Trade deficits are ALWAYS detrimental to their nations’ GDPs.

[DSGE]

Since before WWI, recessions have been global. And since WWII, given the data, imports for the US have decreased on recessions. I suspect the opposite is true for national economies with the low standard of living. But every nation goes into recession simultaneously. So there is something going on that isn't clear. But it seems that net imports are just another symptom of a deeper and broader issue.

It is about comparative advantage, until it's not. That's a key question. What happens when the cost of manufacturing sneakers in every country equalizes?

I don't think it is. That's useful for understanding the composition of international trade, but I don't think it's relevant to trade balances. It's just about wanting to consume/invest more than you produce. A trade deficit is just credit from abroad. Say I want to buy a house. I haven't been sufficiently productive to either have built my own house or earned enough income to trade for an existing house. I get a loan from the bank (a capital inflow). The capital comes from a lender who wants to postpone consumption until the future. I use it to purchase a house from somebody. Over time I earn income equal to the value of the house plus interest. I repay that to the lender, who uses it to consume.

Forget about money, that just needlessly complicates things. Think about the transfer of real goods that is occurring. In period 1 the creditor has produced a house (or something of equal value to a house). They want to postpone consumption. I want to consume now. The creditor gives me the house, which I consume in this period. In periods 1 and 2 I work to produce some good, X. In period 2 I've produced enough X to be equal to the value of the house plus interest. I give that much of good X to the creditor, who consumes it.

Trade deficits are to a nation exactly what credit is to a consumer. It's just a way of changing the intertemporal distribution of consumption to make it consistent with individual preferences.

And like a household, if I borrow to buy a washing machine, my wife can go to work too. If we borrow and buy a second car, I don't have to drop her off and we both can work at higher paying jobs in different places. Then we go and get use to an increasing standard of living and leverage into buying really cool stuff. That's just great until a recession hits and income falls back faster then prices. Now we are just squeezed and can't to no more borrowing.

It's a real bitch if we were borrowing against our home equity. Oops. Balance sheet recession and a liquidity trap.

Here's the broken record playing again: If the central bank is targeting the level of nominal income, then nobody ever gets surprised by nominal income that's 9% lower than expected inflating the real value of nominal debt.

"intertemporal distribution of consumption", eh. "to make it consistent with individual preferences".

I aim to please.

That's part of the deeper issue, the "intertemporal distribution of consumption to make it consistent with individual preferences." Well, it's that "individual preferences based on expectations" thing that gets us every time.

That's why level targeting is so important. Rate targeting just lets the central bank get away with past fuck ups. Level targeting, be it NGDP or price level (I prefer NGDP because it doesn't get affected by supply shocks), let's you make long term nominal contracts without having to worry about the risk that nominal variables are going to be wildly different than expected.

 

[Supposn]

////////////////////////////////////////////
Google Wikipedia, gdp
GDP = C + I + G +(X – M)
X= Exports, M = Imports, (X – M) = (balance of global trade)
Respectfully, Supposn

You have to read the definition of C to get that C is comprised of two parts,

C_domestic and C_imports

So

GDP = C_domestic + C_imports + I + G + ( X - M_imports)

And basically,

C_imports = M_imports

So,

GDP = C_domestic + I + G + X

There is no imports in GDP so imports do not mathematically effect GDP.

If you remove the -M_imports, you get something like

C_domestic + M_imports + I + G + X

Which is GDP + M

So, by your reasoning, what you are actually saying is that

M negatively effect GDP = C_domestic + M + I + G + ( X - M)

Which is not true, mathematically.

That's the issue.

ItFitzMe, you’re playing with a formula which I often also do. I generally hit a wall and do not accomplish anything but I, (like a child) do learn by playing.

I realized that consumers, (“C”) expenditures = C_domestic + C_imports
Government, (“G”) expenditures = G_domestic + G_imports
Investment (“I”) = I_domestic + I_imports + I_exports

Why do you state “there’s no imports in GDP”?
There’s (balance of trade) = (X – M), “X” = exports and “M” = imports.

