Reason.com

Free Minds & Free Markets

Americans Have a Dangerous Deficit in Trade Understanding

It doesn't matter if those to whom you sell goods or labor are not the same as those from whom you buy these things. The same goes for America.

Ingram Publishing/NewscomIngram Publishing/NewscomI was chatting with my tobacconist the other day—I have no rabbi, no priest, no minister, no imam, no chiropractor, and no lawyer, but I do have a tobacconist—when it struck me that my trade deficit with him is astronomical.

How could I have let this happen? For the nearly 20 years I have been patronizing his venerable establishment—nay, institution— it is I who has pushed money (make that plastic) across the counter. But not once has he pushed even a red cent to me. Come to think of it, this is also the case with Kroger, Walmart, McDonald's, and a variety of gas stations.

See the pattern? The money moves in one direction only. What the hell is going on?!

I realize that each time I gave those merchants my hard-earned dollars, I received things—but they were mere goods. Money is where the action is, right? Everybody knows that in any trade, it's the money side that wins. I think Donald Trump said something along those lines, and he wouldn't lie. He has a very fine brain—just ask him—so he couldn't be mistaken.

Yet I have this nagging feeling my torment is misplaced. After all, no one forced me into those stores. Each time, I had an internal reason; in the case of the tobacco shop, it was my habit hobby. I wanted the pipe tobacco, groceries, double-cheeseburgers (keto style: no bun, no fries), and gasoline.

Still, while I buy from those merchants week after week, none of them has ever bought a damn thing from me. Not once have they paid me to write or an edit an article for them. Not one time! But this thought keeps nagging at me: does it matter?

Let's approach this from another direction. Whenever I buy from them, I transfer money to which I hold proper title. It wasn't a gift, so that means I'd previously provided services to somebody. The tobacconist doesn't buy my services, but someone else does. Meanwhile, the tobacconist spends the money I give him to buy other people's products and services.

This suggests that when we abandon barter, what looks like two-sided exchange is really triangular, even though one of the parties is absent. In fact, the emergence of triangular exchange marks the move from barter to money. ("Hey, I know what I'll do. Even though I don't want this rice being offered for my products, I'll accept it in exchange because I know I can trade it to someone else for what I do want.")

Maybe it doesn't matter, then, that those to whom I sell are not the same as those from whom I buy. I shouldn't care about any bilateral "deficit." What matters is just that I don't chronically spend more money than I bring in by borrowing excessively. But as is now evident, my "trade deficit" has essentially nothing to do with any budget deficit I might run up.

I also don't see the point in "adding up" different people's trade situations in an attempt to a get "better" view of things. Let's say my next-door neighbor, Jones, happens to be a wholesaler who deals in pipes and tobacco, and during the year he happens to sell as much in dollar terms to my tobacconist as I buy from him. Do we learn anything important when we see that Richman-Jones has a perfect balance of trade with the shop? I think not. What if that's the case with my whole block, neighborhood, town, county, or state? Same answer. Who cares?

Okay, then maybe this would be a problem: rather than buying things from anybody, the tobacconist invests the money he receives from me. If he invests well, that money will make him money because those who borrow it will be able to produce more, better, or cheaper goods for the (world) community.

Nope, I see no problem there.

If I'm right about all this, then Adam Smith was being anything but hyperbolic when he wrote in The Wealth of Nations that "nothing can be more absurd than the whole doctrine of the balance of trade."

"Yes, yes," a Trumpster will say. "That's all well and good. But what if the person on the money side of my transaction is—gasp!—not an American?"

There's a definitive two-word answer to that question: so what?

This piece was originally published by The Libertarian Institute.

Photo Credit: Ingram Publishing/Newscom

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  • SQRLSY One||

    Well OK, I'm all OK with ignoring trade imbalances between the USA and any given nation then...

    But what about the Earth's trade imbalances with the space aliens?!? They get to derive pleasures and joys out of anally probing us, and WHAT are we getting in return?!?! They even ERASE our memories about getting anally probed, so we don't even get to treasure our memories!!! WHAT have they done for us lately?!?

    All theses tirades about USA trade imbalances, WHERE are our tirades about Earth / space aliens imbalances?!?!? WHO is looking at the bigger picture here?!?!?

  • Vernon Depner||

    But they gave us Velcro!

  • gormadoc||

    I assume this is a Star Trek: Enterprise reference?

  • A Thinking Mind||

    Still waiting on that transparent aluminum.

  • SQRLSY One||

    Speaking of aluminum, have you heard the latest?!?

    Genetically Engineered Bacterial Spores at Root of New Conspiracy

    What I have heard is that the Glibertarians are cooking up yet MORE evil ways to bring down aircraft! They have deviously devised aluminum-eating genetically engineered microbes, which, as we speak (write and read), are being secreted into and onto the main weight-bearing aluminum structural elements of American and allied (non- Glibertarians) aircraft, military and civilian alike. At the release of secret radio codes, these aluminum-digesting microbial GMOs will spring to life, and then will destroy aircraft in-flight.

    What are the microbes called, you say?

    Wait for it now…

    … The Aluminum-Eatee!!!

  • Inigo Montoya||

    For years I've been pushing the idea to anyone that will listen for a technology exchange.

    Our medical imagine is way more advanced than theirs, but hey are always ahead of us in space flight tech.

    So, we teach them how to make CT scanners and MRI machines, and even virtual colonscopies in capsule form, and in return they give us FTL warp drive technology.

  • SQRLSY One||

    Hey man, GREAT ideas there!!! Great tech-trade ideas there!

    I will be in touch with them, and see what they have to say...

  • SQRLSY One||

    They say that our medical scanning tech and pill-cameras are of no real use to them, since it is the PLEASURE of them anally probing us that they are really after!!!

    I have offered that they could permanently abduct both Stormy Daniels AND "Hooker Hulk Hogan", with my permission, in exchange for FTL travel tech. I'll see what they say to THAT!!!!

  • Paloma||

    Just wait until the insurance companies tell them that anal probes aren't covered.

  • sharmota4zeb||

    The pill cam was invented in Israel. Many democrats join the BDS movement so they have an excuse to opt for the traditional colonoscopy.

  • Echospinner||

    As was the first multi row detector CT manufactured by Elscint, now bought out. It grew from Technion.

    Our community hospital bought one and was one of the first to be able to confidently diagnose pulmonary embolism by CT angio. They were also leaders in gamma ray detectors and other imaging technology.

    The pill cam is for small bowel diagnosis not the colon. However the imaging technology developed by elscint has grown and MDCT is capable of virtual colonoscopy.

  • Marty Feldman's Eyes||

    Sounds like someone is mourning Art Bell

  • flemsnopes||

    Do you create your own unique currency to pay your tobacconist? If not, you may be comparing apples and oranges.

  • Agammamon||

    Imean, he's *not*, but he might be. Though he's not.

  • Don't look at me.||

    Not true, the tobacco shop more than likely gave him cancer, so it's not one way trade.

  • Hank Phillips||

    Not so. After I quit smoking and the feds banned smokeless cigs, I discovered I could stand inside a tobacco shop and cop a pretty good buzz just from breathing the air.

  • Echospinner||

    It reminds me of the story about the businessman who pulls up to a hotel in a dusty town fallen on hard times. He wants to check out the room before deciding to stay and puts a $100 bill on the counter as a deposit.

    The hotel owner owes the catering guy $100 for meal deliveries so he rushes over to pay him. The catering guy owes the butcher, who owes the farmer, who owes the feed supplier, who owes the local prostitute, who owes the hotel, and the $100 ends up back on the hotel counter.

    The businessman decides not to stay he picks up his $100 and leaves. Now everyone is paid up.

    Old one but I always liked it.

