Political Crossfire Forums

Brooklyn · Joined: 03 Mar 2006 Posts: 1039 Location: New York City

Quote: The Chinese float the value of their yen with the US dollar, so I don't think depreciation is an issue for them. So no matter how much money the US keeps printing out (which they are like there's no tomorrow) the Chinese won't lose the value of their exports to depreciation of the US dollar.

I was speaking of the dollar as an asset. Basically governments, individuals, banks, corporations ect. ect. know better than to let a dollar sit around and collect dust. They will put that dollar to work by buying securities. Letting millions of dollars sit around not earning the best possible interest is kind of like KFC deciding to lock away its chicken instead of selling it.

Quote: The other thing that many people do not understand is that we have a trade deficit largely because we have a budget deficit, not because of the trade policies of foreign countries.

I read something about this not too long ago. It was pretty interesting. The "twin deficits" move together. As an increasing budget deficit causes interest rates to rise, foreign investors become more attracted to our securities. This causes foreign prices to drop relative to ours as foreigners try to acquire dollars. How exactly would Chinese goods become more attractive if the yuan is pegged to the dollar?

RueTheDay · Joined: 10 Nov 2005 Posts: 2409

Brooklyn wrote: Quote: The other thing that many people do not understand is that we have a trade deficit largely because we have a budget deficit, not because of the trade policies of foreign countries.

I read something about this not too long ago. It was pretty interesting. The "twin deficits" move together. As an increasing budget deficit causes interest rates to rise, foreign investors become more attracted to our securities. This causes foreign prices to drop relative to ours as foreigners try to acquire dollars. How exactly would Chinese goods become more attractive if the yuan is pegged to the dollar?

The effect of fluctuations in the relative values of foreign currencies on trade balances is definitely a factor, but it's not what I was referring to.

There is a fundamental accounting identity within economics called the Savings-Investment Identity. Identities are relationships that are always true, simply by virtue of the way that the terms are defined.

The Savings-Investment Identity, in one of its forms, is:

Private Sector Savings (S) = Private Sector Investment (I) + (Government Spending (G) - Taxes (T)) + (Exports (X) - Imports (M))

S=I+(G-T)+(X-M)

In a state of autarky (no foreign trade) with a governement that has a balanced budget, savings always equals investment.

Thus, if we cancel out savings and investment, we get:

(T-G)=(X-M)

The budget surplus equals the trade surplus or the budget deficit equals the trade deficit. In the real world they're never precisely equal due to both statistical discrepancies and some of the weirdness with which the different government agencies calculate budget deficits, but they definitely do move together.

Another way to look at this is the balance of payments identity. The current account balance is always the negative of the capital account (now called the financial account) balance. The two must sum to zero by definition. So, if you have a capital account surplus (more money coming into the country than leaving) you will have an equivalent current account deficit. Why do we have a capital account surplus? The main reason is that gross domestic investment (private sector investment + the government budget deficit) exceeds private sector savings. The difference has to come from somewhere, and it comes from foreign savings entering the country.

Thus, looking at the above, the current account deficit will not be reversed until either the budget deficit is eliminated or private sector domestic savings increases to meet the current level of gross domestic investment.

Hope this helps.

Free Thinkr · Posted: Sat Oct 14, 2006 4:03 pm Post subject:

Moot wrote: Free Thinkr wrote: Moot wrote: Brooklyn wrote: Quote: The latest report on the Trade Deficit says that the US is exporting less goods than they are importing. That means that less goods are being produced or manufactured in the US.
First of all, the U.S. has been importing more than it exports for a long time now. This is nothing new. It certainly isn't a bad thing either.
Don't you believe in balanced trade?
No. Why would anyone? Why wouldn't they?
You're the one implying a claim: that people should have a problem with trade deficits. Obviously, you can't support it.

Quote: Quote: Quote: Some people think that if the trade deficit continues to widen at its current rate then a serious correction is going to happen and the economy will tank. Wouldn't that be a bad thing?
Some people think there's a magical, invisible fairy in the sky that gets angry when you have sex before marriage.
Cute... but in your case I think its just a personality problem.
That doesn't even make sense.

