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The United States is locked into a net budget deficit as long as nations like China are allowed to have net budget surplus though repressing the wages of their

The United States is locked into a net budget deficit as long as nations like China are allowed to have net budget surplus though repressing the wages of their people though various authoritarian control and subsidy. It will take either an end to global trade or a massive unilateral revision by the United States to fix it. If the US deficit stopped increasing it would result in US consumers being forced to eat the deficit instead. Edit:. This isn't my idea. I'm parroting a guy by the name "Michael pettis". look him up and don't credit this to me. I'm just a fool who believes this guy who posts on the internet.

pdabbadabba 4y ago
This sounds interesting, but I'm not following. What does the U.S. budget deficit have to do with Chinese wages? Can you unpack a bit?
- bioemerl 4y ago
  I'm the average person in China. I make 100 dollars of goods. I buy 25 dollars of goods. Where does the 75 dollars go? Most people invest it, loaning it to others. But how do you invest money? By someone else taking debt. Most nations around the world are locked into trying to make more than they consume. So if you want to buy German debt you'll find you can't - every dollar you buy from them they'll immidiately go looking to buy someone else's debt in a game of musical chairs. If there were no net debtor, eventually the production of 100 dollars and purchase of 25 would have to stop. You'll make more than you need and your economy will be halted by deflation, layoffs, and so on. Enter America and the global economy. Now you can buy USD with those 75 dollars and keep on producing. Because your state is locking you into a trade surplus, the more free economy of the USA is by necessity locked into a deficit. Our companies who try to export immidiately fail to the foreign companies with cheaper labor and state subsidy. The companies trying to export go out of business. The ones using import benefit greatly, and the economy changes. If we locked out this cycle with tariffs and import restrictions it forces China to face the music. Either their 100 productivity must result in 100 spend, or they will face economic and social issues bad enough to turn that 100 dollars of productive work into 25.
  - NovemberWhiskey 4y ago
    I feel like you have internalized somehow a confusion between the concept of balance of payments and government spending policy - the two are slightly related, but not like this. If China sells more stuff to the US than the US buys from China, then China ends up being a net holder of US dollars, which end up in some US denominated investment asset. This is the balance of payments. Since China is a net exporter to the US, it is also therefore a net investor in the US. The question of what the investment ends up being in is affected to some extent by the availability of US debt, but it could equally well end up being in equity or real-estate or whatever.
    - bioemerl 4y ago
      Debt that cannot be paid well is a problem no matter where it is. The US government is the best place for US debt - they are most equipped to pay it. I'm actually all for how it's being handled here. The debt is a problem in general, no matter the form it takes. The fact the balance is forced to be off as a result of Chinese policy and our failure to counter it in the name of free trade is the problem. It forces the US national debt up because if it wasn't the national debt it would be in far more harmful places, so our politicians have no choice. Increase debt or lose your job next election.
actionablefiber 4y ago
Are you conflating budget surplus and trade surplus? China is definitely 100% not running a budget surplus.
- bioemerl 4y ago
  They are similar. If I trade X dollars for Y amount of goods, I by necessity must owe x dollars. That "IOU" can be transformed in many different ways. But you can't erase it (without consequences that would end the flow of goods). If we have a trade deficit we have X dollars of IOU now in our economy that most go somewhere. Where does it go? Into debt, and eventually erased by either paying, inflating away, or printing money. China has massive foreign reserves holdings, and it's been trying to hide that recently with some clever numerical juggling by having state banks hold it all (someone at the top said they have to reduce holdings after Russia got screwed). I'm not 100 on how you can have internal debt and external surplus, sorry. You'll have to talk to someone smarter for that.
  - actionablefiber 4y ago
    > I'm not 100 on how you can have internal debt and external surplus, sorry. You'll have to talk to someone smarter for that. In the simplest case, suppose the government of an export-heavy country such as Germany, Japan or China simply stopped collecting taxes for a year. It would be self-evident that their government would run a large budgetary deficit no matter how large their export surplus for that year was.
NovemberWhiskey 4y ago
This is non-sequitur and also factually wrong: China has a government debt of approximately 40% of GDP (about $7tn): you don't get there by running a government surplus.
- bioemerl 4y ago
  I do not think this is factually wrong. You can't pull single statistics to tell the whole story and you're probably going to be wrong if you try it. For example, a surplus can appear in the form of the average citizen holding US bonds. Large foreign reserves, stuff like that. The US, for example, doesn't have to have it's deficit show in government debt. It could be held by citizens or the states or so on. It just so happens that in this case, it does, because the government is taking on a burden the citizens would reject and averting (temporarily) an economic disaster. China has a massive trade surplus. It has not had a trade deficit in years, and that must show in its pocketbook.
  - NovemberWhiskey 4y ago
    >You can't pull single statistics to tell the whole story and you're probably going to be wrong if you try it. I really can. If your premise is that the US has to run a government deficit because China runs a government surplus then the fact that the Chinese government doesn't run a surplus really sinks the whole line of thought. Again: government spending is not the same thing as the balance of trade. Japan runs a huge current account surplus, but has the highest ratio of government debt to GDP in the world.
    - bioemerl 4y ago
      The US has to have debt in some form. We chose for it to be in government debt because that's the least harmful place for it. It is a problem not because it's government debt, it's a problem because of the lost jobs. It's a problem because of our dependence on China for goods. It's a problem because it's inherently unsustainable debt no matter what form it takes.

