until 1986. So, until about 1983-1986, there was no effective trade imbalance, just a year to year cycling.

Keep in mind, as well, that with each passing year, total population and employment increases. As does productivity. So last years import excess is more easily balanced by this years increased efficient workforce producing an export surplus. It takes a smaller percentage of the workforce this year to make up for the "deficit".

If it were to be done right, while they are making shoes for us, we are making capital equipment for ourselves. Then while they are busy building roads for themselves, we are cranking out shoes with our new and shiny shoe machines. Of course, if we are just sitting on our laurels, consuming shoes from China and doing nothing, then that's a different matter. I'm just saying, in the details, it's a bit complicated.

 

[DSGE]

In a closed system, like the world, the total balance of trade is zero because for one country to run a deficit it requires that other countries run a surplus equal to that deficit.

Well, apparently, this is not true. Someone totaled up all the world country's exports and imports and the total came to a total export that exceeded imports by 1%.

It is accounting which doesn't have errors, not like taking thermal measurements and the like. Even so, the random errors should just cancel out. Another explanation is that they products were not exactly legal imports.

Setting aside systematic measurement errors, random errors won't cancel out. It's just that the expected value of the random error is 0. But yeah, illegal imports also fuck it around.

I'm going with the extra-terrestial theory.

Well there we go. Every country could just run a trade surplus against mars.

 

[itfitzme]

GDP is calculated by starting with the value all final goods and services that are purchased. Since GDP is a measure of production, rather than purchases, things that are purchased here, but produced somewhere else, have to be subtracted out...

and, "things that are purchased somewhere else, but produced here, have to be added in" ?

If so, then calculated GDP = P Q - I + X = P Q + Trade ?

Specifically, this

GDP = P Q - I + X = P Q + Trade ?

I wasn't sure, at first glance, what you were doing here. I haven't seen it defined as such (or it got glossed over, I forgot, or you read a book printed on the east coast where they do stuff differently.)

It works if you mind your Ps and Qs. It works for

GDP = PQ_domestic/domestic + PQ_iMport/domestic + ( X - M )

…………= C + G + I + ( X - M )

I am use to seeing it as two separate equations;

GDP = MV = PQ

and

GDP = C + G + I + ( X - M ), eXport, iMport

On occasion, I've stuck them together at GDP = MV = PQ = C + G + I + ( X - M ) but is was for some less precise purpose. When you did GDP = P Q - I + X = P Q + Trade[/B], it kind got me wondering about it.

So I figured I'd just follow the thought anyways.

That first one, GDP = MV = PQ, is a bit of a general and theoretical equation which applied to a closed system.

The second is the applied equation which uses some convenient national accounts.

If the boundaries are drawn correctly, for GDP = M V = PQ, then we can get

GDP = M V = PQ = C + G + I + ( X - M )

But, the boundary has to be attended to very carefully. I was working on it, enumerating all the parts, for where produced and consumed. I used the following form; C_produced/consumed to get a list like the following

C_import/domestic_P meaning imported for domestic private consumption.

And then

C_domestic/domestic_P for domestically produced for private consumption.

I_domestic/export_X for domestically produced for export for whatever consumption.

And we don't differentiate what it is used in the other country, so they all get X.

G_import/domestic_G for imported for government consumption.

I_domestic/domestic_G for domestically produced for domestic government investment.

And, in the end, C_import/domestic_P is the same as M_import/domestic_P

And so on.

Then I went after the other side with

PQ_import/domestic_P for imported for domestic private consumption

Basically, that P for private consumption equates to the C in C+G+I+X-M

PQ_domestic/domestic_G for domestically produced for government consumption
PQ_domestic/export_X for domestically produced for export for whatever consumption.

and so on.

This nomenclature makes it easier to see the combinations and make sure none are missed.


I tabulated it.