Quote: Quote: Quote: Quote: Quote: Quote: Quote: The American consumer is partly to blame for this.
The American consumer is completely to blame. Though using the word "blame" isn't quite appropriate as it implies that consumers are doing something wrong by buying cheaper goods.
American consumers are being sold a bill of goods. If the US buys cheap goods from China with cash and in return China buys US bonds and assets with that cash and the return on those bonds and assets is going to China....how does that benefit the American consumer for future spending?
"China" doesn't buy bonds and assets, Chinese people do. As for them buying bonds, so what? Someone has to buy those bonds, why not the Chinese? As for them buying assets, what do you have against investment in our country? They buy bonds and assets because that's all they really can do with US cash. They're being sold a bill of goods, if anything; they're like a giant nation of wetbacks doing all our dirty work.
China does buy US bonds and assets. The Chinese people are subsidized by the Chinese government.
This doesn't either.

Quote: You seem to be the typical type that whines about paying taxes, so how come it doesn't bother your ilk to have a large portion of your taxes paying billions in interest on assets that only foreign countries will ever see? Money that doesn't benefit you or America? I only assume your American because foreigners aren't usually so rude, crude and socially unacceptable.
Leaving aside the final comment that, like your last two, is nonsensical: it does bother me. Not necessarily that the interest is being paid to Chinese people, but the simple fact that there's so much borrowing. But that has nothing to do with free trade, and everything to do with the government spending way too much.

Quote: Quote: Quote: Quote: Won't his spending power and his standared of living eventually be diminished? If the US keeps borrowing so it can pay the interest on those foreign assets, I really don't see how that benefits consumers for the long haul. Especially if the countries the US borrows from decide to stop lending the US money because of the high debt already incurred and they are not making anything tangible to trade. That to me is nightmare scenario.
Wont happen.
Says who? You? Pffft.
Says everyone who isn't an economic retard. Seriously, check around.

Quote: Quote: Quote: Quote: Quote: But our government bears most of the blame for not protecting the American worker and selling us out by letting our jobs go overseas and leaving jobs that used to be entry level jobs or summer jobs for teenagers.
Government isn't letting jobs go overseas. They are going overseas because more can be produced for less. The savings is passed on to consumers and producers here which promotes higher efficiency and ultimately leads to expansion and more jobs.
The government is letting jobs go overseas via the free trade agreement aka NAFTA. As opposed to what, protectionism? Jesus, protectionism was debunked 200 years ago. No, as opposed to fair trade. So what does Jesus have to do with it?
Fair trade, eh? What, precisely, is fair trade, and how do we go about acheiving it? Jesus is a fictional character oft used as an exclamation.

Quote: Quote: Quote: Quote: Quote: The jobs being created in this country today are service jobs. Service jobs. What that means is that more people in this country are or soon will be waiting on tables, cleaning other people's fingernails or working at Walmart. This is not the American dream folks. It is the American nightmare. WAKE UP.
You are forgetting that most service jobs are small businesses. Owning your own small business IS the American dream. Besides, who exactly are you to tell me or anyone else that giving someone a manicure is not the American dream? Im sure some manicurists (if that is a word) would take offence to that.
I'm not forgetting that most service jobs are small businesses. But how many people in this country today can afford to own or have the expertise to own their own business?
Millions do. Wow, millions. :duh1:
Yes, millions.

Quote: Quote: Quote: Are you suggesting that the entire working class should own their own business? How about if they all own the one of the same 20 or so franchises? Would that work for you? :roll:
How about if on in 20 owns his own business, and the other 19 work for him? So are you agreeing that not everyone in the entire working class has the funds or expertise to own their own business?
Sure. And?

Quote: Quote: Quote: No, owning a home is the American dream. As far as me telling you anything, may I ask who are you to tell me or anyone else with half a brain that cleaning fingernails is the American dream? Speak for yourself pal, if you think anyone can afford to buy a home cleaning fingernails. Because unless you have ever been to a manicure parlor in a large metropolitan area, they are nothing short of a sweat shop.
Been to many? :lol:
Yes, I have. Do you have a problem with that?
No, just find it really, really funny. :lol:

Brooklyn · Joined: 03 Mar 2006 Posts: 1039 Location: New York City

Quote: The Savings-Investment Identity, in one of its forms, is:

Private Sector Savings (S) = Private Sector Investment (I) + (Government Spending (G) - Taxes (T)) + (Exports (X) - Imports (M))

S=I+(G-T)+(X-M)

In a state of autarky (no foreign trade) with a governement that has a balanced budget, savings always equals investment.

