Matt Yglesias

15 Responses to “Trade Deficit Back on the Rise”

1. TJ Says:
   November 13th, 2009 at 5:58 pm

   That’s easy. We aren’t. Too much financialization.

2. paradox Says:
   November 13th, 2009 at 6:02 pm

   If we had a crash program for oil efficiency certainly stopping the hundreds of billions flowing to the middle east every year would be a good start on a solution.

   So would a jobs program for unemployment and ending wars for peace. But that would mean the government actually get proactive, and that gelded Executive we have can’t even cut the DOD budget, he’s useless.

   Just look at the problem and say gee, a government would be nice. Nothing more to do.

3. bob mcmanus Says:
   November 13th, 2009 at 6:18 pm

   We can run a trade deficit as long as those we trade with let us.

   When after the Financial Collapse there was nevertheless an Int’l flight to quality and dollars even at zero interest rates, I decided that the old neo-classical understanding of Int’l Accounts was probably outmoded. The world may not allow us to be anything but hegemon, and they have us out-voted.

4. Aaron Says:
   November 13th, 2009 at 6:18 pm

   I wonder how much having the yuan pegged to the dollar results in a persistent trade imbalance.

5. cmholm Says:
   November 13th, 2009 at 6:51 pm

   Of course the trade deficit is going back up. We sourced out a large fraction of our components and consumer goods manufacture. We haul in vast quantities of oil. Unless consumers cut back expenditures to utilities, mortgage, and groceries, we’re gonna run a deficit.

   Continuing in this mode, eventually the value of the dollar will shrink faster than the growth in the GDP, at which point the volume of imports will shrink. Obviously, we ain’t there, yet.

   The easiest way to cut ourselves some slack would be to vastly trim our energy imports. I’d prefer getting there via the Scientific American renewable concept, which would also address the climate change issue… a twofer.

6. Ape Man Says:
   November 13th, 2009 at 7:35 pm

   “But you can’t run a giant trade deficit forever.”

   True! However, you can’t do anything forever. Forever is just too damn long! So, hard to see that this statement has much content.

   To say that the large US trade deficit is “unsustainable” is to assume that at some point it will become politically impossible for US citizens to continue using up such a disproportionate share of the world’s resources.

   This is probably true to some degree. In fact, we may have already reached this point. However, this is not some new menace. George Kennan talked about it. He said that we would probably have to fight a bunch of wars to preserve the system. As countries tried to opt out of it, he assumed we would have to pulverize them as a warning to others.

   So we did! Not the most moral system, but so far it works pretty well from a standpoint of preserving this large trade imbalance.

   I would like to think that in our lifetime it will become impossible for the US to continue this system. However, I admit I don’t currently see any sign that this is happening. The status quo will probably continue for a long time. Not forever! But a long time.

7. Jim M Says:
   November 13th, 2009 at 9:18 pm

   Could it just be that we’re on the downward sloping part of the J curve after the latest bid declines in the dollar? That is, imports now cost us more per unit but contracts and sourcing haven’t caught up yet. If so, it’s totally to be expected, no reason for hand-wringing, people.

8. urgs Says:
   November 13th, 2009 at 11:50 pm

   Not so hard to fix

   - Rise taxes
   - cut military spending by 5%
   - introduce forced retirment saveings into some low cost government run saveing plan (no need for financial industry charity there)
   - If nothing helps, get a fair non market distorting import tariff, 1% for everyone, not 25% on that industry with good lobby , 50% on that with very good lobby and 0% on most.

9. urgs Says:
   November 13th, 2009 at 11:51 pm

   Those 5% are as percentage of US gdp, not as percentage of the military budget. Would work, seriously, after that cut the US military would still be the biggest in the world.

10. Max424 Says:
    November 14th, 2009 at 2:04 am

    The best way to reduce our trade deficit is for somebody somewhere to start pumping a shitload of oil out of some new mega-field, or two, and flood the market with new supply that will help suppress prices, or at the very least, lesson the possibility of an oil shock induced Super Depression.

    THANK GOD for Dick Cheney’s brilliant and prescient mind. Iraq has two such mega-fields (Ta Da!), and if we hadn’t invaded Iraq, neither of these fields could ever have been properly exploited.

