2 ms·
This is what a lot of people don't understand. They say thinks like "Country A has nothing that country B wants". Suppose we are in a world with only 2 countrie
by rsj_hn 8y ago
This is what a lot of people don't understand. They say thinks like "Country A has nothing that country B wants". Suppose we are in a world with only 2 countries, and country A has only apples to trade and country B has beautiful cars. It may well be that B doesn't want goods from A and A wants goods from B, nevertheless no trade deficit will occur unless there are foreign capital inflows. And if neither side allows foreign capital flows, then either A and B wont trade, or A and B will trade so that goods flow in both directions with no deficit.
So, we have to tease apart the question of "do I want to buy this good" with the question of "why do people on one border consistently buy more goods than those on another". The former is up to individual preferences, but the latter -- the trade deficit -- is really just a matter of policy.