_____________________________________________________
|……………………PQ……………………………………|………C + G + I + ( X - M )……|
|------------------------|--------------------------|
|…PQ_domestic/domestic_P…|………C_domestic/domestic_P……|
|………………………………………………………………|………C_import/domestic_P…………|
|………………………………………………………………|……………………………………………………………………|
|…PQ_domestic/domestic_G…|………G_domestic/domestic_G……|
|………………………………………………………………|………G_import/domestic_G…………|
|………………………………………………………………|……………………………………………………………………|
|…PQ_domestic/domestic_I…|………I_domestic/domestic_I……|
|………………………………………………………………|………I_import/domestic_I…………|
|………………………………………………………………|……………………………………………………………………|
|………………………………………………………………|…………………Added in……………………………|
|………………………………………………………………|……………………………………………………………………|
|…PQ_domestic/export_X………|………C_domestic/export_X…………|
|……………(These don't…………………|………G_domestic/export_X…………|
|………differentiate…out)………|………I_domestic/export_X…………|
|………………………………………………………………|……………………………………………………………………|
|………………………………………………………………|…………Subtracted out……………………|
|………………………………………………………………|……………………………………………………………………|
|……PQ_import/domestic_P……|………M_import/domestic_P…………|
|……PQ_import/domestic_G……|………M_import/domestic_G…………|
|……PQ_import/domestic_I……|………M_import/domestic_I…………|
|………………………………………………………………|……………………………………………………………………|
|________________________|__________________________|

The questions are for this tabulation are;

Are all the combinations accounted for?
Are there combinations that are nonsense?
Are there combinations that don't belong?
In the end, do they all match up?


I suppose your using a boundary around just the PQ_domestic/domestic stuff for PQ.
That gives GDP = P Q - I + X = P Q + Trade.

Which then works.

The boundaries for the MV = PQ are forced by the equality to C + G + I + ( X - M ).

And, in analysis, it gets a bit odd for the PQ thing in MV = PQ. The problem is that, as I've know it, the MV=PQ is a closed system equation and the X,M are crossing the boundary. In the most general case, it doesn't matter because in a closed system consumption = production. Once it has exports and imports, it becomes a whole other thing.

So it becomes

GDP = MV

…………= PQ_domestic/domestic + PQ_domestic/eXport

…………= PQ_domestic/domestic + PQ_iMport/domestic + ( X - M )

…………= C + G + I + ( X - M )

So, as you've got it, the P Q in your GDP = P Q - I + X = P Q + Trade
are different then the PQ in GDP=MV=PQ.

But, as long as your minding your Ps and Qs, then it works.

 

[editec]

I can't believe that this issue is really under debate.

What a tangled web we weave when at first we practice to decieve.

Yeah, no kidding.

This is just this simple.

Imports cannot be detrimental to a nation's GDP when everyone is working.

Welll that's not exactly true, but I get your point that if everyone was working TRADE wouldn't be the same kind of problem it is now.

During all the times of full employment, imports are just more stuff to consume and not detrimental to production. We can't produce more stuff without more people to produce it. Imports are just some other nation producing that more stuff for us.

Yeah sure, no problem with that theory.

But that is NOT the situation we are discussing, is it?

We are discussing THIS ECONOMY, the one that we have, not some theoretical economy where "everyone is already working" and that economy still needs to IMPORT goods to make supply meet demand.

 

[itfitzme]

I can't believe that this issue is really under debate.

What a tangled web we weave when at first we practice to decieve.

Yeah, no kidding. This is just this simple. Imports cannot be detrimental to a nation's GDP when everyone is working.

Welll that's not exactly true, but I get your point that if everyone was working TRADE wouldn't be the same kind of problem it is now.

During all the times of full employment, imports are just more stuff to consume and not detrimental to production. We can't produce more stuff without more people to produce it. Imports are just some other nation producing that more stuff for us.

Yeah sure, no problem with that theory. But that is NOT the situation we are discussing, is it? We are discussing THIS ECONOMY, the one that we have, not some theoretical economy where "everyone is already working" and that economy still needs to IMPORT goods to make supply meet demand.