Thus, if we cancel out savings and investment, we get:

(T-G)=(X-M)

This is exactly why I come to this forum. Thanks.

Gaea · Joined: 22 Jun 2004 Posts: 5576

Free Thinkr wrote: Moot wrote: Free Thinkr wrote: Moot wrote: Brooklyn wrote: Quote: The latest report on the Trade Deficit says that the US is exporting less goods than they are importing. That means that less goods are being produced or manufactured in the US.
First of all, the U.S. has been importing more than it exports for a long time now. This is nothing new. It certainly isn't a bad thing either.
Don't you believe in balanced trade?
No. Why would anyone? Why wouldn't they?
You're the one implying a claim: that people should have a problem with trade deficits. Obviously, you can't support it.

Quote: Quote: Quote: Some people think that if the trade deficit continues to widen at its current rate then a serious correction is going to happen and the economy will tank. Wouldn't that be a bad thing?
Some people think there's a magical, invisible fairy in the sky that gets angry when you have sex before marriage.
Cute... but in your case I think its just a personality problem.
That doesn't even make sense.

Quote: Quote: Quote: Quote: Quote: Quote: Quote: The American consumer is partly to blame for this.
The American consumer is completely to blame. Though using the word "blame" isn't quite appropriate as it implies that consumers are doing something wrong by buying cheaper goods.
American consumers are being sold a bill of goods. If the US buys cheap goods from China with cash and in return China buys US bonds and assets with that cash and the return on those bonds and assets is going to China....how does that benefit the American consumer for future spending?
"China" doesn't buy bonds and assets, Chinese people do. As for them buying bonds, so what? Someone has to buy those bonds, why not the Chinese? As for them buying assets, what do you have against investment in our country? They buy bonds and assets because that's all they really can do with US cash. They're being sold a bill of goods, if anything; they're like a giant nation of wetbacks doing all our dirty work.
China does buy US bonds and assets. The Chinese people are subsidized by the Chinese government.
This doesn't either.

Quote: You seem to be the typical type that whines about paying taxes, so how come it doesn't bother your ilk to have a large portion of your taxes paying billions in interest on assets that only foreign countries will ever see? Money that doesn't benefit you or America? I only assume your American because foreigners aren't usually so rude, crude and socially unacceptable.
Leaving aside the final comment that, like your last two, is nonsensical: it does bother me. Not necessarily that the interest is being paid to Chinese people, but the simple fact that there's so much borrowing. But that has nothing to do with free trade, and everything to do with the government spending way too much.

Quote: Quote: Quote: Quote: Won't his spending power and his standared of living eventually be diminished? If the US keeps borrowing so it can pay the interest on those foreign assets, I really don't see how that benefits consumers for the long haul. Especially if the countries the US borrows from decide to stop lending the US money because of the high debt already incurred and they are not making anything tangible to trade. That to me is nightmare scenario.
Wont happen.
Says who? You? Pffft.
Says everyone who isn't an economic retard. Seriously, check around.

Quote: Quote: Quote: Quote: Quote: But our government bears most of the blame for not protecting the American worker and selling us out by letting our jobs go overseas and leaving jobs that used to be entry level jobs or summer jobs for teenagers.
Government isn't letting jobs go overseas. They are going overseas because more can be produced for less. The savings is passed on to consumers and producers here which promotes higher efficiency and ultimately leads to expansion and more jobs.
The government is letting jobs go overseas via the free trade agreement aka NAFTA. As opposed to what, protectionism? Jesus, protectionism was debunked 200 years ago. No, as opposed to fair trade. So what does Jesus have to do with it?
Fair trade, eh? What, precisely, is fair trade, and how do we go about acheiving it? Jesus is a fictional character oft used as an exclamation.