There’s the problem that we have no creditable sources to break down “C”, “G” or “I”.

Furthermore C_imports does not equal M_imports. I’m supposing “C” is final prices and “M” is values at U.S. port.

Mathematically the reduction of imports does not in itself change the GDP but that’s true only if you believe that within a transferable Import Certificate policy the sum of our domestic plus export sales would not increase more than otherwise.

Respectfully, Supposn

 

[itfitzme]

Here's the broken record playing again: If the central bank is targeting the level of nominal income, then nobody ever gets surprised by nominal income that's 9% lower than expected inflating the real value of nominal debt.

"intertemporal distribution of consumption", eh. "to make it consistent with individual preferences".

I aim to please.

That's part of the deeper issue, the "intertemporal distribution of consumption to make it consistent with individual preferences." Well, it's that "individual preferences based on expectations" thing that gets us every time.

That's why level targeting is so important. Rate targeting just lets the central bank get away with past fuck ups. Level targeting, be it NGDP or price level (I prefer NGDP because it doesn't get affected by supply shocks), let's you make long term nominal contracts without having to worry about the risk that nominal variables are going to be wildly different than expected.

I'm coming in from the south-west and there is a hill blocking my view.

 

[itfitzme]

////////////////////////////////////////////
Google Wikipedia, gdp
GDP = C + I + G +(X – M)
X= Exports, M = Imports, (X – M) = (balance of global trade)
Respectfully, Supposn

You have to read the definition of C to get that C is comprised of two parts,

C_domestic and C_imports

So

GDP = C_domestic + C_imports + I + G + ( X - M_imports)

And basically,

C_imports = M_imports

So,

GDP = C_domestic + I + G + X

There is no imports in GDP so imports do not mathematically effect GDP.

If you remove the -M_imports, you get something like

C_domestic + M_imports + I + G + X

Which is GDP + M

So, by your reasoning, what you are actually saying is that

M negatively effect GDP = C_domestic + M + I + G + ( X - M)

Which is not true, mathematically.

That's the issue.

ItFitzMe, you’re playing with a formula which I often also do. I generally hit a wall and do not accomplish anything but I, (like a child) do learn by playing.

I realized that consumers, (“C”) expenditures = C_domestic + C_imports
Government, (“G”) expenditures = G_domestic + G_imports
Investment (“I”) = I_domestic + I_imports + I_exports

Why do you state “there’s no imports in GDP”?
There’s (balance of trade) = (X – M), “X” = exports and “M” = imports.

There’s the problem that we have no creditable sources to break down “C”, “G” or “I”.

Furthermore C_imports does not equal M_imports. I’m supposing “C” is final prices and “M” is values at U.S. port.

Mathematically the reduction of imports does not in itself change the GDP but that’s true only if you believe that within a transferable Import Certificate policy the sum of our domestic plus export sales would not increase more than otherwise.

Respectfully, Supposn

C_imports does not equal M_imports

Close enough for illustration. If you like break it out then. M_imports = C_imports + G_Imports + I_Imports. Break it out in the data. When the number match, you've got a 50/50 chance that you've got the right data.


Mathematically the reduction of imports does not in itself change the GDP but that’s true only if you believe that within a transferable Import Certificate policy the sum of our domestic plus export sales would not increase more than otherwise.

Sound like circular reasoning. "A is always true. B proves A. We know that B is true because of A."

 

[itfitzme]

ItFitzMe, you’re playing with the formula which I often also do. I generally hit a wall and do not accomplish anything but I, (like a child) do learn by playing.

I also realized that both Consumers, (“C”) and Investments, (“I”) expenditures have some portions that are attributable to exports.

The problem is that they had no sources of creditable data to determine the proportional break down of domestic and exports within (“C”) expenditures; (statistically the break down for (“I”) is unimportant).

Regarding terms “M” and “X”, I suspect that domestic expenditures are based upon retail prices but how would they generate retail prices for imports? They have to be using global trade prices; (i.e. wholesale prices) or they’re multiplying import prices by an arbitrary number. (export retail prices are unimportant).