To be clear, a hypothesis is an unproven model of how nature functions. Data is a collection of measures of nature as it functions. A statistic is a summary of that data. A theory or law is a proven model of how nature functions. A theory or law is simply a more compact statement of the data.

So sure, there is no problem with that theory, that "During all the times of full employment, imports are just more stuff to consume and not detrimental to production. We can't produce more stuff without more people to produce it. Imports are just some other nation producing that more stuff for us." because it is simply a statement of the actual data of how the economy has functioned. It's kind of hard to call "not detrimental to production" as an "interpretation" of "During all the times of full employment" and "We can't produce more stuff without more people to produce it" because it has been demonstrated historically that we can't increase production without more people working. We can set up an experiment, at any time, and demonstrate it.

The fact is that "everyone was working". Up until December of '07, "everyone was working". In fact, the very perspective of NOW is dependent of comparing it to 2006. Without the level of employment of 2006 to compare to, there is no issue with today's employment level.

The OP was, "always". That was, of course, my point. The underlying comparison of the "detrimental" is based on comparing today's situation to the situation of 2006. The unstated precision is that today's employment would be at what it was in 2006 if an IC was in place.

Even ignoring this, it is still a part of the situation we are discussing. The fact is that the "then otherwise" is dependent upon 2006 as a comparison. We got here because of where we were. The economy of 2006, the economy of full employment isn't some some "theoretical economy where everyone is already working". It is the economy of 2006, 2000, 1989, and 1980. It is the economy just before each recession. Today's economy doesn't exist in isolation.

If we remove 2006 from the equation, then we ARE at full employment. We have been at this employment to population level before. We were at this level in 1985. It is higher then it was in 1974, during a recession. Had the economy never reached the 2006 level, then we wouldn't be looking at unemployment of 2012 because the labor force wouldn't even be at the 2006 level.

Perhaps there in lies the problem, not recognizing that all measures are relative to something. 2012 unemployment is relative to a host of reference points. To even measure unemployment requires having a relative reference to measure from. The full employment is relative to the size of the population and how many of those want to work. The rate is relative to how many people want to work. Percentages, most often used, are used because they incorporate an ever changing reference level into the measure. But even then, the reference level is changing for a host or reasons, both social and material.

We could go with the classical interpretation that "unemployment" exists because people don't want to work, but that just pushes the workforce level down to the employment level. And by extension, there is never any unemployment. Everyone that want's a job has a job and everyone that doesn't have a job doesn't want one.

Otherwise, we have to consider some other year. And if we consider one year, we have to consider all years. If not, we have to show why 2006 is somehow more "right" then 1985.

Even then, it simply isn't possible to even conceive of NOW without considering BEFORE.

This is often a fundamental flaw in reasoning, not defining what the measure and subsequent interpretation is relative to. As such, the logic and subsequent interpretation keep switching off between different underlying reference points. In examination of all measures, there is no absolute point of reference. All measures are relative to something else. And the interpretation of "good", "bad", "better", or "worse" is intimately connected to that point of reference.

By comparison to Elizabethan England, today's economy and standard of living are exceptional. By that reference, we might as well not even be having this discussion.

.

 

[Supposn]

Yeah, no kidding. This is just this simple.

Imports cannot be detrimental to a nation's GDP when everyone is working. During all the times of full employment, imports are just more stuff to consume and not detrimental to production. We can't produce more stuff without more people to produce it. Imports are just some other nation producing that more stuff for us.

ItFitzMe, I’m 75 years of age.
Thus far within my lifetime the only period when ALMOST “everyone in the USA was working, occurred during World War Two.

For the remainder of those 75 years, due to our annual trade deficits, our GDPs and median wages were less than otherwise. (Otherwise being if the USA had not been experiencing annual trade deficits).

