For people who are stupid and brain dead enough to believe that "trade" simply just represents an exchange of goods and services that will benefit both countries. You people are real simpletons. Have a look at this: US Assets are Falling in the Hands of Foreign Owners at Record Pace As Warren Buffett, America's second richest billionaire, says, Americans are selling the farm to finance their spending. That's essentially going to mean years of America having to export things to creditor nations without getting anything in return, beyond and above just what the trade deficits were. Buffett even directed his own cartoon to try to warn people:
Is comparative advantage really beyond your comprehension? There are issues with trade imbalances, created through countries with high or low savings rates. But you haven't provided anything of value over that issue...
Trading something of lasting value for something that will be worthless in a few years is not the way to create personal wealth. Seems the same would hold true on a larger scale.
Comparative advantage doesn't apply when one country is trading away it's capital rather than products and services. That turns out to be the primary "comparative advantage" of wealthier countries: their wealth. Trading it away.
You're not making sense. Comparative advantage always applies. You're moaning about trade when the imbalance reflects savings rates.
But it isn't always beneficial to both countries. I've never seen a textbook example of comparative advantage where one country's comparative advantage was it's land (as the most obvious example). Obviously in these sort of scenarios, where capital is being traded away, that comparative advantage isn't sustainable in the long-term.
This is complete drivel. Factor proportions is used to understand comparative advantage. You're whinging about something different: repercussions of a low savings rate in one country and high one in another.
You're probably familiar with the way thieves in NYC look for cars that were left overnight by the roadside due to malfunction and how they strip the car of anything that can be sold and leave it up on blocks after taking the wheels, antenna, headlights, seats, etc. (and no one ever seems to see it happening). That is what leading capitalists are doing to the USA today. They see the economic crisis brewing. They know the game's up. They're just taking everything they can and will later move to another country into a gated, guarded compound. That's why everywhere you turn, you feel like businesses are screwing you. They are. A guy I know of who got his Masters in economics at Harvard and his Doctorate in economics at Yale meets regularly with his colleagues and former classmates for lunch. (Of course since they were educated at Yale, they're mostly big successes in business.) He says they're telling him that they're just grabbing everything they can while they can. They see it coming. They know the game's up. Trump is taking this country in a very bad direction with the help of mainly Republicans but also Democrats who don't warn us well of what's happening. You say people who believe trade "simply just represents an exchange of goods and services that will benefit both countries" are simpletons. The same is true of people who think what's happening is "just politics and it will all work out in the end". This nation is going down. It's over. The capitalist world is about to crash as we have never seen it before. And conditions following will be very, very unimaginably bad for a good long time before the people will realize they need to solve it all ourselves and then get it fixed. We're about to enter the Dark Ages of capitalism and the crash. I wish it weren't so.
I don't believe the economy of the U.S. is as fundamentally reliant on international trade as you think. I mean, given 4 or 5 years it wouldn't be that big of a strain to convert back to local reliance. (with only the exception of a small number of specific commodities, like oil or coconuts for example)
Econ 101: we tried it 1950-60's our cars were rusted junk buckets until Japanese rescued American consumers. Without international trade we would be a second rate country with inferior health care and military. Civilization would end shortly thereafter. Do you understand?
Question: Do the benefits from international trade outweigh the costs of long-term trade deficits? This question isn't all an "either-or", because not all of that international trade with other countries is responsible for the trade deficits.
? I don't know what you mean by that. Long-term trade deficits are not sustainable and have to eventually come to an end. (in the very long-term) Are you referring to China manipulating their currency to effectively subsidize exports?
Don't differing savings rates go hand in hand with trade imbalances? It's interesting to think about, and maybe I'm wrong, but I don't think there can be one without the other. The question is which one is the cause for the other. I don't think it's all just low savings rates that lead to trade deficits.
if we buy from China, we buy with US dollars. Unless they burn the dollars they will spend them here and the deficit will be eliminated. Do you understand? If we have nothing they want to buy they would be stupid to take our dollars! Do you understand??
The issue isn't so much them not spending the dollars they have, it's about what they will eventually spend them on. Also, they are pouring those dollars back into the US, but not to buy things. Those US dollars get loaned back to Americans and then the Chinese collect an interest rate. That means, ultimately, that over the long-term (say 20 or 30 years) the Chinese are going to be able to get more from the US than they exported, without that leading to a trade deficit. The US will be having to export to China to pay them back, with no net gain of wealth to the US economy, at that time. As an analogy, the US will be a slave to China.
Because what they're buying isn't products and services. It's like the metaphor in the OP. The US is a farm. The US isn't selling them wheat, they're selling them the farm, piece by piece.
so? if they buy land it's value is based on goods and services. When Silicone Valley cant make computer stuff the land there will have no value.
When you hold capital assets, that capital continues to produce dividends. That's the economy of a foreign country being the recipient of those dividends instead of the American economy.
Americas largest corporations are reliant on international trade to fuel their growth.Withrawing to just serve the domestic market would force huge worker layoffs.
Yes, but step back and analyze this for a moment. In normal trade, where products & services are traded for products & services, one country gives $10 in products or services and gets $10 in products or services back. When, on the other hand, one of the countries buys up another country's capital, it can continue getting products/services long after the trade deficits officially end. Basically, they no longer have to buy the wheat because they own the farm. They're going to get a lot more back than they gave in, because they invested that money, rather than just immediately spending it. American companies will be owned by Chinese, if not in whole than in part. When those companies pay out dividends, it won't be Americans spending that money. (And even when the money is spent, it won't necessarily be going immediately to American jobs, it might be some other Chinese person who wants those US dollars so they can also invest it) The other issue, of course, is that while trade deficits are happening those jobs are going to another country.
A trade imbalance reflects savings rates, by definition. The analysis turn splits into 2. First, use of a standard currency creation. Second, if that's destabilising (and it would be for the US), structural change in the economy and a switch away from reliance on consumerism.