US "trade deficit" at 948.1 billion

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https://www.morningstar.com/news/market ... on-in-2022

Hello, I wanted to just highlight how typical news stories lie. A trade deficit is actually impossible.

What they are reporting is a "current account" deficit. Current account + financial accounts always balance out.

The larger the current account deficit, the larger the financial account surplus.

What does this mean in practice?

When we use US dollars to purchase foreign goods, those foreigners have some choices:

1. Keep the dollars

2. Convert the dollars in the foreign exchange market

3. Use the dollars to buy things in the US.

Generally, what has happened over the decades is we are using our dollars to buy manufactured goods from foreigners and those foreigners are taking those dollars and purchasing US assets such as land and stocks.

The way the media reports the story, they act like its cash leaving the country never to return, as if its a bad thing that will lead to our demise or that its a debt that must be repaid. It is repaid, instantly - in the financial accounts.

Thanks for reading!

So Americans are selling existing assets to cover their import spending?

Wut?

Americans are selling those to buyers. Some of their buyers are foreigners who have US dollars that they earned selling manufactured items to Americans.

It's as simple as that.

So dumb that people don't realize that if the USA has a trade deficit with another country it just means they bought more stuff from them than that country bought from the USA. That's it. Pretty simple stuff.

But morons in politics and the media are presenting it as if it's a debt owed by that country or somehow unfair when there was a fair exchange of money for goods/services, and quite simply, the USA bought more than they sold. People are stupid.

It used to be argued that trade deficits dont matter because "foriegners dont want our dollars just to finger our dollars. They want our dollars to buy stuff". So as foreign countries get richer trading with us they will become bigger consumers as well. They will buy more of our stuff. So we will get rich too because it will stimulate our industries too.


Trouble is that it does NOT stimulate industry here. We just keep on deindustrializing. So those foreigners who get American dollars dont buy American made manufactured stuff, they invest in American assets like real estate.

So instead of China buying American cars in exchange for us buying the Disney Toys they manufacture, China buys up farmland, and buildings, and golf courses, here in America. Is that a bad thing, or a good thing? I dunno.

....

::taps into mic::

No comment.

Lets say China invades Taiwan. All that crap they bought here is now ours and we get to keep all that crap we bought from them.

From a strategic point of view, trading trinkets for land here actually gives us more power over them. They can't take back the trinkets. We can take back the land with a new law if they decided to go Nazi Germany on SE Asia.

Its the same with all the US treasury debt they own (its not at much as people think), and the US stock equities they own.

If China goes Nazi Germany on SE Asia, we just write a law that says "no dividend payments to enemies."

The only concern I have about China owning US equities and land is that they aren't a democracy. If someday the CCP fell or guided the country into a democracy (unlikely, I know), I welcome more integration.

China is a great culture with a rich history and the CCP is oppressing their people from their true potential to contribute to the future of humanity.

However, I disagree with your statement of "we keep de industrializing."

The problem is the definition of manufacturing is arbitrary. Why is taking a few slices of bread and meat and making it into a Big Mac not called "sandwhich manufacturing?" Why is organizing text into software not called "software manufacturing?"

US manufacturing is actually larger than it ever has in dollar amounts. The things we manufacture are things you don't buy at Wal Mart.

China makes relatively cheap goods. We make things like Boeing 767's, multi million dollar MRI machines, and those giant dump trucks made by Caterpillar. What has declined is the share of workers in traditional manufacturing jobs, which don't exist anymore. Machines play a much larger role in manufacturing than they did 50 years ago.

They're smarter than we are. Same thing in Canada. Now they become our landlord. etc.

They're not breaking any rules - it's the rules that are wrong. Dipshit politicians and business people, and combinations of them, focused on their own short term greed keep offshoring jobs to the extreme.. and then more dipshits allow foreign entities to buy up our land/buildings/infrastructure and rent it back to us. Everyone's getting paid Except the North American worker bee taxpayer that gets screwed.

BUT that's what we get for our own short sighted greed of buying inexpensive products made in China in the first place.. if we didn't buy their stuff, none of this would happen. But because everyone's addicted to impossibly low prices on crap they don't even Need, the system does what it does.

