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Annual trade deficits are always net detrimental to their nation's GDP.

I'm Supposn said:
JohnfrmClevelan, we all benefit from cheaper imported goods, but they do not fully compensate for trade deficits reduction of their nation's GDP and drag upon our their numbers of jobs. The national net economic costs due to our trade deficits of goods are almost entirely at the expense of wage-earners' families. They represent the great preponderance of of USA's middle income earners.
Persons dependent upon enterprises that are more dependent upon middle and lower income segments of our population are also detrimentally impacted.

Respectfully, Supposn
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a previous study claimed trade deficits are a relatively minor issue, once we understand the fundamentals of the imbalance.
 
JohnfrmClevelan said:
If not via credit, then explain to me how an economy grows from one year to the next. Especially when our economy both net saves and runs a large trade deficit.
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JohnfrmClevelan, annual GDP, (gross domestic product) is not a cumulative amount that continues to grow. It's the nation's production of goods and service products for the reported year.

It increases due to actual improved production, and the U.S. dollar's inflation. Aside from production increases due to technological improvements, increases of GDP are also driven by our increased national working (and consuming) population.

Respectfully, Supposn
 
I'm Supposn said:
JohnfrmClevelan, annual GDP, (gross domestic product) is not a cumulative amount that continues to grow. It's the nation's production of goods and service products for the reported year.

It increases due to actual improved production, and the U.S. dollar's inflation. Aside from production increases due to technological improvements, increases of GDP are also driven by our increased national working (and consuming) population.

Respectfully, Supposn
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It increases due to money. No commerce happens in this country without money, so when you are talking about the economy and growth, you can't dismiss it. In other words, production doesn't increase unless somebody with money to spend demands more goods and services.

Go back to my scenario where you make $50K and borrow $5K. Without credit, how are you going to increase your demand? We almost never net spend out of savings. We never run a trade surplus. And without credit, we can't spend more than we earn. You can't grow from a $17 trillion economy to an $18 trillion economy without an addition of money ahead of the addition of production, because that new money pays for the increased production.


Put another way, when you look at "C" for a given year, most of it was paid for out of our income from the past year's production, but some of it was paid for with credit (which, when spent, becomes somebody else's income). Same goes for I.
 
danielpalos said:
a previous study claimed trade deficits are a relatively minor issue, once we understand the fundamentals of the imbalance.
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DanielPalos, you're referring to the fact that USA's imports and our trade deficits volumes are not of great proportion relative to our annual gross domestic products, (GDPs). But the amounts of nations' net trade balances effects upon their GDPs to some extents understate, (never overstate) their ACTUAL effects upon their nation's domestic production which is reflected by the GDP amount.

But annual trade deficits, are ALWAYS net detrimental to their nation's GDP and due to lesser domestic production, they do drag upon their nation's numbers of jobs.

That's the short answer. Respectfully, Supposn
 
danielpalos said:
a previous study claimed trade deficits are a relatively minor issue, once we understand the fundamentals of the imbalance.
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Trade balance's economic importance.

Annual trade deficits indicate the nation has consumed more products than it has produced. That occurs when imports have “crowded out” the nation's domestic products from the marketplaces. The amount of a nation's net trade balance can only account for the prices of globally traded products effects upon their nations' GDP, but the products' prices do not reflect all of the commercial activity their production has generated.

There are enterprises in industries that we would suppose our unrelated, but they generate commercial activity between them. (e.g. a coffee shop or a pizza parlor near a producer of goods, or a cartoonist that that provides content for that producer's in-house posters or company bulletins are two of many examples. All production supporting or other commercial activity induced by production, are not reflected within the prices of those products. Of course all domestic commercial production activity contributes to their nation's GDP but if it's not reflected within the prices of globally traded products, we cannot account for the ALL of global trades' net effects upon domestic production due to the nation's net balance of international trade; but it's always to a greater extent than the net balance itself.

Governments often locate or modify or build public infrastructures more favorable to their jurisdictions' larger producers. Similarly, professional well-qualified advice, opinions, research, and development studies are some examples of production supporting goods and services that may be provided by governments, universities, and other organizations on much lesser than market or at no cost. They mutually benefit from promoting their national or local economies.

These are costs that contribute to their nations' domestic production, but are not fully paid for by the favored producers, and are not reflected in those producers' prices. To the extent that prices of globally traded goods are understated, they understate international trades' effects upon their nation's domestic production.

