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FrankMiller, are you contending USA's people have no need for jobs and incomes? Are you suggesting we transform the basic economic and social systems of our nation in some manner you haven't yet mentioned? Respectfully, Supposn
... The point is, when you talk about the trade deficit and economic improvement, what do you actually mean? You're debating measures and simplifications, but what are you actually talking about in material terms? When the US changes a number in a spreadsheet to make a boatload of smartphones show up in Seattle, who is hurt and how?
FrankMiller, except when a nation's workers are effectively experiencing “full employment”, annual trade deficits are otherwise ALWAYS net detrimental to families dependent upon wages, and entities sensitive to the financial conditions of that substantial segment of the nation's population.
I searched via the question, “What are the medium and long-term consequences of a nation's chronic annual trade deficits?” Microsoft Bing's artificial intelligence responded as follows:
Excerpted from: Trade Deficit: Definition, Causes, and Effects (thebalancemoney.com)
“The Bottom Line
A nation with a trade deficit spends more on imports than it makes on its exports. In the short run, a negative balance of trade curbs inflation. But over time, a substantial trade deficit weakens domestic industries and decreases job opportunities. A huge reliance on imports also leaves a country vulnerable to economic downturns. Currency devaluations, for example, make imports more costly. This situation stimulates inflation. [Refer to [5 & 6]”
Economists understand that GDP is a measure, not reality. It is useful but it has its limits. If you and your spouse started paying each other $50k per year to do chores the US GDP would go up by $100k. Would it be fair to say US living standards had also gone up? ...
FrankMiller, no, that's not how GDP is calculated. It's a "snap shot" of a moment's values of goods and services shifting between categories. It's a statistical approximation of the nation's entire NET production of goods and services.
If my wife and I paid each other but didn't produce any goods or services that sold in the markets, it would not increase our nation's GDP. But your question leads me to inquire, from what source of wealth my wife and I would be paying each other? You're suggesting we just keep passing our money back and forth between us?
We all seek our own best interests. It's to businesses and consumers best interests to purchase cheaper imported goods. But trade deficits are net detrimental to jobs and wages. Our individual persons or organizations shares of the nation's direct or indirect costs due to lesser jobs and wages are inconsequential to us; but it's consequentially of increased cost to our governments. It increases our government's costs and debts. Eventually, in the case of our chronic trade annual trade deficits, it actually reduces the value of U.S. dollars, (i.e. increases our rate of inflation).
Imagine if the US had zero GDP, nobody had to work and we all lived in luxury off of Chinese-made imported goods that they gave us in exchange for currency i.e. imaginary numbers. What a disaster that would be.
FrankMiller, whenever someone would remark “Remember when steaks were a quarter per pound?”, my mother's response was, “Yes, I remember when none of us had a quarter”.
In your imagined scenario, a nation with few wage paying jobs, most people would be impoverished and striving to survive. Yes, I would consider that to be disastrous.
I don't know how anyone can talk about trade deficits when one has the world reserve currency, at least for now. Dollars go out an do not return. Its axiomatic to a reserve currency that trade deficits are mathematically deterministic. We also have a tax system mismatch. The US tax system has taxes embedded in the product while VAT taxes have no embedded taxes.
i could certainly see an argument to have a tariff cancel out our embedded taxes. I certainly don't want to make it even with our own VAT .Just call it an IVAT. Imported value added. Then we would pay the same thing say Germany does for German products. We pay less for them than the Germans.
FrankMiller, except when a nation's workers are effectively experiencing “full employment”, annual trade deficits are otherwise ALWAYS net detrimental to families dependent upon wages, and entities sensitive to the financial conditions of that substantial segment of the nation's population.
You have never proven that and continuously repeating it ad nauseum doesn't prove it.
$1 of imports generates $3-$18 of GDP.
You can't even refute that simple fact which proves your entire thesis wrong.
Mircea, components of GDP by the expenditure method.
GDP is the sum of consumption (C), investment (I), government Expenditures (G) and net exports (X – M).
GDP = C+I+G+(X − M) = (Nation's net expenditures) + (Nation's net balance of trade)
For any given amount of a trade deficit nation's annual net expenditures, their annual GDP was reduced. Annual trade deficits are net annual imports that are net detrimental to their nation's GDP.
GDP = (Nation's net expenditures) - (Nation's net trade deficit)
For any given amount of a trade surplus nation's annual net expenditures, their annual GDP was increased. Trade surpluses are net annual exports that are additional to their nation's net expenditures.
GDP = (Nation's net expenditures) + (Nation's net trade surplus)
Where or how did you ever conclude a $1 of imports generates $3-$18 of GDP?
Mircea, components of GDP by the expenditure method.
GDP is the sum of consumption (C), investment (I), government Expenditures (G) and net exports (X – M).
GDP = C+I+G+(X − M) = (Nation's net expenditures) + (Nation's net balance of trade)
You don't understand the equation.
You don't even understand Economics.
Imports and exports are recorded as total value of goods/services that are imported or exported.
What happens to items that are imported?
Do they just sit on the docks collecting dust?
Did it not occur to you those imports which are raw goods are processed and then sold and those which are semi-finished goods are used to produce finished goods which are then sold and those which are finished goods go to wholesalers and distributors and then to retailers and are sold?
Where is the sale of those imported goods recorded in the equation you don't understand?
Quote:
Originally Posted by Supposn
Where or how did you ever conclude a $1 of imports generates $3-$18 of GDP?
Your government says so. The economic data says so.
Smith, Ricardo, and Mill proved you wrong centuries ago, but you have no idea who they are and wouldn't understand anything they say.
Imports and exports are recorded as total value of goods/services that are imported or exported. ...
... Smith, Ricardo, and Mill proved you wrong centuries ago, but you have no idea who they are and wouldn't understand anything they say.
Mircea, I suppose most, (if not all) nation's governments employ what's essentially an expenditure specie of GDP calculation methods. It's apparently the conventionally accepted method among the world's economic and statistical communities. I suppose Members of those communities would be very much more skeptical of any other GDP valuations if they substantially differed from GDPs calculated via the expenditure method. I don't suppose you're referring to any such less conventional methods?
GDP is the sum of:
consumption (C), investment (I), government Expenditures (G) and net exports (X – M).
GDP = C+I+G+(X − M) = (Nation's net expenditures) + (Nation's net balance of trade).
Trade deficits are a negative balance of international trade. For any given annual expenditures, trade surplus nations increased, and trade deficit nations reduced their GDPs more than otherwise.
Please provide a link to whatever you think Adam Smith, or David Ricardo, or James Mill wrote, that contradicts this post. I don't recall how much of Ricardo or Mill's that I read, and I recall nothing within “Wealth of Nations” that you may be referring to.
Last edited by Lizap; 10-22-2023 at 03:20 PM..
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