  • sarcasmic||

    Except that that Benjamin is what the innkeeper was owed by the hooker, so when the businessman picks it up, the hotel is our a hundred bucks.

  • Echospinner||

    The innkeeper does not owe the catering guy anything. Even trade.

  • Paloma||

    So? He's still out $100.

  • ThomasD||

    No, he's not out anything. He is even. Which he was before the businessman even walked in, he simply lacked the knowledge required to make his debtors and creditors whole. In this example that is all the Benjamin was - a means of communication.

    And, in that sense, that is what a trade deficit is (well, that coupled with the whole "print your own money" thing.) A trade deficit is another word for "money printing problem."

  • Iheartskeet||

    The guest and his $100 are irrelevant. At best, you could say he's providing liquidity.

    The rest of them could have settled up among themselves even if the guest never showed up.

    The other thing is In most cases, people get paid AFTER they deliver a good/service, so I don't get the guest/hotel owner transaction.

  • Juice||

    The story simply illustrates the utility of money. It's also a special case. What if everyone owed each other different amounts of money instead of $100 and the currency is divisible? The story would be slightly different and not make the existence of money seem superfluous.

  • Iheartskeet||

    No argument...its the specifics of the example I found...odd

  • Henry Buttal||

    This is a lovely straw man that avoids discussing many of the other impacts of "free trade". As a more realistic view, Let's say that Sheldon funds his smoking habit by running a liquor store, but the smoke shop owner is instead saving funds to accrue new sources of capital rather than indulging in demon drink.

    The local bank sees the improved economic conditions of the smoke shop owner as a capital investment opportunity, and extends financial terms for possible business expansion. The town can only support one smoke shop, but demand is there for ANOTHER liquor store. The bank happily supplies the capital to the smoke shop, and the owner opens a nice new liquor store with lower prices. Sheldon wants a loan, but the capital return isn't there.

    Think this is another fairy tale? Look at the capital inflow into Mexico post NAFTA...

  • Jerryskids||

    Well that's a lovely straw man that avoids discussing many of the other aspects of "free trade" - what if the tobacconist does invest the money he gets from Richman to buy a liquor store that competes with Richman? How am I hurt by having two liquor stores competing for my business? I don't give a shit about Richman, I only care about me. "America" doesn't buy anything from China, Americans do. You're fine with telling me I can't buy shit from China because it's bad for "America"? Fuck off, slaver.

  • Sevo||

    Henry Buttal|4.15.18 @ 11:21AM|#
    "This is a lovely straw man that avoids discussing many of the other impacts of "free trade"."

    You wasted a lot of time. You could simply have said you don't understand what you read.

  • Scarecrow Repair & Chippering||

    That assumes he knows that he doesn't understand it.

  • Henry Buttal||

    It's pretty clear both of you think something like NAFTA is free trade and that it is magic and happens without any other impacts. Or maybe you just like liquor stores and were drinkIng early. I understood enough to offer a counter example, and to recognize the movement of capital is remarkably different than in Adam Smith's time. Your responses were just drivel.

    Hell, I built and sold a company leveraging trade policy, and even I'm not fully sold "free" trade is always a good idea.

    Fuck off, serfs - you built your own chains...

  • Ship of Theseus||

    ^This cunt really is clueless.

    I believe the "fuck off, slaver" from Jerryskids above is the right response here.

  • Agammamon||

    What other impacts of free trade?

    If you're going to say I *owe* someone trade - then that trade is not free, is it?

  • DajjaI||

    The problem isn't individual trade deficits, but that overall they contribute to the national debt. Which is basically mortgaging the country to the Chinese (and others), who basically enslave the country's youth to pay them back. So yeah, it's a good thing to reduce the trade deficits overall.

  • sarcasmic||

    The trade deficit and government debt are in no way related other than in misleading terminology designed to fool idiots like you.

  • DajjaI||

    The fact that you would resort to bullying shows you're full of shit and you know it. In fact, the extra money we send to China and other countries means that they will use it to invest in our assets. It can be corporate, or government (national debt), or something else. But regardless we are mortgaging away our country because our kids will have to pay it back. Though it's funny you think you can win an argument by insults and bullying. When has that ever worked out? Anyway, yes the fact that China is stealing our intellectual property and applying unfair tarriffs is a huge problem and must be addressed in order to reduce the trade deficit and then in turn the national debt. This propaganda that 'trade deficits are wonderful' is pretty Orwellian, but kudos on the attempt.

  • Scarecrow Repair & Chippering||

    You truly are an idiot. Dollars out have to match dollars in, unless the Chinese are burning them. That alone ought to end the discussion, but the bozos invented the stupid accounting buzzword of "trade deficit" which only includes physical goods. It may have been useful when trading gold for locomotives, but it has no usefulness when fiat money and non-physical goods enter the scene. It really is just a stupid accounting term of no importance. Sheldon's comparison to his tobacconist is spot on, because that really his how stupid that term is.

  • DajjaI||

    You truly are an idiot. Dollars out have to match dollars in. Which means that if the Chinese are not spending it all on our goods and services, then they might be buying our... wait for it... NATIONAL DEBT.

    Well looky here:

    $6.3 trillion or approximately 45% of the debt held by the public was owned by foreign investors, the largest of which were Japan (about $1.06 trillion) and China (about $1.18 trillion).
  • Scarecrow Repair & Chippering||

    What's that got to do with the price of tea in India? All you've done is admit that the so-called trade deficit is just an accounting buzzword of no import.

    Are you seriously suggesting that we wouldn't be borrowing that money if the Chinese weren't offering it?

    The more sensible take is us owing them all that money means they are much less likely to start a war involving us.

  • Robert||

    Does it occur to you that someone who's investing will later be in a better position than someone who's consuming? That's the important sign behind all this. Clamping down on imports won't per se help, because net import'n is a symptom, not cause, of the problem. But neither will denying its existence help.

  • DajjaI||

    The more sensible take is us owing them all that money means they are much less likely to start a war involving us.

    Haha ok whew.

  • Agammamon||

    When goods do not cross borders, soldiers do.

  • JFree||

    It really is just a stupid accounting term of no importance.

    It is only an unimportant bookkeeping term - when there is no net deficit/surplus of significance.

    It's a huge deal when the deficit/surplus is persistent and big. eg within the euro area, Germany runs a huge trade surplus. They (via the ECB) want to keep that money in euros. Which means that eg Greece has to supply euro-denominated debt instruments. Which they did early on via a mortgage bubble on Greek vacation homes - which popped and Greek govt was forced to bail out those Greek banks - which means the debt is now govt debt and must be financed and rolled over by taxpayers - which means the Greek govt can no longer spend on what Greeks themselves agreed to pay in taxes but have to pay what German banks expect to receive on the debt instruments

  • ||

    mortgage bubble on Greek vacation homes - which popped and Greek govt was forced to bail out those Greek banks - which means the debt is now govt debt

    A Greek economist's take on the Greek debt crisis

  • JFree||

    In the first few pages, he's mostly talking about the impact WITHIN Greece of declining interest rates. That is fine (and true) as far as it goes - but it is like trying to explain a cars acceleration by talking about the behavior of the dog chasing it.

    What drove those interest rates (and spreads to bunds) lower was Germany's trade surplus within the eurozone. And those German banks buying euro-denominated Greek mortgages and bonds is what created the crisis for Greece. A professor of banking - writing an article for the Federal Reserve - is not going to spend much effort even thinking about how banking itself creates these crises. It's one reason economists can never see this shit coming beforehand. They no longer even have a concept of money that is not based on bank debt.

  • JoeBlow123||

    "And those German banks buying euro-denominated Greek mortgages and bonds is what created the crisis for Greece."

