Don't understand the trade deficit

[Muse]

I've been hearing about the US trade deficit for years. It seems that there's always a trade deficit. The current report (read an article in today's paper) is that it's shrunk somewhat, mostly due to decreased oil imports and a weakening dollar helping to increase US exports. However, there's still a deficit. Why hasn't the US economy gone bust by virtue of this deficit? I don't think I understand the basic economics. How can I get an understanding short of taking a course in economics or reading a good text?

 

[ElFenix]

because we generally create wealth at a rate greater than we have been shipping it overseas.

 

[Zebo]

There is no trade deficit. They take our money for goods we buy and in turn buy assets like businesses or loan us money back.

It's better to produce than lose wealth and be in debt though, therein lies the problem with it and can't continue forever.

 

[werepossum]

We had a vast amount of wealth built up after World War II, as we had developed a huge wartime industrial base. Since most other nations were either devastated to one degree or another by the war, or unaffected (no industrial base build-up), we were in an excellent position to export product. Thus we built a tremendous amount of wealth in American corporations and in personal accounts. As more and more of our goods and even services began to be imported, the foreign-owned corporations producing those goods and services built up wealth in American dollars. Many corporations and nations hold dollars as a form of wealth, but most of those dollars are traded for things that don't show up in the trade imbalance - American corporations (in the form of stocks, bonds, and mutual funds), American debt (T-bills and other government bonds), and American real estate. There are a huge amount of foreign-owned corporations that used to be American-owned; ditto with real estate. Companies that don't want to use their American dollars to buy American debt, real estate, or corporations can also trade their dollars to other companies that do.

It's like if you're working a very large family farm, busting your hump and clearing $40K a year. One day someone says "I noticed you have a lot of land, I'll give you $10,000 for this lot right here." So for that year your income climbs $10K and your standard of living goes up, even though your net worth goes down a bit (trading real property for transient personal property.) Do that a few years and you get to thinking that if you just sold two lots instead of one, then you could give up planting those marshy, not so productive acres and get down to a sixty hour work week. Then you get to thinking that if you sold a big chunk of land to an investor, you'd probably get enough to give up farming altogether and still make much more than you did farming, maybe just run some cattle on that land. It works pretty well, gives you a high standard of living with less work.

Until you run out of land to sell . . .

 

[Modelworks]

We had a vast amount of wealth built up after World War II, as we had developed a huge wartime industrial base. Since most other nations were either devastated to one degree or another by the war, or unaffected (no industrial base build-up), we were in an excellent position to export product. Thus we built a tremendous amount of wealth in American corporations and in personal accounts.

Very true.
The other thing is countries that were rebuilding were able to look at the mistakes we had made and take advantage of new manufacturing and design methods, where we were already entrenched in a set way of doing things.

The way the USA does production is like an old car that has been patched and repaired over and over to the point it isn't cost effective. Building and investing in things like infrastructure wasn't done, the mindset became 'that factory we built 50 years ago worked then why change, that will cost us money that we will not get back soon' , so companies invested in whatever got them the quickest return rather than spending like some countries that looked at longer term goals. Add in the corrupt politicians who gave deals to companies that never delivered and you get to where we are now.

 

[JS80]

There is no trade deficit. They take our money for goods we buy and in turn buy assets like businesses or loan us money back.

It's better to produce than lose wealth and be in debt though, therein lies the problem with it and can't continue forever.

Or the Chinamen take a haircut later on because of the currency game they play and the lack of reciprocal trade. And if they threaten to shut us off we give them the finger and move to the next 3rd world asian country who'll accept our money. Of course the Chinamen wouldn't do that.

One thing's for sure they aren't very smart. Or they are just too cheap. They are like little goblins that hoard money in the vault only to wake up one day it ain't worth shit. Honestly I don't mind send them toilet paper for computers and TVs. Works for me.

 

[bob4432]

Or the Chinamen take a haircut later on because of the currency game they play and the lack of reciprocal trade. And if they threaten to shut us off we give them the finger and move to the next 3rd world asian country who'll accept our money. Of course the Chinamen wouldn't do that.

One thing's for sure they aren't very smart. Or they are just too cheap. They are like little goblins that hoard money in the vault only to wake up one day it ain't worth shit. Honestly I don't mind send them toilet paper for computers and TVs. Works for me.

man, you underestimate your adversary...guess that is what they want you to think, so w/ you, they win.

i have known a few chinamen - from china when they were going to the american graduate school of international mang to get their mba's....they want you to think they are lower than you but in fact, they are not. your american arrogance is your downfall and they know this.

keep thinking the way you do, as most of the country does and won't wake up until they rule us literally. there are many wars going on atm and not all drip blood and don't use military might - electronic wars, currency wars and my friend, we are not on top on many of the fronts.

