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Minyan Mailbag: Are Trade Deficits Good for the Economy?

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The world is borrowing future productivity.

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Prof. Succo,

I don't understand how having such a high trade deficit can help our economy. I was looking over some charts over the past 30 years and saw a much smaller gap in our imports and exports and they would eventually catch up to each other narrowing the gap. But within the past 15 yrs our imports have far outnumbered our exports. I raised a question in class as to how this could be beneficial to our economy. I got the response that the
U.S. is creating a market for its own goods. Does that not mean that the U.S. is just financing the world for U.S. Trade market? Isn't the U.S.
just financing its own growth by buying foreign products? Basically all tying back to your main point of the erosion of the middle class.

I was just wondering if you could point me in the right direction. Maybe a few articles about the trade deficit and its advantages and disadvantages or even your point of view on Free Trade?

Thank you,

Minyan Brian

MB,

I never had much empathy for the approach economists take. They are a strange breed to me; their love of markets often leads them to rationalize phenomenon as something it is not.

Your professor is saying that we are creating a market for our goods because we are buying their goods with borrowed money now so these "producing "countries" can increase their standard of living and someday buy our goods too. This circular thinking is far from logical for they are not considering the costs.

We are in reality creating more over-capacity from already such a state and doing it by creating more debt in all countries. Public debt in our country, as well as
Japan, as well as China is exploding. This is a by-product of the central bank devaluing process.

The world is borrowing future productivity.

It seems government is becoming more and more pervasive in societies, controlling production, finance, and markets. The curious reaction I am seeing to "bad" news like a surprising shortfall in GDP (not to me) and horrible geo-political events (Hamas) by markets leads me to believe that government is very active in the day to day management of prices.

This in the long run is very bad.

-Succo
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