    This is an important point to make. Money was easy and the Greeks borrowed too much. They did not create the easy money, they just took advantage of it.

    It was just as irresponsible for the Greeks to borrow what they cannot pay as for the lenders (Germany) to give Greece what they cannot pay. Who was more irresponsible? Does not matter now because the ECB owns Greece and can dictate terms to them.

  • ||

    What drove those interest rates (and spreads to b[o]nds) lower was Germany's trade surplus within the eurozone.

    Nope, it was the result of Greece joining the €-zone which has a central bank (ECB) which sets interest rates.

    And those German banks buying euro-denominated Greek mortgages and bonds is what created the crisis for Greece.

    Nope, the way Greeks (both govt & private industry) spent the borrowed monies what created the crisis for Greece: it was (mostly) consumption which was financed by the growing govt & private debt, not investments into productive capacity.

    If Johannis borrowed €100,000 and spent it on non-productive goods (cars, consumer electronics &c.) then he wound up with a debt which he had to pay from his income derived from other sources. If he purchased a CNC machine with it, then operating (or leasing out) the machine provided him with the income stream out of which he was able to make loan payments and (possibly) consume. This is true even if both kind of goods (consumer goods vs. the CNC machine) was purchased from Germany.

  • JFree||

    it was the result of Greece joining the €-zone which has a central bank (ECB) which sets interest rates.

    Interest rates are not 'set' in the way you seem to think. Yes joining the euro made a deflationary crisis inevitable at some point since existing debt was rolled from a weak currency (drachma) to a strong one. And it meant that currency flows and arbitrage within that zone would equalize interest rates. But that is just another way of saying that Greece's trade deficits required it to export money/assets and that Germany's surplus meant they ended up there. And since Germany is a lot bigger than Greece, it's fair to say that German demand for those assets drove Greek interest rates lower.

    the way Greeks (both govt & private industry) spent the borrowed monies what created the crisis for Greece

    Actually it wasn't Greeks themselves who took out the private debt. It was northern Europeans - who were buying vacation homes in Greece - taking out mortgages from Greek banks. The Greeks who sold that to them took the proceeds and sent it to Switzerland/London. The result was financial assets in Greece rose in price while money itself left Greece. That stopped in 2005 or so - but since the trade deficits were perpetual, it meant Greek banks now had a liquidity problem. Which became a Greek govt problem and a classic debt-deflation depression.

  • ||

    Interest rates are not 'set' in the way you seem to think.

    What is this, then?

    It was northern Europeans - who were buying vacation homes in Greece - taking out mortgages from Greek banks

    What was the volume of these mortgages in proportion of all debt -- public and private -- taken on by Greece?

  • JFree||

    What was the volume of these mortgages in proportion of all debt -- public and private -- taken on by Greece?

    Greeks generally don't do mortgages. Those foreign mortgages were the majority of all new bank lending from 2000-2004 with the Olympic boondoggle being most of the rest. AFTER 2004 (by which point the liquidity problem for banks was in place), Greeks did some buy-high consumer/residential borrowing - but mostly the lending to Greeks was corporate/govt - NOT consumer/residential. The corporate loans gradually went bad because Greece was now trapped in a strong-currency euro and couldn't export its way into servicing euro-denominated debt.

    Paul Krugman is often correctly seen as a partisan hack now. But he does know trade flows and currency crises and he was dead on when he wrote this has never been a fiscal crisis at its root; it has always been a balance of payments crisis that manifests itself in part in budget problems, which have then been pushed onto the center of the stage by ideology. His prescription - well imo he's wrong there. But his diagnosis is correct.

  • ||

    Those foreign mortgages were the majority of all new bank lending from 2000-2004

    You mean that those foreign mortgages constituted more than half of all new banking lending public & private between 2000 & 2004? Could you point to some data supporting this assertion?

    currency crises

    Greece is part of the €-zone since 2001; her problem is precisely that she can't print €s at will.

    [Krugman:] this has never been a fiscal crisis at its root; it has always been a balance of payments crisis that manifests itself in part in budget problems, which have then been pushed onto the center of the stage by ideology

    Which is an ideological statement.

  • AJ_Liberty||

    "but that overall they contribute to the national debt"

    Deficits arise because the government spends more than it takes in. The fact that we must finance the debt by selling treasury notes is not dependent at all on who we are running trade deficits with. We run trade surpluses with countries like Hong Kong, Holland, Australia, and the United Arab Emirates but this does not somehow spell doom for these countries. You are correct that China owns a growing portion of this debt and that the excess dollars in China must go somewhere....but it is actually a good thing that there is high demand for investment in the U.S. The problem occurs when no one wants to invest in this country, interest rates spiral, and the service payment on the debt explodes. If you care about deficits and debt, then you need to complain about too much government spending....where the VCR I choose to buy comes from is not the concern.

  • DajjaI||

    Thank you for the civil tone of your comment. I'm amazed you guys have chosen 'trade deficits are actually good' as your hill to die on. Sad, really.

  • AJ_Liberty||

    I did not say that trade deficits were either good or bad. They may represent specialization within one country.....abundance of natural resources in another.....low production costs in another. The trade deficit also does not take into account the complexities of the supply chain. Electronic components that U.S. companies get from Chinese companies may then show up in complex system that get sold to other countries....and so we have a deficit with China and a surplus with Hong Kong. Some trade practices can be unfair like when China has manipulated its currency rate some years back. Everyone is competing for market share and jobs in their countries....but encouraging trade competition is beneficial to the consumer. It's always hard for workers in industries that lose...but the question is, "do you want to subsidy those industries through higher costs?".....I say no.

  • JoeBlow123||

    Do what to subsidize/authorize the Chinese state owned enterprises and quasi state owned enterprises (every business in China has sold their soul to the CCP) investment and takeover of Western property, intellectual property, and corporations?

    I do not. They are totalitarian, Orwellian mafia thugs. Fuck them.

    You guys forget that while free trade may be great among friends and allies, you do not want to enrich Hitler or Stalin or Xi Jinping so they can later use their trade windfalls to kill your citizens with. Geopolitics matter, libertarians forget this at their peril.

  • The Last American Hero||

    What is a trade windfall? Is that what Japan used to buy up all the coastal real estate in the early 1990's, leading to the rise of the Megacorps and the institution of Japanese as the official language of some states?

    Oh, wait, in our timeline those trade deficits of the 1980's meant squat.

  • JoeBlow123||

    We send dollars to China for stuff. They can either invest in our stock markets, our real estate markets, buy our companies, buy our products, or buy our treasury bonds. Perhaps even buy oil with it or anything else that is dollar denominated. We send them money, they buy assets or invest in assets that are denominated in dollars.

    Simply, we send them money that they use to then buy things. Since they don't want our trade goods, they buy treasury bonds or buy things to own. This serves two purposes

    1) China now owns things and can transfer know how and technology to China which they can put into their military or transfer to their state owned enterprises. As serial technology thiefs, China should worry you. Even the Russians do not like to sell them military tech because they just reverse engineer it, steal it, produce it, and give zero royalties. They just tell Russia to go stuff it.
    2) Creditors make the rules. This has been the truth for ages. Gunboat diplomacy has backed up creditor nations against debtor nations since the Renaissance, forcing debtor nations to give in to the demands of creditor nations.

    One more thing. Japan is a functioning democracy that was under the military protection of the United States. I could give two fucks if they became world hegemon. I care a little bit more when bullying, totalitarian communists are sitting on the threshold of that same situation and everyone around pretends like everything is hunky dory.

  • Agammamon||

    If they're 'investing in our assets' then that means that they are *keeping the budget deficit from being larger* - or funding increased government 'services' while allowing the government to maintain the same deficit.