We’ve thus far identified two reasons for the understatement of import and export prices, externalities and unavailability of total import and total export retail amounts.

"The problem is that they had no sources of creditable data". That's the problem with economics, it often depends on the availability of data. Without data, all we have is a hypothesis. And until you prove or disprove the hypothesis, you can't make the next step to figure out what data to look at next. It's like the interplay between theoretical physics and experimental physics. They advance together, standing on each others shoulders. Economics has an extra problem in that you can't do experiments. So it has to wait until the economy does the experiment naturally. And hopefully, the economists have been able to convince the politicians to spend the money on the data collection.

That has always been the problem with economics, figuring out how to find things in the available data.

Trust me on this, it's not the problem. The problem is what caused the recession, not what might have been. The problem is always, "what happened?" not "what didn't happen?".

The problem with the "shipping jobs overseas" thing is that it doesn't look at the economies from a global perspective of continuous growth. It's a static model that only becomes a question when recessions hit and growth stop temporarily.

The fact is that the trade imbalance only exists while the advanced country is growing, increasing in labor utilization. It can only detract from the national production if there was a higher to detract from. There is no "greater production" reference point. The national production was always less before the trade imbalance. As such, supporting services, what I called "positive externatilities" are being absorbed by the countries current industries.

The trade imbalance increases the standard of living for both countries. If the imports are investment, it also increases the national production for both countries.

We are getting into the position that we have to consider exactly how comparative advantage really works for two countries. Then we can consider if there really are any detrimental effects due to some lost "positive externatilities" that is the loss of stimulation of supporting industry and services due to the loss of manufacturing of the imported products.

Consider two islands, one that has flint and one that has steal. The two pieces, combine, make a pair that can be scratched together to make fire. Alone they are useless. So the two countries begin trading. In this case, the have net zero trade balance. Each has a physical comparative advantage.

Now, instead, consider two countries that have different technologies, one knows how to make DVDs and the other can make DVD players. Each is tooled up and each has a comparative advantage based on the tooling. There is no point in one tooling up to make the other. The trade balance is still zero.

Now, instead, consider two countries with different standards of living. One is ahead technologically. It has new technology, DVD players and DVDS along with an old technology, tennis shoes. The poor country will happily tool up and make tennis shoes cheaply while the wealthy country tools up and makes DVD players. In fact, as the DVD players are beginning to be tooled up and made, the sneaker manufactures just move their production to the poor country. So now the wealthy country is happily making DVD players and importing sneakers. This is, of course, a weak example. The full global economy has more countries, more products, and trade going both ways. The balance is finer, infinitely incremental. Also, population is increasing in both, there are more then two products, even the workforce is increasing in both.

Anyways, so the poorer country is enjoying an increasing standard of living. They are learning to make sneakers. They are building services around their sneaker manufacturing.

The wealthy country is further ahead. They already know how to make sneakers and there is no need for sneaker support, even sneaker research. On the other hand, they have supporting industries around the DVD technology. There standard of living is increasing, their workforce is increasing, their efficiency is increasing. So there is no detractor due to the lack of making sneakers. Their resources and developing supporting resources are all organized about new technologies. They are fully utilized. If they are not fully utilized, like a medium wealth country, they are more utilized then they were before. In the long run, utilization increases to maximum. The long run was what, like 40 years+.

As long as utilization is below maximum, gauged by it increasing, there is no detractor.

There is no detractor to employment due to a trade imbalance. If there is not detractor to employment, there is no detractor to production.

And when the world economy goes into recession, trade imbalances begin to shrink. The recessions are not caused by the trade imbalances. The shrinking trade imbalance offsets the recession. The trade imbalance is a minor issue compared to benefit of the gains from comparative advantage as both countries increase in standard of living. It doesn't cause it and it won't stop it.

The recessions are caused by something else and eliminating the trade imbalance would have eliminate the gains of comparative advantage. The imbalance occurs because the importing country is able to better utilize the resources in increasing the global standard of living. They need sneakers so they can make DVD players. And because they see growth on the horizon, they will happily import just about anything.

