31 consecutive years of trade deficits

In the comments to this thread on Lou Dobbs decrying our trade deficits, one Mike Laursen had the winning quote in my book:

You’d think that our having thrived through thirty-one years of trade deficits might spark the thought that maybe trade deficits don’t matter that much.

Ah yes, remember how great things were before the huge trade deficits?  The crappy-funk economy that was the mid-70’s; gas shortages and national ‘malaise’?

Until someone can offer some better proof — historical precedence even — that these trade deficits are bad, I don’t buy it.  The prediction that impending doom is right around the corner is as old as mankind, and it sells a lot of books and TV airtime…

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6 Comments

Filed under angry, damn lies, economics, I believe that trade deficits are our future, politics

6 responses to “31 consecutive years of trade deficits

  1. Kevin

    Maybe a trade deficit doesn’t ruin the economy, as you’ve anectotally proven, but would the economy be that much better without one? I’m just asking(I don’t have an opinion). And while I don’t know that the trade deficit it solely responsible for China controlling such a large amount of our currency, it does scare me a little that do.

  2. killer

    i’m no international finance wiz but it would seem that a “deficit” is a bad thing. and 31 years of such can’t be good. our national debt is over 8 TRILLION dollars. we are spending money that we apparently do not have and we are doing it at an alarming pace. please to be explaining how this can be okay? are “trade deficits” and “national debt” even related? are we just sandbagging? does bush have a bank account that we don’t know about with 8.5 trillion dollars accruing interest every day? is our country simply too big to exist in reality anymore? scary questions if you ask me.

  3. The trade deficit in and of itself doesn’t really trouble me, but I do find some side effects to be a concern. Just this morning, there was yet another recall announced on the news. This time tires. So, in the last few months we have seen at least two toy recalls for lead contamination (which I don’t think would be a problem for toys produced here), of course the pet food, garlic, and now tires. I know that recalls occur regardless of the country of origin, but is there a pattern developing here?
    China’s human rights record is enough to discourage me- trade deficit is really not even on my radar.

  4. Kevin — there’s no inherent reason why a trade surplus would be a benefit… it really could go either way, but I can think of an easy scenario that proves Surplus does not equal Good: let’s say the US can dump some product on the global market (forget WTO and potential trade sanctions). We produce a billion of these widgets and sell them to China at a loss (we’d have to sell them at a loss, otherwise if we were so good at making them cheaply in reality, we’d be doing it right now). Let’s say this product singlehandedly eliminates the trade deficit — are we better off? No way, we wasted resources and investment that could have been put to better use.

    If we can bridge the trade gap selling things that we’re the best (most efficient) in the world at, then we would certainly be better off. And I’m in no way saying that there is inherent benefits in deficits — it all depends on what we’re investing our resources in.

  5. killer — you’re right the word “deficit” sounds bad, but that’s just semantics. if we called it an “import surplus” would you feel better about it?

    actually, this leads to a point I read after I read some more opinions on the trade balance — we run the highest deficits when the US economy is really cranking. in effect, the trade deficits are demonstrations of the excess profits/wealth our economy has those years. would we be better off investing it locally than spending it on foreign stuff? maybe, but we tend to consume rather than save… and if you’re dropping your excess on a new TV, good luck finding one made in America.

  6. re: national debt — it’s not directly related, but it is related. Chinese sell us stuff, we give them US$. There isn’t much they can do with that money; either buy US stuff or invest in US things. They can invest in plant/equip, companies, or land in the US (but nobody likes to hear that China is buying up businesses or real estate) or they can buy US government debt. So they do.

    That big huge debt amount you talk about is total debt — the US govt itself owns $3.7 Trillion of that (“intragovernmental”, I don’t fully understand that part myself), the US public owns $2.6 Trillion, and the Chinese own $354 Billion (behind the Japanese at $649B). great pie chart and explanation here: http://www.optimist123.com/optimist/2007/03/updated_pie_cha.html

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