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Another US Tech Trade Deficit
eldavojohn writes "The United States is suffering again from a massive trade deficit — $38.3 billion in 2006. And it's been going on since 2002. From the press release: 'In 2006, Asia supplied 60 percent of all US imports of advanced technology products. Europe supplied more than 20 percent, and North America more than 15 percent.'"
By definition of trade, something is given away and something is received in exchange. There is no deficit whatsoever that occurs from any single instance of trade, even if that trade involves promises to repay at a future time. Also, trade only occurs because that which is received is valued more than that which is given away in exchange. Thus, both parties *profit* from every instance of trade, at the moment of trade. That's the only reason trade occurs.
Talk of "trade deficits" is political manipulation designed to bamboozle the uninformed. Anyone who believes "deficits" result from trade is as gullible as the Emperor's New Clothes.
"From DNA to P2P, we are all Copycats now. Go Go Copycat Power! Copycat Powers activate! Form of, a Copycat." --monxrtr
What explains the US net income balance?
d a nking
http://www.bis.org/publ/work223.pdf
And a great mystery for the uninitated.
http://en.wikipedia.org/wiki/Federal_Reserve_Boar
http://en.wikipedia.org/wiki/Fractional-reserve_b
http://en.wikipedia.org/wiki/Money_multiplier
From TFA
"U.S. technology product imports exceeded exports for the first time in 2002 starting a trend that left a $38.3 billion trade deficit in 2006 after reaching a high of $44.4 billion in 2005."
So it actually went down.
Also
"in 2006, the United States continued to export considerably more than it imported in two technology areas: aerospace and electronics."
Oh, the horror.
I only go to buffets for the unlimited soft serve.
Looks like you have no idea what a trade deficit is. Here's some help.
We don't "owe" anyone that money. That's the imbalance between what we export vs. what we import, i.e., we import that much more. A trade defecit - and some would argue any large trade imbalance - is unhealthy for the economy as a whole.
Is this $20 billion included in the $80 billion trade deficit? That is, would it be $100 billion without Microsoft?
Yes, this is included in the trade deficit calculation so yes, if your numbers were correct then the deficit would be $100 billion without Microsoft. Washington state is one of the very few states with an international trade surplus in large part due to Microsoft and Boeing. Other companies with a trade surplus are restaurant chains that sell franchises overseas (such as Starbucks, McDonalds, and KFC).
On the other hand, is perhaps this money not arriving to the US, but rather received only by "Microsoft Japan"
The money is funneled through Microsoft Japan. Microsoft in Redmond still gets a slice of every license sold there (or at least for the great majority of licenses). In the case of restaurant chains usually the franchises are locally owned and operated so the American company only profits from the initial franchise sale and (sometimes) from the ingredients sold.
you're an idiot. If we only bought american goods, then we'd inflate our local prices, and foreign companies would kick the crap out of us abroad, and we wouldn't have anyone able to compete. Then instead of losing SOME money to them, we'd have whole companies go out of business. You weren't paying attention in economics class where you. It might sound nice to say 'buy american' but if we really did that, and boycott foreign stuff, you'd drive the price on american shit up so much there would be no way in hell anyone but americans would buy american, and foreign business is what keeps a LOT of companies afloat.
Speak for yourself.
In case anyone's wondering what he's talking about...
And with what money shall the US consume if it does not manufacture anything to sell for profit? Technology was the last real growth manufacturing field. Without turning one thing into another, to sell for profit, there is no more real consumption as rather than generating money, you are just recycling money. And then, when you buy foreign made goods, that recycled money leaves the country, leaving you with less to purchase with. It is an entropic cycle, and will eventually fail.
When that money leaves the country it leaves in Dollars, other countries may trade that currency, but eventually they are still U.S. dollars and have to come back into the U.S. The majority of these end up buying treasury bonds. China is now the biggest holder of treasury bonds. They own our asses... and our children's.
The solution (or at least part of the solution) is a very libertarian one: stop the growth of government, stop the congressional borrow and spend cycle, stop printing money and bonds. Bonds are a tax on the future.
