This WSJ ($) article reports ominously that the U.S. trade deficit widened by over $100 billion last year to $726 billion from $618 billion in 2004.
In this TCS Central article, Don Boudreaux lucidly explains why we shouldn’t worry much about it.
A far greater problem than the trade deficit is the widespread misunderstanding of it that often results in demagogic appeals for counterproductive protectionist policies.
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Longtime Houston attorney Tom Kirkendall's observations on developments in law, business, medicine, culture, sports, and other matters of general interest to the Houston business, professional, and academic communities.
The so-called trade deficit crisis in an invention of the union leaders and silly leftist economic thinkers. I always remind people to look at the stock market and the other economic indices. Are they infallible? Of course not. Nonetheless, the markets provide us with information of how individuals are betting on the future. These folks are literally putting their money where their mouth is.
TK on trade deficits… we won’t even go there.
Suffice to say that what Boudreaux omits is that foreigners are investing in foreign workers, plant, and equipment, which is why the standard of living for 97 percent of America is level or declining over the past 30 years and why last year we had to go negative, dipping into savings, just to pay current bills.
but as for your reader who thinks that investors are “putting their money where their mouth is. . .” That is far from true.
There is no rule of economics that says that the amount of money available for investment is equal to the available good investments.
Investments in the stock market are not made, as a whole, because these are good investments. They are made because it appears there are no better investments.
Any one who understands how prices of a bond moves in relation to interest rates understands that stocks, today, are about 25/35%% below historic highs when we had a balanced budget and a healthy economy under Clinton. Like lowering interest rates, the capital gains tax cut was a hugh hidden non-economic boost to stock prices. Second, since 2000 we have had a 10/15% decline in purchasing power. Add the two together and the stock market is, in real historic terms, in the tank.