Trade deficits are ALWAYS detrimental to their nations’ GDPs.

[DSGE]

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.

I have a couple of points, but I'll stick to the two main ones for now:

First, how is international trade different from interstate trade? Or intercity trade? Or any kind of trade? Does Michigan being able to produce cars cheaper than California mean that California has permanently higher unemployment or significantly lower wages? The way I see it, going from interstate trade to international trade only involves the addition of one thing: a foreign exchange market. Besides that, maybe you can explain to me why they're different.


Second, competition from abroad can lower the profit and wages of particular sectors (if those sectors cannot increase efficiency in the face of competition). So what? We shouldn't be protecting one sector at the expense of all the consumers in the economy. Even the workers in that sector are ultimately consumers. We don't say "oh, K-mart, we don't want competition lowering profits, wages and employment in the retail sector, so we're going to protect you from competition. Nobody else is allowed to provide retail services." That'll increase profits and wages in retail by artificially granting them market power, but who honestly thinks that's a good thing?

Competition take with one hand and give with the other. It's not like "oh everybody gets cheaper stuff now but you also all have lower wages". Competition increases the standard of living by promoting efficiency.

 

[itfitzme]

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

I'm really sorry that what you "seem to recall" is wrong. This is why I check everything that I read and why peer reviewed papers are the standard, because to many people write pure bs.

Or perhaps, this is what happens when you get old. You can "seem to recall something from years ago, like that transistor radio in the '60s or some thing about the trade balance that you read years ago, but you can't seem to recall what I just told you.

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.

I flat out put a date to it. Where the fuck do you think I got that date? Out of my ass? I mean, really...

And, in fact, if you do it in real dollar terms, it doesn't go negative until later, not earlier.

If we use "NETEXP.XLS" from the Federal Reserve, which only goes back as far at 1947, then the balance didn't go negative in current dollars in 1981. If we use one that goes back to 1929, if goes negative in current dollars in 1984. If we use real dollars and the 1929 table, it goes negative in 1986. If we use the 1947 table and real dollars, it goes negative in 1984. "gands.txt" (which is the data referenced on Wikipedia) starts in 1960 and gives 1978 as the current dollar transition. "NETFI.xls" gives 1984 in real dollars. Some table I got off of the BEA site gives 1986.

NetExports didn't go consistently negative until shortly before these dates. When it went negative, it went way negative which is why the transition of running total occurred shortly after the transition of NetExport sign.

If you know what your doing, it's easy to check that real dollars aggregate values would go negative later than current dollar and the 1929 table would go negative later than the 1947 table because the earlier years would add to rather then subtract from the running balance. That is a quick check that the tables giving a consistent answer.

1981, 1984, and 1986 is not "well before 1975".

I tell you these things, in no uncertain terms, and you choose to ignore them.

Who the fuck do you think your talking to?

 

[itfitzme]

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.

If a woodchuck is chucking as much would as it could, while another woodchuck chucks wood too, then the woodchuck that is chucking as much wood as it could wouldn't be chucking any less wood.

That is pretty darned basic.

You're only managing a disagreement by changing the problem, the ceterus paribus, if you will. And, by changing it from a macro issue to a micro issue. Intra-market competition is a micro problem

The topic of the post is "A trade deficit is ALWAYS detrimental to a nation's GDP. I said, it isn't ALWAYS detrimental. It isn't detrimental if the GDP is already at full resource utilization.

Macro economics is concerned with the overall aggregate functioning of all of the markets. Additional competition in one market may simply shifts labor over to another market. That is another reason why the "always" doesn't hold.

I pointed this out because I have been looking at employment, GDP and the balance of trade and find that, in fact, there were times when it didn't. In fact, looking at the balance vs employment, it is pretty clear that there is no isolated causal connection from net imports to employment.

If there is anything, it is a dependency upon some third factor. The most likely relationship is that increased employment drives increased demand for all products, including imports. This seems to be the most reasonable consideration of why, in fact, a decrease in net imports is accompanied by a decrease in employment just before a recession.

I am pointing out that the a-prior existence of imports, even a net trade deficit, isn't ALWAYS a detriment to the nation's GDP. It cannot be a detriment if the nation's GDP is already at maximum.