Is it too much? Too much compared to what? It's always more then it was before and there is not previous history to determining a maximum. There is no too much except in retrospect is seems like it might have been too much.

The global economy is goal seeking. As it goal seeks, it finds a new solution and then the standard of living increases. At some point, the particular solution becomes "tapped out".

Then imports fall back. Why do they fall back?

Even then, the global economy restructures around a new equilibrium. Perhaps a zero trade imbalance, like those two countries where each is tooled up for different things. We don't know exactly what happens, it hasn't happened yet.

Trade imbalances do not detract from national production. Trade imbalances are the national productions finding a balance of preferred growth rates in a global economic balance by best utilizing scarce resources.

The contraction in production is separate and causes a contraction in the imbalance.

The trade increases growth rate for both countries. The trade imbalance increases the standard of living for both countries. Balanced trade won't increase the growth rate for the importing country. There is no way to prove "what might have been" unless there is data to show that it was before. There is no data to show that it was before.

The trade imbalance only looks like a problem after the recession is over and with high unemployment because, with perfect 20/40 hindsight, all we see is the jobs that we use to have but we don't see that we traded those jobs for better ones and a higher standard of living.

 

[itfitzme]

////////////////////////////////////////////
Google Wikipedia, gdp
GDP = C + I + G +(X – M)
X= Exports, M = Imports, (X – M) = (balance of global trade)
Respectfully, Supposn

You have to read the definition of C to get that C is comprised of two parts,

C_domestic and C_imports

So

GDP = C_domestic + C_imports + I + G + ( X - M_imports)

And basically,

C_imports = M_imports

So,

GDP = C_domestic + I + G + X

There is no imports in GDP so imports do not mathematically effect GDP.

If you remove the -M_imports, you get something like

C_domestic + M_imports + I + G + X

Which is GDP + M

So, by your reasoning, what you are actually saying is that

M negatively effect GDP = C_domestic + M + I + G + ( X - M)

Which is not true, mathematically.

That's the issue.

ItFitzMe, you’re playing with a formula which I often also do. I generally hit a wall and do not accomplish anything but I, (like a child) do learn by playing.

I realized that consumers, (“C”) expenditures = C_domestic + C_imports
Government, (“G”) expenditures = G_domestic + G_imports
Investment (“I”) = I_domestic + I_imports + I_exports

Why do you state “there’s no imports in GDP”?
There’s (balance of trade) = (X – M), “X” = exports and “M” = imports.

There’s the problem that we have no creditable sources to break down “C”, “G” or “I”.

Furthermore C_imports does not equal M_imports. I’m supposing “C” is final prices and “M” is values at U.S. port.

Mathematically the reduction of imports does not in itself change the GDP but that’s true only if you believe that within a transferable Import Certificate policy the sum of our domestic plus export sales would not increase more than otherwise.

Respectfully, Supposn

Get the GDP data and the M data. Do a scatter plot. Find it.

Show a correlation between &#8710;GDP > 0 for &#8710;M <0. Show &#8710;GDP(2) < 0 for &#8710;M(2) > 0.

Do a scatter plot on &#8710;GDP and &#8710;M. If it's a line, maybe you got something.

If it looks like a shotgun blast, it's not there.

Time shift it, see what you get.

Really, this is what you've got to do, the scatter plot then the linear regression. I get an R^2 of like 3.5% and a slope of 11.7. For a time shift of 1, it's R^2 = 0.0222 with a slope of 9.65. In all of history, &#8710;GDP > 0 for &#8710;M > 0.

Better yet, plot &#8710;(C + G + I - M) and &#8710;M. Do a time shift on this.

Okay fine, M=C_import + G_import + I_import.

But C + I + G + ( X - M ) is not GDP. It is a way to calculate GDP. It is a proxy measure.

GDP is C_domestic + G_domestic + I_domestic + X

There is no trade imbalance or import in GDP. The country doesn't make imports.

There is import in consumption, C = C_domestic + C_import.

- M is just a way of subtracting out the C_import + G_import + I_import.

( X - M ) is just combined this way for some other illustrative purpose that has nothing to do with GDP.