Our trading partners buy bonds because they have dollars they've gotten from the stuff we've bought from them. They are a fairly safe investment and gives them a good return. If bonds were not so easily available they'd HAVE to spend that money in real investments in the U.S. The money that is now going to fund the growth of government would instead go to fund investment and economic growth
Trade imbalances aren't bad on their own, it all depends on what you do with the imbalance, if you use it to fuel Government they are terrible (look at the Latin American Economies of the 80's and what they did with the inflow of foreign currency in the form of loans, same effect). Use them to fund growth and trade imbalances are not a problem.
Basic Macroeconomics, cxu ne?
But they can't use that U.S. currency to purchase things in France, or to purchase things in the UK, or to purchase things in Japan, unless they find a bank that will be willing to trade them a corresponding amount of those currencies... and to do that, there have to be people in France, or the UK, or Japan, who want to buy U.S. goods and so are willing to trade their own currency for U.S. dollars.
There is no gold standard... The dollar isn't backed by any commodity. The only value that the U.S. dollar has is that it can be used to purchase U.S. goods. For every dollar the U.S. spends on foreign goods, those foreign traders need to spend a dollar on U.S. goods (or on U.S. stocks or bonds or property). I don't think you have any idea how international trade actually works. This from someone who thinks the U.S. is still on the gold standard and wants to emulate the trade policies of Cuba.
Those exporting countries are willing sit on trillion+ dollar reserves because oil typically hasn't been available for import with any currency other than US dollars. Cutting a deal with Saudi Arabia (the OPEC swing producer) to price oil only in dollars in exchange for propping up their oppressive dictatorship, has caused the rest of OPEC to fall in line... at least until 2000 when Iraq switched from the dollar to trading oil exclusively in euros.
In other words, there was an artificially-maintained relationship between oil and the US dollar, creating great demand for our currency and causing the world to subsidize the lavish/wasteful lifestyles of so many Americans. The more oil gets pumped to third parties, the more demand there is for greenbacks, and the more we can print up over here to send abroad in exchange for real goods and services.
The oil-backed dollar is sometimes called the 'petrodollar'.
Since 2000 Iran, Russia and Venezuela have started trading in euros as well and as of last month Iran has thrown down the gauntlet and excluded the dollar. Last month was also when China decided to start spending/investing that pile of dollars (their first investment fund, with more to follow, is $300bn.).
I read through a few of the posts here, and I think some of the posters are not experts in econ despite their claims.
Although I'm not an economist, I am interested in the topic and have read some books about it.
Some facts accepted by all trade economists:
1. When the United States has a "trade deficit", it means that foreigners are buying US bonds (typically treasuries), or are increasing their reserves of dollars. (If you count selling bonds and sending currency as exports then the trade deficit is always 0).
2.At some point in the future, foreigners will want their money back or will want to spend their dollar reserves, at which point the US will have to export more than it imports. Then the trade deficit will run the other way. There is no chance of other countries "cutting out" the US, because that would mean they sent us products and lent us money while getting nothing in return.
3. The trade deficit increases the standard of living for Americans in the short term. It means that we can buy more things at Wal-Mart and other places than we otherwise could. It does not affect our overall unemployment rate. The only problem with the trade deficit is that it can't be extended indefinitely, which means that at some point we will have to export more than we import, which will be unfortunate for us.
4. Although China accounts for a larger share of the trade deficit than any other single country, it accounts for much less than Europe and Japan combined.
5. The reason Europe and Japan export things to the US is because they want to pay for imports from the US, either now or in the future.
6. The trade deficit by itself is not necessarily a problem. The only problem is if there's a "hard landing" which means that Europe, Japan, and China demand their money back more quickly than the US economy can adjust, which would harm all parties.
First off... did you have a brainfart, or are you actually advocating USA ISOLATIONISM, on all fronts, economic, political and military ?!?
You know it can never work nowadays, do you ?
Not that I wouldn't just love to see the USA shut the hell up already and keep its nose out of other people's bussiness, work out internal issues first... but that will and could never happend.
Second... fiat currency is insignificant compared to the "virtual money" in circulation nowadays, at least 90% of today's "money" doesn't actually exist at all (with a pessimistic estimate of up to 98% of it being virtual money... yes, that's one "real, paper dollar" out every 50 in "circulation" in the worst case scenario, or one out of 10 in the best case scenario).
And government has zero fucking control over it, because it declined it in favor of the banking industry, just like most countries on this stupid planet.
I'd really love to see a "bank run" in the world of today, with the banking system's bubble burst wide open to its rotten core all across the globe, governments forced to make banking a state issue rather than a private one.
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