    We're mortgaging away our country because the government is printing money to fuel ever more government - not because I bought a table from Mexico instead of Maine.

  • Robert||

    He wrote national, not gov't debt. I know we're used to thinking of the gov't as the nation, but obviously gov't is but a part of the nation. If $ are flowing out of the nation on net, that means in the future we're going to have to produce more to get back to the situation the nation was in previously, because in the long run acc'ts will balance.

  • Emotional Opposition Animal||

    He didn't say government debt, he said national debt, which includes debt of private entities.

  • I'm Not Sure||

    "The problem isn't individual trade deficits, but that overall they contribute to the national debt."

    You're saying the money I earn that I spend at the market contributes to the national debt? I would suggest you might be misinformed and need to rethink things before saying something else equally silly.

  • DajjaI||

    If the market uses your money to buy US Treasuries then yes, of course it does. For example, the Philly soda tax. This caused a trade deficit with the suburbs. Who are now flush with cash. Do you think they will just buy more soft pretzels? No, they will likely invest a lot of it in government debt. Which guess who will have to pay it back? The children. Like I said.

    I would suggest you might be misinformed and need to rethink things before making another silly comment.

  • Scarecrow Repair & Chippering||

    Why don't you draw it out in detail, list some actual (or made-up) numbers? I suggest it not to enlighten us (we already know how dim you are) but for you to enlighten yourself.

  • DajjaI||

    Sure, here goes. Philadelphia man crosses to the suburbs to buy soda for a year, spending $200. The store owner in the suburbs invests that in a Philadelphia Municipal Bond. Which pays for 'social services' and prisons to accommodate the newly unemployed Philadelphia worker. Whose child will eventually have to pay back the bond (if they stay in the city). Great deal, huh?

  • Scarecrow Repair & Chippering||

    The unseen part of course is that alternatively, the soda is bought in the city and the seller does exactly the same thing.

    What point do you think you are making?

  • I'm Not Sure||

    "f the market uses your money to buy US Treasuries then yes, of course it does."

    Once I pay for something, it is no longer my money. I hardly think the store has an account labeled "I'm Not Sure's Money", where they track what they do with the specific dollars I use to pay them.

    Nevertheless, let's play along...

    Using your logic, if the market uses the money they get from you to pay a worker who then uses that money to buy drugs, you are responsible for enabling illegal drug use.

  • Emotional Opposition Animal||

    national debt is ALL debt incurred by the nation, not just government debt.

  • Agammamon||

    National debt is *only* debt incurred by the government. The rest of it debt of provate individuals.

    You are not on the hook for my mortgage, for example. Nor are you respknsible for or will profit (directly) from any other debt I take on.

  • Shirley Knott||

    This gets a lot of attention at Cafe Hayek, which you all should be reading at least as regularly as Hit & Run.
    Rich man is exactly right here.

  • sarcasmic||

    I visit Don's blog every day.

  • Ken Shultz||

    Richman's argument is compelling in that it makes the case for free trade so that average people can get their heads around it.

    The only criticism I have is that it doesn't denigrate the white, blue collar, middle class of the rust belt for being racist, homophobic, and stupid.

    I mean, if we go around making the case for free trade to average people without denigrating them, they might start listening--and then God only knows what could happen.

    What's the point of being libertarian if we can't lord over people?

  • Shirley Knott||

    Not being a slaver?
    That's the only point I need.

  • Ken Shultz||

    Where's the fun in that?

    I just got a new slaver hat and everything.

  • Don't look at me.||

    And a new monocle!

  • Agammamon||

    Wait, we can still own orphans, right?

  • Aloysious||

    Well, at least we can denigrate Richman for not putting bacon on his double-cheeseburger, and lord it over Dajjal before he gets banned again.

  • JoeBlow123||

    Buying a pack of cigarettes from 7/11 is not even closely equivalent to international trade. This argument gets bandied around so often around here ("Look at the huge trade surplus I have with my grocery store!") it is comical.

    It is nice to pretend complicated shit is actually simple, but the reality is that it is not. It is dishonest intellectually to pretend it is.

  • Agammamon||

    Its exactly the same.

    Or are you telling me that there is some fundamental difference between me buying a table from a guy i San Luis - 20 miles from me - vice buying it from a guy in Bangor - 1000 miles away?

    If there is, please tell me what that difference is.

  • Hank Phillips||

    That was clear and informative, thanks. Reminds me of the prof who explained Marketing as "things people do to shift their product's supply and demand curves away from the commodity curve intersection."

  • DajjaI||

    my "trade deficit" has essentially nothing to do with any budget deficit I might run up

    If you get a pay cut or an unexpected expense in your life, you might be singing a different tune.

  • Echospinner||

    We all have those. Checkbook economics.

    When that happens you try to find ways to reduce outflow, buy less or smarter. At the same time try to increase inflow by working more or getting a better paying job.

    The government just prints more T Bills.

  • Robert||

    I shouldn't care about any bilateral "deficit." What matters is just that I don't chronically spend more money than I bring in by borrowing excessively. But as is now evident, my "trade deficit" has essentially nothing to do with any budget deficit I might run up.


    But an aggregate trade deficit of just that type is what has critics concerned: a chronic net outflow of $. It's not the cause of a problem, but a symptom of one, foretelling impoverishment.

  • gormadoc||

    Are you impoverished by your individual trade deficit? Are large cities impoverished by their trade deficits with rural areas? Has Switzerland been impoverished compared to its neighbors for all of its history?

    A straight answer to your begged question is that the trade deficit does not account for services, which is how most developed countries generate most of their wealth now. It doesn't consider wealth generation in general, really.

    All of that only matters if you're considering the nations as trading partners, which is not actually the case. Individuals and companies trade. If they are choosing to trade they are increasing their utility, the exact opposite of poverty.

  • Robert||

    They're increasing their present utility at the expense of the future.

  • Emotional Opposition Animal||

    Are you impoverished by your individual trade deficit?

    I don't have an individual trade deficit. My trade surplus with my employer is larger than my trade deficit from businesses I buy from, allowing me to invest the difference. If the reverse were true, and I had an individual trade deficit, then I would have to be either depleting my savings or going into debt.

    A straight answer to your begged question is that the trade deficit does not account for services, which is how most developed countries generate most of their wealth now.

    The vast majority of American service industry revenue comes from American customers, and thus has no effect on trade surplus or deficit. There are far fewer Indian customers calling American tech support than the reverse.

  • gormadoc||

    You have an individual trade deficit with almost everybody you transact with even if you have a capital surplus with your employer. You understand that in reality you have no meaningful deficit or surplus with the whole of the outside world but fail to see that it's also true of almost all Americans. The aggregate deficit or surplus similarly has no real meaning. That's why worrying about the US trade deficit with specific countries is nonsensical; we export more to some countries than we import from them.

    It doesn't matter what the vast majority goes to. We provide a lot of services around the globe that simply aren't counted in the trade ledgers. F2P video games offered by Valve are a good example. These games are some of the most widely played (if not the most considered together) games in the world.

  • Emotional Opposition Animal||

    You have an individual trade deficit with almost everybody you transact with even if you have a capital surplus with your employer.

    I am not capital. I can quit at any time and go work for someone else or not at all. My economic arrangement with my employer is trade, not capital.

    You understand that in reality you have no meaningful deficit or surplus with the whole of the outside world

    That is not true. I have a surplus with the rest of the world, which I invest. I know the globalists want to recast investment as purchase, but that's BS.

    That's why worrying about the US trade deficit with specific countries is nonsensical; we export more to some countries than we import from them.

    I would agree with this, actually. But the total surplus or deficit with the rest of the world is meaningful.

    It doesn't matter what the vast majority goes to.

