Reduce the trade deficit; increase GDP & median wage

[GenSeneca]

Re: Trade deficits are always detrimental to their nations’ GDPs.

There’s no reason or point to continue our discussing (with regard to nations’ global trade imbalances), the additional fallacies or contradictions within the remainder of your messages.

Clearly you only wish to discuss trade deficits as a one dimensional concept applicable only to it's role as a negative integer within the statistical formulation of GDP and you consider any attempt to discuss the dynamic nature of a trade deficit to be fallacious and contradictory.

Are Trade Deficits a Drag on U.S. Economic Growth?
by Daniel Griswold
...
Belief that a growing trade deficit means slower growth rests on the enduring myth, perpetuated by the U.S. Commerce Department's own language, that imports simply subtract from economic growth. The prevailing orthodoxy in public discussion about trade is that a surge in imports will depress growth because imports are assumed to largely displace domestic production. Although there is an appealing plausibility to the belief, the evidence since 1980 contradicts it.

Applying the same test as above to changes in imports and GDP since 1980 shows that, contrary to popular wisdom, faster import growth has been associated with faster domestic economic growth. In years since 1980 in which imports of goods and services fell as a share of GDP from the previous year, economic growth averaged 2.1 percent. In years in which imports grew by up to 0.5 percent of GDP, growth averaged 3.3 percent. And in years in which imports surged by more than 0.5 percent of GDP, growth averaged 3.6 percent.

The same economic expansion in the late 1990s that saw a rapid expansion of the trade deficit also saw a rapid rise in imports of goods and services. For all the same reasons, recessions tend to dampen demand for imports. During each of the three most recent recessions, imports as a share of GDP have dropped sharply. That simple fact alone should give protectionists pause. Their dream scenario of sharply declining imports is frequently accompanied by the economic nightmare of recession.
...
In other words, economic growth has been more than twice as fast, on average, in years in which the current account deficit grew sharply compared to those years in which it actually declined. If trade deficits drag down growth, somebody forgot to tell the economy.​

But don't be confused by facts and empirical data... Simply look at trade deficits as a one dimensional concept applicable only to it's role as a negative integer within the statistical formulation of GDP, otherwise Supposn will reject anything you say as fallacious and contradictory.

 

[Supposn]

Re: Trade deficits are always detrimental to their nations’ GDPs.

..................... I must have struck a cord by pointing out that the Buffet plan does absolutely nothing to increase America's ability to compete in the global market because you are just doing everything you can to avoid admitting that inconvenient truth.

GenSeneca,

it is our global trade deficit rather than global trade that’s detrimental to our nation’s economy (based upon our nation’s GDP). That’s a fact rather than an opinion.

To a great extent our trade deficit is due to foreign nations’ inability and/or unwillingness to promote greater compensation to their laborers and/or manipulation of their currencies’ exchange rates and/or other policies which in my opinion should continue to be exclusively within each nation’s own jurisdiction.

Our trade deficit is also increased due to foreign policies less favorable than those of other foreign nations attempting to sell products within their domestic markets, and our unwillingness to follow foreign examples of national sales taxes. Taxes due to both their domestic and imported products contribute sales tax revenues to their governments and they increase their exports by waiving their sales taxes upon them. Imported products contribute nothing to our federal revenue while U.S. exported products fully contribute to foreign nations' sales tax revenues.

Additionally we depreciate our own sovereignty by accepting international trade pacts’ regulations and World Court’s jurisdiction over what should be considered as exclusively our own domestic matters.

[Fortunately our presidents and congresses were unable to muster sufficient political support and our trade agreements are not due to international treaties confirmed by a 2/3 U.S. Senates. It doesn’t require any constitutional amendments to remedy any of this. Some of items could be remedied by the president without any U.S. Senate or the entire U.S. congress’s approval].

This trade proposal does not protect or favor any particular U.S. enterprise or industry but it’s of advantage to any U.S. enterprise that competes or aspires to compete with foreign goods within or beyond U.S. borders. The proposal doesn’t limit U.S. exports but it limits hindrances of U.S. exports. It limits our import goods to the assessed value of our exported goods.

I do find many things within this message as inconvenient but I do confront them. Can you do the same?

Respectfully, Supposn

 

[Supposn]

Re: Trade deficits are always detrimental to their nations’ GDPs.

.............. I know for a fact that my ability to purchase foreign goods cheaper than domestic goods greatly adds to my standard of living, yet there is no statistical device within the "conventionally accepted definition and calculation of GDP" that even attempts to consider my improved standard of living as a result of our trade deficit.

