Reduce the trade deficit; increase GDP & median wage

Reduce the trade deficit; increase GDP & median wage

Warren Buffett’s concept to significantly reduce USA’s trade deficit.

It is not our global trade but our trade deficits’ that are a significant net detriment to our economy. Trade deficits’ are ALWAYS detrimental to their nations’ GDPs and the detriments are leveraged; they’re significantly larger than the deficits themselves.

I’m a proponent of a proposal to reduce USA’s trade deficit of goods that was first introduced to the Senate in 2006. The proposal does not favor or discriminate between the goods of any industry or foreign nation. The market driven proposal does not discriminate between manufactured, agricultural or any other industries’ products.

The basic concept is for exporters who choose to pay the federal fees to acquire TRANSFERABLE IMPORT CERTIFICATES, (ICs) for the assessed value of their goods leaving the USA. Importers would be required to surrender ICs for the assessed value of their goods entering the USA. Surrendered certificates are cancelled.

This may seem as a boon to exporters of USA goods but it’s actually an indirect but effective export subsidy and the trade proposal’s eventually and entirely funded by U.S. purchasers of foreign goods.

The version of this trade policy I advocate would exclude values of specifically listed scarce or precious minerals integral to goods from assessed goods’ values.
This trade policy would significantly decrease USA’s trade deficit of goods and increase the aggregate sum of USA’s imports plus exports and our GDP more than otherwise. The GDP bolsters the median wage.

Wage earning families benefit from cheaper imported goods but every day of every year they’re dependent upon their U.S. wages. Regardless of how small the additions to imports’ prices due to Import Certificates, (unlike tariffs) USA’s assessed imports could never exceed that of our exports. USA consumers will be able to purchase cheap, (but not the absolute cheapest) imported goods. We cannot afford the absolute cheapest.

Refer to: www.USA-Trade-Deficit.Blogspot.com
or Google: “ wikipedia, import certificates “.

Respectfully, Supposn

 

More government bureaucracy?

 

You've already peddled this nonsense. You're completely reliant on a nonsensical use of the national income accounting identity. It cannot be used to understand the impact of trade. You therefore need to acquire some basic trade theory so your arguments have a level of validity.

 

Reiver, you’ve again invoked the phrase “impact upon come accounting identity “. You’ve now prefixed it with the word “national” and then state “It cannot be used to understand the impact of trade”.

I suppose most of this group’s members share my inability to read minds.

What is it you’re describing as a “national income accounting identity”? Is that the same “it” you’ve declared “cannot be used to understand the impact of trade”? It’s not clear as to what is or isn’t affected by trade but you or I or we cannot understand trade’s impact upon “it”? (I suppose the trade you’re referring to USA’s global trade)?

Concerning your contending the "it" that's not affected by USA’s global trade or that trades affect upon “it” cannot be determined by you or I or us, Is that your opinion or is that a fact?

I was a poor English student and I’ll never be an adequate writer but your prose provides me with a superiority complex. I await a rewrite of your inexplicit message.
If you’re unable to express yourself in an explicit manner, you may find someone that could correct your writing. We shouldn’t await your repeating English 101.

If you can repost your position in reasonably explicit English, I’ll read and fully consider it. Your suggestion that I restudy foreign trade concepts may valid, or your position may have absolutely no merit.

Respectfully, Supposn

 

You've replied with huff and puff, but without any defence. Your statement "trade deficits’ are ALWAYS detrimental to their nations’ GDPs" is absolute nonsense. You cannot support it with economics. You know that, when you tried, you gave a desperately silly abuse of the national income accounting identity. But, fair's fair, perhaps you've done some reading since and you have something earth shattering to offer. Please provide a justification for the statement. I look forward to something 'new' from you

 

Reiver, can you explain these two sentences you wrote?
(1) .”You're completely reliant on a nonsensical use of the national income accounting identity. It cannot be used to understand the impact of trade”?

(2)..“You cannot support it, (i.e "trade deficits are ALWAYS detrimental to their GDPs") with economics”?
[What does “support it with economics” mean]?

To be more explicit, trade deficits are ALWAYS detrimental to their GDPs. Due to a trade deficit the nation’s GDP is ALWAYS less than otherwise; “otherwise” being if the nation otherwise had not experienced a trade deficit during the reporting period.

I may in the future try to better explain what I believe has been already well explained. But each time the ball’s in your court,you fail to return it. The phrase “accounting identity” does not refute my position.

I’ve explained my position within the topic of Trade deficit's always detrimental to the GDP, posted @ 6:38AM, May 9, 2010.

Transcript of that same topic’s message #30:

Originally posted by Reiver
You've been informed that this is unsupportable by economic analysis again and again. All you've done is abused a GDP accounting identity (failing to spot that trade impacts on every term in that identity). Its particularly low brow stuff that a secondary school student encountering Economics for the first time would spot the error.
//////////////

Reiver, message #26 is explicit and gives some examples.