It's easier to measure M then it is to measure C_import, G_import, and I_import. It would be impractical to measure them separately. And it's impracticable to measure C_domestic, G_domestic, and I_domestic. It's easier to just measure C, G, and I. It's easier to just measure X.

So, if you like,

GDP = C_domestic + G_domestic + and I_domestic + X <= C + I + G + ( X - M ).

C + I + G + ( X - M ) is not physically equivalent to GDP. It is an accounting relationship because in the NIPA accounts, they don't do C_domestic, G_domestic, and I_domestic. All they do is C, G, I, X and M. Thankfully, in the accounting, they cancel out. But it's just a way of accounting, not a physical representation.

Doing GDP(t=2) = GDP(t=1) + M(t=1) doesn't follow from GDP = C + I + G + ( X - M ).

I've got no other way of putting it.

Not only does it not mathematically reduce it, it doesn't physically reduce it.

For one thing, it makes absolutely no sense to say

GDP(1978) = GDP(1978) + M(1978)

Nor can we infer, deduce, abduct, or otherwise conclude that

GDP(1979) = GDP(1978) + M(1978).

There is no past data to demonstrate this, no physical process upon which to define this. It simply does not exists.

There isn't even a function of

GDP(t=2) = GDP(t=1) + f( M(t=1)&#8594;0 ).

There is no relationship upon which to define GDP(2) > GDP(1) for M(2) < M(1).

There is no principle by deduction or empirically to show it.

Empirically, it has always been that GDP goes up with increase in M. (rather, it's M goes up with an increase in GDP, but that's a causality issue.)

 

[DSGE]

Here's the broken record playing again: If the central bank is targeting the level of nominal income, then nobody ever gets surprised by nominal income that's 9% lower than expected inflating the real value of nominal debt.

"intertemporal distribution of consumption", eh. "to make it consistent with individual preferences".

I aim to please.

That's part of the deeper issue, the "intertemporal distribution of consumption to make it consistent with individual preferences." Well, it's that "individual preferences based on expectations" thing that gets us every time.

That's why level targeting is so important. Rate targeting just lets the central bank get away with past fuck ups. Level targeting, be it NGDP or price level (I prefer NGDP because it doesn't get affected by supply shocks), let's you make long term nominal contracts without having to worry about the risk that nominal variables are going to be wildly different than expected.

I'm coming in from the south-west and there is a hill blocking my view.

Which hill is that?

 

[editec]

...No they don't. In fact one has to make simple fallacies such as "there are finitely many jobs" or "that money goes overseas" in order to think international trade has a negative effect on GDP.

Say what?

I'm saying the conclusion only comes from making common fallacies that jobs can be "taken" in that there are x jobs and y people and if a job gets "taken" overseas now there are only x-1 jobs domestically but still y people. That's bullshit. As long as people continue to want things there will continue to be jobs for everybody.

Wrong.

Or fallacies like "now that income goes overseas we're less able to buy things here!". That's bullshit because nominal money that flows out of a country flows back in, because that's the only place it can be spent. If US dollars go to China, what's China gonna do with them? They can't spend them in China. The exchange them for yuan in the forex market where somebody who wants to buy, because they want to buy US goods, gets them, or they send them right back to the US to buy investment securities where they get spent on Us goods.

The fact that China buys US debt does NOT negate the fact that US workers who lost their jobs offshore now do not have jobs, Lad.

You seem to believe that in the long run all this debt will resolve itself and everything will return to normal.

First of all, that is wrong.

But if you believe it, show me an example of that working to the benefit of a nation's working classes.


Here's the problem...working people's economies do not have a LONG run. They have to pay their bills EVERY MONTH

 

[Supposn]

ItFitzMe,
Consumers, (“C”) expenditures = C_domestic + C_imports
Government, (“G”) expenditures = G_domestic + G_imports
Investment, (“I”) expenditures = I_domestic + I_imports + I_exports
GDP= C+I+G+(X-M).

