America’s Middle Class Crisis: The Sobering Facts

[Gonad the Barbarian]

having a trade deficit with a country just means you are getting an inflow of capital instead of goods

You have a lot of things wrong in your reasoning, but this is exactly backwards.

 

[matt0611]

You have a lot of things wrong in your reasoning, but this is exactly backwards.

How is that backwards?
Its pretty straightforward economic reasoning.

 

[AyashiKaibutsu]

How is that backwards?
Its pretty straightforward economic reasoning.

We're the ones getting goods/losing capital...

 

[Doc Savage Fan]

How is that backwards?
Its pretty straightforward economic reasoning.

Trade deficits are essentially financed by increased debt.

http://useconomy.about.com/od/tradepolicy/p/Trade_Deficit.htm

 

[matt0611]

Trade deficits are essentially financed by increased debt.

Debt by whom?

Trade deficits don't necessarily mean that a country needs to go into debt.
China has trade deficits with some countries...

 

[matt0611]

We're the ones getting goods/losing capital...

Because we are squandering the capital being invested from the world.
Just like I said.

 

[Doc Savage Fan]

Debt by whom?

Trade deficits don't necessarily mean that a country needs to go into debt.

From the link:
Why an Ongoing Trade Deficit Weakens the Economy:

An ongoing trade deficit is detrimental to the nation’s economy over the long term because it is financed with debt. In other words, the U.S. can buy more than it makes because the countries that it buys from are lending it the money. It is like a party where you’ve run out of money, but the pizza place is willing to keep sending you pizzas and put it on your tab. Of course, this can only go on as long as there are no other customers for the pizza, and the pizza place can afford to loan you the money. One day the lending countries may decide to ask the U.S. to repay the debt. On that day, the party is over.

 

[matt0611]

From the link:
Why an Ongoing Trade Deficit Weakens the Economy:

An ongoing trade deficit is detrimental to the nation’s economy over the long term because it is financed with debt. In other words, the U.S. can buy more than it makes because the countries that it buys from are lending it the money. It is like a party where you’ve run out of money, but the pizza place is willing to keep sending you pizzas and put it on your tab. Of course, this can only go on as long as there are no other customers for the pizza, and the pizza place can afford to loan you the money. One day the lending countries may decide to ask the U.S. to repay the debt. On that day, the party is over.

Its not necessarily true though.

Say our country buys good from China and then china invests that money into US companies for them to grow (through buying stocks or bonds in private firms). This doesn't mean that we as a country have to go into debt. Our economy could grow and start producing more goods from the capital inflow that would lower our trade deficit in time.

This is not what we are doing though. The scenario in your link is what is happening and that is why it is a problem.

 

[ShawnD1]

On to trade deficits, trade deficit with countries can be ok, China has a run long standing trade deficit with many countries (such as germany) oh noes right?

China has the world's largest trade surplus. USA has the world's largest deficit.
http://en.wikipedia.org/wiki/List_of_sovereign_states_by_current_account_balance

having a trade deficit with a country just means you are getting an inflow of capital instead of goods

The exact opposite is true. Trade surplus means you are selling things and making money (what China is doing).
Surplus --> products leave the country, money enters the country.
Trade deficit means you import more than you export, so basically you are losing money but buying more stuff (what USA is doing).
Deficit --> products enter the country, money leaves the country.

which is fine as long as the capital is going into something productive

It sure is. China is quickly changing from third world ghetto shit hole to being the next Japan, a first world shit hole.
In exchange, USA is filled with low quality Chinese shit products.

 

[matt0611]

China has the world's largest trade surplus. USA has the world's largest deficit.
http://en.wikipedia.org/wiki/List_of_sovereign_states_by_current_account_balance




The exact opposite is true. Trade surplus means you are selling things and making money (what China is doing).
Surplus --> products leave the country, money enters the country.
Trade deficit means you import more than you export, so basically you are losing money but buying more stuff (what USA is doing).
Deficit --> products enter the country, money leaves the country.



It sure is. China is quickly changing from third world ghetto shit hole to being the next Japan, a first world shit hole.
In exchange, USA is filled with low quality Chinese shit products.

China has trade deficits with some countries. This is a fact.

Trade deficit = Capital surplus.
This is an economic fact. Look it up in any econ 101 textbook.
Its basic accounting.

What a country does with the capital is up to them. But we currently have a net capital inflow from China. We are wasting the capital on unproductive things though. We are in agreement there.

 

[actuarial]

China has trade deficits with some countries. This is a fact.

Trade deficit = Capital surplus.
This is an economic fact. Look it up in any econ 101 textbook.
Its basic accounting.

What a country does with the capital is up to them. But we currently have a net capital inflow from China. We are wasting the capital on unproductive things though. We are in agreement there.