Economies of scale are more conspicuous in manufacturing, but they occur to some extent in almost all industries.
The lesser cost per unit of production is less available to U.S. steel producers because they have a smaller potential home market of USA enterprises purchasing steel. USA has lesser steel purchasers due to lower-priced imports made with steel.
[This is the reason that levying tariffs on steel, but not on products containing steel is illogical].. We're increasing costs to USA purchasers of steel while their products must still compete with foreign imports. Thus, we're reducing the competitive position of USA steel purchasers and contributing to those enterprises' demise.

Economies of scale indirectly contribute to the producing nations GDP by enabling them to increase their production and/or the quality of their production at lesser cost.

We know that an enterprise's additional commercial activity can “resonate” with other seemingly less related enterprises and consequentially increase their nation's domestic production. An enterprise's production for export can, and often is such an additional commercial activity; we know international trade balances usually understate their nations net balances effects upon their nation's annual domestic production; We know that trade surplus nations' domestic productions are increased, and trade deficit nations' productions are reduced due to their annual net balances of trade; We know domestic production supports domestic employment.

Beyond the economic benefits of increasing their nations commercial activity and numbers of jobs, increasing domestic production often provides social, technical, and military benefits to their nation.

By by manipulating the materials, methods, and materials of production, we gain familiarity, knowledge and insight to production. So much of our economies' progress was due to research and development induced by USA's defense purchases. If our military has need for something fast, will it be delayed because a foreign government doesn't agree with our then current policy? What of military security for foreign produced equipment?

Respectfully, Supposn
 
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I'm Supposn said:
DanielPalos, you're referring to the fact that USA's imports and our trade deficits volumes are not of great proportion relative to our annual gross domestic products, (GDPs). But the amounts of nations' net trade balances effects upon their GDPs to some extents understate, (never overstate) their ACTUAL effects upon their nation's domestic production which is reflected by the GDP amount.

But annual trade deficits, are ALWAYS net detrimental to their nation's GDP and due to lesser domestic production, they do drag upon their nation's numbers of jobs.

That's the short answer. Respectfully, Supposn
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The short answer is, balance of trade is a relatively minor issue once we understand the fundamentals of the inefficiencies of that market sector. Infrastructure, not trade wars.
 
I'm Supposn said:
Trade balance's economic importance.

Annual trade deficits indicate the nation has consumed more products than it has produced. That occurs when imports have “crowded out” the nation's domestic products from the marketplaces. The amount of a nation's net trade balance can only account for the prices of globally traded products effects upon their nations' GDP, but the products' prices do not reflect all of the commercial activity their production has generated.

There are enterprises in industries that we would suppose our unrelated, but they generate commercial activity between them. (e.g. a coffee shop or a pizza parlor near a producer of goods, or a cartoonist that that provides content for that producer's in-house posters or company bulletins are two of many examples. All production supporting or other commercial activity induced by production, are not reflected within the prices of those products. Of course all domestic commercial production activity contributes to their nation's GDP but if it's not reflected within the prices of globally traded products, we cannot account for the ALL of global trades' net effects upon domestic production due to the nation's net balance of international trade; but it's always to a greater extent than the net balance itself.

Governments often locate or modify or build public infrastructures more favorable to their jurisdictions' larger producers. Similarly, professional well-qualified advice, opinions, research, and development studies are some examples of production supporting goods and services that may be provided by governments, universities, and other organizations on much lesser than market or at no cost. They mutually benefit from promoting their national or local economies.

These are costs that contribute to their nations' domestic production, but are not fully paid for by the favored producers, and are not reflected in those producers' prices. To the extent that prices of globally traded goods are understated, they understate international trades' effects upon their nation's domestic production.

Economies of scale are more conspicuous in manufacturing, but they occur to some extent in almost all industries.
The lesser cost per unit of production is less available to U.S. steel producers because they have a smaller potential home market of USA enterprises purchasing steel. USA has lesser steel purchasers due to lower-priced imports made with steel.
[This is the reason that levying tariffs on steel, but not on products containing steel is illogical].. We're increasing costs to USA purchasers of steel while their products must still compete with foreign imports. Thus, we're reducing the competitive position of USA steel purchasers and contributing to those enterprises' demise.

Economies of scale indirectly contribute to the producing nations GDP by enabling them to increase their production and/or the quality of their production at lesser cost.