 

[cubeless]

man, you underestimate your adversary...guess that is what they want you to think, so w/ you, they win.

i have known a few chinamen - from china when they were going to the american graduate school of international mang to get their mba's....they want you to think they are lower than you but in fact, they are not. your american arrogance is your downfall and they know this.

keep thinking the way you do, as most of the country does and won't wake up until they rule us literally. there are many wars going on atm and not all drip blood and don't use military might - electronic wars, currency wars and my friend, we are not on top on many of the fronts.

damn, and i need to get my yellow peril stuff out of the back of the closet... all that's old is new again...

 

[Zebo]

We had a vast amount of wealth built up after World War II, as we had developed a huge wartime industrial base. Since most other nations were either devastated to one degree or another by the war, or unaffected (no industrial base build-up), we were in an excellent position to export product. Thus we built a tremendous amount of wealth in American corporations and in personal accounts. As more and more of our goods and even services began to be imported, the foreign-owned corporations producing those goods and services built up wealth in American dollars. Many corporations and nations hold dollars as a form of wealth, but most of those dollars are traded for things that don't show up in the trade imbalance - American corporations (in the form of stocks, bonds, and mutual funds), American debt (T-bills and other government bonds), and American real estate. There are a huge amount of foreign-owned corporations that used to be American-owned; ditto with real estate. Companies that don't want to use their American dollars to buy American debt, real estate, or corporations can also trade their dollars to other companies that do.

It's like if you're working a very large family farm, busting your hump and clearing $40K a year. One day someone says "I noticed you have a lot of land, I'll give you $10,000 for this lot right here." So for that year your income climbs $10K and your standard of living goes up, even though your net worth goes down a bit (trading real property for transient personal property.) Do that a few years and you get to thinking that if you just sold two lots instead of one, then you could give up planting those marshy, not so productive acres and get down to a sixty hour work week. Then you get to thinking that if you sold a big chunk of land to an investor, you'd probably get enough to give up farming altogether and still make much more than you did farming, maybe just run some cattle on that land. It works pretty well, gives you a high standard of living with less work.

Until you run out of land to sell . . .

werepossum nailed it. We are basically getting poorer they are getting richer. Americans own less and less and they should by virtue of producing less and less and taking in more debt personal and governmental. Good post.

 

[JS80]

man, you underestimate your adversary...guess that is what they want you to think, so w/ you, they win.

i have known a few chinamen - from china when they were going to the american graduate school of international mang to get their mba's....they want you to think they are lower than you but in fact, they are not. your american arrogance is your downfall and they know this.

keep thinking the way you do, as most of the country does and won't wake up until they rule us literally. there are many wars going on atm and not all drip blood and don't use military might - electronic wars, currency wars and my friend, we are not on top on many of the fronts.

Any currency war they try to pull on us is shooting themselves in the foot. We have the federal reserve to buy their holdings for for a discount if they ever threaten the SELECT-ALL SELL MARKET on us.

For every fob chinaman who are here to get their MBA we have ten harvard phd goldsteins to counter whatever financial war you think they are plotting and we are not countering.

It's their arrogance and cheapness that will be their downfall. We've already experienced sneakiness from the japs in WW2 you think we'll fall for it again? We will win no matter what. We have the innovation, we have the talent. China is just a slave working for us.

 

[Zebo]

Or the Chinamen take a haircut later on because of the currency game they play and the lack of reciprocal trade. And if they threaten to shut us off we give them the finger and move to the next 3rd world asian country who'll accept our money. Of course the Chinamen wouldn't do that.

One thing's for sure they aren't very smart. Or they are just too cheap. They are like little goblins that hoard money in the vault only to wake up one day it ain't worth shit. Honestly I don't mind send them toilet paper for computers and TVs. Works for me.

Of course someday we will nationalize or inflate debt away debt. They know it we know it. Their goal in the meantime is to acquire as much assets as possible intellectual and hard assets. Once they are satisfied they can function as a super power they will cut ties. It's already starting with difficulty in selling bonds to china reported awhile back.

