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re: Trump tells Canada they FA'd and are about to FO
Posted on 3/11/25 at 10:04 am to wackatimesthree
Posted on 3/11/25 at 10:04 am to wackatimesthree
quote:
That's what I thought.
So all of this economic isolationism is going to raise prices even higher.
Short answer, Yes. Long answer, Yes, of course. We're getting lots more inflation no matter what we do. We've abused our currency for a long time and we will pay the price for that. We have to produce more at home and our production costs are higher. On the plus side, increasing domestic production means true economic expansion and that should help to reduce the govt deficits, maybe even balance them some day.
quote:
won't we run a trade deficit with any country whose economy is significantly smaller than ours, regardless of whether protectionist policies aggravate that situation or not?
The deficit with individual countries is not the issue. But our overall foreign trade is going to have to balance, ideally even run a surplus but not sure if that will ever happen. If we run a deficit with Canada, we'll need to run a surplus somewhere else to balance it out. No amount of financial or monetary manipulation can change that fact because eventually the US dollar will begin to depreciate at a faster pace and our trading partners won't accept it. Or if they do, they won't hold it or lend it back to us; they'll immediately dump it on the forex market and that will accelerate the dollar's decline.
quote:
do we have an alternative to trading using the US dollar?
Currency is obviously the easiest way to trade, but like I said earlier, foreign trade eventually has to balance. We can use dollars, but we can't continue to export excess dollars to support that trade deficit. Our twin deficits, budget and trade, will eventually force us to consume less, produce more, or probably both.
This post was edited on 3/11/25 at 10:31 am
2
Posted on 3/11/25 at 12:51 pm to wdhalgren
quote:
wdhalgren
Again, not denying what you're posting; frankly, I don't know enough about relative international currency values to know whether what you're saying is valid or not. I kind of have no choice but to give you the benefit of the doubt.
I would be interested to see what you think of the linked chart, though. To summarize, it shows US Household net worth climbing right along with the trade deficit since 1970.
Obviously correlation isn't causation, but it's a pretty tight correlation.
What do you make of it?
Trde Deficits and Household Net Worth
Posted on 3/11/25 at 12:59 pm to wdhalgren
Re: Canada, what's your gut on Trump's motivation? To make some, if not particularly significant, gain on that deficit?
Is it just a war he's got to fight even if non-consequential because much of the country views the concept of tariffs as a tool as an all/nothing thing?
Is it just a war he's got to fight even if non-consequential because much of the country views the concept of tariffs as a tool as an all/nothing thing?
Posted on 3/11/25 at 1:22 pm to stout
you're
This post was edited on 3/11/25 at 1:24 pm
Posted on 3/11/25 at 2:19 pm to Pettifogger
quote:
Re: Canada, what's your gut on Trump's motivation? To make some, if not particularly significant, gain on that deficit?
Is it just a war he's got to fight even if non-consequential because much of the country views the concept of tariffs as a tool as an all/nothing thing?
First of all, I'm not a Trump fan, or a fan of any other politician. I have very low confidence in the whole lot of 'em at this point. I'm also not a fan of tariffs, as you can tell from this post from Jan 2017.
Since I made that post above, our federal debt has increased by 16 trillion dollars in 8 years ( it was predictable). Interest expense alone is blowing a gaping hole in the budget. We're running nearly $2 trillion deficits during "good times". Our trade deficits are soaring, a record $913B in 2024, a $133B increase over 2023. Our deficit with Canada is our 6th biggest I believe, $64 billion in 2024 and has grown 8 fold since the early 90's. Mexico is listed at $172B in 2024, # 2 on the list after China.
Our combination of budget and trade deficits is not only an economic problem, it's a national security problem, IMO. Unbalanced trade over time means other countries hold more dollars and dollar based assets than we hold in foreign currency based assets. That amount of excess foreign held dollars increases every year. That's a recipe for attacks on your currency. We are dependent on others' trust in our currency even as we run huge deficits and intermittently monetize debt. We depend on them selling us things that are vital to our survival, like semiconductors and base materials for drugs, batteries, etc, some of which we can produce at home. A vulnerable currency is just as dangerous as a vulnerable military, and it increases risk from both internal and external sources.
Desperate times call for desperate measures. We have to produce more at home. Canada and Mexico are fair game for starting that process. Trudeau and Trump seem to disagree on just about every issue, so Canada's a target. But this is not just a US/Canada issue. We have to balance trade overall. We have to cut military spending, which is sending allies into a frenzy. We can't pay for their protection anymore. We have to decrease the size and cost of our govt at every level, and make it more efficient.