GenSeneca, there are many instances within our laws where contracts are deemed to be illegal despite the fact that the principles entered into the agreements for what they believe to be to their own advantages.

In most cases the principles are generally correct. The contract has been by law deemed to be illegal because the law has decreed that the activities or agreements are contrary to our societies best interests.

Our purchases of cheaper foreign goods are generally to the advantage of both ourselves and the seller. Our trade deficit is detrimental to our society’s economy. That’s the legal justification for this trade proposal.

Your assumption that because aggregate commercial agreements and activities are likely to be to most principles' financial advantages they are all also to societies' net aggregate economic advantages. It ain’t necessarily so. Sometimes individual and public goals coincide and sometimes they diverge.

Respectfully, Supposn

 

[Supposn]

Re: Trade deficits are always detrimental to their nations’ GDPs.

I understand the statistical relationship between trade deficits and GDP.Totally false.................
.............. I understand that, statistically, a trade deficit counts against a nations GDP. What I reject is the unsubstantiated claim that trade deficits are somehow bad outside the realm of statistics.

GenSeneca,

GDP is a statistical description of what was the nation’s production of goods and services within the reported duration of time. If you acknowledge that the trade deficit was detrimental to the GDP, then what leads you to believe that it was not detrimental to the nation’s production of goods and services?

Would you further argue that it somehow increased the nation’s production of goods and services?

Respectfully, Supposn

 

[GenSeneca]

Re: Trade deficits are always detrimental to their nations’ GDPs.

GenSeneca,

it is our global trade deficit rather than global trade that’s detrimental to our nation’s economy (based upon our nation’s GDP). That’s a fact rather than an opinion.

Belief that a growing trade deficit means slower growth rests on the enduring myth, perpetuated by the U.S. Commerce Department's own language, that imports simply subtract from economic growth...Although there is an appealing plausibility to the belief, the evidence since 1980 contradicts it.
​

 

[GenSeneca]

Re: Trade deficits are always detrimental to their nations’ GDPs.

This trade proposal does not protect or favor any particular U.S. enterprise or industry but it’s of advantage to any U.S. enterprise that competes or aspires to compete with foreign goods within or beyond U.S. borders. The proposal doesn’t limit U.S. exports but it limits hindrances of U.S. exports. It limits our import goods to the assessed value of our exported goods.

During each of the three most recent recessions, imports as a share of GDP have dropped sharply. That simple fact alone should give protectionists pause. Their dream scenario of sharply declining imports is frequently accompanied by the economic nightmare of recession.​

 

[GenSeneca]

Re: Trade deficits are always detrimental to their nations’ GDPs.

Our purchases of cheaper foreign goods are generally to the advantage of both ourselves and the seller. Our trade deficit is detrimental to our society’s economy.

Applying the same test as above to changes in imports and GDP since 1980 shows that, contrary to popular wisdom, faster import growth has been associated with faster domestic economic growth.​

 

[GenSeneca]

Re: Trade deficits are always detrimental to their nations’ GDPs.

If you acknowledge that the trade deficit was detrimental to the GDP, then what leads you to believe that it was not detrimental to the nation’s production of goods and services?

Oil accounts for our largest trade deficit with the rest of the world, explain how our trade deficit in oil reduces our production of oil.

 

[GenSeneca]

Re: Trade deficits are always detrimental to their nations’ GDPs.

it is our global trade deficit rather than global trade that’s detrimental to our nation’s economy (based upon our nation’s GDP).

I can't believe I didn't see it earlier... I found the problem. You mistakenly believe that imports are represented as a negative integer because they are "detrimental" to the Gross Domestic Product.

That is incorrect.

GDP (Y) is a sum of Consumption (C), Investment (I), Government Spending (G) and Net Exports (X - M).

Y = C + I + G + (X − M)
...
M (imports) represents gross imports. Imports are subtracted since imported goods will be included in the terms G, I, or C, and must be deducted to avoid counting foreign supply as domestic. ​

Imports are not produced Domesticly and therefore should not be counted in Gross Domestic Product.
Imports add a positive value to the terms of G, I, and/or C.
To give an accurate account of Gross Domestic Product, the Import value must be zero'd out.
Imports are therefore represented as a negative integer (- M) to zero out the positive value they add in G, I, and/or C.
Imports are not detrimental to GDP.

 

[Supposn]

Trade deficits are ALWAYS detrimental to their nations’ GDPs.

GenSeneca, A nation’s entire production is reported within its GDP.

To the extent that the entire production and production support of exported goods are not fully reflected within the prices of any globally traded goods, they are not identified and attributed to global trading. Additionally any portion of non-globally traded products that are supported or induced by production of globally traded products cannot be identified or attributed to global trading.