So if I sell you something, and you pay me money, you now have more capital?

 

[matt0611]

So if I sell you something, and you pay me money, you now have more capital?

If you sold me something and took that money to invest in my company (say I have one that sells things) I have more capital, yes.

I have a trade deficit and capital surplus with you.

 

[actuarial]

If you sold me something and took that money to invest in my company (say I have one that sells things) I have more capital, yes.

I have a trade deficit and capital surplus with you.

The important part is in bold. You don't have any say on how I use the money. China isn't investing in the US, they're investing in themselves. Is it still a capital surplus?

 

[matt0611]

The important part is in bold. You don't have any say on how I use the money. China isn't investing in the US, they're investing in themselves. Is it still a capital surplus?

How are they investing in themselves by holding our green pieces of paper?
They have to use them to invest with them...

They are clearly investing in us by lending us money to run our big government (mostly).

 

[ElFenix]

The important part is in bold. You don't have any say on how I use the money. China isn't investing in the US, they're investing in themselves. Is it still a capital surplus?

the trade deficit is a current account deficit. it is balanced by a capital account surplus.

http://en.wikipedia.org/wiki/Capital_account


china has purchased large amounts of foreign capital, and so is overall running a capital account deficit. the US is running a capital account surplus.


the japanese did this same thing back in the 80s. the US was running a current account deficit to japan and the japanese were buying up US assets to balance. the japanese famously bought a lot of new york real estate, and lost their shirts when the market fell.

 

[actuarial]

How are they investing in themselves by holding our green pieces of paper?
They have to use them to invest with them...

They are clearly investing in us by lending us money to run our big government (mostly).

So what you're saying is the trade deficit is increasing US debt? I thought you said that wasn't the case?

So if a country wants to increase investment, all if has to do is starting buying shit from other countries like crazy using money borrowed from those countries?

 

[AyashiKaibutsu]

Its not necessarily true though.

Say our country buys good from China and then china invests that money into US companies for them to grow (through buying stocks or bonds in private firms). This doesn't mean that we as a country have to go into debt. Our economy could grow and start producing more goods from the capital inflow that would lower our trade deficit in time.

This is not what we are doing though. The scenario in your link is what is happening and that is why it is a problem.

Why would China on their good graces invest in the US instead of themselves? Saying it could work if some crazy premise took place isn't really much better than just saying it can't happen.

 

[Blackjack200]

Why would China on their good graces invest in the US instead of themselves? Saying it could work if some crazy premise took place isn't really much better than just saying it can't happen.

1. Because US companies are profitable
2. Because if they didn't, the value of the dollar would collapse, and their cheap imports wouldn't be cheap anymore.

 

[matt0611]

Why would China on their good graces invest in the US instead of themselves? Saying it could work if some crazy premise took place isn't really much better than just saying it can't happen.

How can they invest in themselves by keeping dollars under a mattress?

 

[Gonad the Barbarian]

How is that backwards?
Its pretty straightforward economic reasoning.

I'm probably wasting my time but trade deficit = negative trade balance = more imports than exports = more goods than capital. Just admit you were wrong, learn something, and be better for it.

 

[matt0611]

I'm probably wasting my time but trade deficit = negative trade balance = more imports than exports = more goods than capital. Just admit you were wrong, learn something, and be better for it.

No, I don't even think you know what capital is.

See ElFenix's post for an explanation.
You clearly have not even taken econ 101 if you don't understand that trade deficit = capital surplus.

Its a basic accounting concept.

 

[Triumph]

http://www.washingtonpost.com/polit...-club-speech/2011/05/09/AFCp22ZG_story_2.html



Yep, that Boehnehead really wants to cut trillions with country still teetering on the brink of recession and millions out of work.

Don't worry. If we just get rid of planned parenthood benefits and pass a heterosexual marriage amendment, the budget will balance itself.

 

[Gonad the Barbarian]

No, I don't even think you know what capital is.

See ElFenix's post for an explanation.
You clearly have not even taken econ 101.

Its a basic accounting concept.

Haha. I have taken far beyond Econ 101. Capital = money. Trade deficit = less capital. If you want to argue some balance sheet shinanary instead of economic fact good luck with that.

 

[Gonad the Barbarian]

Don't worry. If we just get rid of planned parenthood benefits and pass a heterosexual marriage amendment, the budget will balance itself.

Since on the subject of Mr. Boehner:
Boehner’s Views on Economy Contradicted by Indicators, Studies
http://www.bloomberg.com/news/2011-...onomy-contradicted-by-indicators-studies.html

 

[senseamp]

Since on the subject of Mr. Boehner:
Boehner’s Views on Economy Contradicted by Indicators, Studies
http://www.bloomberg.com/news/2011-...onomy-contradicted-by-indicators-studies.html

GOP would never let reality get in the way of their ideology.