We know that an enterprise's additional commercial activity can “resonate” with other seemingly less related enterprises and consequentially increase their nation's domestic production. An enterprise's production for export can, and often is such an additional commercial activity; we know international trade balances usually understate their nations net balances effects upon their nation's annual domestic production; We know that trade surplus nations' domestic productions are increased, and trade deficit nations' productions are reduced due to their annual net balances of trade; We know domestic production supports domestic employment.

Beyond the economic benefits of increasing their nations commercial activity and numbers of jobs, increasing domestic production often provides social, technical, and military benefits to their nation.

By by manipulating the materials, methods, and materials of production, we gain familiarity, knowledge and insight to production. So much of our economies' progress was due to research and development induced by USA's defense purchases. If our military has need for something fast, will it be delayed because a foreign government doesn't agree with our then current policy? What of military security for foreign produced equipment?

Respectfully, Supposn
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not trade related at all; only efficiency related. infrastructure solves those issues.
 
danielpalos said:
not trade related at all; only efficiency related. infrastructure solves those issues.
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DanielPalos, what issues are you referring to that are not related to global trade?
The issue I'm referring to is the additional commercial activity generated by producers of products that are not reflected within those products prices.

Although all of the nation's production of goods and service products are reflected within the nation's GDP, we cannot account for the production activity that was induced by the production of globally traded products but not included within those products' prices. We know that the nation's net balance of trade understates global trades effects upon their nation's domestic production.

We know the extents of increased domestic production due to a surplus trade nation's positive trade balance, or the reduced production due to a trade deficit nation's negative balance, exceed their nation's net balance of trade.

Regarding infrastructures, what issues were solved?
USA's railroads and and waterway cargo handling is second class in comparison to many other industrial nations. Our highways are good but do not compare to the autobahn. Our nation's bridges, tunnels, pipelines and electrical grids were not maintained and updated.

Respectfully, Supposn
 
I'm Supposn said:
DanielPalos, what issues are you referring to that are not related to global trade?
The issue I'm referring to is the additional commercial activity generated by producers of products that are not reflected within those products prices.

Although all of the nation's production of goods and service products are reflected within the nation's GDP, we cannot account for the production activity that was induced by the production of globally traded products but not included within those products' prices. We know that the nation's net balance of trade understates global trades effects upon their nation's domestic production.

We know the extents of increased domestic production due to a surplus trade nation's positive trade balance, or the reduced production due to a trade deficit nation's negative balance, exceed their nation's net balance of trade.

Regarding infrastructures, what issues were solved?
USA's railroads and and waterway cargo handling is second class in comparison to many other industrial nations. Our highways are good but do not compare to the autobahn. Our nation's bridges, tunnels, pipelines and electrical grids were not maintained and updated.

Respectfully, Supposn
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balance of trade means deficits and surpluses; who's fault is that?
 
I'm Supposn said:
But annual trade deficits, are ALWAYS net detrimental to their nation's GDP and due to lesser domestic production, they do drag upon their nation's numbers of jobs.
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You have not demonstrated this. I showed you earlier how an economy can benefit from foreign trade even when they run a trade deficit. Why didn't you address that post?
 
danielpalos said:
balance of trade means deficits and surpluses; who's fault is that?
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DanielPalos, It's the “fault” of we voters and the legislators we elected. Consumers and enterprise managers, (as we all should) now and in the future, act in our own bests interests.

Within all levels of U.S. government jurisdictions, we've identified and prohibited practices that are contrary to the safety or general welfare of our populations. Regardless of how profitable such practices may be to the individual or agreeing parties, we deemed that those practices are (in aggregate), grievously detrimental to our society.

That's the justification for the proposed Import Certificate trade policy.
Under the Import Certificates laws, what's to the individual's best interests would coincide with our nation's best economic interests.

Respectfully, Supposn
 
JohnfrmClevelan said:
You have not demonstrated this. I showed you earlier how an economy can benefit from foreign trade even when they run a trade deficit. Why didn't you address that post?
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JohnfrmClevelan, I have so “demonstrated” in posts addressed to both you and to others; you have not successfully so “showed”.

Specifically, you have not shown how a trade deficit is not net detrimental to the nation's GDP. You just can't accept my responses.

Respectfully, Supposn
 
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zyzygy said:
Would you do that by investing in infrastructure?
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yes. There have been some issues upon which Democrats and Republicans did more than co-operater. They also more or less fully agreed upon some issues to similar extents. Foreign policy and infrastructure are two such issues.