Respectfully, Supposn

 

[Supposn]

ItFitzMe, each year for over a half century, USA has experienced annual trade deficits of goods every year.
When we exclude the values of precious or scarce minerals integral to those globally traded goods, there remains USA’s trade deficits of goods for each of those years.

The proposed Import Certificate, (IC) trade policy eliminates the possibility of USA’s imported goods exceeding the total assessed values of their exports.

Unless our nation’s willing and able to do with less of such goods, due to the enactment of an IC policy it is unreasonable not to expect a reduction of such a trade deficit. Furthermore it’s unreasonable not to expect that it would be a significant reduction of the trade deficit.

Respectfully Supposn

Another consideration is that any isolated year is not of significance as it is the running balance that matters more, if anything matters at all.................Keep in mind, as well, that with each passing year, total population and employment increases. As does productivity. So last years import excess is more easily balanced by this years increased efficient workforce producing an export surplus. It takes a smaller percentage of the workforce this year to make up for the "deficit"..................I'm just saying, in the details, it's a bit complicated.

ItFitzMe, you are correct to point out that it’s invalid to compare economic statistics based upon amounts (rather than proportions) over periods of years.

If we adjust for the U.S. dollars’ purchasing powers for each year, and we calculate our economic statistics per capita, we still have annual trade deficits of goods every year for more than the past half century.

Respectfully, Supposn

 

[Supposn]

For the first time ever, total U.S. exports to China have passed $100 billion with 30 states now counting China as one of their top three export markets. As these Chinese get richer, they are importing more goods from America.
.............................Where (And What) China Imports From U.S. - Forbes

Sealybob, I am not opposed to USA’s trade or trade deficit with any particular nation, I am opposed to USA’s annual global trade deficits.

Each year in excess of a half century, USA’s global trade deficits indicated our DPs, and median wages were less than otherwise; (otherwise being if the USA had not been experiencing trade deficits).

Respectfully, Supposn

 

[DSGE]

ItFitzMe, I’m 75 years of age.

Ah. Well that explains it then.

 

[Supposn]

oddsterPariot, trade deficits are detrimental to GDPs (more than otherwise).

Trade deficits are detrimental to GDPs which in turn affect our median wage and rates of unemployment. This all can be determined logically but not historically demonstrated.

This cannot be proved or disproved historically because:
Sales of foreign and domestic products move in tandem within the domestic markets;
domestic markets move in tandem with the GDP;
trade deficits are one of the factors for determining the GDP and its proportional affect upon GDP is variable.

......................In all the history of science, there has never been anything proven logically but not demonstrated empirically.

In all of science, with one exception, everything has begun from empirical data and a model was developed that explained that data.

The one exception was Einstein's 1905 work, "On the Electrodynamics of Moving Bodies", popularly known as The Theory of Relativity. It was the first and only time that unobserved observations were predicted by logical deduction. And yet, though so simple in it's prove, it was also so outrageous in it's claimed that it was not accepted as a theory until it was demonstrated in nature.
Not in all of history has there ever been, "proven logically but not demonstrated historically."

ItFitzMe, philosophy is a system of thought; it deals with concepts; science deals with how things naturally behave, Science deals with things, their interactions and most importantly we have difficulty studying the science of anything that we can’t measure or weigh in some manner.

Mathematics is not a science, it’s a philosophy. I consider it to be the most precise of all philosophies because when an exception of a mathematical rule is encountered, the concept is no longer acceptable as a rule. When we consider a concept as being mathematically “proven”, we mean that accepting all of mathematics’ “rules” a given concept has been proven.

You incorrectly wrote “In all the history of science, there has never been anything proven logically but not demonstrated empirically".

Gaps in the periodic table led many physicists and chemists to ague elements never having been encountered and recognized would likely to exist. They correctly predicted the gaps within the periodic table would be discovered. That was done within the study of actual things, rather than philosophical concepts.
I do agree that the existence of those elements were considered to be theoretical until they were actually proven.

