We might wonder about how long this can go on and the answer is pretty much indefinitely. Which doesn't make much difference to anything at all. We're really paying for those imports by selling China houses and stocks instead of goods. Which are thus back in American hands in America. And when they do come back of course those assets being sold are being sold by Americans who now have the dollars. in the capital account.Īnd they really all do come back because, by definition, the balance of payments does balance. has a services surplus with China) and those that aren't will end up coming back into the U.S. If they don't get used to buy goods they might buy services (the U.S. economy so they've got to be used to buy something in the U.S. Those dollars only really work in the U.S. dollars, that being what we pay for those goods with. The result of which is that they have piles of U.S. Sure, we buy more from China than they do from us in goods. So, again, it's the imports that make us richer because it's the imports that we get to consume.Įven the more sophisticated arguments against trade deficits get it wrong too.
Imports are the result of the hard work of those foreigners which we then get to enjoy. Imports are an addition to what we can consume thus they make us richer.Īnother way to approach the same point is to point out that exports are the result of our hard work that go off to be enjoyed by foreigners. Not how much we produce at all, but how much we can consume. What we get to eat, wear, play with, travel in is what determines how rich we are. Both Adam Smith and Frederic Bastiat tell us that the purpose of an economy is consumption. But this is simply a trick of national accounting, not a reflection of the underlying economic reality. Yes, it's true, imports are recorded as a subtraction from GDP, exports as an addition to them. Quite the contrary: We are made richer by what we import. We are not being attacked, raped or made poorer in any manner by buying more goods from China than we sell to them. Which brings us to the second and much more important misunderstanding-imports are the point and purpose of trade.
If China stopped manipulating then the trade deficit would likely widen. Exactly the opposite of what The Donald is claiming. exports to China cheaper than they otherwise would be. more expensive than they would be, make U.S. The actions of the Chinese government thus make exports from China into the U.S.
#Donald trump wrong sound effect free#
If there was a proper free market in the yuan or renminbi then the standard calculations from the likes of the World Bank are that the value would fall against the U.S. It does this by insisting that Chinese citizens may not freely transfer their own personal wealth out of the country. Currently the country works very hard to keep the value of the yuan up.
To deal with the first misunderstanding: China as a currency manipulator. We have a lot of power with China,' CNN quoted Trump as saying at his second rally in Fort Wayne, Indiana on Sunday. We’re like the piggy bank that’s being robbed.
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