Nowhere in the original statement or in my response, was the premise that new import products were added. Regardless, it doesn't change the fact that there have been periods of full employment at the same time as there were imports. And in those years, imports cannot be detrimental to GDP.

We can think of all manners of situations in which an import product is competitive with a domestic product. But all the situations in which they are doesn't prove ALWAYS.

And, in fact, the trade restrictions put on imported sugar, cause domestic candy manufacturing to decline. Sugar quotas have been repeated numerous times in US history and with disastrous results. The Great Sugar Shaft

 

[editec]

Itfitz is right when he suggests that the "ALWAYS" part of the thread's title make it an overstament.

If a society is running at full capacity, if there is no unemployment that results in diminishing wages, and if that nation is buying goods from OFFSHORE that that nation really cannot produce efficiently?

THEN a trade imbalance really isn't a pernicious event.

That is NOT the happy state of affairs we find ourselves in.

 

[Widdekind]

First, how is international trade different from interstate trade? Or intercity trade? Or any kind of trade? Does Michigan being able to produce cars cheaper than California mean that California has permanently higher unemployment or significantly lower wages? ...

Second, competition from abroad can lower the profit and wages of particular sectors (if those sectors cannot increase efficiency in the face of competition). So what? We shouldn't be protecting one sector at the expense of all the consumers in the economy...

Competition increases the standard of living by promoting efficiency.

yes, "competition" benefits consumers

yes, "competition" detriments producers, i.e. in the "particular sectors" exposed to foreign competition

no, "competition" does not permanently reduce wages & employment -- if entrepreneurs can re-employ the now-more-competitively-priced labor

 

[Widdekind]

If a woodchuck is chucking as much would as it could, while another woodchuck chucks wood too, then the woodchuck that is chucking as much wood as it could wouldn't be chucking any less wood.

perhaps you are confusing "production" vs. "consumption" ? If "wood" becomes more available, from foreign sources; then "wood" becomes less necessary, from domestic sources. Ergo, "access" & "exposure" to foreign competition increases "supply", which drives down "prices", via "supply" vs. "demand"; which, in turn, drives down "wages" & "employment".

I.e. domestic labor, which had been supplying domestic markets, with "wood"; is displaced, in favor of foreign labor, now supplying the same domestic markets, with "better wood". Domestic workers only work, when others purchase their products; competition decreases demand, for their products, thereby decreasing demand for them, too.

Additional competition in one market may simply shifts labor over to another market.

yes, given "time", for economies to adjust, i.e. "long-term"

in the "long-term", competition improves economies, benefiting all consumers; by increasing competition, trade improves economies, etc.



"exposure" to foreign markets never (directly) harms economies; however, "exposure" to foreign manipulations often harms economies, e.g. "China suppresses domestic wages, whilst exacerbating wages in America (by supporting labor-unionism)". I.e. market manipulation, not market exposure, is problematic.

 

[EdwardBaiamonte]

Competition increases the standard of living by promoting efficiency.

yes imagine what your standing of living would be if liberals kept cutting back free trade until you had to make everything you consumed yourself. With each cut your standard of living would decline.

A liberal will lack the IQ to understand this.

 

[EdwardBaiamonte]

yes, "competition" detriments producers, i.e. in the "particular sectors" exposed to foreign competition

thats liberal and idiotic. Who's to say how broad a sector is or what detriment is ? Was Ford hurt or helped in the long run by foreign competition?

Everyone has to be organized to help the consumer, not the producer who then would have no incentive to help the consumer. The more you help the producer the less competitive he is and the less it is real help.

 

[Widdekind]

yes, "competition" detriments producers, i.e. in the "particular sectors" exposed to foreign competition

thats liberal and idiotic. Who's to say how broad a sector is or what detriment is ? Was Ford hurt or helped in the long run by foreign competition?

Everyone has to be organized to help the consumer, not the producer who then would have no incentive to help the consumer. The more you help the producer the less competitive he is and the less it is real help.