    It does when you're making the argument that since most of our economy is in services, therefore ignoring services invalidates the deficit/surplus computation. The vast majority of those services are locally-provided by Americans for Americans.

    F2P video games offered by Valve are a good example. These games are some of the most widely played (if not the most considered together) games in the world.

    Not familiar with their financials... they would have bring in an awful lot to counteract the services Americans purchase from foreigners and then the enormous trade deficit in non-services.

  • Agammamon||

    Still not getting it.

  • Robert||

    The question it raises that should be asked policy makers is, what is it about the USA that causes foreign goods, on aggregate, to be a better buy than domestic ones? Not particular goods, but the aggregate. It means it's more expensive to produce value in the USA than in the rest of the world. Considering the amount of capital in use here, why would that be the case? What's putting the brakes on productivity?

    Or, looked at another way, why does time preference in the USA favor buying more & saving less than it does in the rest of the world? Why do people think they're better off spending now than the rest of the world thinks that?

  • Emotional Opposition Animal||

    It means it's more expensive to produce value in the USA than in the rest of the world.

    Not the rest of the world but some other parts of the world. Some European companies manufacture in the South because it's cheaper to do so there than in Europe.

    A lot of the extra cost of doing business in USA or EU is environmental and labor regulation as well as far more expensive real estate compared to third world countries. For example, we're getting the hue and cry about how we can't piss off PRC because they produce the vast majority of rare earths needed for technology. In reality we have sufficient amounts of rare earths in the US, but generally don't extract them because it's environmentally hazardous. It's just as environmentally hazardous in the PRC, of course, but commies don't give a shit about the environment.

  • gormadoc||

    You're only looking at it that way because you don't understand comparative advantage. It's expensive to make Americans pick beans or sew shirts because there are more productive (and therefore lucrative) pursuits.

    Absent government involvement, high wages are caused by high productivity; nothing is "putting the brakes on productivity." The fact that Americans have high wages is also due to our high productivity. For instance, I can work for one hour and buy a pretty good shirt. That's not possible in China or Mexico.

    On savings, there's a myriad of factors contributing to US savings rate being relatively low compared to the rest of the world. The biggest factors are that the US is extremely stable and continues to grow. Another factor is that the US dollar is the global standard, making our savings in USD better than a foreigner's savings in their national currency. They then have to save more to be safe. USD are popular to save in foreign countries because people (or likely the people they trade with) expect to be able to trade up for American goods or services in the future.

  • Emotional Opposition Animal||

    It's expensive to make Americans pick beans or sew shirts because there are more productive (and therefore lucrative) pursuits.

    Like collecting welfare?

    Absent government involvement, high wages are caused by high productivity; nothing is "putting the brakes on productivity." The fact that Americans have high wages is also due to our high productivity. For instance, I can work for one hour and buy a pretty good shirt. That's not possible in China or Mexico.

    So a kid scrubbing grills at McDonalds in Topeka for $8 an hour is 16 times more productive than a kid making 10 pairs of sneakers per hour in the Dominican Republic for $0.50 an hour? That doesn't pass the laugh test. The higher wages of Americans are due to labor regulations, the welfare system, higher real estate costs, more money flowing through our economy, and the effect of compounding all these phenomena.

    USD are popular to save in foreign countries because people (or likely the people they trade with) expect to be able to trade up for American goods or services in the future.

    Oh my here's this fallacy again. Dollars don't have to be traded for American goods or services, anymore than gold has to be traded for goods or services provided by a gold mine. They're currency because people think they're currency, nothing more.

  • Robert||

    Of course I understand comparative advantage, that's why I wrote, "Not particular goods, but the aggregate."

    On savings, there's a myriad of factors contributing to US savings rate being relatively low compared to the rest of the world. The biggest factors are that the US is extremely stable and continues to grow.


    Then you'd think time preferences in the US would disfavor spending now

    USD are popular to save in foreign countries because people (or likely the people they trade with) expect to be able to trade up for American goods or services in the future.


    Which means, the more $ flow out of the country, the more competition Americans will have in purchasing domestic goods in the future. Foreigners will be getting a greater share than otherwise.

    In the long run all books balance. The question is, what factors are causing the relative transnational flow of $ we see now compared to other times in hx? I think they predict a weaker economy. Americans are buying now because they don't think they'll be as able to later.

  • Unlabelable MJGreen||

    How many critics are actually concerned about that?

    What about it foretells impoverishment? That Americans don't save enough? That interest rates are 'artificially low,' increasing the demand for (foreign) capital? Perhaps those are the case, but they are not a necessary component of a trade deficit.

  • Emotional Opposition Animal||

    What about it foretells impoverishment?

    It means we're depleting our assets and/or going into debt to foreign countries. If that continues long-term, impoverishment is the result.

    I don't think anybody could dispute this when it comes to an individual's overall trade deficit/surplus. When talking about it at a national level, however, there appear to be more opportunities (and motivations) for obfuscation of this very simple fact.

  • gormadoc||

    You really don't understand that the trade deficit looks at imports vs exports of goods, do you? Most Americans do not produce goods to receive goods, rather we trade our service for goods. Our individual trade deficits are complete ass.

  • Emotional Opposition Animal||

    I would bet that even if you include services we still have a trade deficit.

  • Emotional Opposition Animal||

    And I would win that bet: https://en.wikipedia.org/wiki/Current_account

    The US is the reddest country on the planet in that map.

  • Agammamon||

    The impoverihlsjment here comes fro.the government taking spending more money than it takes in, borrowing, then raising taxes or borrowing more to cover interest payments on order to buy votes.

  • Cep Rast||

    It's funny how the MAGA crowd doesnt seem to know how America became great in the first place.

    It's even funnier when you realize the lefty Bern-outs have the same protectionist stances as the MAGA crowd.

    Never forget lots of Trumpkins are former Democrats, Trump won by poaching democrat votes in swing states.

  • Emotional Opposition Animal||

    The US has been a high tariff nation for most of its existence. That used to be the federal govt's primary revenue stream.

  • Agammamon||

    When the US abolishes the income tax we can talk about reimposing tarrifs.

    Until the, nope.

  • JFree||

    Well here's a graph of the net current account (trade plus services - though it excludes capital account or FDI) from 1950 on - https://goo.gl/images/t5BWBc

    And before 1950, it was pretty much the same right back to 1790 or before. Roughly balanced - since imbalances in that account drove exchange rates which then self-corrected the current account.

    It is only since 1980 that there has been a non-self-correcting decline. And only since the mid-1990's, that that decline has turned into a cliff.

    So was America before 1980 just some pissant little Third World country? Or has America since the mid-1990's simply turned into a completely financialized country where most 'growth' is merely a series of financial bubbles and the financial sector receives near perpetual bailouts from other sectors to keep the bubbles from popping?

    Don't get me wrong. Trump and the MAGA crowd have no fucking clue - since their 'solutions' don't address the actual problem. But we sure as hell do have a BIG problem. And it is in fact a form of protectionism - not a form of free trade.

  • JFree||

    BTW - the decline from 1980-mid1990's was mostly an interest-rate based repricing of financial assets. Part of a normal long-term (50 year or so) debt cycle - which creates its own problems in that next stage. What has happened SINCE then is the gutting out of a country that is doing everything it can to avoid the usual next stage (a debt-deflation with deleveraging that can turn ugly - see Great Depression) in that normal long-term debt cycle.

  • The Last American Hero||

    Pretty easy to be a net exporter when you bomb the industrial capacity of Europe and Japan to dust.

