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http://en.wikipedia.org/wiki/Trade_surplus http://en.wikipedia.org/wiki/Trade_surplus "Milton Friedman, the Nobel Prize-winning economist and father of Monetar

http://en.wikipedia.org/wiki/Trade_surplus http://en.wikipedia.org/wiki/Trade_surplus "Milton Friedman, the Nobel Prize-winning economist and father of Monetarism, argued that many of the fears of trade deficits are unfair criticisms in an attempt to push macroeconomic policies favorable to exporting industries. He stated that these deficits are not harmful to the country as the currency always comes back to the country of origin in some form or another (country A sells to country B, country B sells to country C who buys from country A, but the trade deficit only includes A and B). In fact, in his view, the "worst case scenario" of the currency never returning to the country of origin was actually the best possible outcome: the country actually purchased its goods by exchanging them for pieces of cheaply-made paper. As Friedman put it, this would be the same result as if the exporting country burned the dollars it earned, never returning it to market circulation." It's worth keeping in mind that trade is not a race or competition. It doesn't hurt us in any way if Europe accumulates wealth quickly. I think the idea that trade deficits are bad and trade surpluses are good is largely an artifact of the way we talk about it. It wouldn't sound as scary if Lou Dobbs talked about "America's looming capital account surplus," even though a capital account surplus is logically equivalent to a trade deficit. Right now, foreigners are buying up a small share of our capital goods and sending us consumer goods in exchange. At some point in the future, those same foreigners will sell the capital goods and use them to purchase consumer goods from us. In an of itself, neither situation is something to be concerned about.

rms 19y ago
Our trade deficit is bad because it is combined with an enormous fiscal deficit... we're not exporting anything other than currency and we're simultaneously borrowing positively enormous amounts of money. If we had a trade surplus, we probably wouldn't have to borrow as much money.
kingkongrevenge 19y ago
> It's worth keeping in mind that trade is not a race or competition. It doesn't hurt us in any way if Europe accumulates wealth quickly. This isn't quite true. The nations that accumulate capital tend to buy up the high return assets of financially weaker nations. Now that the dollar is tanking, due to the deficits and monetary irresponsibility, you see foreigners snapping up American companies and properties. The dividends from those things are now less likely to be invested here.
- stuki 19y ago
  Foreigners, who almost by definition have less local knowledge than locals (duh), are more likely to be stuck overpaying for less than premium assets, rather than getting the prime ones. The most talked about European investments in the US as of late seems to have been in Chrysler and subprime mortgages. Hardly stellar examples of high return assets. Hollywood has been riding high on this principle for decades, sucking in foreign money like a turbocharged vacuum cleaner on crack, and promptly distributing it to themselves, their lawyers, surgeons, trainers and decorators, as salaries and bonuses. All the while, the local insiders/studios keep the choicest releases to themselves. They only need financing 'help' for the risky, read subprime, stuff. What's really sad, for European savers at least, is that despite being fully aware of this, their homegrown movie industries continue to be an even shittier bet.

rms 19y ago

Our trade deficit is bad because it is combined with an enormous fiscal deficit... we're not exporting anything other than currency and we're simultaneously borrowing positively enormous amounts of money. If we had a trade surplus, we probably wouldn't have to borrow as much money.

kingkongrevenge 19y ago

> It's worth keeping in mind that trade is not a race or competition. It doesn't hurt us in any way if Europe accumulates wealth quickly. This isn't quite true. The nations that accumulate capital tend to buy up the high return assets of financially weaker nations. Now that the dollar is tanking, due to the deficits and monetary irresponsibility, you see foreigners snapping up American companies and properties. The dividends from those things are now less likely to be invested here.

stuki 19y ago
Foreigners, who almost by definition have less local knowledge than locals (duh), are more likely to be stuck overpaying for less than premium assets, rather than getting the prime ones. The most talked about European investments in the US as of late seems to have been in Chrysler and subprime mortgages. Hardly stellar examples of high return assets. Hollywood has been riding high on this principle for decades, sucking in foreign money like a turbocharged vacuum cleaner on crack, and promptly distributing it to themselves, their lawyers, surgeons, trainers and decorators, as salaries and bonuses. All the while, the local insiders/studios keep the choicest releases to themselves. They only need financing 'help' for the risky, read subprime, stuff. What's really sad, for European savers at least, is that despite being fully aware of this, their homegrown movie industries continue to be an even shittier bet.