stravinskian Member since Feb 24th 2003 12698 posts
Thu Mar-08-18 08:59 PM
9. "I still don't think you get how this works. " In response to In response to 8 Thu Mar-08-18 09:04 PM by stravinskian
I give the grocery store money, they give me things. It's a perfectly equitable exchange and it works for both parties. But it means I have a 100% trade deficit with them, and I always will. Who cares?
The money is counted in the trade deficit and the goods are not. This does not mean that I'm giving anything up. The food is more important to me than the cash.
Similarly, the steel that the US buys from foreign countries is more useful to those who buy it than the cash they used to buy it. Car makers, for example, use that steel to produce goods, some of which are sold back to foreign countries (hence the trade deficit is not 100% in that case), and some of which are sold within the US. {Note that when a US car is sold in the US, it actually hurts the trade deficit because then it can't be counted as a foreign purchase!} The car buyers are happy with their cars, the car makers are happy to have made a profit, and the foreign steel producers are happy to have sold their steel. Each of these players is gaining in this transaction.