  • JFree||

    Yeah. But the reality is that our current accounts were in rough balance then. Because the combo of paying money to American troops (who spent it in Europe) and various foreign aid stuff (like Marshall Plan) meant we were paying them to buy our stuff

  • Emotional Opposition Animal||

    Seriously, this stupid argument conflating trade deficits with "deficit with my grocer" or "deficit with my tobacconist" needs to die. Richman is ignoring the fact that he has a far greater surplus with whoever is paying him to write these idiotic articles, which (hopefully) balances out the deficit with people he buys things from. If the surplus does not balance his deficits, then he is either depleting his assets or going into debt, neither of which is a good thing.

    And yes, real estate is an asset, so selling off bits of our country to foreigners is depleting assets. For example, most Canadians living in Vancouver have to pay rent to China to live in their own country. Not a good situation to be in.

    That's before we get to the issues of the PRC's strategy buying up American IP useful for military applications, and bleeding dry American industries that would be necessary in case of a war.

  • gormadoc||

    That's an account surplus, not a trade deficit. He most certainly has a trade deficit with everyone, as Richman produces no goods.

    They don't pay rent to China, they pay rent to Chinese companies or individuals (if what you say is even true). By the same token, Chinese in the US don't pay rent to the US, they pay rent to their landlords.

    US manufacturing recently hit a peak during the last two decades and has stayed around that peak ever since. The industry certainly isn't bleeding.

  • Emotional Opposition Animal||

    That's an account surplus, not a trade deficit. He most certainly has a trade deficit with everyone, as Richman produces no goods.

    Way to nitpick terminology. We also have a current account deficit of $389.5B, so changing the terminology doesn't really help your position.

  • Emotional Opposition Animal||

    They don't pay rent to China, they pay rent to Chinese companies or individuals (if what you say is even true).

    Which are located where, and primarily spending the rent money in which economy?

  • ||

    Which are located where

    Vancouver, British Columbia, Canada.

    The companies which rent out real estate in Vancouver have to be Canadian (BC) companies. The owners of such companies might be Chinese individuals who may be citizens of Canada, China or both and may reside in Canada (BC), China or both (not at the same time, of course).

    primarily spending the rent money in which economy?

    CAD can be spent only in Canada. Let's say that there's a mainland Chinese company which owns a Canadian company which owns rental property in Vancouver: its rental income is in CAD. Said company can do two things with its CAD: spend it in Canada on consumer goods, or invest it in Canada. If it wants to acquire yuan (renminbi) because it wants to spend in China then it has to sell the CAD to someone for yuan (renminbi); and then the purchaser of the CAD has the same two options which the recipient of the CAD rental income had.

    Earlier you said:

    most Canadians living in Vancouver have to pay rent to China to live in their own country. Not a good situation to be in.

    For the renter it doesn't make a whit of difference to whom she pays rent: it's the same amount and she gets the same goods (the use of the rental property) irrespectively of what is the owner's nationality. As a matter of fact, she pays rent precisely because she doesn't own that particular piece of the country (Canada).

  • vek||

    Ugh. You're completely missing the fact that a foreign national, business or person, is becoming wealthier at the expense of the Canadian.

    WHO owns assets MATTERS. A far greater portion of that money would stay in Canada and benefit Canadians and the Canadian economy if that property were owned by a Canadian. Buying goods, services, rent, etc can all be useful for a person to do for various reasons... But the person owning the assets and benefiting from the income is still the person at the top of the totem pole. Those who own capital are king. Those that are beholden to capital are NOT king.

    This is obvious stuff. Now paying rent to somebody may be preferable to being homeless, but OWNING your own property is preferable. Get it?

  • Nardz||

    US consumer debt through 2017: $13.15 trillion
    US government debt through 2017: $20.49 trillion
    Income growth 1979-2013:
    -Bottom 20%: +39%
    -Middle 60%: +31%
    -Upper 19%: +65%
    -Top 1%: +187%

    Just some numbers to think about when discussing surplus vs deficit.

    My impression is that the middle class in the US is shrinking, while the lower class is growing. Don't know if that's accurate or not.
    What I do know I'd that there are a lot of incompetent people with good jobs, and a lot of capable people under or unemployed.

  • Emotional Opposition Animal||

    Not that it changes your argument, but are those income growth numbers adjusted for inflation?

  • Nardz||

    Yea, figured I'd get caught.
    I don't know. It was some site citing CBO numbers, but didn't mention inflation adjusted or not.
    Give me a minute...

  • Nardz||

    Okay, it appears to be adjusted for inflation (according to Forbes)

  • The Last American Hero||

    Income is meaningless when employer health insurance has been growing by double digits - thus eating up a lot of potential wage increases.

  • Agammamon||

    Your impressipn os half right.

    Because the middle class is shrinking.

    Its just that the lower class is shrinking faster and we're all moving into the upper class bracket.

  • Agammamon||

    The lower the economic bracket, the faster that bracket is getting richer.

  • Emotional Opposition Animal||

    Since there's a dispute about goods vs. services in the "trade deficit", let's look at the current account balances, which include service payments.

    Top 10 current accounts surplus (2017, millions of USD):


    1 Germany 296,000
    2 Japan 175,000
    3 China 162,500
    4 South Korea 85,140
    5 Netherlands 82,440
    6 Taiwan 79,000
    7 Switzerland 67,330
    8 Singapore 59,790
    9 Italy 52,830
    10 Thailand 44,000

    Top 10 Current account deficits (2017, millions of USD):


    1 United States 462,000
    2 United Kingdom 91,420
    3 Canada 55,570
    4 Turkey 38,950
    5 India 33,680
    6 Brazil 28,990
    7 France 28,920
    8 Algeria 22,870
    9 Argentina 22,130
    10 Australia 21,680
  • Old Mexican - Mostly Harmless||

    Hey, subnormal, economics is NOT accounting.

  • Libertarian||

    "What matters is that we don't chronically spend more money than is coming in."

    Not according to Dick Cheney.

  • Elias Fakaname||

    At this point, Dick Cheney is the least of our problems.

  • Earth Skeptic||

    Forget that stupid trade stuff. The genius is in the rest of the headline: "Dangerous Deficit in Understanding".

    Now apply this to any human interactions. Measure the communication after a few minutes or days, and determine the Understanding Deficit. One side is clearly not getting it, and we can probably define a UD threshold where further communication is hopeless. Hell, this might even work for Congress, like during the Zuckerberg "questioning", or just about any government (or any other) official.

  • Old Mexican - Mostly Harmless||

    Oh, look! Trumpistas showcasing their economic ignorance and incompetence!

    Gee, what are the odds of that?

    Confusing trade with national debt, confusing cause and effect, confusing monetary policy with trade... And those are only the highlights.

  • Elias Fakaname||

    You really are a tiresome little twat, aren't you? Begone bitch! Back to the border with you!

  • JoeBlow123||

    Yeah, what retard does not like the future where the communist, totalitarian Chinese own our hotels, our companies, our movie studios, our sports teams? Who could possibly object to their "investment" in our economy using their trade windfalls in their dollar denominated trade surplus. Fucking ignoramuses!

    Don't they understand anything! They have trade deficits with their local grocery stores for Chris'sake!

  • ||

    Who could possibly object to their "investment" in our economy using their trade windfalls in their dollar denominated trade surplus.

    The source of their 'trade windfalls' is the 'trade windfalls' of American consumers: all the goods which are shipped from China to the US in exchange for USD.

  • JoeBlow123||

    I will state this simply. I would rather buy more expensive jeans than put a single dollar in a totalitarian, communist mafia country that has zero interest in joining the 21st century and reforming into a capitalist democracy. In fact, they are going in the opposite direction and reforming their country in a more totalitarian manner every single day. I can deal with this in a country that has no hegemonic aspirations, I do not think this is wise to ignore these tendencies in a country with a billion people that is led by a totalitarian, communist dictatorship with hegemonic aspirations.