I agree with those contending:

“C”, “I” and “G” are all total final retail prices;

(balance of trade) = (X – M), “X” = exports and “M” = imports
Prices of (balance of trade) and all of its components are those at U.S. ports of entry and exits;

We have no creditable sources to determine or calculate the portion amounts of “C”, “G” and “I” that are due to the amount of our imports.

Mathematically the reduction of imports does not in itself change the GDP. Reduction of any imported product volume due to a transferable Import Certificate policy would induce some replacement with additional domestic production. Additional domestic production (by definition and actually) contribute to the GDP.

Respectfully, Supposn

 

[EdwardBaiamonte]

You seem to believe that in the long run all this debt will resolve itself and everything will return to normal.

First of all, that is wrong.

But if you believe it, show me an example of that working to the benefit of a nation's working classes.

It very simple really, you spend a dollar at Walmart that then goes to China. The Chinese don't burn it, they must spend it in America.
Every dollar we spend on Chinese made goods must in turn be spent in the USA, or burned for warmth.

 

[Supposn]

You seem to believe that in the long run all this debt will resolve itself and everything will return to normal.

First of all, that is wrong.

But if you believe it, show me an example of that working to the benefit of a nation's working classes.

It very simple really, you spend a dollar at Walmart that then goes to China. The Chinese don't burn it, they must spend it in America.
Every dollar we spend on Chinese made goods must in turn be spent in the USA, or burned for warmth.

Edward Baiamonte, you have never understood or deliberately ignore the concept of wealth transfers.

Transfers of wealth do not cause the creation of any goods or service products and (with the exceptions of initial public offerings or treasury stocks) provide absolutely no additional capital to the share issuing enterprises.

Foreign or domestic purchasers’ of U.S. shares do so because it benefits them;
If they purchase or create U.S. products they benefit themselves, the goods producers’ and our nation.
If they directly invest into enterprises that in turn purchase or create U.S. products, they benefit themselves, the enterprises with increased capital, the goods producers’ and our nation.

Respectfully, Supposn

 

[DSGE]

You seem to believe that in the long run all this debt will resolve itself and everything will return to normal.

First of all, that is wrong.

But if you believe it, show me an example of that working to the benefit of a nation's working classes.

It very simple really, you spend a dollar at Walmart that then goes to China. The Chinese don't burn it, they must spend it in America.
Every dollar we spend on Chinese made goods must in turn be spent in the USA, or burned for warmth.

Edward Baiamonte, you have never understood or deliberately ignore the concept of wealth transfers.

Transfers of wealth do not cause the creation of any goods or service products and (with the exceptions of initial public offerings or treasury stocks) provide absolutely no additional capital to the share issuing enterprises.

Foreign or domestic purchasers’ of U.S. shares do so because it benefits them;
If they purchase or create U.S. products they benefit themselves, the goods producers’ and our nation.
If they directly invest into enterprises that in turn purchase or create U.S. products, they benefit themselves, the enterprises with increased capital, the goods producers’ and our nation.

Respectfully, Supposn

"you have never understood or deliberately ignore the concept of..."

If that isn't the pot calling the kettle ignorant.

You're very confused. What you seem to be thinking of is the idea that purchasing securities in the secondary market is not counted as "investment" but "saving". In a closed economy, purchase of an asset in the secondary market does not increase total savings. "Saving" by purchasing the asset is offset entirely by the person selling you the asset "dissaving".

This is not the case in an open economy. When an international creditor purchases US securities with their US dollar holdings, be it in the initial offering or in the secondary market, this increases the total stock of savings, and hence increases total production.

 

[DSGE]

You seem to believe that in the long run all this debt will resolve itself and everything will return to normal.

First of all, that is wrong.

But if you believe it, show me an example of that working to the benefit of a nation's working classes.

It very simple really, you spend a dollar at Walmart that then goes to China. The Chinese don't burn it, they must spend it in America.
Every dollar we spend on Chinese made goods must in turn be spent in the USA, or burned for warmth.

I think this is the second time you've said something correct. I'm very impressed. If only you were this lucid all the time.

 

[DSGE]

Say what?