I was thinking along the same lines as your first paragraphs. In theory if Beijing invades Taiwan, or engages in other military aggression then it would look on paper like they could control us...they would own all of our soybean fields here in Nebraska...which would seem like they control US...but in fact it would be their own weakness. The POTUS could just nationalize all Chinese owned assets in the US at the stroke of a pen (like how Iran nationalized British BP oil refineries in Iran in 1953), and China would lose its investments in our economy. The US government would then own it all and would then auction the seized Chinese owned assets off to non Chinese bidders (so we dont go Communist from the government owning so much private property. LOL). And China would be screwed.

You need help man.

Not really.

We buy manufactured goods from China.

Chinese people buy our land/buildings/mines etc and in some countries ports/railways etc etc.

How do I need help?

You are very negative and you see boogeymen where there are none. Usually, thats a sign of antisocial tendencies. When you say people buy stuff they don't need, thats you making a judgement on other people's purchases.

Economics states that you cannot judge how to maximize others' utility. If other people buy things they like, its kindof nuts to wave it off as useless. Its implicitly saying you know better how to maximize others' utility. That's pretty narcissistic.

Buying Chinese manufactured goods is no different from buying oil at a gas station. We just stick a national border in between you and the gas station and suddenly it's an import.

Last edited by stratozyck on 08 Feb 2023, 1:00 am, edited 1 time in total.

How about the fact that they bid up the price of land, thereby contributing to the housing crisis, among other problems caused by high real estate prices?

Yeah, mmmkay. Even 5th generation Canadian-Chinese people here have a disdain for the massive amounts of cash from wealthy Chinese flooding in and distorting our real estate market far beyond anything resembling affordable for working class people. They're not boogeymen, they're RICH af.

Also, it's not boogeymen buying entire mines, swaths of forests, large industrial land areas & developing them etc it's (mostly) extremely wealthy Chinese investors.

Then there's China's whole belt & road initiative literally stealing infrastructure from African and Eastern European nations in extremely shady contract deals - but that's an entirely different thing.



Umm, I'm talking about the endless container loads of cheap plastic crap that fills dollar stores & landfills. MOST of it people don't need, but for some reason there seems to be quite the demand for it. So, they make a bunch of junk and people buy it. Way rather see people buying quality consumer electronics etc than straight up useless plastic crap.

Excellent question.

There are many ways to help this.

- Expand the land available to development. We have gotten even worse than NIMBYism, its now BANANA - build absolutely nothing anywhere near anyone. California's land prices are sky high, right? But their density if actually quite low. Its not just lack of high rise apartments, in counties like San Mateo county, something like 50% of the land is prohibited from development for environmental protections.

- Its not just building up. The land usage control is such that even in low density areas, localities restrict building to keep others out. Want to convert some empty office space to apartments? You can't. Where I live - and I live in a low cost area - if you build an apartments you have to have 2 parking spaces per bedroom, two tennis courts, and a pool. Its a way of keeping rent/land costs high.

- Finally, you can just tax it more. Land is fixed, and you always want to put taxes on the "inelastic" factor. Land is fixed, so it is "inelastic." Its not just land, tax US corporations more! Repeal the Trump tax cuts for starters and lets return to a late 1990s tax structure.

We can all enjoy the benefits of increasing asset prices if they are taxed and redistributed a little.

The problem is the people that own the assets use that money to buy marketing to convince Joe Six pack that cutting taxes on capital gains is in his interest.

If you cut trade, the pie is smaller. You want a bigger pie, and you tax it. Maybe that is a bit too "dreamy," but its what is done in a lot of European countries. The difference is the US has a lot more social divisions that can be exploited by the rich to fracture us.

The housing crisis is by and large made up due to local regs. It has little to do with foreigners buying up land.

During the COVID pandemic there was some well intentioned business leaders that offered to house the homeless in empty hotel rooms. Homeless advocates made a list of demands for the owners to install kitchens in each room. Result: the rooms stayed empty.

We have put so much minimal cost into housing that its no surprise its expensive. Its like saying "I want to go out to eat, but it must be at a place that serves steak and lobster."

You should have been an economist. The consumer is always right.