    Again, it is cute how the commentariat here explicitly continues to ignore that while the American consumer may be better off by buying cheaper stuff, they are also enriching a totalitarian communist mafia in China. I think that is a crappy trade. If libertarians want to sell me on the idea that I am a fool to think it is foolish to enrich totalitarian communists then I am all ears, but no one even bothers to address this. There is just tremendous bleating that free trade is the best and we should free trade with everyone, even totalitarian communists.

  • ||

    I would rather buy more expensive jeans than put a single dollar in a totalitarian, communist mafia country

    This article is more than five years old, but according to it, it is (or at least was) possible to purchase "Made in the USA" jeans.

    while the American consumer may be better off by buying cheaper stuff, they are also enriching a totalitarian communist mafia in China

    The American consumers aren't enriching only the totalitarian communist mafia in China: they're enriching the Chinese masses as well. Totalitarian communist mafias are able to extract riches from poor masses, too; take a look at Cuba: the USA maintains a trade embargo with Cuba at least since 1962; it made no difference as far as the existence of a totalitarian communist mafia in Havana goes, but it certainly contributed to the poverty of the Cuban masses.

  • JoeBlow123||

    "The American consumers aren't enriching only the totalitarian communist mafia in China: they're enriching the Chinese masses as well."

    Thats great but the CCP siphons off huge portions off the top to pay for their military, their surveillance state, their intelligence matters.

    I have nothing but respect for what the Chinese have done, they put their futures on their back and modernized their country. All the CCP does is leech off of their hard work. But their wealth is enriching a government that stands for things antithetical to individualism and individual rights.

  • ||

    but the CCP siphons off huge portions off the top to pay for their military, their surveillance state, their intelligence matters

    Which the CCP did before 1979, too; but then the Chinese masses were much poorer than nowadays.

    All the CCP does is leech off of their hard work. But their wealth is enriching a government that stands for things antithetical to individualism and individual rights.

    Which is true of all central governments, including the government of the USA. If one is not supposed to trade with people because some of the riches thus created wounds up in the pockets of politicians, then one isn't supposed to trade with anyone, with the possible exception of black market trade.

  • Iheartskeet||

    Suit yourself...the issue is why you think YOU get to force your economic biases on the rest of us. If someone wants to buy a $12 Chinese made sweater instead of an $18 US made sweater, why is it your business ?

    Gotta ask...what are you proposing exactly ? Should America cease all exports to China ? Should we have no trade at all ?

  • JoeBlow123||

    "Suit yourself...the issue is why you think YOU get to force your economic biases on the rest of us. If someone wants to buy a $12 Chinese made sweater instead of an $18 US made sweater, why is it your business ?

    Gotta ask...what are you proposing exactly ? Should America cease all exports to China ? Should we have no trade at all ?"

    1) Americans collectively enriching China (i.e. the CCP) harms me by potentially creating a rival power that wants to supplant the West, bully our friends in Asia like Japan, disrupt and do away with the rules based order that was created after the end of WWII, and push military weapons and military threats closer to the United States. China will also create little puppet states just like them across the globe that are not committed to democracy, individual rights, or capitalism. I do not think it is wise to blithely accept a return to totalitarianism. I believe the word for this is a collective action problem.
    2) Reciprocity with China. Communists and dictators understand one thing, strength. Show them weakness and they exploit it. 100% reciprocity with China. Erect so many non-tariff barriers with them it is impossible for them to do business with the United States like they do with us, provide their corporations zero legal protection in the United States like they do to ours, smack tariffs in their face until they stop pegging their currency, sell weapons to Taiwan until China stops militarizing fake islands in the South China Sea, etc.

  • Iheartskeet||

    I honestly can't make sense of your arguments here. You paint China as hell-bent on power, but then propose a bunch of penny ante economic stuff that, frankly, doesn't match your rhetoric. If they are THAT BAD, why aren't you proposing an all-out embargo ?

    The other thing is you see trade with China as only benefiting China...but this trade strengthens our economy also (I'd argue we get MORE out of it, as we take in more than we send out). So, your penny ante stuff seems at once implausible in terms of thwarting their ambitions (which seem to go beyond mere money), yet makes us economically weaker. We'd be way better off getting our own economic house in order.

    Yet further you make predictions about the impact of wealth on China that are frankly nothing more than guesses. God knows what will happen, and China has plenty of problems. They sit on a demographic time bomb, and the government-directed cronyism rampant in their system is bound to blow up in some way eventually.

    Nothing in an argument for Free Trade diminishes a need for a decisive military defense capability. And we're already selling arms to Taiwan.

  • Elias Fakaname||

    China is Hell bent on supplanting us as the dominant world power. They aren't trying to hide their ambitions. Enriching them unnecessarily isn't wise in the king run.

  • JoeBlow123||

    "I honestly can't make sense of your arguments here. You paint China as hell-bent on power, but then propose a bunch of penny ante economic stuff that, frankly, doesn't match your rhetoric. If they are THAT BAD, why aren't you proposing an all-out embargo ?"

    Because it is impossible to happen at this time and impracticable. If it ever gets to that point that is fine, but continuing to blithely accept their aspirations to supplant the West and the world that has been created by Western democratic powers with a one dominated by a communist dictatorship is dumb. Meet force with force and if they back down great, but we need to let them know militarily, economically, and politically we are not going to accept their bullshit.

    All they have seen is weakness and placating attitudes from us as we predict their eventual democratization. This has obviously not happened and shows no signs of happening. It is best to start treating them as the rival they are and stop sending them wealth, wealth they are turning into weapons and economic bribes like their "One Belt One Road" baloney or shenanigans in Africa.

    More or less I am arguing they have relatively been gaining more from us with free trade than we gain from them. While we might be gaining absolutely from free trade with them, it is hurting is relatively vis a vis China as they continue to gain more. Force them to play nice with the world, open up their markets, or treat them as a rival power that they continue to act like.

  • Iheartskeet||

    I think this is the crux of it. I really doubt your proposed policies will do any of the things you think. If the Chinese are untrustworthy, power hungry hegemons, I quite doubt they are going to start playing nice just because of some trade sanctions. They might give the outward appearance of change, but I suspect their IP and military technology theft will continue unabated.

    In my view, the best policy is to continue free trade (on our side, regardless of their actions) and not give US companies the illusion that some brokered trade deal will protect their IP. Because it won't. Any US company doing business there ought to be wary...meanwhile we can continue to benefit from trade ourselves.

    In the end, the course of this is unpredictable. The best thing for America is to secure our own economic health and vibrancy as best we can, and have a strong defense. A trade war with China doesn't help us on either front.

  • JoeBlow123||

    "And we're already selling arms to Taiwan."

    One more point. The Taiwanese military is trash, we do not sell them as much as you might think. For instance, they have four submarines. Two of which, the Guppy, are no-shit WWII era submarines from the United States. Their surface fleet is composed of Oliver Hazard Perry class frigates and a few older destroyers that are both decades old and severely outclassed by nearly every Chinese surface ship. They have some good jets, but we have been afraid to sell them anything over the past two decades in fear of pissing off the CCP. This is the story of nearly every arms sale, we do not do it because we do not want to annoy the Communist gods in Beijing. And lord knows no one else will either because everyone is afraid of pissing off the Communists, with their billion consumers. So we sit and do nothing while the communists bully Taiwan into virtual non-existence.

  • Iheartskeet||

    Selling more or better gear to Taiwan isn't inconsistent with Free Trade...heck I'm all for it. We have to be careful what we sell though, as there is a risk if they go down, the Chinese will inherit whatever hi-tech gear we sold them. Again, however, I don't see the relevance of this to restricting trade.