"competition" detriments producers, e.g. in the "particular sectors" exposed, by trade, to foreign competition; cp. "protectionism" & "monopolies" benefit producers

"competition" benefits consumers, e.g. in the "particular sectors" exposed, by trade, to foreign competition, thereby made more competitive; cp. "protectionism" & "monopolies" detriment consumers

 

[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..................

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’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

I'm really sorry that what you "seem to recall" is wrong. This is why I check everything that I read and why peer reviewed papers are the standard, because to many people write pure bs.

Or perhaps, this is what happens when you get old. You can "seem to recall something from years ago, like that transistor radio in the '60s or some thing about the trade balance that you read years ago, but you can't seem to recall what I just told you.........
............................I tell you these things, in no uncertain terms, and you choose to ignore them.

Who the fuck do you think your talking to?

ItFitzMe, after receiving your post # 202, I searched for 1960 data.
Refer to http://www.census.gov/foreign-trade/statistics/historical/gands.txt

I learned that USA’s balance of payments for goods didn’t tilt negative until 1971, 41 years ago.
I’ll try to find a breakdown of types of goods during the 1960’s. I’m certain in 1960 or 61 I couldn’t find an American manufactured transistor radio when I shopped.

In those years there were of course no flat screens and I’m supposing (because I wasn’t shopping for one) almost all televisions in the USA market were still using glass electronic tubes. I suppose at that time solid state electronics were still much more expensive. I remember being reluctant to spend the additional cost for a transistor TV because I couldn’t “fix” one.

When your TV began to trouble you, you looked the symptom up in a handbook, found the suspected tubes on the schematic pasted behind the TV, and grounded the high voltage capacitor before removing the suspected tubes. You took the tubes down to a drug store that provided a testing device for public use. Drug stores sold replacement electronic tubes It was quite a while before Japanese color TV’s with transistors dropped in price and completely dominated the U.S. market.

My wording would have been different if I had read your entire message before beginning to compose a response.

In response to your message #202 ‘s last question: I knew I’ve been corresponding with a person of some intelligence. The rudeness of your last paragraph betrays the limitations of that intelligence. Your choice of words I suppose would be a disappointment to your mother.

Somewhat less respectfully, Supposn

 

[Supposn]

Trade deficits are ALWAYS detrimental to their GDPs.

Itfitz is right when he suggests that the "ALWAYS" part of the thread's title make it an overstament.

If a society is running at full capacity, if there is no unemployment that results in diminishing wages, and if that nation is buying goods from OFFSHORE that that nation really cannot produce efficiently?

THEN a trade imbalance really isn't a pernicious event.

That is NOT the happy state of affairs we find ourselves in.

Editec, thus far once in my lifetime am I aware of USA APPROACHING full employment; that was during WW2.
Full employment is an ideal that infers there’s no under-employment. Unemployment is the most extreme case of under-employment.

IF "ALWAYS" is an overstatement, (and I doubt that it is), it is not a grievous overstatement.

Similarly I’m a proponent of a minimum wage rate that’s annually adjusted to the U.S. dollar’s purchasing power. I have no doubt that it’s conceivable for a minimum wage rate to be too much and detrimental to a nation’s economy.

My answer to those opposed to the federal minimum wage rate is my being unaware and strongly doubting that such a minimum rate has ever been enacted by any nation at any time.

An annually adjusted U.S. dollar would not break that precedent.

Respectfully, Supposn

 

[Supposn]

...............................First, how is international trade different from interstate trade? Or intercity trade? Or any kind of trade? Does Michigan being able to produce cars cheaper than California mean that California has permanently higher unemployment or significantly lower wages? The way I see it, going from interstate trade to international trade only involves the addition of one thing: a foreign exchange market. Besides that, maybe you can explain to me why they're different........................................

DSGE, no it is not that different.
That’s why it’s unconstitutional for individual states to enforce their own Import Certificate regulations at their borders.

We have gone beyond the city-state, counties, provinces or even unconditional allegiance to any individual state within the USA.

I for one am still less altruistic and I’m more of a chauvinist where my nation’s welfare is at stake. That’s why I’m a proponent of a USA federal Import Certificate policy.

Respectfully, Supposn

 

[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.

I didn’t ignore this; I was refraining from nit picking over this "running total" nonsense.

