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There can be a general trend and relationship between national debt and trade deficit or not. Nothing direct.
A trade deficit *does* necessitate a corresponding increase in currency outflow. We could in theory cover this by increasing taxes and revenue rather than debt, but that would defeat the purpose and also tank our domestic economy.
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We buy cheaper. This is savings for the common American. Also a job cutter for some. Capitalists like it because it means more profits. This can be good for American investors, bad if you lose your job.
It is much more on the "profit" side than the "cheaper" side. A simple look at what has happened to real median income (nearly flat for 40 years), and real income for the top .01% (~10x increase) will show that.
A trade deficit *does* necessitate a corresponding increase in currency outflow. We could in theory cover this by increasing taxes and revenue rather than debt, but that would defeat the purpose and also tank our domestic economy.
It is much more on the "profit" side than the "cheaper" side. A simple look at what has happened to real median income (nearly flat for 40 years), and real income for the top .01% (~10x increase) will show that.
It's bad for nearly everyone in this country.
Currency outflow is not typically national debt. Now if the Federal gov't decides to deficit spend for the sole purpose of buying stuff from overseas, then it would equate.
A trade deficit *does* necessitate a corresponding increase in currency outflow.
A trade deficit IS ITSELF a currency outflow. Both numbers are large, but we buy more abroad than we sell there. This puts dollars into foreign hands. What they can do with those dollars is first, use them to buy US exports at some point in the future, second, use them to buy now or later the exports of third countries who will take dollars in payment, and third, invest them at some point in dollar-denominated assets in either US or global markets.
The global balance of trade is always equal to zero. Total exports are always exactly equal to total imports. Presumably, that much is easy to understand. But it means that the event of any country's trade surplus must somewhere be offset by a trade deficit, and the question then arises as to which countries should play which roles. The current consensus would be that the luxury of export-driven growth should be reserved for poor and developing economies while the already rich an developed ones run trade deficits.
The current consensus would be that the luxury of export-driven growth should be reserved for poor and developing economies while the already rich an developed ones run trade deficits.
Consensus? And what is the rationale for this consensus?
It would appear that it is only in your mind, since excluding the US (which runs a massive deficit), the other developed economies in aggregate run a surplus.
"What are the Key Dangers from running Persistent Trade Deficits?
A deficit leads to lower aggregate demand and therefore slower growth
In the long run, persistent trade deficits undermine the standard of living
Trade deficit can lead to loss of jobs in home-based industries
Deficit countries need to import financial capital to achieve balance"
Consensus? And what is the rationale for this consensus?
It would appear that it is only in your mind, since excluding the US (which runs a massive deficit), the other developed economies in aggregate run a surplus.
"What are the Key Dangers from running Persistent Trade Deficits?
A deficit leads to lower aggregate demand and therefore slower growth
In the long run, persistent trade deficits undermine the standard of living
Trade deficit can lead to loss of jobs in home-based industries
Deficit countries need to import financial capital to achieve balance"
Hence the triffin dilemma. The u.s economy has been hollowed out domestically where it literally can no longer produce the things it needs to consume on net. In order to satisfy its role in the system, the u.s needs to keep importing....allowing the other countries to run a surplus. We saw it during the financial crisis when the fed put blast after blast of stimulus to weaken the dollar and correct the imbalances....but other central banks continue to devalue in lock stop to maintain their export growth. They know no other path, and don't want to accept the inevitable. While importing other nations real wealth and resources for paper is great in the short term, it ultimately will undo this nation.
As china has pointed out in 2009, this system has outlived its usefulness and is actually hurting the u.s. And the world.
I'm just the messenger. But it's not going to get paid off because we don't want to.
Well maybe more like We'd love to, but we don't want to do what is necessary to do it?
Obviously a national debt isn't the same as a household budget. But Dave Ramsey gave an amusing speech a few years back when the debt was less than now, and what if we had to do what he advises his followers to do.
Discussion and debate of the matter in academia and in multilateral economic and financial fora.
Again, what is the rationale and goal that leads to this consensus? Why do you suppose that the majority of countries in the world are not following it?
I think a small problem with the graph is Europe appears to be thrown in with "other". My guess would be that some of the richer countries like the U.K., France, and Germany run current account deficits as well.
1. The cause of our debt is health care, the security state (military, war etc.) and a tendency to give tax cuts out of money we don't have (debt and deficit).
2. We can't pay it off - doing so would require sacrifice and Americans are selfish at heart.
3. Remember one political party that mentioned the debt in every sentence for the last 8 years? Notice that you haven't heard from them lately? Where are the Tea Party Protests? Case closed.
As a thought exercise, let's pretend that Americans were sane people who cared about their country, children and society and therefore wanted to pay off some of the debt. Here is the only way to do that.
1. Cut the Military/Security State by 40% (it's currently about a trillion a year).
2. FORCE complete and total health care reform - to single payer with heavy government regulation of price - we are currently at 10.5K per person per year and can only afford about 7K or less.
3. Take ANY tax cuts off the table and increase as many taxes as possible. Do it in places where it is not felt as badly - for example, adding a dime to Fed. gas tax wouldn't even cause a burp. Oil and gas are dirt cheap any way you look at it. DO NOT repeal taxes...
Without those reforms it is simply impossible. We aren't paying as we go...we are all in it for ourselves and/or our businesses, bosses or churches/non-profits.
I'm just the messenger. But it's not going to get paid off because we don't want to.
It's true. If we just balance the budget, the national debt would be gone in 30 years, which is the duration of the longest term federal debt. The immediate pain would be bad, since the Treasury has been issuing short term bonds to take advantage of low interest rates, but over 30 years the per capita expense would only be about another $1500/year.
Pulling $500 billion a year out of defense and health care spending would force bankruptcy reorganization of some big sectors of the economy. If you think the banking crisis was ugly, try a defense contractor crisis. They would have to start a big war to make up the losses.
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