  • Agammamon||

    Then do so. No one is stopping you.

    You just don't get to put a gun to our heads to force us to do the same.

  • Agammamon||

    Of course you would be ingoring that the massive relaxing of control (its relative) that is entirely due to the averqge Chinese peasant seeing howuch better his life could be trading with us and forcing the Party to compromise or lose everything in another bloody revolution.

  • JoeBlow123||

    How long have people been saying this? Chinese peasants become more rich and China becomes more free. The will flower into a democracy!

    It might be some nice fiction to believe, like Francis Fukayama, that the history is over and we are all headed to a happy, democratic future as we become richer but that is bunk. We now have dictator Xi in charge of the second most powerful military in the world, the largest economy in the world by PPP, in charge of the largest police state in the world, in charge of the largest surveillance state in the world, a state utterly committed to suppression of individual rights. China shows zero signs of democratizing or opening up their country or economy, lets not pretend to live in the happy fiction of the 1990s anymore and come to grips with reality.

  • JoeBlow123||

    You are right. I cannot force you to do anything you do not want. But one day sooner or later you and me and every other American will have to deal with the consequences of enriching a kleptocratic communist dictatorship that gives zero fucks about the Enlightenment, zero fucks about democracy, zero fucks about individual rights, and zero fucks about capitalism.

    Just own that decision and make sure you are aware of it. All I can do is point out the ridiculous contradiction of libertarians defending free trade so we can enrich a communist dictatorship that does not like us and does not like our values.

  • Elias Fakaname||

    It's funny that given the attitudes here about nation building and changing the way people think in foreign countries, that those same peril,e assume free trade will do the same thing, no problem.

  • Released||

    They blindly assume that we live in a world with perfect free trade and perfectly free markets. Because their first schoolbook assumed that, because that is the most simple situation imaginable. It is of course completely unreal and false and leads to grotesquely false conclusions that tyrants can take advantage of to spread socialism and islamism.

  • Iheartskeet||

    Nope...no Free Trade advocate I've seen here or know assumes we live in any kind of perfect world. Indeed, its anti-Free Trader's irrational and economically illiterate response to the world's imperfections that is the issue.

    You can go all the way back to Adam Smith and find him talking about...basically people like you. People who see one country implement dumb tariffs or whatever, and who then advocate we compound the problem by taxing our own people.

  • Agammamon||

    No they do not. Jesus man. Do you people even thinl that maybe this isn't the first time this has been hashed out and that you question has already been posed *and answered*? In great detail?

  • Diane Reynolds (Paul.)||

    That picture is like a cooler version of me. Respect.

  • buybuydandavis||

    "It doesn't matter if America becomes a company town of Xi Jinping"

  • Azathoth!!||

    I have always been under the impression regarding these 'trade deficit' deals that the idea was that OUR market is more open to them than theirs is to us--and not something so childishly stupid as the scenarios being continuously put forth about this weird equality of sales thing.

    It is nonsensical to suggest that a stance that we should be as free to sell to your people as you are to sell to ours is wrong.

    Based on the recent negotiations with South Korea to get them out of the tariffs the opening of markets does seem to be the impetus behind this. The US is allowed to export more goods into SK.

    Because, believe it or not, we DO have goods that people want that are kept scarce in other nations through government policy. And that type of government policy is not good for anyone.

    Open, free markets, that's the goal.

  • Agammamon||

    Yes. It is the goal.

    But unilateral free trade is still better - for us - than tit-for-tat trade war to get some other country to loightwn up.

  • Elias Fakaname||

    No, not necessarily. Sometimes it might be. Sometimes not. When you get down to it, I think for most people here, it comes down to getting their widgets a few bucks cheaper and not giving a shit that a lot of other Americans may lose their livelihood and everything they ever worked for so that commentariat member getting an extra 5% off of their next electronics purchase.

  • Azathoth!!||

    If you don't do anything to get others to lighten up, you don't get free trade. You get one country, trying to act as if there's free trade being screwed by those who don't have it.

  • vek||

    "I shouldn't care about any bilateral "deficit." What matters is just that I don't chronically spend more money than I bring in by borrowing excessively. "

    He is right... The problem is WE ARE BORROWING EXCESSIVELY. We're literally having to sell off our assets to pay for current consumption, since they don't want our goods. If we had no deficit overall, or if it was very small, it would not matter. If we ran in the red with China, but made it up exporting to XYZ country it would be totally fine. But hundreds of billions a year in the red overall adds up.

    Think about it this way: The average home price in the USA is around $200,000. For every billion dollars we run in the trade/account deficit we have to sell off 5,000 American homes worth of value to pay for that current consumption. According to numbers above that means we have to sell 2,310,000 (that's 2.3 MILLION) houses a year to pay for our trade deficit. PER YEAR. Over 10 years that would be 23 million houses worth of value.

  • vek||

    That is selling off A LOT of assets so that we can essentially over consume in the here and now. As a country we should be consuming a bit less, and saving/investing a bit more. The average American has HORRIBLE personal finances. Not nearly enough saved for retirement, and far too many bobbles they don't need. Humans like instant gratification, but it's not always a healthy urge. The trade deficit would likely be hugely helped by people just being more responsible. It would also help if foreign countries had their protectionist policies removed.

    All I know is the current track is NOT a wise one for the long haul. Bobbles are good, but only if you can legitimately afford them. I don't consider selling off assets to pay for current consumption to be responsible behavior. Who thinks taking out home equity lines on their homes equity to buy jet skis is a good idea? NOBODY. That's what we're doing as a nation.

  • Mark22||

    How could I have let this happen? For the nearly 20 years I have been patronizing his venerable establishment—nay, institution— it is I who has pushed money (make that plastic) across the counter

    Hopefully, you haven't had a "trade deficit" with the rest of the world for the past 20 years, because otherwise you'd be deep in debt by now. But if you did, then it would be prudent to find the trading partner who you have the biggest deficit with and count back.

    Americans Have a Dangerous Deficit in Trade Understanding

    Well, you certainly do.

  • pemaintoto||

    Saya akan menyatakan ini dengan sederhana. Saya lebih suka membeli jeans yang lebih mahal daripada menaruh satu dolar di negara mafia komunis totaliter yang tidak memiliki minat untuk bergabung dengan abad ke-21 dan mereformasi ke demokrasi kapitalis. Bahkan, mereka menuju arah yang berlawanan dan mereformasi negara mereka dengan cara yang lebih totaliter setiap hari. Saya dapat menangani hal ini di negara yang tidak memiliki aspirasi hegemonik, saya pikir tidak bijaksana untuk mengabaikan kecenderungan ini di negara dengan miliaran orang yang dipimpin oleh kediktatoran komunitarian yang totaliter dengan aspirasi hegemonik.

  • McCarthy1967||

    I had an accident that made me quit my job and I and my Family are seriously facing financial issues at the time. We collected thousands of money from our Home Equity line of credit (HELOC) account which works sort of like a credit card to raise our son through college. This caused our credit scores to drop drastically, the bank almost terminated our line of credit and at that point I almost regretted my existence in life. I am using this opportunity to say a BIG THANK YOU to my sister and her BFF she introduced to us as a credit score hacker and counselor. He cleared our HELOC debt of $142,000 and raised our scores to 765 and 758. My special thanks goes to this genius hacker, we purchased our second home last week for our son. As we have promised to give him more clients if he should successfully fix our problems. We are living testimonies and confident of this miracle worker to handle all jobs, I will implore everyone facing challenges with credit scores, credit report,bankruptcy,mortgage issues to reach him on spiderwebhhack at g male dot come

  • prediksifajar||

GET REASON MAGAZINE

Get Reason's print or digital edition before it’s posted online