ItzFitzMe is implying or actually stating that some the funds our federal government has identified and earmarked as benefits due to our global debt was put aside by the U.S. Treasury to defray the economic harm due to trade deficits.
Trade deficits detriment to our economy didn’t turn negative until 1986?

This is leads up to one of the Import Certificates many advantages over other economic stimulus programs. The government receives no net revenue. All of the monetary benefits due from the IC proposal are an indirect but effective subsidy of U.S. Exports and the proposal’s no net federal expenditure. The proposal’s eventually and entirely funded by U.S. purchasers of Foreign goods.

Respectfully, Supposn

 

[itfitzme]

Itfitz is right when he suggests that the "ALWAYS" part of the thread's title make it an overstament.

If a society is running at full capacity, if there is no unemployment that results in diminishing wages, and if that nation is buying goods from OFFSHORE that that nation really cannot produce efficiently?

THEN a trade imbalance really isn't a pernicious event.

That is NOT the happy state of affairs we find ourselves in.

So, a more fundamental issue in resolving if a trade deficit is sometimes a detriment to a nation achieving full employment is determining what full employment is.

If we take it as a fact, then there is no discussion. If we take it as a fact, there is no need to compare NOW to previous times in the history of the US and global economy.

If we take it as a hypothesis that remains to be demonstrated, then examination of previous years is required. There is no manner of examining NOW and determining that imports are a factor restricting employment. That there is unemployment and there are imports doesn't, in an of itself, prove that imports are sometimes a detriment.

To simply say that they are, that because there is a deficit and unemployment demonstrates that a trade deficit is NOW detrimental is circular reasoning based on the a-priori acceptance that a trade deficit must be detrimental.

An additional problem is that, should some hypothetical trade restrictions be put in place NOW, it changes the very balance of the economy as a whole. The obvious facts are that NOW there are people employed in the distribution of imported products. There is no current manufacturing to replace those products. The immediate impact of a sudden implementation is obviously a decrease in employment as Walmart, Target and other businesses shut there doors forever.

So implementing such a policy necessitates that the structural balance of the economy change as domestic production tools up and the distribution channels switch from the imported to domestic products. NOW becomes a dynamic, time dependent issue.

If such a restriction were put in place slowly, so as to not create a shock to current employment, then things become confligrated. The economy is, in fact, recovering naturally on it's own. Employment hasn't been particularly golden in it's recovery, but this is the nature of recessions, as businesses work on increased efficiency to serve the rather minimally increasing demand. So, while a restriction is put into place, any effects that it may have, to increasing employment, may not be clear as it is combined with all the other recovery processes. We have changed the very nature of the economy with no baseline for comparison. The very foundation of scientific analysis and experimentation is that of controlling for confligrating factors. If A changes while B and C change, there is no way to clear way to determine if A changed because of B, C or both.

We simply cannot determine if the hypothesis is true without examining the prior history of the economy. And, to be clear, it may be that history lacks sufficient evidence to be able to even tell. That's the nature of economics, which requires natural experiments to reveal it's functioning. Lacking the control of the laboratory, we are relegated to waiting for the economy to happen to have presented itself in a manner as if the factors had been controlled. It is either that or we hope that the factors which we might otherwise control for have played out randomly and effectively cancel in the analysis.

The only way to prove that imports are a detractor to employment is to look at the history of the economy after WWII, when the economy has been reasonably, structurally similar to what it is NOW.

The economy has, though, been different in more subtle structures as it has gone in and out of recessions or "business cycles". The unemployment level is not in phase with the changing GDP. Unemployment tends to begin rising after the recession has begun and peaks after the official end of the recession. It is not so simple as lower employment means exactly lower GDP.

The nature of the demand for imports is not directly connected to GDP and employment either. It both increases and decreases with increasing and decreasing GDP and employment.

In the fundamental analysis, to set up for some comparison we need to be able to differentiate between different periods within the business cycle. Reasonably, when labor has been fully utilized then demand for imports is predominately a factor of comparative advantage and excess demand. So, as a starting point, it seems most useful to figure out exactly what full employment is and when the economy has, in fact, been at full employment. At the very least it may provide something to compare the current state of NOW to.

 

[Euro]

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.