Quote: Quote: Quote: Quote: Quote: The jobs being created in this country today are service jobs. Service jobs. What that means is that more people in this country are or soon will be waiting on tables, cleaning other people's fingernails or working at Walmart. This is not the American dream folks. It is the American nightmare. WAKE UP.
You are forgetting that most service jobs are small businesses. Owning your own small business IS the American dream. Besides, who exactly are you to tell me or anyone else that giving someone a manicure is not the American dream? Im sure some manicurists (if that is a word) would take offence to that.
I'm not forgetting that most service jobs are small businesses. But how many people in this country today can afford to own or have the expertise to own their own business?
Millions do. Wow, millions. :duh1:
Yes, millions.

Quote: Quote: Quote: Are you suggesting that the entire working class should own their own business? How about if they all own the one of the same 20 or so franchises? Would that work for you? :roll:
How about if on in 20 owns his own business, and the other 19 work for him? So are you agreeing that not everyone in the entire working class has the funds or expertise to own their own business?
Sure. And?

Quote: Quote: Quote: No, owning a home is the American dream. As far as me telling you anything, may I ask who are you to tell me or anyone else with half a brain that cleaning fingernails is the American dream? Speak for yourself pal, if you think anyone can afford to buy a home cleaning fingernails. Because unless you have ever been to a manicure parlor in a large metropolitan area, they are nothing short of a sweat shop.
Been to many? :lol:
Yes, I have. Do you have a problem with that?
No, just find it really, really funny. :lol:

LET IT BE KNOWN

That to respond any further to Freethinkr would be like farting in the wind. But I thank him for his responses, for they only help to validate my original contention.....

DON"T TRUST THE BUSH ECONOMISTS

8:)

Gaea · Joined: 22 Jun 2004 Posts: 5576

Brooklyn wrote: Quote: The Savings-Investment Identity, in one of its forms, is:

Private Sector Savings (S) = Private Sector Investment (I) + (Government Spending (G) - Taxes (T)) + (Exports (X) - Imports (M))

S=I+(G-T)+(X-M)

In a state of autarky (no foreign trade) with a governement that has a balanced budget, savings always equals investment.

Thus, if we cancel out savings and investment, we get:

(T-G)=(X-M)

This is exactly why I come to this forum. Thanks.

I + (G -T) + (X - I) = S

(X - I) Exports minus Imports? How does that work in the equasion if the US is importing more than it is exporting?

RueTheDay · Joined: 10 Nov 2005 Posts: 2409

Moot wrote: Brooklyn wrote: Quote: The Savings-Investment Identity, in one of its forms, is:

Private Sector Savings (S) = Private Sector Investment (I) + (Government Spending (G) - Taxes (T)) + (Exports (X) - Imports (M))

S=I+(G-T)+(X-M)

In a state of autarky (no foreign trade) with a governement that has a balanced budget, savings always equals investment.

Thus, if we cancel out savings and investment, we get:

(T-G)=(X-M)

This is exactly why I come to this forum. Thanks.

I + (G -T) + (X - I) = S

(X - I) Exports minus Imports? How does that work in the equasion if the US is importing more than it is exporting?

If you subtract a larger number from a smaller number, you get a negative number. When you add a negative number to another number, you make the negative number a positive number and change the addition operation to a subtraction operation.

I assumed, perhaps incorrectly, that everyone in this forum had passed at least 2nd grade arithmetic.

Gaea · Joined: 22 Jun 2004 Posts: 5576

RueTheDay wrote: Moot wrote: Brooklyn wrote: Quote: The Savings-Investment Identity, in one of its forms, is:

Private Sector Savings (S) = Private Sector Investment (I) + (Government Spending (G) - Taxes (T)) + (Exports (X) - Imports (M))

S=I+(G-T)+(X-M)

In a state of autarky (no foreign trade) with a governement that has a balanced budget, savings always equals investment.

Thus, if we cancel out savings and investment, we get:

(T-G)=(X-M)

This is exactly why I come to this forum. Thanks.

I + (G -T) + (X - I) = S

(X - I) Exports minus Imports? How does that work in the equasion if the US is importing more than it is exporting?

If you subtract a larger number from a smaller number, you get a negative number. When you add a negative number to another number, you make the negative number a positive number and change the addition operation to a subtraction operation.

I assumed, perhaps incorrectly, that everyone in this forum had passed at least 2nd grade arithmetic.