Regardless of academians referring to “social sciences”, they are actually “social studies”. Economics and mathematics are not sciences, they’re philosophies.

Respectfully, Supposn

 

[itfitzme]

Yeah, no kidding. This is just this simple.

Imports cannot be detrimental to a nation's GDP when everyone is working. During all the times of full employment, imports are just more stuff to consume and not detrimental to production. We can't produce more stuff without more people to produce it. Imports are just some other nation producing that more stuff for us.

ItFitzMe, I’m 75 years of age.
Thus far within my lifetime the only period when ALMOST “everyone in the USA was working, occurred during World War Two.

For the remainder of those 75 years, due to our annual trade deficits, our GDPs and median wages were less than otherwise. (Otherwise being if the USA had not been experiencing annual trade deficits).

Respectfully, Supposn

Well there is the unstated premise to your hypothesis, that there has always been unemployment caused by imports. Employment being compared to what it was during WWII. "Less then otherwise" is "less then WWII".

And, that there has always been is why there is no history which which to compare a time that there wasn't. Of course, we can ignore all those times when there were fewer imports. They don't count.

This is exactly what I meant by all measures being relative to something. The foundation upon which your measure is relative to is the level of "employment" when the world is at war. That is, though, not a standard definition for defining employment.

Nor is there any easy reason to conclude that trade restrictions are going to achieve the same effect. The economy of WWII was clearly not the economy of NOW and far different then the economy of 2006. If we are to use WWII as a basis for comparison, then we might just as well consider going around and breaking all the windows in every house because this will, for sure, put a shit load of people to work fixing windows.

I am, in no way, particularly pleased with the cyclical nature of the economy. But if we have learned anything from history, it is how restricting some singular part of the economy inevitably leads to an imbalance far worse then the problem it was meant to solve. The economy is a precariously balance system that is a reflection of the individual motivations of all of it's members.

If your going to base an argument upon some non standard, personal definitions, it is of little wonder that I cannot seem to find some evidence for what you propose. Nor should you be terribly surprised when others cannot come to your conclusion. I, for one, learned how carpenters measure lumber, and purchased a tape measure, rather than devise my own measuring device with which to order wood paneling for my den.

This is exactly why an operable definition is of such fundamental importance. A lot of confusion would have been saved if you had stated it specifically in the first place.

"Description: By comparison to the level of employment and trade balance of WWII. The United States economy has experienced a trade deficit and negative running trade balance with less then 100% employment since 1973, including four recession."

Hypothesis: Restricting trade to a zero net export will cause employment to be about 1.2% as experienced during WWII.

Null Hypothesis: The unemployment rate has been more than 1.2% for years when the trade deficit was zero."

With all due respect, I cannot help it if you have your own proprietary measures. I can only speak based on the standard accepted measures.

The standard for the natural rate of unemployment is about 5%. That means that, on average, 5% of the population is between jobs. Indeed, if we look back at the record for employment, the unemployment rate has often been as low as 3%. This is considered to be full employment. And while I do not consider it to be a particularly successful achievement, given the government's mandate to assure full employment, 34% of the months since 1948 have been at or better then 5%.

Just as well, since 1964, the workforce itself has continued to increase as more and more of the population chose or had to enter the workforce. Whatever it's nature, a 7% unemployment rate in 1976 is a far larger percentage of the population then a 3% in 1948.

There are, therefore, two underlying references of employment. The first is that there have been stretches of years when the existing workforce was fully utilized, unemployment below the natural turnover rate of 5%. Just as well, there have been stretches of years when the underlying workforce was increasing. And if the percentage of the population that is working is increasing, it is clear that employment was full the immediate time before.

Even so there have been, periods when the workforce itself declined, an effect that I cannot interpret in any other way except people dropping out of the workforce for lack of finding sufficient work. And there are times when it was increasing, but was below what it was at it's previous peak, a situation that I must interpret as the previously disillusioned, disenchanted, disenfranchised, disgruntled and discouraged unemployed working finally finding reason to rejoin the workforce.