I didn’t ignore this; I was refraining from nit picking over this "running total" nonsense.

ItzFitzMe is implying or actually stating that some the funds our federal government has identified and earmarked as benefits due to our global debt was put aside by the U.S. Treasury to defray the economic harm due to trade deficits.
Trade deficits detriment to our economy didn’t turn negative until 1986?

This is leads up to one of the Import Certificates many advantages over other economic stimulus programs. The government receives no net revenue. All of the monetary benefits due from the IC proposal are an indirect but effective subsidy of U.S. Exports and the proposal’s no net federal expenditure. The proposal’s eventually and entirely funded by U.S. purchasers of Foreign goods.

Respectfully, Supposn

I think a lot of the problems with the US economy is because of to much urbanization. US has states with small populations like Alaska,Vermont, North Dakota etc. These states are net exporters. These states are full of natural resources that could be exported, like oil,gas,timber,wheat,corn,hydropower,coal.

So what would make both the US economy and the trade balance better would be a deurbanization. Send the people that are unemployed in the cities out to the countryside to exploit natural resources and export it. The states with small populations has a demand for labor, the cities are overpopulated and has huge unemployment.

 

[itfitzme]

This concept of trade restrictions to improve employment has some merit if, for no other reason then the concept of absolute advantage. If a country has absolute advantage in production due to similar efficiency combined with a lower standard of living and deflation of it's currency, then absolute advantage may be an issue.

On the other hand, there are reasons why a trade deficit is not an issue. The simplest is that the balance may shift from year to year, as it has done up through about 1982.

Additionally is the concept of comparative advantage and investment that becomes the more important reason that a trade deficit is not of particular concern. Output is a function of production efficiency. Earlier investment in efficiency gains compounds over time and has an exponential effect on later efficiency. Production efficiency is not simple efficiency in current production but also affects the efficiency by which the very nature of efficiency can progress. A typical process is that a company producing widgets will find a method for increasing it's efficiency, a widget manufacturing machine. Another company is spun off that manufactures widget manufacturing machines, employing the fundamentals to it's own process while then selling spin-offs to other companies. As the efficiency has increased in the widget manufacturing, it also then increases in production of even unrelated products across the economy. The rate by which this can propagate through other industries may be held back due to a lack of labor available to manufacture and distribute widget efficiency spin offs.

A trade deficit due to the import of even simple items like shoes can free up labor to produce related efficiency products. And the earlier these product are implemented in the economy, the sooner it begins to grow. The very rate of growth becomes dependent upon earlier implementation of efficiency products. The efficient production of production efficiency products boosts productivity and returns a greater income to those making them compared to what they would otherwise be making producing shoes. And this greater income afford them the purchase of imports.

The idea that we are "borrowing from the future" is offset by the fact that, in doing so increases output in the future. We may be restricting future output by some 5% of what it would otherwise be but it has also been increased by 10% over what it would otherwise have been. As a result, at least philosophically, the net gain is a 5% increase. Figuring out exactly if, how and by how much this is becomes a question. And really, without actually doing the measures and math, we don't know either way.

The downside is that, once the economy has been saturated with production efficiency products, a large percentage of the labor that is employed in that production finds itself unemployed. Not only are they unemployed from the production efficiency product manufacturing market but the previous manufacturing in which they were employed, shoes, no longer needs their labor. They have, in essence, worked themselves out of a job.

With great hope, new products spin off, like the production of consumer entertainment efficiency products or some new technology that is the outcome of efficiency in the new technology generation markets. As long as this process continues, then they can make a career out of working themselves out of jobs.

Comparative advantage is not fixed in time. As long as a economy, like the US economy, continues to have a comparative advantage in one product over another, then no issue arises. It may be that, at some point, there is considerable labor that is underutilized. And as this settles in, the very balance of production, consumption, and prices will adjust. Real prices fall due to a lack of demand. Incomes fall due to an over supply of labor. The comparative advantage disappears. Someone recognizes an opportunity to begin producing products previously abandoned to imports. And in the balance, comparative advantage shifts.

I have to wonder if we may see this occur in the near future or if we are on the forefront of an expansion of under produced services or the generation of new products.