Thus trade surpluses’ contributions to their nations’ GDPs are understated.

We cannot identify foreign production not fully reflected within the prices of our imports. Additionally we cannot identify any foreign production supported by or induced by the production of our imports but not attributed to our imports. Due to these afore mentioned reasons, similarly to trade surpluses, trade deficits are understated.

Trade deficits are deducted from net domestic spending because they’re the nation’s net purchase of foreign goods within the aggregate foreign markets. Trade deficit’s detriment to the GDP can only be reported to the extent of the deficit itself. It cannot report the additional detriment due to the deficit’s understatement.

All of this was more fully explained with some examples within this discussion’s message #16.

Respectfully, Supposn

 

[kowalskil]

Re: Trade deficits are always detrimental to their nations’ GDPs.

... But don't be confused by facts and empirical data...

Yes, facts and empirical data can be confusing, especially when one is not prepared to deal with this essential information.
.

 

[Supposn]

Trade deficits are ALWAYS (MORE THAN OTHERWISE) detrimental to their nations’ GDPs.

GenSeneca, it’s argued that the expenditures for foreign products cannot again be spent for domestic products. It’s further argued that nations' global trade balances inversely affect their GDPs more than otherwise.
(The comparatively simpler and more common method of calculating GDP is by the use of expenditures. Other methods should yield similar GDP statistics).

You argue that annual statistics demonstrate a positive rather than an inverse relationship between trade deficits and their nation’s GDPs. Logically then wouldn't a trade surplus be detrimental to the GDP?

Trade deficits are not the only factor that affects GDP. Nation’s import volumes are affected by their volumes of all (imported and domestic) products sold within their domestic markets. Similarly nations’ export volumes are affected by the volumes of all products sold within their foreign markets. Currency exchange rates are both affected by and affect nations’ trade deficits. (My next message comments upon “Currency Inflation and Trade Deficits”).

For simplicity’s sake there’s an unstated qualifier to the statement “trade deficits are ALWAYS (MORE THAN OTHERWISE) detrimental to their nations’ GDPs”.

Respectfully, Supposn

 

[Supposn]

Currency Inflation and Trade Deficits.

Currency Inflation and Trade Deficits.

[I posted this message on February 18, 2010, 9:38pm, within a discussion of ” A remedy for USA's trade deficit of goods”, within the “Outsourcing, Globalization & Free Trade” board of the “Economic Populist Forum” group].

I’m impressed with the concept introduced by Unawflcombatnt within his topic entitled “Trade deficit: Inflation vs. $ Devaluation”. The conventionally accepted expectation is during U.S. dollar’s periods of inflation our trade deficit will decrease. Unawflcombatnt explained why the reverse has been occurring.

During historically more recent periods of USD inflation there was excessively increased commercial and consumer credit made available. Many loans were granted to less credit worthy borrowers and/or for less adequate collateral. (Recall ex-Fed chairman Greenspan’s phrase “unjustifiable optimism”).

During these periods of USD’s inflation our consumers’ perception of their own wealth increased their purchasing rate of all, (i.e. both imported and domestic) goods. USA’s rate of consumption exceeded our dollar’s rate of inflation. The rate of USA exports did increase but never faster and often much slower than USD’s rate of inflation. In the case of China that pegs their currency exchange rate to USD, their rates of imports increases are extremely little or nonexistent.

During these periods of USD’s inflation USA’s rates of importing goods did not keep abreast with USD’s inflation rate. In these periods (contrary to conventional expectations), USA’s trade deficit proportion relative to our GDP did not decrease and often increased. In such cases USA’s trade deficit has been additionally more detrimental to USA’s GDP.

Respectfully, Supposn

 

[GenSeneca]

Re: Trade deficits are always detrimental to their nations’ GDPs.

I went back to #16, you were wrong then, and you're still wrong now.

USA’s trade deficit denied our nation the production of the products we imported. That’s why trade deficits are negative terms within GDP calculations.

Not according to the formula for calculating Gross Domestic Product:

Imports are subtracted since imported goods will be included in the terms G, I, or C, and must be deducted to avoid counting foreign supply as domestic. ​

I thought you were just confused but it turns out you're simply dishonest.

 

[Dr.Who]

This article has a few interesting things to say and a few that are not.

http://money.msn.com/how-to-budget/what-if-you-had-to-buy-american.aspx

But one line that was interesting is this:

"Trade protections, whether through tariffs or quotas, cost the economy roughly $2 for every $1 in additional profit for domestic producers,[]"