Trade Deficits: Not So Bad, After All
John Tamny of RealClearMarkets—an official F.O.B. (Friend of the Blog)—has a great post, "My Falling Deficit With Safeway," on the logic of free trade. A choice bit: "Broken down to individuals, we can see that falling trade deficits, far from being good, are usually signals of our not being able to purchase what we want, or our not being able to attract the investment that we need." Read it all.
Tags: trade | free trade
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My thoughts on Trade Deficits
I read the article. Most certainly I am no economist. I do like the author's viewpoint from a personal point of view. But trade is a bit more complex than that.
In my mind it is fact specific and has a military significance. When speaking of a trade deficit with China, historically, that means paying out a LOT of money for products that are average at best, fatal at worst. The money paid to obtain these products goes in large part to the government of China either directly or indirectly. To have such a large deficit with a potential enemy means that you are leveraging their ability to wage war with your funds. Or set up a base on the Moon First.
In the case of the trade surplus with a country due to embargo's and the like, sometimes it results in conditions of such poverty that health is threatened and governments become embattled by the social pressures that seethe in the despair of their populace. Cuba, Nicaragua, and other Central American countries.
Make no mistake about it. Our trade with China is also done, after being opened by President Nixon, with the intention of Americanizing a great enemy. As a result we have helped them become more efficient. With only limited trade and a Communist Government they would have become a larger Korea. With our funding they are remodeling into a larger Japan. We have created a monster economy that just happened to have world domination institutionalized and in a healthy condition when trade opened up . . .
So, I guess it does matter to me what our Deficit with China is. Along with most of the public, I care less about Cuba and the other Central American Countries. Though when I do think about it I am saddened.
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