Trade restrictions, while they may resolve unemployment, may also end up crowding out the opportunity to expand other services or generate new ones. Unrestricted, the market place will determine the best path, however uncomfortable this may be for the unemployed consumer product engineer that now visits the food bank once week.

The problem is that there is no crystal ball.

 

[itfitzme]

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 didn’t ignore this; I was refraining from nit picking over this "running total" nonsense.

ItzFitzMe is implying or actually stating that some the funds our federal government has identified and earmarked as benefits due to our global debt was put aside by the U.S. Treasury to defray the economic harm due to trade deficits.
Trade deficits detriment to our economy didn’t turn negative until 1986?

..

Respectfully, Supposn

I said or implied no such thing.

I simply took the net export data and summed it up, starting from the beginning of the record. There is nothing to nit pick about it.

It cannot be a detriment if it doesn't exist.

A table is available at http://www.census.gov/foreign-trade/statistics/historical/gands.txt

It is just that simple.

There is a saying that a theory should be made as simple as possible but only as simple as it needs to be. What we often find is that bad theories become increasingly more complicated as they continue to plug up holes in what they fail to account for.

You keep insisting that there has been continuous trade deficits for a half a century.

Quoting Wikipedia, "The US last had a trade surplus in 1975." That is not "well before 1975".

I simply took the net export record and did a running balance.

In fact, net exports didn't go consistently negative until about 1982. That is not a half century. It didn't go permanently negative until 1992. In 1991, according to at least one record, it was +7.9 billion, a surplus. That is even less of not a half century. For decades, it simply flipped back and forth, a few years of a trade surplus then a few years of a deficit. The only reasonable market is to run a balance. And in running a balance in real dollar terms, 1984 is the year that the balance went negative. None of this even accounts for the fact that each year we are more efficient and have a larger population working along with a larger percentage of the population working.

To say that the US has run a trade deficit every year for a half a century is simply wrong. It is inaccurate. It is imprecise. It is simply not the fact.

A trade imbalance cannot have been a detriment to the US GDP for half a century if there has not been an imbalance for a half a century.

It is just that simple.

Making your theory more and more complex to justify that it fails on ALWAYS and A HALF CENTURY is simply bs.

First it is "A trade deficit is ALWAYS detrimental to a nation's GDP." Then it is "A trade deficit is always detrimental to a nation's GDP, then it would be OTHERWISE". Then it is "A trade deficit is always detrimental to a nation's GDP then it would be COMPARED TO EMPLOYMENT DURING WWII." Then it is "A trade deficit of GOODS is always detrimental to a nation's GDP then it would be compared to employment during WWII."

You filter out what doesn't fit. If you can't filter it out, you then make your "theory" more complicated to explain it away.

Your "theory" is based on confirmation bias, not deduction. It's apparent simply watching your immediate behavior.

 

[itfitzme]

I think a lot of the problems with the US economy is because of to much urbanization. US has states with small populations like Alaska,Vermont, North Dakota etc. These states are net exporters. These states are full of natural resources that could be exported, like oil,gas,timber,wheat,corn,hydropower,coal.

So what would make both the US economy and the trade balance better would be a deurbanization. Send the people that are unemployed in the cities out to the countryside to exploit natural resources and export it. The states with small populations has a demand for labor, the cities are overpopulated and has huge unemployment.

You are, I believe, correct in all of your facts. Indeed, it seems that your point may be typically so during every recession. It is a rather interesting question as to what mechanism accounts for this.

As I understand it, relatively easy mobility is one of the fundamental of the expectation of the US economy. This recent recession, with so many homeowners underwater and unable to sell, is considered an impediment to this.

Frankly I consider the idea bad for numerous reasons. One is simply the cost of moving. The cost of moving is a considerable impediment. A large portion of the population lives paycheck to paycheck. As such they have no savings to depend on. Even just changing apartments includes a considerable up front cost in covering last months rent and deposit before the previous residence deposit is returned. And, there is that minor issue of needing an overlap of the rentals and the cost of moving expenses which inevitably are far more then initially estimated.

While credit may be available, I don't see an economic policy based on an assessment and expectation that people incur revolving debt as particularly appealing.