 

[bob4432]

Any currency war they try to pull on us is shooting themselves in the foot. We have the federal reserve to buy their holdings for for a discount if they ever threaten the SELECT-ALL SELL MARKET on us.

For every fob chinaman who are here to get their MBA we have ten harvard phd goldsteins to counter whatever financial war you think they are plotting and we are not countering.

It's their arrogance and cheapness that will be their downfall. We've already experienced sneakiness from the japs in WW2 you think we'll fall for it again? We will win no matter what. We have the innovation, we have the talent. China is just a slave working for us.

so, who currently owes who billions?

again, your american arrogance is your downfall and they know this. look into who owns many of the financial institutions in the US, or at least who runs them. i would brush up on your mandarin and cantonese we are not the country we were after the war.

 

[dullard]

Think of it on more simple terms. Imagine this scenario: Each and every day, you print some money and I give you a new car in exchange. You have a trade deficit and I have a trade surplus. The value of goods that you are accepting is less than the value of goods that I am accepting. Sure, some days I give you a car that is worth more (your trade deficit grows) and some days I give you a car that is worth less (your trade deficit shrinks).

Now, on the surface is that bad for you? Damn, I bet most people would want to be in your situation. You do almost nothing, and I give you lots of my stuff. Trade deficits are WONDERFUL.

That is, until you get hooked and the trade deficit ends. Or even worse, what if I decide to try buying your stuff with this money? Suddenly your money that you've been printing is worthless. You still have all the stuff that I've been giving you for decades, but you won't be getting any more stuff and you won't be trading with me anymore for any reason as long as your printed money is worthless.

 

[dullard]

so, who currently owes who billions?

again, your american arrogance is your downfall and they know this. look into who owns many of the financial institutions in the US, or at least who runs them. i would brush up on your mandarin and cantonese we are not the country we were after the war.

We owe china less than a trillion dollars. If everyone in the US wrote a $2500 check to China, we'd have it paid off. Doing that would suck, but it is quite doable. We really don't owe that much. I'm not learning a new language for such a small sum.

 

[JS80]

so, who currently owes who billions?

again, your american arrogance is your downfall and they know this. look into who owns many of the financial institutions in the US, or at least who runs them. i would brush up on your mandarin and cantonese we are not the country we were after the war.

It's actually about a trillion, which is almost nothing. That's less than one year's Obama budget deficit.

It will take them a while for their sneak attack plan to be even viable. But they will never catch up because we will inflate out of it. So sowwy chinaman. Better ruck tomollow.

 

[Zebo]

JS80 your post is a bit racist. 'arnt smart' 'gobins' etc they are just as smart as Americans but have to use this relationship to build up out of an agrarian society. China in 20 years will be top dog or at least parallel with USA and Euros. USA has issues like stiffleing debt and growing underclass unable to make anything world wants. Just different circumstance we are a declining empire they are a growing one.

 

[JS80]

JS80 your post is a bit racist. 'arnt smart' 'gobins' etc they are just as smart as Americans but have to use this relationship to build up out of an agrarian society. China in 20 years will be top dog or at least parallel with USA and Euros. USA has issues like stiffleing debt and growing underclass unable to make anything world wants. Just different circumstance we are a declining empire they are a growing one.

How is it racist?

I disagree they will reach parity to the west. They need to use authoritarian power to keep their slave laborers - if they are reaching the west economically on a per capita basis, the people will demand democracy and they will either 1) die because the government will kill them or 2) revert back to communism or go to extreme socialism and kill their growth prospects. Either way it's a catch 22.

PS I'm not white so whatever I say can't be racist

 

[bob4432]

It's actually about a trillion, which is almost nothing. That's less than one year's Obama budget deficit.

It will take them a while for their sneak attack plan to be even viable. But they will never catch up because we will inflate out of it. So sowwy chinaman. Better ruck tomollow.

you laugh now but i wonder how much you will be laughing when you are building their railroads? the chinese are not lending us $$ and putting their top people through our schools and running and/or owning many of our top financial institutions because they are just nice, there is a war going on here regardless if you fail to see it or not. by you not seeing it makes them stronger and you are doing exactly what they want. so again, they are winning w/ you because you underestimate them.

if a trillion is nothing, why don't we pay it back? because our current and past govt administrations (not just obama and bush, but back about 30+yrs or so) are addicted to spending and making themselves rich at our demise.

 

[bob4432]

How is it racist?