So, on one side, the economy has continued to develop to employ a larger proportion of the population while simultaneously dropping them back out again as it fails to sustain the level to which we become accustom.

On the other side, the fact that there have been stretches with the unemployment rate remaining steady and with the workforce increasing cannot be interpreted as anything else but full employment. More and more people, in excess of population growth and in excess of the number that had been working at the previous peak. Whether this constitutes a greater of lesser part all of the years may be in question, but it remains a fact. We cannot ignore one third of reality for the sake of some reference point where the country was busy building bombs to blow up large parts of the European countryside.

Whatever your personal and anecdotal experience may be, the facts remain that employment has repeatedly peaked in utilizing the entire available workforce. On this basis alone, the hypothesis that "The trade deficit is ALWAYS detrimental to a nation's GDP" fails.

The fact that the workforce, efficiency, and standard of living steadily increases AT THE SAME TIME that the US has been running a "trade deficit" is a easier argument to make. And that it is so easy to make requires that it be addressed. The reality is that a far lesser proportion of the population was working during the years before 1973 when the US ran a trade surplus. The fact is that every time the trade deficit recedes, it is followed by a recession. Since the end of 2007, when the recession began, the trade deficit has fallen by half. And to look at the trajectory towards which it was headed, it clearly indicates that a zero trade imbalance was going to be accompanied by an unemployment rate of over 20%.

Certainly, in spite of these facts, we are not likely to conclude that the decrease in the trade imbalance causes an increase in unemployment. But the logic cuts both ways. If we cannot conclude that a declining trade imbalance causes unemployment, in spite of the actual facts, we can certainly not conclude that a decreasing trade imbalance is going to increase employment by any stretch of reasoning. The two are either directly connected or they are not. Correlation doesn't prove causation but a complete lack of correlation does prove a lack of causality. And in examination of the evidence, it is clear that they are connected only in that increased employment will drives demand for products, including and depending on other factors, the demand for imports.

That you happened to have experienced extreme labor utilization during WWII, with no imports from other countries, is not a basis for a sound argument. All it says is that everyone was busy making tanks.

The fact that the only time in which the trade deficit recedes while employment rises is in the years before a recession suggests that the problem, and it's solution, lies elsewhere.

Going after exports is like not using the air hose at Exxon because last time you used it your tire went flat. And, after all, it didn't go flat when you put air in your tire at Shell. It's actually worse then that. At least with the Exxon air theory causes flats theory, there is a correlation. There is no correlation between imports and employment except that during WWII, everyone was employed and no one was exporting.

It may be that it represents the economy seeking a zero growth point and that a zero growth point is unstable. And it may very well be, should other things be made such that it can maintain that zero growth without crashing, the trade balance will tend towards zero. But that is a secondary effect, not a focal point with which to achieve stability.

 

[Supposn]

ItFitzMe, each year for over a half century, USA has experienced annual trade deficits of goods every year.

Except this is not true. A half a century would be 2012 - 50 = 1962. Net exports didn't go consistently negative until about 1976. Now perhaps you think it a bit nit picky, but that is 36 years, not fifty. I think, though, it speaks to a lack of precision.

It occurred to me that, to be more precise, this years trade deficit may be offset by next years trade surplus.

ItFiitzMe, I seem to recall our aggregate trade balance tilted to deficit in the mid 70’s but we began experiencing our trade deficit of goods (as opposed to service products), well before 1975.
These USA trade deficits are not annual aberrations or adjustments, The trade deficits continue to occur every year.

[I recall purchasing a transformer radios as a 1960 or 61 mother’s day cumulatively and . They had been around for a number of years but were still pricey. Transistor radios were all imported from Japan but the transistor itself was invented and developed by Bell Laboratories. Bell was the R&D of Western Electric which was the manufacturing arm of AT&T. Regardless of all this, all or almost all solid state electronics sold in the USA were manufactured in Japan.
If this is of any interest to you,
refer to the message “Manufacturing’s economic significance”
within the site of USA's trade ].