So subtracting a larger number from a smaller number is a negative number. Please explain how that translates into a savings if you can, which I doubt or you would have.

Should I be impressed that you somehow managed to pass the 2nd grade?

I assumed people in the economic forum could actually defend their views with logic and honest debate. Obviously I was wrong since the only people here seem to be Milton Friedman goonies unable to defend the theory with nothing but a smarmy attitude in attempt to chase away opposing views lest they are discovered to be the phonies they really are.

Free Thinkr · Posted: Mon Oct 16, 2006 9:51 am Post subject:

Moot wrote: LET IT BE KNOWN

That to respond any further to Freethinkr would be like farting in the wind.
Well, I suppose that's one way of avoiding supporting your arguments; claim the other guy is unreasonable, preferably in big letters.

And by the way, I actually advocate farting in the wind; if you fart in an area with little air movement, you have to sit there and smell your own s**t. Pissing in the wind, however, not so much.

Quote: But I thank him for his responses, for they only help to validate my original contention.....

DON"T TRUST THE BUSH ECONOMISTS

8:)
Huh? It's more than just the Bush economists who recognize the invalidity of protectionism.

Brooklyn · Joined: 03 Mar 2006 Posts: 1039 Location: New York City

Quote: So subtracting a larger number from a smaller number is a negative number. Please explain how that translates into a savings if you can, which I doubt or you would have.

When the government runs a budget deficit it has negative savings for the year. You subtract that from private savings. When that happens, net savings is less than domestic investment. Since savings has to equal investment, the funds MUST come from somewhere to make up the difference.

RueTheDay · Joined: 10 Nov 2005 Posts: 2409

Moot wrote: RueTheDay wrote: Moot wrote: Brooklyn wrote: Quote: The Savings-Investment Identity, in one of its forms, is:

Private Sector Savings (S) = Private Sector Investment (I) + (Government Spending (G) - Taxes (T)) + (Exports (X) - Imports (M))

S=I+(G-T)+(X-M)

In a state of autarky (no foreign trade) with a governement that has a balanced budget, savings always equals investment.

Thus, if we cancel out savings and investment, we get:

(T-G)=(X-M)

This is exactly why I come to this forum. Thanks.

I + (G -T) + (X - I) = S

(X - I) Exports minus Imports? How does that work in the equasion if the US is importing more than it is exporting?

If you subtract a larger number from a smaller number, you get a negative number. When you add a negative number to another number, you make the negative number a positive number and change the addition operation to a subtraction operation.

I assumed, perhaps incorrectly, that everyone in this forum had passed at least 2nd grade arithmetic.

So subtracting a larger number from a smaller number is a negative number. Please explain how that translates into a savings if you can, which I doubt or you would have.

Do you even know what "savings" means? It's an excess of income over consumption. If you spend more than you take in, you have negative savings. That is exactly what happens when you import more than you export.

Quote:
Should I be impressed that you somehow managed to pass the 2nd grade?

I assumed people in the economic forum could actually defend their views with logic and honest debate. Obviously I was wrong since the only people here seem to be Milton Friedman goonies unable to defend the theory with nothing but a smarmy attitude in attempt to chase away opposing views lest they are discovered to be the phonies they really are.

Let us know when you have something intelligent to contribute. I won't hold my breath.

LeopardPM · Joined: 21 Oct 2005 Posts: 1226 Location: Arizona

RueTheDay wrote:
Do you even know what "savings" means? It's an excess of income over consumption. If you spend more than you take in, you have negative savings. That is exactly what happens when you import more than you export.
oh, now you have made the leap to error - importing more than exporting (in the way you allude to: on a national scale, without talk of capital flows) does not result in negative savings - you are equating 'exporting' with production, and 'importing' with consumption....

Brooklyn · Joined: 03 Mar 2006 Posts: 1039 Location: New York City

After much thought, (and a little research) I am puzzled. During the last 2 years of the Clinton Administration, the U.S. had a budget surplus and a current account deficit.

Am I missing something here?

LeopardPM · Joined: 21 Oct 2005 Posts: 1226 Location: Arizona

Brooklyn wrote: After much thought, (and a little research) I am puzzled. During the last 2 years of the Clinton Administration, the U.S. had a budget surplus and a current account deficit.

