Given that no other country has as much wealth as the United States, how is it mathematically possible for the U.S. not to have a trade deficit unless we materially cut back our purchases, which will lower our standard of living, not to mention shrink our economy?
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I believe the thinking is if everything is manufactured here, there will be little need for trade.
Not sure that is possible.
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It’s not very likely, unless we boost our services exports to a near impossible level. Unless…we start charging other countries for protection services. Maybe we can charge them for not invading their countries? You know…a typical extortion racket.
Any new manufacturing built in the U.S. would not only be expensive, it would also be highly automated. Hardly a recipe for job growth.
This is a real conundrum and I don’t see an easy solution to the very real issue of creating jobs where working people can earn a living wage.
UBI?
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You may have answered your own question.
The intention may be to look like we’re reducing our deficit, claim victory, give another tax cut to the wealthy, then let things turn to shambles on someone else’s watch.
I’ve seen this movie before.
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It’s not possible, of course. Not only that, but we would not be a reserve currency without the trade imbalance.
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Before the USD was the “reserve currency”, that distinction was held by the GBP, from a cold, damp, place of little size.
UK imports and exports prior to WWI. I see trade surpluses.
Seems that saying the US needs to run trade deficits is like Greenspan, eager to please the new POTUS, calling federal budget surpluses a problem.
Steve
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That is interested because a paper published with NBER states that at no time from the 1880s to the 1950s did they have a trade surplus:
Excess Imports. The first characteristic of the British trade balance is,
of course, the excess of imports over exports. Over the whole period
covered, 1883 to 1954, there was not one quarter with an export surplus
and the quarterly deficit was never less than ÂŁ17 million. From 1883 to
1912 the deficit averaged about ÂŁ34 million per quarter (Table 10); in
the interwar period about twice as much million of 1930 parity);
and from 1948 to 1954, ÂŁ99 million per quarter (1930 parity). From1886 to 1903 the trend of the balance was downward (i.e. the deficit
rose); this was followed by a steep increase to 1907. There was no trend
over the remaining years before World War I, nor over the interwar
period, nor from 1948 to 1954.
The table I posted is in this article.
Steve
Ya, I am pretty sure your link doesn’t state what you think it states. It refers to UK, USA, and Germany. It doesn’t appear to be a reflection of the entire world.
Quote:
STATEMENT showing for the United Kingdom, Germany, and the United States of America for each of the undermentioned years the values, of the imports for Home consumption and of the Exports (Domestic) of “Raw Materials and Articles mainly unmanfactured,” and of “Articles wholly or mainly manufactured.”
And, in going back at looking at your chart, it appears that imports for all displayed periods is over 100 while the exports are all below 100, so I am not even sure what you displayed supports that point.
Lastly, The British Pound what the world currency (used for over half of all financial transactions) and that is exceedingly difficult to do with a trade surplus. Foreigners have to have Pounds from the Brits buying more stuff in order to spend them. If you have another theory about how the rest of the world obtained Pounds to spend without a trade imbalance, I sure would like to read it.
huh? There are two data sets: one for imports and exports of raw materials, and one for imports and exports of manufactured goods. UK exports of manufactured goods run from 225MGBP in 1890 to 362MGBP in 1911.
Maybe they borrowed Pounds from the UK? Maybe they ran surpluses with other countries, that they could convert to GBP, to buy British exports?
Steve