I'm saying the conclusion only comes from making common fallacies that jobs can be "taken" in that there are x jobs and y people and if a job gets "taken" overseas now there are only x-1 jobs domestically but still y people. That's bullshit. As long as people continue to want things there will continue to be jobs for everybody.

Wrong.

If that's how you're going to handle this conversation, maybe we should just stop. You clearly have a foregone conclusion and aren't willing to actually put some reasoning into your responses.

The fact that China buys US debt does NOT negate the fact that US workers who lost their jobs offshore now do not have jobs, Lad.

You seem to believe that in the long run all this debt will resolve itself and everything will return to normal.

First of all, that is wrong.

But if you believe it, show me an example of that working to the benefit of a nation's working classes.

Weren't you supposed to be showing me how trade with California and China is different from trade with California and Michigan?

Here's the problem...working people's economies do not have a LONG run. They have to pay their bills EVERY MONTH

This makes no god damn sense.

 

[itfitzme]

ItFitzMe,
Consumers, (“C”) expenditures = C_domestic + C_imports
Government, (“G”) expenditures = G_domestic + G_imports
Investment, (“I”) expenditures = I_domestic + I_imports + I_exports
GDP= C+I+G+(X-M).

I agree with those contending:

“C”, “I” and “G” are all total final retail prices;

(balance of trade) = (X – M), “X” = exports and “M” = imports
Prices of (balance of trade) and all of its components are those at U.S. ports of entry and exits;

We have no creditable sources to determine or calculate the portion amounts of “C”, “G” and “I” that are due to the amount of our imports.

Mathematically the reduction of imports does not in itself change the GDP. Reduction of any imported product volume due to a transferable Import Certificate policy would induce some replacement with additional domestic production. Additional domestic production (by definition and actually) contribute to the GDP.

Respectfully, Supposn

This idea that

"Trade deficits are ALWAYS detrimental to their nations’ GDPs."

lacks a sufficient operational definition in order to avoid running in circles, having an argument where both parties are really talking about two different things, or changing the hypothesis midstream.

This idea was further refined with

"Trade deficits cause their nations’ GDPs to be less than otherwise".

This idea of "would have been otherwise" states the hypothesis in a manner that what existed is to be compared to something that did not exist. It is nearly impossible to create a proof that depends on something that never existed.

There are two complimentary approaches to a proof. One is identifying all significant factors and creating a model of performance of the system. The second is to identify all significant factors, measure the system, then show that the factors really move in the direction that is defined by the hypothesis. As it often goes, data is examined for a pattern, a model is produced that illuminates some new data that needs to be examined, data collection is refined, then the data is tested against the hypothesis.

In the history of science, the theory is a model that describes the operation of known systems. It refines understanding from, "things fall", to "F=MA" and "y2 = x0 + v0*t + a0 * t^2". So, in all cases, the theory and proof depend on first having data that demonstrates the process.

There is exactly one instance where a theory was produced which predicted observations that had never been made. This was Einsteins "On The Electrodynamics of Moving Bodies". Beginning with a known fact, that the speed of light is dependent on only two fundamental constants, the deduced proof used basic geometry to demonstrate length contraction and time dialation. It remained a hypothesis until it had been demonatrated empirically and failed to be disproven to an exceptional degree of confidence.

Physics enjoys the fact that the elementary constituent particles are "dumb". They are well behaved and have no memory. Economics suffers from the difficulty that the elementary constituent particles are individual in a transaction. The particles are not dumb, have memory, and respond to considerable information regarding structure of the environment. As well, unlike the particles in physics which are all identical, individuals vary greatly in how they respond to the environment.

As well, the accepted economic laws are all based on "all other things being equal". They are functional in providing a basis for understanding the functioning of the economy where all other things are not necessarily equal.

Often there is an issue of magnitude. While a function may be in play, the magnitude of it's contribution to the overall performance is minimal.

Care must be taken when applying an economic law, especially when attempting to combine them.

It is unlikely that a purely deductive proof with be generated in economics. As such, the only viable approach is to produce data that shows "less than otherwise." Until the "less than otherwise" has been put in a form of an operable definition, there is no manner of proof. And as economics does not lend itself to purely deductive proofs, it has to come from data that shows this baseline of "otherwise".

