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That's the way it is. If the US has a trade deficit and the companies and private households are net savers, then there is only one sector left who can make the

That's the way it is. If the US has a trade deficit and the companies and private households are net savers, then there is only one sector left who can make the required debt (without new debt, no new savings). Simple accounting. If you don't want the government to make new debt (or at least not as much), you have to force one of the other 3 sectors to make it. - Private households: You can't do that. - Companies: Everywhere we see tax cuts, so why would a country increase taxes? Bad, but that's the way the world is these days. - Foreign countries (trade deficit): Looks like the only way at the moment. Sorry, but Trump is on to something if he talks about fair trade.

bilbo0s 7y ago
In all honesty, even foreign countries won't work. You would need to find foreign nations meeting all three of the following criteria: -Wealthy enough to buy goods. Can't really sell much to Lesotho for instance. -Net consumers as opposed to net savers. Places like China you have that dreaded 90/90 trap. Where 90 percent or more of families feel a need to save 90 percent or more of their disposable income. Probably because they have both a one child policy and a completely nonexistent social safety net. -Which is a good segué for the third necessary condition, a government willing to grease the gears of consumption with fiscal and monetary policy. Policies like, for instance, providing their citizens with a reliable safety net. (In addition to cultural tendencies of course.) At any rate, as we look around the world, you just don't see any nations out there meeting all those criteria. The trade war is more about trying to turn China into a country that does meet those criteria. I'm not too hopeful that will happen though to be honest. The Chinese proclivity to save is not born simply of a lack of a safety net to look after you in old age, it's also deeply ingrained culturally. Has been for thousands of years. Chinese have to be pretty wealthy before they become spendthrifts. And like you said, how do you force a guy to spend money instead of saving? It's a tough problem all the way around.

bilbo0s 7y ago

In all honesty, even foreign countries won't work. You would need to find foreign nations meeting all three of the following criteria: -Wealthy enough to buy goods. Can't really sell much to Lesotho for instance. -Net consumers as opposed to net savers. Places like China you have that dreaded 90/90 trap. Where 90 percent or more of families feel a need to save 90 percent or more of their disposable income. Probably because they have both a one child policy and a completely nonexistent social safety net. -Which is a good segué for the third necessary condition, a government willing to grease the gears of consumption with fiscal and monetary policy. Policies like, for instance, providing their citizens with a reliable safety net. (In addition to cultural tendencies of course.) At any rate, as we look around the world, you just don't see any nations out there meeting all those criteria. The trade war is more about trying to turn China into a country that does meet those criteria. I'm not too hopeful that will happen though to be honest. The Chinese proclivity to save is not born simply of a lack of a safety net to look after you in old age, it's also deeply ingrained culturally. Has been for thousands of years. Chinese have to be pretty wealthy before they become spendthrifts. And like you said, how do you force a guy to spend money instead of saving? It's a tough problem all the way around.