Respectfully, Supposn
 
I'm Supposn said:
DanielPalos, It's the “fault” of we voters and the legislators we elected. Consumers and enterprise managers, (as we all should) now and in the future, act in our own bests interests.

Within all levels of U.S. government jurisdictions, we've identified and prohibited practices that are contrary to the safety or general welfare of our populations. Regardless of how profitable such practices may be to the individual or agreeing parties, we deemed that those practices are (in aggregate), grievously detrimental to our society.

That's the justification for the proposed Import Certificate trade policy.
Under the Import Certificates laws, what's to the individual's best interests would coincide with our nation's best economic interests.

Respectfully, Supposn
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How about export certificates? Our alleged wars on crime, drugs, and terror; are not conducive to Any balance of trade.
 
I'm Supposn said:
JohnfrmClevelan, I have so “demonstrated” in posts addressed to both you and to others; you have not successfully so “showed”.
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No, you have taken a very superficial look at a simple equation, and made a sweeping conclusion based on an incomplete and incorrect understanding of it.

I'm Supposn said:
Specifically, you have not shown how a trade deficit is not net detrimental to the nation's GDP. You just can't accept my responses.
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A trade deficit is merely a matter of replacing dollars lost to foreign savings with increased deficit spending and increased credit. In real terms, our exports + our dollars are worth exactly enough to buy those imports. If those dollars just sit in foreign hands, what have we lost? And if they eventually are used to purchase American goods down the road, great, that's good for American labor. Point is, increased commerce is a good thing in either case.

Look at any economy - the ones that isolate themselves do poorly, and the ones that trade in the world market grow. What matters is how much your economy produces. The more you produce, the more labor you will employ, and the more you can consume. Foreign trade obviously increases the market for your goods.

You are looking at a simple equation that doesn't take into account the increased commerce that foreign trade brings. It merely looks at the difference between imports and exports, not the size. In the GDP equation, ($3 trillion in exports - $4 trillion in imports) gives you the same result as ($30 trillion in exports - $31 trillion in imports). Are you going to stick with the argument that those two situations have the same effect on our economy?

What if, instead of a small trade surplus ($4 trillion in exports - $3 trillion in imports), we had a trade deficit ($30 trillion in exports - $31 trillion in imports)? Which economy is creating more jobs?
 
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JohnfrmClevelan said:
... What if, instead of a small trade surplus ($4 trillion in exports - $3 trillion in imports), we had a trade deficit ($30 trillion in exports - $31 trillion in imports)? Which economy is creating more jobs?
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JohnfrmClevelan, in the two examples you provide, the net effect of the nation's trade balance upon their GDP is exactly the same and all other factors being equal, the trillion dollar trade deficit would be net detrimental to both nation's GDPs and would drag upon their number of jobs; (i.e. trade deficits reduce, not increase numbers of jobs in both nations).

Nation's benefit from their producing goods and service products; they benefit from global trade; but chronic annual trade deficits are net detrimental to a nation's economy. An annual trade deficit is always net detrimental to its nation's GDP. It indicates the nation has consumed more than it has produced.

Respectfully, Supposn
 
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I'm Supposn said:
JohnfrmClevelan, in the two examples you provide, the net effect of the nation's trade balance upon their GDP is exactly the same and all other factors being equal, the trillion dollar trade deficit would be net detrimental to both nation's GDPs and would drag upon their number of jobs; (i.e. trade deficits reduce, not increase numbers of jobs in both nations).

Nation's benefit from their producing goods and service products; they benefit from global trade; but chronic annual trade deficits are net detrimental to a nation's economy. An annual trade deficit is always net detrimental to its nation's GDP. It indicates the nation has consumed more than it has produced.
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But all other factors are never equal. You take foreign trade as it comes. Not everybody can run a trade surplus. You make up the difference with money, which may or may not be spent on your production at some future date (usually, it's not).

Were we to run a trade surplus, we end up with a pile of euros, yen, and yuan. What good does that do us?

So to sum up, you think it's better to have a trade surplus and produce $4 trillion worth of goods than to have a trade deficit and produce $30 trillion worth of goods. You believe that you employ more workers producing $4 trillion than you employ producing $30 trillion.

You sure you don't want to rethink that?
 