I’m a proponent of an Import Certificate trade proposal. It is not applicable to service products and excludes the values of specifically listed scarce or precious minerals within assessed goods.
Refer to the topic of ”Warren Buffett's concept to significantly reduce USA's trade deficit”
posted at 8:10PM, August 30, 2009

or www.USA-Trade-Deficit.Blogspot.com
or Google: “wikipedia, import certificates “.

Respectfully, Supposn

 

[Widdekind]

Imports cannot be detrimental to a nation's GDP when everyone is working. During all the times of full employment, imports are just more stuff to consume and not detrimental to production. We can't produce more stuff without more people to produce it. Imports are just some other nation producing that more stuff for us.

i do not agree

trade "exposes" domestic markets, to foreign markets. If foreign products "compete" against domestic products, e.g. Japanese cars vs. American cars; then trade "exposure", to increased "competition", drives down prices, profits, wages, employment. Only if foreign products "compliment" domestic products, i.e. foreign products are "novel" to domestic markets having no comparable substitutes, e.g. Chinese silk & porcelain; only then does trade "exposure" represent mere "access" to "novelties", that do not (directly) compete against domestic products.

e.g. if every American was working, e.g. manufacturing American cars; then trade "exposure" to foreign competition, e.g. Japanese cars; would displace domestic production, eliminating domestic employment. trade "exposure" to competing products always displaces domestic production, resulting in job loss. meanwhile, "competition" always reduces prices, benefiting consumers.

 

[itfitzme]

Each year in excess of a half century, USA’s global trade deficits indicated our DPs, and median wages were less than otherwise; (otherwise being if the USA had not been experiencing trade deficits).

Respectfully, Supposn

Bullshit.

Unmitigated lying bullshit.

And either you know it's bullshit, or you haven't bothered to check the facts because you don't want to admit it's bullshit.

 

[itfitzme]

ItFitzMe, each year for over a half century, USA has experienced annual trade deficits of goods every year.
When we exclude the values of precious or scarce minerals integral to those globally traded goods, there remains USA’s trade deficits of goods for each of those years.

The proposed Import Certificate, (IC) trade policy eliminates the possibility of USA’s imported goods exceeding the total assessed values of their exports.

Unless our nation’s willing and able to do with less of such goods, due to the enactment of an IC policy it is unreasonable not to expect a reduction of such a trade deficit. Furthermore it’s unreasonable not to expect that it would be a significant reduction of the trade deficit.

Respectfully Supposn

Another consideration is that any isolated year is not of significance as it is the running balance that matters more, if anything matters at all.................Keep in mind, as well, that with each passing year, total population and employment increases. As does productivity. So last years import excess is more easily balanced by this years increased efficient workforce producing an export surplus. It takes a smaller percentage of the workforce this year to make up for the "deficit"..................I'm just saying, in the details, it's a bit complicated.

ItFitzMe, you are correct to point out that it’s invalid to compare economic statistics based upon amounts (rather than proportions) over periods of years.

If we adjust for the U.S. dollars’ purchasing powers for each year, and we calculate our economic statistics per capita, we still have annual trade deficits of goods every year for more than the past half century.

Respectfully, Supposn

Now you're just being ignorant, as in ignoring things. I'm sorry, but that's the truth. I already presented the dates at which the running balance went negative, in both real dollar and current dollar terms.

You even stripped it from the quote.

Starting back at 1929 (that's what I've got) and doing a running total, in current dollars, the net export "debt" doesn't go below zero until 1984. In real dollars, actual value, the total balance didn't go negative until 1986. So, until about 1983-1986, there was no effective trade imbalance, just a year to year cycling.

I never cease to be amazed at how good people are at intentionally ignore reality. You actually had to highlight the very facts that I presented in order to delete them from the response.