There is also the social cost of contacts, friends and relatives. Our social network is extremely important and unaccounted for as an economic cost.

All in all, in theory it is a great idea. In practice, I believe it is far more difficult and costly then it appears.

 

[Widdekind]

Trade deficits are ALWAYS detrimental to their GDPs.

trade "exposes" domestic markets, to foreign products. Some of those products "compete" directly, against domestic substitutes; others are "exotic novelties", lacking domestic comparisons. The former directly displace domestic production, e.g. jobs, wages; the latter indirectly displace domestic production, by "luring" money away, from other economic activities.

 

[itfitzme]

Trade deficits are ALWAYS detrimental to their GDPs.

trade "exposes" domestic markets, to foreign products. Some of those products "compete" directly, against domestic substitutes; others are "exotic novelties", lacking domestic comparisons. The former directly displace domestic production, e.g. jobs, wages; the latter indirectly displace domestic production, by "luring" money away, from other economic activities.

In produce, imported produce from Chile and Peru are available counter cyclical to domestic produce. The two compliment each other, domestic available during one season and imports during the other.

When "exotic novelties" are available, prices adjust as a percentage of the total money supply. If there are 100 available and regularly consumed products, then the average price is M/100. If there are 200 available and regularly consumed products, the average price is M/200. They do not "lure" money away from other economic activities. They share in the availability of the total money supply.

Prices are simply a representation of the relative value that things have with respect to each other. This is why increasing the money supply, given no increase in production, increases the nominal prices but does not increase the real price. And in the same fashion, an increase in the availability of products for consumption (assuming the nearly unlimited consumption rule) simply lowers the price of all products proportionally.

The equation of exchange, MV=PQ highlights this. If Q increase, with no change to the money supply or velocity, P falls. It has to. The natural law of the equation of exchange is like any natural law, like the law of gravity. What the prices are depends on what relative value the consumer applies to the goods.

In general, and in the greater balance, the availability of imported products is simply the availability of imported products and an increase in the products available for consumption, including an increase in consumption.

Additionally, the availability of a product as an import frees up labor to manufacture the product that the domestic labor is most competitive at, in the global market place.

It is called comparative advantage.

What import tariffs do, in general, is increase prices for the domestically available, otherwise imported products, by creating an artificial shortage of supply. This is to the detriment of the consumer who then is not given the opportunity to make the choice in the marketplace.

What is clear is that the imports purchased are purchased with US currency which has no value except in the US currency zone. The only place it can be spent is in the US currency zone. All it is, is giving paper money to China in exchange for goods. If anyone should be more concerned it would be China in the fact that they are exporting more resources then they are importing. It is, after all, the materials that has value. Money is simply a tool with which to account for that value.

And, as it has been demonstrated, that they have US currency doesn't guarantee the right to purchase anything. Durban attempted to invest in a US port authority and was summarily denied the ability to do so when public outcry pushed Congress to deny them the right to do so.

What becomes more interesting is why the trade deficit should exist for any extended period of time if, in fact, the system is balanced. A higher level of imports in one quarter results in an increase in the supply of money in the hands of the foreign country. This increase then devalues the dollar for them, in the trade market place. As such, the price of the US exports should rise in the following quarters thus reversing the flow of dollars.

The trade "imbalance" may simply be the result of Chinese devaluation of it's own currency, a practice that, while increasing the Chinese export markets also hurts the Chinese domestic purchasing power of Chinese domestic domestic products. The Chinese are, essentially, creating an oversupply of Renminbi and Yuan

The problem with economics is that, for ever observed effect, there is typically another effect that balances it. The trick is, for every observed process, to recognize what the counter process is that balances it.

The question become what processes exist, in the greater balance, that do not balance out entirely and under what conditions these happen.

The real question here is if the approximately thirty year total trade imbalance represents a real issue or not, either directly to labor utilization during a recession, or in the long run.

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What I find interesting is that the entire body of economist, both past and present, including Frédéric Bastiat, all agree that imports, are not a detriment to the economy but rather an asset.

It is an interesting social psychology observation that given a little knowledge about a subject, the layman will consider themselves to have a better understanding of the subject then experts in the field.