Originally Posted by JohnfrmClevelan:
... What if, instead of a small trade surplus ($4 trillion in exports - $3 trillion in imports), we had a trade deficit ($30 trillion in exports - $31 trillion in imports)? Which economy is creating more jobs?

Originally Posted by Supposn:
JohnfrmClevelan, in the two examples you provide, the net effect of the nation's trade balance upon their GDP is exactly the same and all other factors being equal, the trillion dollar trade deficit would be net detrimental to both nation's GDPs and would drag upon their number of jobs; (i.e. trade deficits reduce, not increase numbers of jobs in both nations).

Nation's benefit from their producing goods and service products; they benefit from global trade; but chronic annual trade deficits are net detrimental to a nation's economy. An annual trade deficit is always net detrimental to its nation's GDP. It indicates the nation has consumed more than it has produced. ...
JohnfrmClevelan said:
But all other factors are never equal. ... You sure you don't want to rethink that?
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JohnfrmClevelan, I would hedge my bets and further qualify your statement, other factors are [in my opinion rarely if] ever equal; but yes, I agree in essence with that statement you posted. But we have discussed trade deficits without any regard for “the other factors”.

As you solicitously suggested, I reconsidered my prior post. I'm satisfied that my prior post is factually and logically correct.
Respectfully, Supposn
 
I'm Supposn said:
Annual trade deficits are always net detrimental to their nation's GDP and drag upon their numbers of jobs. They indicate national use and consumption exceeded the nation's production.
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Your lame theory doesn't account for GDP generated by trade.

If you import $600 Billion, but export $400 Billion, then you have a trade deficit of $200 Billion, but if that $600 Billion in imports generated $2.4 TRILLION in GDP, are you better off, or worse off?

If you had $0 in imports, you can neither guarantee nor assume you'd be able to generate that $2.4 TRILLION in GDP domestically.

And if you limited imports to $400 Billion to match your $400 Billion in exports, you might only create $1.6 TRILLION instead of $2.4 TRILLION, in which case your GDP is less, not more.
 
Mircea said:
Your lame theory doesn't account for GDP generated by trade.

If you import $600 Billion, but export $400 Billion, then you have a trade deficit of $200 Billion, but if that $600 Billion in imports generated $2.4 TRILLION in GDP, are you better off, or worse off?

If you had $0 in imports, you can neither guarantee nor assume you'd be able to generate that $2.4 TRILLION in GDP domestically.

And if you limited imports to $400 Billion to match your $400 Billion in exports, you might only create $1.6 TRILLION instead of $2.4 TRILLION, in which case your GDP is less, not more.
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Mircea, annual trade deficits are ALWAYS net detrimental to their nation's GDP because they always reduce their nation's domestic production more than otherwise.

I suppose you're referring to imports of tools, or materials or components used to support domestic production of a finished product.
I'm among the proponent of the improved trade policy described within Wikipedia's “Import Certificates” article. For examples:
. General Motors exporting body part blanks to be finished by cheaper Mexican labor would use the certificates they acquired when they export the steel blanks, and they'd need additional Certificates to import the fenders and other finished body parts of increased value, back into the USA.
. If Toyota or Ford imports tools or components would have to acquire certificates to cover the value of whatever they import.
But those importing completely finished products, would have to acquire certificates to cover the complete value of the entire products they're importing.

Respectfully, Supposn
 
Mircea said:
Your lame theory doesn't account for GDP generated by trade.

If you import $600 Billion, but export $400 Billion, then you have a trade deficit of $200 Billion, but if that $600 Billion in imports generated $2.4 TRILLION in GDP, are you better off, or worse off?

If you had $0 in imports, you can neither guarantee nor assume you'd be able to generate that $2.4 TRILLION in GDP domestically.

And if you limited imports to $400 Billion to match your $400 Billion in exports, you might only create $1.6 TRILLION instead of $2.4 TRILLION, in which case your GDP is less, not more.
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Mircea, USA's adoption of Import Certificate trade policy would grant advantages to products entirely. and lesser advantages to products partially USA produced. But it would be of some advantage to any USA producer that competes or aspires to compete with foreign products anywhere in the world.

Remember, USA's chronic annual trade deficits are not due to production supporting imports, but rather primarily due to imported finished products. The economic differences between domestic and imported products cease when the goods are under USA jurisdiction and handled by USA labor. After a Fiats leave the docks of a USA entry ports, or a Ford leave their shipping platforms, similar products are of similar economic benefit to the USA.

Respectfully, Supposn
 
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