Trade gap


The Commerce Department said the trade gap, which economists had expected to fall from $56 billion in October, instead rose 7.7% to an all-time high of $60.3 billion. The trade gap for the past 12 months is now more than $600 billion, the largest share with China.

"We now have the Grand Canyon of trade deficits, and there is no saying it will not widen further," Joel Naroff, president of Naroff Economic Advisors.

That's nothing. You should see the trade gap between me and Wal-mart. :beatnik:

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The whole idea of trade

The whole idea of trade "deficits" is serious economic nonsense!

Perhaps if the countries were totalitarian states where the respective governments owned everything there could be such a thing. But even in that case careful consideration if warranted.

"Joel Naroff ought to stop

"Joel Naroff ought to stop spouting attention-grabbing nonsense, at least in a professional capacity," commented Alex, president and dictator-for-life of Alex Economic Advisors LLC PhD OMG.

My econ knowledge is limited

My econ knowledge is limited to an intro class I took in college. Are trade deficits really that bad a thing? It seems to me that it should just mean that we are creating enough wealth to be able to afford to buy stuff from other countries.

My knowledge of economics is

My knowledge of economics is similarly limited, but as I understand it there is nothing bad in trade deficits in and of themselves. Rather they may be indicative of other problems, such as too much spending and not enough saving. The trade deficit, as I understand it, is a symptom, not the disease.

The point being made is that

The point being made is that the very notion of a trade "deficit" is illusory. They give us stuff, we give them money. Where's the deficit? The whole notion of a trade deficit is based on the fallacy that money is not a good, that instruments of exchange and stores of value somehow don't count in the ledger of international trade. I'm cribbing this almost whole-cloth from a recent blog post that might have been here or that I might have seen on CotC somewhere...

I agree that hand-wringing

I agree that hand-wringing over trade deficits is *mostly* unjustified. However, while the old "my trade deficit with Wal-Mart" argument is effective against concerns about our trade deficit with a particular country (e.g., China), it doesn't work so well against concerns about our trade deficit with the rest of the world.

Think about it this way. I buy lots of stuff from Wal-Mart, while Wal-Mart buys nothing from me. Therefore, I have a trade deficit with Wal-Mart. Obviously that's not a problem, because I'm selling my services elsewhere in the economy. But what if the total amount that I'm spending per year (at Wal-Mart and everywhere else) is much greater than the amount I'm earning per year? Then I'm running a trade deficit with the rest of the economy. To do so, I must be either going into debt or running down my savings (or both), and that *could* be a bad thing.

There are excellent arguments to be made in response here, showing that even a trade deficit with the whole rest of the world (not just a single country) is no big deal. My point is just that the "my trade deficit with Wal-Mart" argument isn't sufficient.

its only good for americans

its only good for americans while you hold the position of reference or reserve currency. once the process goes the other way it will manifest itself in a very ugly economic outcome. americans are slightly less productive than most people on earth but the most creative at publishing positive statistics about how productive they are. that fact that the rest of the world believes it is testimony to gullability. holding and creating the reserve currency causes amazing distortions in the data that are not actually there in "TV Slob and Giant Soda,Iowa" reality land.

Just for the record the

Just for the record the "trade deficit with wal-mart" thing was a joke not an argument, oh yeah and a "trade deficit" does not indicate that we are spending more than we are earning. It implies that we are buying more from other countries than they are buying from us. As a result large quantities of american dollars are being converted to foreign currency to ultimately pay for such goods which can lead to devaluing of U.S. currency and a rise in inflation. A rise in inflation is supposed to curtail economic growth. This is a result of the nature of our currency and the currency of other nations. There are various economic theories out there that are supposed to solve this exact sort of problem but I don't have an in-depth knowledge of them. Also I do not know how much of a problem trade deficits, inflation, etc. are for the economy overall. I suspect it is dependent on what sector of the economy you are in.