I disagree they will reach parity to the west. They need to use authoritarian power to keep their slave laborers - if they are reaching the west economically on a per capita basis, the people will demand democracy and they will either 1) die because the government will kill them or 2) revert back to communism or go to extreme socialism and kill their growth prospects. Either way it's a catch 22.

PS I'm not white so whatever I say can't be racist

nice thinking, should have figured. what are you?

they will reach us and unless we get some decent leadership ourselves we will be their slaves. we already are financially, and consuming so much shit that we don't need.

 

[heyheybooboo]

The trade deficit with China used to be $21 billion or so a month --- I believe it has dropped a bunch (to $16 billion/month ??).

In a country with a $14+ trillion annual GDP and a 'net worth' somewhere in the range of $55 trillion it really ain't much.

The actual trade deficit has been declining somewhat over the last few years ---- our biggest is most likely the petroleum deficit which was $386.3 billion last year.

More Hot Stuff ...

* The 2008 exports to Canada ($261.4 billion) and the 2008 imports from Canada ($335.6 billion) were records.
* The 2008 exports to Mexico ($151.5 billion), and imports from Mexico ($215.9 billion) were records.
* The 2008 exports to the European Union ($274.5 billion) and the 2008 imports from the European Union ($367.9 billion) were records.
* The 2008 deficit with China ($266.3 billion), exports to China ($71.5 billion), and imports from China ($337.8 billion) were records.
* The 2008 exports to South/Central America ($137.8 billion) and the 2008 imports from South/Central America ($160.0 billion) were records.
* The 2008 deficit with OPEC ($175.6 billion), exports to OPEC ($67.0 billion), and imports from OPEC ($242.6 billion) were records.
* The 2008 exports of advanced technology products ($275.8 billion) and 2008 imports of advanced technology products ($331.4 billion) were records.
* The 2008 import average price per barrel of crude oil ($95.23) was a record.

 

[JS80]

nice thinking, should have figured. what are you?

they will reach us and unless we get some decent leadership ourselves we will be their slaves. we already are financially, and consuming so much shit that we don't need.

I have slanty eyes like the chinamen.

 

[ElFenix]

We had a vast amount of wealth built up after World War II, as we had developed a huge wartime industrial base. Since most other nations were either devastated to one degree or another by the war, or unaffected (no industrial base build-up), we were in an excellent position to export product. Thus we built a tremendous amount of wealth in American corporations and in personal accounts. As more and more of our goods and even services began to be imported, the foreign-owned corporations producing those goods and services built up wealth in American dollars. Many corporations and nations hold dollars as a form of wealth, but most of those dollars are traded for things that don't show up in the trade imbalance - American corporations (in the form of stocks, bonds, and mutual funds), American debt (T-bills and other government bonds), and American real estate. There are a huge amount of foreign-owned corporations that used to be American-owned; ditto with real estate. Companies that don't want to use their American dollars to buy American debt, real estate, or corporations can also trade their dollars to other companies that do.

It's like if you're working a very large family farm, busting your hump and clearing $40K a year. One day someone says "I noticed you have a lot of land, I'll give you $10,000 for this lot right here." So for that year your income climbs $10K and your standard of living goes up, even though your net worth goes down a bit (trading real property for transient personal property.) Do that a few years and you get to thinking that if you just sold two lots instead of one, then you could give up planting those marshy, not so productive acres and get down to a sixty hour work week. Then you get to thinking that if you sold a big chunk of land to an investor, you'd probably get enough to give up farming altogether and still make much more than you did farming, maybe just run some cattle on that land. It works pretty well, gives you a high standard of living with less work.

Until you run out of land to sell . . .

except that the land is generally growing faster than we're selling it off.

 

[0marTheZealot]

Any currency war they try to pull on us is shooting themselves in the foot. We have the federal reserve to buy their holdings for for a discount if they ever threaten the SELECT-ALL SELL MARKET on us.

For every fob chinaman who are here to get their MBA we have ten harvard phd goldsteins to counter whatever financial war you think they are plotting and we are not countering.

It's their arrogance and cheapness that will be their downfall. We've already experienced sneakiness from the japs in WW2 you think we'll fall for it again? We will win no matter what. We have the innovation, we have the talent. China is just a slave working for us.

Doesn't that scenario basically end up as both America and China being losers? MAD by economic warfare.

Little solace for the person spending hundreds of dollars for a loaf of bread, no matter where they are at.

 

[Ausm]

China owns us.

/Thread

 

[Fenixgoon]

China owns us.

/Thread

china owns us because of loans, not because of trade deficit.