[AlexTWithBeard]

I think you're right.

There's plenty of articles explaining why deficit is not a problem, but despite of all the economic theory I find this view very weird. In the bottom line, if you're consuming more than you're manufacturing, mostly likely you're in trouble.

[omegaworks]

>In the bottom line, if you're consuming more than you're manufacturing, mostly likely you're in trouble.

Or you are a dominant entity on the world stage with the power to demand more physical goods than the physical goods that you produce.

Trade deficit rebalancing is an argument for the destruction of the supremacy of the dollar.

[AlexTWithBeard]

No domination can last forever.

If you consume more than you produce, you're creating a debt. Sooner or later this debt should be paid.

If you're exporting dollars, be prepared that these dollars will come back to purchase your best land and your best people.

[omegaworks]

>If you consume more than you produce, you're creating a debt. Sooner or later this debt should be paid.

Few things: firstly, trade imbalance is not debt. That is a gross oversimplification of the macroeconomy.

Secondly: debt repayment doesn't even guaranteed with personal debt (bankruptcy, for example, discharges personal debt). The state has mechanisms for discharging debt available to it that personal debtors do not have.

[simonh]

Not all consuming is importing, and not all production is exported. This distinction is actually crucial. The balance of trade is only one part of a bigger picture, the other is domestic production and consumption. You can't understand one without also factoring in the other.

If a country has a very productive, vibrant and innovative domestic economy, it can increase the value of it's domestic net assets. It generates valuable new technology perhaps, it finds ways to maintain it's standard of living using fewer resources, or simply increases it's standard of living at current prices. It becomes a wealthier nation, without trading externally at all. Maybe it even attracts foreign investment.

In 2018 the US trade deficit was $890m (10% higher than 2017, thanks Trump), but it's GDP growth was $1trn.

If internal activities increase the value of the domestic economy by more than the trade deficit, then the trade deficit really doesn't matter. It's already paid for.

Finally, the only way to buy goods abroad is for someone to sell your currency and buy theirs. If you're buying more abroad than people buy from you, the balance is exactly equal to the 'deficit' in trade of your currency. Well, nobody is forcing anyone to buy your currency but if they do that's implicitly an investment in your economy.

[ltbarcly3]

> 10% higher than 2017, thanks Trump

It's been increasing dramatically since the early 80's, regardless of who has been president. So I'm sure you meant thanks {Carter, Reagan, Bush, Clinton, Bush, Obama, Trump}.

> If internal activities increase the value of the domestic economy by more than the trade deficit, then the trade deficit really doesn't matter. It's already paid for.

I'm not sure what you're trying to argue for? Are you saying we should ignore things as long as we can afford them (so there's no reason for rich people to insulate their houses or close their windows, so long as they can keep paying their electric bill), or that there's secretly some benefit of running trade deficits as long as you can afford them? To me this sounds like the captain of a boat denying that a huge hole in the boat is a problem so long as the water gets pumped out slightly faster. The thing is if you are a net exporter you are getting richer, and if you are a net importer you are getting poorer (richer and poorer than you would have been otherwise). If you live in some bizarro universe where that isn't true, explain why companies keep trying to sell us stuff? Why do farmers try to sell more corn than they buy for seed every year? Why does China, and every other country, try so hard to stay competitive and increase their exports? The answer is as obvious as it is true, whatever other wealth you generate, if you export goods you get that money too, just like the rich guy who insulates his house gets to keep his rich guy bank account AND the amount he saves on his bill every month.

> Finally, the only way to buy goods abroad is for someone to sell your currency and buy theirs. If you're buying more abroad than people buy from you, the balance is exactly equal to the 'deficit' in trade of your currency.

This makes the opposite point of what you are trying to make. There is a net flow of funds towards China. That means China is holding USD, which means our currency is made more valuable and their currency is made less valuable, since we have less dollars in circulation domestically. This makes our exports more expensive in terms of foreign currency, which means we sell less stuff to every country, and especially to China. Meanwhile having a currency that actually gets more valuable is an economic disaster, it will throw the country into depression if left unchecked (if you don't know why then you shouldn't be commenting on economics: https://www.economicshelp.org/blog/978/economics/definition-...). So we have to print more money to keep the value of our currency stable, so the effect of 'china's investment' is exactly nothing, apart from China building up huge wealth exporting to the US and the US not building up wealth exporting to China.

[simonh]

Not Clinton, he's the only pres under which the deficit fell since carter, although Obama had it somewhat under control in much of his last term.

https://zfacts.com/national-debt/

Deflation is falling prices inside your economy, as valued in your own currency. It's got nothing much to do with external exchange rates in other currencies.

Yes it makes stuff bought from abroad cheaper, but maybe your domestic economy doesn't compete in those goods? In which case who cares, you just get more stuff for less. It also means inputs into your own manufacturing from abroad are cheaper, so you can capture more value add.

Deflation is a problem only when it affects the economy as a whole, because it means wages get depressed and investment dries up, but it's usually an effect of those things as much as a cause. Individual goods getting cheaper happens all the time, and it's great. The entire computer industry is an example of a whole economic sector built on deflation.

[ltbarcly3]

So you don't know the difference between the national debt and US-China trade deficit. Please continue to share your extremely valuable insights into economics.

[alexis_fr]

Or you consume more than you produce, and output other forms such as debt or a lower dollar, so foreign companies will day be able to purchase things you’ll produce in the future. So everything balances out it the end, doesn’t it?