This is an identity, it's more accounting than economics. Or math, like 3+2 = 4+1.
If you import more than you export, foreigners end up with your dollars. The foreigners invest those dollars in U.S. government and corporate bonds, equities, real estate, bank accounts, etc.
The trade deficit has to equal GDP less consumption less investment. We as Americans, ourselves and our government, consume and invest more than we make. The difference is made up by the trade deficit, that is, by foreigners sending dollars back and investing in our economy.
If you set out to reduce the trade deficit, which many economists would consider to be stupid, this is what you can do. All else being equal, a dollar change in any one of these components will cause a dollar's change in the trade deficit.
Decrease imports (IM)
Increase exports (EX)
Increase GDP (GDP)
Decrease government spending (G)
Decrease private consumption (C), that is, increase savings
Decrease Investment
That is, EX-IM = GDP-C-G-I
Say we increase exports (EX) through an increase in GDP. Nothing else in the equation changes. We'd all agree that's good. Or maybe we decrease government expenditures so we end up spending more in the private sector, on producing exports among other things (G goes down, EX goes up). I like that idea, I suspect you might not. Another example, I think people spending less and saving more (decrease in C), would correlate with a decrease in imports (IM) and would be good.
Tariffs are not a benign or favorable way of getting the job done, if you believe the trade deficit should be smaller. First your trading partners are going to retaliate with tariffs of their own, so exports go down along with imports. You're taking away the benefits of comparative advantage, where everyone produces what they can make most efficiently. And you have crony capitalists running industries that wouldn't be competitive except they're protected by high tariffs.
Originally Posted by Tiny
as far as i'm concerned, you don't have any valid argument in this issue. you stated .. after i insisted .. that trade with China is unfair. which we all knew anyway.
so now you think the solution is a bunch of equations? and what exactly does that do for the fact that China is still engaging in unfair trade practices? we whitewash it via adjustments? and let them continue on like it's no big deal?
i'm not buying that. as Bam said, Trump wants
at least fair trade, if not free trade. guess who doesn't want that? everyone else. not China, not the EU, no one but Trump and the US.
why don't they want that? what equations do
they use that makes it unpalatable to
them??
don't they know economic theory too? of course they do. they just don't fucking care.
the deficit is a separate issue. we could discuss the 1913 fed reserve act and its impact on the current deficit if you like. a classic example of American back door political deal making at it's finest .. and worst. no one makes political deals good or bad like America!
the Fed has been referred to as a "quasi-governmental entity" what the fuck is that????
i'll tell you .. a PRIVATE BANKING CARTEL that controls the money supply .. and thus the spending and borrowing of this nation ... without ANY oversight by Congress.
Yeah .. that sounds like a good idea,
right???
and the establishment powers that be called Ron Paul a nutcase for wanting the Fed audited.
well when even a partial audit was done a few years back ... the results were eye popping weren't they? you want to fix the deficit?
FIX THE FED FIRST.
too bad Woody realized this
after he signed it, yeah??