Your insults, name calling and labels such as “accounting identities” cannot substitute for a logical valid argument. You can’t compose one or you don’t have one?

Respectfully, Supposn

 

This is just repetition of your zero sum game nonsense. You cannot take "C+I+G+(X-Z)" to understand trade effects. You cannot say "(X-Z) is negative so GDP has been harmed". You've already been told why. Trade impacts on other components in the national income accounting identity (higher consumption and higher investment). A country with a trade deficit can therefore see higher GDP.

You can't explain it as its complete cobblers. I've already told you how you could use trade deficit whinge in terms of macroeconomic analysis (i.e. the Keynesian analysis into mass unemployment and how it can be used to provide a support for mercantilist thinking). However, you haven't referred to anything as sophisticated. Indeed, you haven't referred to any valid trade theory

 

Reiver, almost all of what you've described as investment due to USA’s trade deficit was actuiallypurchased stocks and bonds or was deposited into financial funds. What you’re casually describing as ‘investment” is described by economists as “transfers of wealth” when they’re writing precisely
Although liquidity enabled by our financial markets are of economic benefit to our nation, transfers of wealth are not factors within the calculations of GDPs and do not significantly affect GDP amounts.

Concerning “increased consumption: wage earning families benefit from cheaper foreign goods but they are dependent upon their USA wages every day of every year. The cheapest priced foreign goods do not compensate them for trade deficit’s detriment to the GDP and the reduced GDP’s affect upon the median wage.

I don’t recall the message you’re referring to within this paragraph:
, “You can't explain it as its complete cobblers. I've already told you how you could use trade deficit whine in terms of macroeconomic analysis (i.e. the Keynesian analysis into mass unemployment and how it can be used to provide a support for mercantilist thinking “.
If you can recover it, I’ll read and try to respond to it

Respectfully, Supposn

 

Wrong again! We know that trade impacts on investment because of increased competition, purchase of intermediate input (and increased opportunities thereby created) and more straight forward phenomenon such as economies of scale

Wrong again. We know that trade leads to an increase in consumption. One merely has to refer to comparative advantage and the distinction between the trade possibility frontier and the production possibility frontier. Your whole argument is based on fallacy.

Find it yourself. Its actually a reference to mercantilism. Mercantilism, the idea that trade is a zero sum game, is cretinous and has been rejected for yonks. The only defence for it is a very specific Keynesian point (quite alien to your argument though which is completely at odds with economic theory and empirical evidence)

 

Reiver, I reject your claim that trade deficitt do not cause their nations’ GDPs tube less than otherwise.
You’re defending the nation’s global trade in general. I’m discussing only nation’s negative global trade balances.

I did not state that global trade is detrimental to a nation’s GDP. Trade deficits are detrimental to their nation’s GDPs. Due to trade deficits, their GDPs are less than otherwise.

I’ve got to go now. Good bye.

Respectfully, Supposn

 

You're rejecting accepted economic analysis.

No. I'm rejecting the zero sum game nonsense for what it is.

And of course you can't defend that opinion with economic analysis. Perhaps you'd like to refer to an economic text that states "trade deficits are ALWAYS detrimental to their GDPs". You'll find none.

 

Reiver, I’m unaware of any creditable economist that perceives a nation’s economic benefit due to their trade deficit. Similarly you will not find any creditable economist statements refuting that due to trade deficits their nations’ GDPs are less than otherwise.

We I suppose have debated this issue as best as we could.
We apparently cannot reconcile the differences between us regarding this matter.

What's this zero sum game you’re introducing? You introduce it and then state the concept’s invalid?

Respectfully, Supposn

 

Every credible economist knows about comparative advantage and therefore rejects trade as a zero sum game.

As I said, you need to do some reading.

i.e. The bogus belief that a trade surplus is necessarily good and a deficit is necessarily bad, such that policy should be implemented to ensure the latter (its a mercantilist belief that foolishly thought a trade surplus to increase well-being by bringing in gold)

 

Reiver, thank you for your interest. I read and try to give sufficient thought to what I read. I hope and have no reason to believe you do not do the same.

I’ve written of David Ricardo’s concept of comparative advantage; what’s your point for mentioning it?

You, not I brought up the topic of a zero sum game. I know what a zero sum game is but again I don’t know what’s your reason for mentioning it?

What’s nonsensical is denial that trade deficits are not detrimental or trade surpluses do not contribute to their nations’ GDPs.

I suppose your mention of a policy that may be implemented is referring the trade policy I advocate.

I have no objection to your relating nations’ global trade balances with the topic of merchantism but your mention of gold is not germane to this issue. The Import Certificate’s proposal I advocate specifically excludes the values of precious or scarce minerals integral to all goods being assessed.