Am I missing something here?
apples and oranges

My personal budget is always surplus, yet my current account is always deficit (if you exclude my own sale of my labor, which National Current Accounts don't factor in)

Brooklyn · Joined: 03 Mar 2006 Posts: 1039 Location: New York City

Quote: My personal budget is always surplus, yet my current account is always deficit

Your current account is in surplus if your budget is in surplus. Your current account is your net exports. You export the value of your labor, you import what you buy. That is why your net exports equal your income minus expenditures. Since you run a surplus, you loan your savings out. That is a capital outflow offset by your current account surplus. If you run a deficit, you borrow. Or, you need a capital inflow to finance your budget deficit (which you have because of your current account deficit).

So its actually oranges and oranges.......

LeopardPM · Joined: 21 Oct 2005 Posts: 1226 Location: Arizona

Brooklyn wrote: Quote: My personal budget is always surplus, yet my current account is always deficit

Your current account is in surplus if your budget is in surplus. Your current account is your net exports. You export the value of your labor, you import what you buy. That is why your net exports equal your income minus expenditures. Since you run a surplus, you loan your savings out. That is a capital outflow offset by your current account surplus. If you run a deficit, you borrow. Or, you need a capital inflow to finance your budget deficit (which you have because of your current account deficit).

So its actually oranges and oranges.......
except when it is trying to describe nations... budget includes internal trade as well as external, whereas current account focuses just upon external - apples/oranges. The fact that I have a current account deficit with my grocer does not imply that my budget is not surplus.

Brooklyn · Joined: 03 Mar 2006 Posts: 1039 Location: New York City

Quote: except when it is trying to describe nations... budget includes internal trade as well as external, whereas current account focuses just upon external - apples/oranges. The fact that I have a current account deficit with my grocer does not imply that my budget is not surplus.

You may have a current account deficit with your grocer, your doctor, the cable company, Burger King, Toys R Us ect ect. But you have a very large current account surplus with your employer. As an individual you have no internal transactions so your internal transactions equal zero. Within a nation, all of the individual little "imports" will equal all of the individual little "exports". So the internal transactions within a nation also equal zero.

Gus · Joined: 17 Jun 2005 Posts: 7324 Location: Tampa, FL

TheKrava wrote: You know.... Personally I have a huge trade deficit with my local Target store....... I buy stuff from Target................................ But............ Target never buys anything from me!!!!!!!!!!!!!! I"m going to dye from hunger!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

I think that's a good comparison, and one that probably should be addressed by the original poster...

Gaea · Joined: 22 Jun 2004 Posts: 5576

Gus wrote: TheKrava wrote: You know.... Personally I have a huge trade deficit with my local Target store....... I buy stuff from Target................................ But............ Target never buys anything from me!!!!!!!!!!!!!! I"m going to dye from hunger!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

I think that's a good comparison, and one that probably should be addressed by the original poster...

The topic is about the US trade deficit, not Kravas personal deficit to Target. For all we know Krava may be borrowing and paying interest on that debt to Target. We don't even know if Krava has job to pay for the items he buys at Target. For all we know Krava may have been shoplifting or printing out his own money to buy items at Target. We don't even know if Target will allow Krava in its store at all. So in lieu of that and especially Kravas snotty attitude, I really didn't see the point in discussing anything further with Krava.

There I addressed it, are you satisfied?

PS: IMO, many of the responses here are nothing more than trolling, personal attacks and name calling and that should probably be addressed by the moderator.

RueTheDay · Joined: 10 Nov 2005 Posts: 2409

LeopardPM wrote: RueTheDay wrote:
Do you even know what "savings" means? It's an excess of income over consumption. If you spend more than you take in, you have negative savings. That is exactly what happens when you import more than you export.
oh, now you have made the leap to error - importing more than exporting (in the way you allude to: on a national scale, without talk of capital flows) does not result in negative savings - you are equating 'exporting' with production, and 'importing' with consumption....

The error is yours. I am not equating exporting with production and importing with consumption. I am equating the excess of exports over imports with a positive savings and the excess of imports over exports with a negative savings.

As far as "without talk of capital flows" is concerned - what do you think capital flows between nations represents? It is the movement of one nations' savings to be realized as investment in another nation.