    Now they will be. China’s oil giant CNPC, and the UK’s oil giant British Petroleum, recently signed $15 billion contracts with Iraq that will require them to invest $50 billion over the next 20 years resurrecting the moribund oil field at Ramaila, known to contain some of the largest, easily accessible oil reserves left on earth. Nobody’s oil giant, Exxon-Mobile, last Thursday was rewarded an almost identical contract -to develop Iraq’s other huge and easily accessible oil field, known as West Qurna 1.

    As long as US forces remain in Iraq and keep a watchful eye on the prize jewels at Ramaila and West Qurna 1, the two mega-fields will pump extra oil on to the world market and allow Western policy makers to put off until tomorrow any tough decisions that should be made today.

    Now, let’s get back to Cap and Trade, and other such nonsense, and start pretending again that we are doing something.

11. Patrick C Says:
    November 14th, 2009 at 2:16 am

    I tend to think that worry about trade deficit is much like worry about government deficit. It is worry generated by a false analogy to personal finances. In reality the deficit probably just indicates that people in the United States are getting a steep discount on international goods because some other governments imagine it is in their best interests to do so.

12. Ape Man Says:
    November 14th, 2009 at 11:04 am

    Patrick C has it, basically.

    The fundamental failure of understanding is this – what backs the dollar?

    The dollar is backed by US power. Economists refuse, by and large, to accept this. I assume that’s because they want an economic answer to the question. But the dollar is not, at its foundation, an economic entity. It is a political entity.

    The dollar, and the global economic system generally, are a mechanism by which we get other countries to send us their resources. As long as this system persists, our large trade deficit persists. The trade deficit is the point of the system!

    Patrick C points out that people hear “deficit” and think that we’re losing something. We aren’t! China, Japan, etc. send us resources, real physical goods that improve the standard of living of our citizens.

    This unbalanced system is where our stratospheric standard of living comes from! I used to think that economists were engaged in a conspiracy to intentionally obscure this fact. Now I realize they just don’t get it.

    A weird situation, to be sure. But a persistent one! It’s not going away anytime soon.

13. Patrick C Says:
    November 14th, 2009 at 11:09 pm

    Ape Man,

    I wouldn’t lump all economists together. There are a lot of different economists with a wide spectrum of views. I tend to think that the views that make it into the mainstream are just not very representative.

    Here’s a summary of an alternative view. which I don’t entirely agree with but it is interesting, nonetheless:

    http://www.friesian.com/money.htm

    Highlight:
    “When money can simply be printed by the government, exporting it is an extraordinarily profitable business.”

14. TRIATHLON Says:
    November 15th, 2009 at 2:20 pm

    MATT SAYS: Now, however, the deficit is back on the rise once again raising the question of how we’re ever going to get to a sustainable situation for the global economy.

    TRIATHLON: That is the very idea of not letting the American-Israeli Empire close the trade deficit, by [2020] the Empire will no longer exist, the only question is just how its going to end with contraction or destruction, from within or from without, the best case would be a [USSR] Union of Soviet Socialist Republic from within due to an economic collapse. This would be the best case for all the citizens of the Worlds Global Community, no Mushroom Clouds and a Nuclear Winter caused by Empire Stimulus War [Wars of Resources and Markets].

    The Citizens not the governments of the Global Community have come to understand this, don’t buy American, don’t use the Dollar, shift to the DIVERSIFIED/MULTILATERAL CURRENCY REGIME, cut the life blood of the Empire, and end the Empire, its the [21st] Century the Dreamers, Thinkers, and Workers are in the process of building that new society a society minu the Empire.

    The choice has come down to two, An Economic Decline and Internal fall of the Empire or its external destruction from forces outside for self preservation.

    The best case is the fall from within, and a new government structure of Republics on the North American Continent, with limited bloodshed. The System is immoral by all standards and can not be fixed, it is time to replace it.

    HERCULE TRIATHLON SAVINIEN
    HARD-CORE INDEPENDENT TEA-BAGGER

15. Ape Man Says:
    November 15th, 2009 at 3:31 pm

    Patrick C:

    Some parts of this are interesting, but in my view it’s incorrect on many points.

    You might find this interesting, although the writing style is kind of annoying:

    http://mosler2012.com/wp-content/uploads/2009/03/7deadly.pdf