 

[itfitzme]

I'm saying the conclusion only comes from making common fallacies that jobs can be "taken" in that there are x jobs and y people and if a job gets "taken" overseas now there are only x-1 jobs domestically but still y people. That's bullshit. As long as people continue to want things there will continue to be jobs for everybody.

Wrong.

If that's how you're going to handle this conversation, maybe we should just stop. You clearly have a foregone conclusion and aren't willing to actually put some reasoning into your responses.

The fact that China buys US debt does NOT negate the fact that US workers who lost their jobs offshore now do not have jobs, Lad.

You seem to believe that in the long run all this debt will resolve itself and everything will return to normal.

First of all, that is wrong.

But if you believe it, show me an example of that working to the benefit of a nation's working classes.

Weren't you supposed to be showing me how trade with California and China is different from trade with California and Michigan?

Here's the problem...working people's economies do not have a LONG run. They have to pay their bills EVERY MONTH

This makes no god damn sense.

The idea is that if we could just pick up the production of the products now imported and plop them into existence domestically, there would be more jobs. That's the image that is so clear. Clearly there are imported products being purchased. Someone is making them overseas. If they were made here, then they could be made by people without jobs.

There is no such thing as "plopping them into existence". There in is the problem. As attractive as this intuitive idea is, it is based on a reality that does not exist.

We cannot build a hypothesis or prove a theory that is based on something that doesn't exists.

Just as well, we cannot disprove a hypothesis based on a non-existent factor.

The economy, with increasing standard of living and efficiency, is a growth process. The intuitive consideration is a non-growth consideration, ignoring the myriad of factors that do exist. The economy got here by some path. To get to the no import condition, it would have to follow a different path. There is no guarantee that that path would lead to the condition exactly like as if the imports were domestically produced "as if they had been just plopped into existence."

Having looked at it with some consideration, my intuition is that if the production was domestic, employment would not increase.

If the production could really be plopped into existence, it would be entirely different then it would be if it got there by some other path. Being able to realistically plop them into existence would, itself, be a weird sort of stimulus itself.

If we could devise a realistic method of comparing the global economy to a closed "if we could just plop imports into domestic production" economy, what would change is the distribution of employment, not the actual employment level. Whatever is the cause of the recession remains the same, whether the economy be open and part of a global recession, or closed with it's own isolated recession.

 

[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&#8217;s trade deficits of goods for each of those years.

The proposed Import Certificate, (IC) trade policy eliminates the possibility of USA&#8217;s imported goods exceeding the total assessed values of their exports.

Unless our nation&#8217;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&#8217;s unreasonable not to expect that it would be a significant reduction of the trade deficit.

Respectfully Supposn

 

[Toddsterpatriot]

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 their 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

Why should we reduce our "trade deficit"?

 

[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

We have not gotten past the hypothesis that "A trade imbalance is always detrimental to the nation's GDP then it would be otherwise."

1960-1971, 1973-1976, 1980-1981 and half of 1982, and much of 1991 did not have a significant trade imbalance.

During periods of recession, the trade imbalance decreases. In all cases but one, the trade imbalance has gone to zero. This recession of '07 is the single instance of net imports not rising to zero.

So far as I have been able to conclude, that a net import (negative net export) occurs while GDP is growing, the nation is at maximum resource utilization, and that maximum level is being increased. There is no "then it would be otherwise".

Clearly, imports are driven by demand and increasing employment. Recessions are not caused by net imports.

I see no reason to entertain the idea of an IC trade policy given the lack of any causal relationship between recessionary declines in employment and previous imports of goods and services.

Whatever issue is to be addressed, it is not the balance of trade which serves purposes that are beneficial to all countries involved. Lacking any definitive proof of a causal detrimental relationship, interfering with the free market is always ill advised.

 

[Supposn]

Why should we reduce our "trade deficit"?

ToddsterPariot, 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 it proportional affect upon GDP is variable.

Respectfully Supposn