Respectfully, Supposn

 

Already know trade analysis. No reading necessary

It automatically destroys your argument a junk

Sounds like you don't even understand your own argument. "Trade deficits are always detrimental" is zero sum game language.

Zero sum drivel! I've proved that, without doubt, by referring to the national income accounting identity. The problem is, because you don't understand the basics, you don't appreciate it.

As I said, you need to do some reading!

 

Reiver, you continue to use your favored buzz words as a substitute for explicit arguments.
If as you wrote, “comparative advantage “destroys (my) arguments a junk”, than make an explicit argument to do so. Simply evoking the words or even the concept of “comparative advantage” does not “destroy” my argument.

Within my messages I’ve stated and explained how and why due to trade deficits their nations’ GDPs are less than otherwise. You're labeling my contention as “zero sum game language” does not make it so.

Am I to assume you can explicitly argue in support of your contention and its relationship to this discussion? I and other readers will never know if you don’t post your arguments.

Your evocation of the phrase “national income accounting identity” is not an argument and is certainly not proof of anything.
Again I question what is it you’re labeling and can you explain how whatever you’re referring to is germane to whatever you’re contending?

You’re faulting me for not having read what you haven’t written? If you write a brief and adequate explanation of your position I’ll read and try to fully consider your posts.

Respectfully, Supposn

 

Get it right now. I continue to use basic economics that- whilst you don't understand it- destroys your argument

Comparative advantage destroys the notion of trade as a zero sum game and, by definition, destroys the 'trade deficits are necessarily damaging' garbage. Basic economics"!

Again you simply don't understand your own argument. 'Trade deficits are bad' and 'trade surplus are good'? That is simply a rehashing of the long-time dead belief in trade as a zero sum.

Actually it is. The only way you could derive your bogus comments over trade deficit is via (X-Z) in the national income accounting identity. Unfortunately for the sub-mercantilist grunt, as shown by comparative advantage and its impact on consumption, we also know that C and I are not constant. End result? Trade deficits are actually be associated with higher GDP

Read something!

 

Reiver, both comparative advantage and zero sum games are concepts that are not exclusively applicable to global trade.

How have you determined that the proposal for transferable Import Certificates is contrary to the concepts of comparative advantage or mistakenly treats nations’ global trade deficits as zero sum games?

These particular clauses from message #17 are not explicit or meaningful.

Respectfully, Supposn

 

They are both an integral aspect of trade analysis. There's no point in suggesting otherwise. We just know that comparative advantage cannot explain all forms of trade (e.g. inter-industry trade versus intra-industry trade)

You're attempting to interfere with the specialisation process. That is harmful by definition!

 

Reiver, GDP is a statistic describing what occurred within political boundaries and periods of time.
We often hope and sometimes succeed to affect the present or the future but we cannot actually modify the past.
Thus the factors and terms of GDPs are constants and beyond change.

A zero sum game is one where the factors and terms may be modified but their sums remain constants.
If the factors of GDPs are constants, GDPs cannot be part of a zero sum game.

This clause extracted from message #17 is both inexplicit and illogical.

Respectfully, Supposn

 

Your post was prance.

Simplify the world to 2 countries. Country A has a trade deficit and B a surplus. Your erroneous position would see that as a redistribution from A to B; a standard case of zero sum.

 

Reiver, comparative advantage is applicable to many applications. It’s one of the concepts for maximizing gain derived from finite resources. The basis of the concept is also applicable to activities other than trade.

Transferable Import Certificates proposal is based upon the fact (rather than an opinion) that GDPs are ALWAYS less than otherwise.

You write of this trade proposal’s interfering with the “specialization process”; by which I suppose you mean that process within the concept of comparative advantage.

It is not unusual for circumstances or applications to arise that bring valid concepts in conflict with each other. The concepts and the choice of national policy must be parsed to choose the most advantageous and least detrimental outcome.

With regard to nations’ that would otherwise generally run annual trade deficits, (in my opinion) their most advantageous and least detrimental national policy is the proposed Import Certificate policy.

Respectfully, Supposn

 

Reiver, you assume to explain my position to me while you’re unable to fully explain your own position?
Respectfully, Supposn

 

For every deficit there is a surplus. If there's a deficit in trade, then there is a capital account surplus. What are the foreign buyers of US currency going to do with it? They can't eat it, they can't use it for fuel or make luxuries from it. Either they are buying something from the US with that currency, or investing it back into the US.

If it's detrimental to GDP, then perhaps the way GDP is calculated needs to be rethought out, as a trade deficit is not necessarily detrimental to an economy.

So it's your contention that some should suffer a reduced standard of living so that some can obtain a higher standard of living at their expense?

 

My position is straight-forward. There is only justification for interference in the specialisation process: a distinction between static and dynamic comparative advantage caused by economies of scale. Multilateralism, within a trade liberalisation environment, should only allow interventionism according to economic development concerns. I can support that position with trade theory and empirical evidence. Your position, in contrast, is unsupportable