I don't always agree with Trump's tactics or rhetoric, but big changes are coming. If we don't fix our problems voluntarily, these trade and budget imbalances will be fixed at a time and pace of someone else's choosing.
This post was edited on 3/11/25 at 3:04 pm
Posted on 3/11/25 at 2:34 pm to UptownJoeBrown
quote:
Can someone please proofread his tweets?
After nine years you still haven't figured out that he always misspells one word?
Posted on 3/11/25 at 4:01 pm to WarBoudin
scary
Posted on 3/11/25 at 4:24 pm to wackatimesthree
Sorry, missed your post.
Foreign governments and producers have played along with our system of exporting dollars to fill the trade gap. It gave their people jobs, kept them busy. So they did what I described earlier, invested or loaned our excess dollars back at affordable rates rather than selling them via foreign exchange (which would have steadily driven the dollar lower due to perpetual trade deficits). By providing us with goods cheaper than we make ourselves, they actually restrained our rate of inflation below what it would've been if we produced things at home. So we continued borrowing more and consuming their stuff, essentially using vendor financing. Consumers consumed, debt levels rose, trade deficits rose, incomes rose, stock market rose, house prices rose, Household net worth rose.
But, compounding debt is an inexorable exponential force for destruction, as is monetary inflation. Eventually we reached 2008 and the consumers were tapped out. Their wages didn't, couldn't, keep up because that would have caused a wage price spiral. They couldn't pay the mortgages on the same high priced homes that were elevating their net worth. Home prices started dropping, the banking system was about to collapse, so the federal reserve started mass monetizing mortgages and govt debt. Drove interest rates to the zero bound and transferred risk away from consumers and to the Federal govt and the Fed's own balance sheet. They restarted the cycle, but now with even higher deficits and eventually higher inflation, and of course greater risk because debt equals risk. Asset values soared again. The process is accelerating.
Inflation waxes and wanes, sometimes for years, but continues to compound right along with the debt, and in the end inflation always outruns most of the population because exponential curves go vertical. Eventually our trading partners won't hold our dollars or debt and the trade deficit will go away in real (inflation adjusted terms). I've even heard financial experts suggest that inflation cures inflation, which is somewhat true when a majority of the population becomes too destitute to consume and the paper currency retains some value as fuel. The correlation you pointed out may even remain positive because trade deficits and household net worth will go vertical as measured in dollars, while plunging as measured in cartons of eggs.
quote:
it shows US Household net worth climbing right along with the trade deficit since 1970.
Obviously correlation isn't causation, but it's a pretty tight correlation.
What do you make of it?
Foreign governments and producers have played along with our system of exporting dollars to fill the trade gap. It gave their people jobs, kept them busy. So they did what I described earlier, invested or loaned our excess dollars back at affordable rates rather than selling them via foreign exchange (which would have steadily driven the dollar lower due to perpetual trade deficits). By providing us with goods cheaper than we make ourselves, they actually restrained our rate of inflation below what it would've been if we produced things at home. So we continued borrowing more and consuming their stuff, essentially using vendor financing. Consumers consumed, debt levels rose, trade deficits rose, incomes rose, stock market rose, house prices rose, Household net worth rose.
But, compounding debt is an inexorable exponential force for destruction, as is monetary inflation. Eventually we reached 2008 and the consumers were tapped out. Their wages didn't, couldn't, keep up because that would have caused a wage price spiral. They couldn't pay the mortgages on the same high priced homes that were elevating their net worth. Home prices started dropping, the banking system was about to collapse, so the federal reserve started mass monetizing mortgages and govt debt. Drove interest rates to the zero bound and transferred risk away from consumers and to the Federal govt and the Fed's own balance sheet. They restarted the cycle, but now with even higher deficits and eventually higher inflation, and of course greater risk because debt equals risk. Asset values soared again. The process is accelerating.
Inflation waxes and wanes, sometimes for years, but continues to compound right along with the debt, and in the end inflation always outruns most of the population because exponential curves go vertical. Eventually our trading partners won't hold our dollars or debt and the trade deficit will go away in real (inflation adjusted terms). I've even heard financial experts suggest that inflation cures inflation, which is somewhat true when a majority of the population becomes too destitute to consume and the paper currency retains some value as fuel. The correlation you pointed out may even remain positive because trade deficits and household net worth will go vertical as measured in dollars, while plunging as measured in cartons of eggs.
This post was edited on 3/11/25 at 4:47 pm
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