pdabbadabba 4y ago

This sounds interesting, but I'm not following. What does the U.S. budget deficit have to do with Chinese wages? Can you unpack a bit?

bioemerl 4y ago
I'm the average person in China. I make 100 dollars of goods. I buy 25 dollars of goods. Where does the 75 dollars go? Most people invest it, loaning it to others. But how do you invest money? By someone else taking debt. Most nations around the world are locked into trying to make more than they consume. So if you want to buy German debt you'll find you can't - every dollar you buy from them they'll immidiately go looking to buy someone else's debt in a game of musical chairs. If there were no net debtor, eventually the production of 100 dollars and purchase of 25 would have to stop. You'll make more than you need and your economy will be halted by deflation, layoffs, and so on. Enter America and the global economy. Now you can buy USD with those 75 dollars and keep on producing. Because your state is locking you into a trade surplus, the more free economy of the USA is by necessity locked into a deficit. Our companies who try to export immidiately fail to the foreign companies with cheaper labor and state subsidy. The companies trying to export go out of business. The ones using import benefit greatly, and the economy changes. If we locked out this cycle with tariffs and import restrictions it forces China to face the music. Either their 100 productivity must result in 100 spend, or they will face economic and social issues bad enough to turn that 100 dollars of productive work into 25.
- NovemberWhiskey 4y ago
  I feel like you have internalized somehow a confusion between the concept of balance of payments and government spending policy - the two are slightly related, but not like this. If China sells more stuff to the US than the US buys from China, then China ends up being a net holder of US dollars, which end up in some US denominated investment asset. This is the balance of payments. Since China is a net exporter to the US, it is also therefore a net investor in the US. The question of what the investment ends up being in is affected to some extent by the availability of US debt, but it could equally well end up being in equity or real-estate or whatever.
  - bioemerl 4y ago
    Debt that cannot be paid well is a problem no matter where it is. The US government is the best place for US debt - they are most equipped to pay it. I'm actually all for how it's being handled here. The debt is a problem in general, no matter the form it takes. The fact the balance is forced to be off as a result of Chinese policy and our failure to counter it in the name of free trade is the problem. It forces the US national debt up because if it wasn't the national debt it would be in far more harmful places, so our politicians have no choice. Increase debt or lose your job next election.

actionablefiber 4y ago

Are you conflating budget surplus and trade surplus? China is definitely 100% not running a budget surplus.

bioemerl 4y ago
They are similar. If I trade X dollars for Y amount of goods, I by necessity must owe x dollars. That "IOU" can be transformed in many different ways. But you can't erase it (without consequences that would end the flow of goods). If we have a trade deficit we have X dollars of IOU now in our economy that most go somewhere. Where does it go? Into debt, and eventually erased by either paying, inflating away, or printing money. China has massive foreign reserves holdings, and it's been trying to hide that recently with some clever numerical juggling by having state banks hold it all (someone at the top said they have to reduce holdings after Russia got screwed). I'm not 100 on how you can have internal debt and external surplus, sorry. You'll have to talk to someone smarter for that.
- actionablefiber 4y ago
  > I'm not 100 on how you can have internal debt and external surplus, sorry. You'll have to talk to someone smarter for that. In the simplest case, suppose the government of an export-heavy country such as Germany, Japan or China simply stopped collecting taxes for a year. It would be self-evident that their government would run a large budgetary deficit no matter how large their export surplus for that year was.

NovemberWhiskey 4y ago

This is non-sequitur and also factually wrong: China has a government debt of approximately 40% of GDP (about $7tn): you don't get there by running a government surplus.

bioemerl 4y ago
I do not think this is factually wrong. You can't pull single statistics to tell the whole story and you're probably going to be wrong if you try it. For example, a surplus can appear in the form of the average citizen holding US bonds. Large foreign reserves, stuff like that. The US, for example, doesn't have to have it's deficit show in government debt. It could be held by citizens or the states or so on. It just so happens that in this case, it does, because the government is taking on a burden the citizens would reject and averting (temporarily) an economic disaster. China has a massive trade surplus. It has not had a trade deficit in years, and that must show in its pocketbook.
- NovemberWhiskey 4y ago
  >You can't pull single statistics to tell the whole story and you're probably going to be wrong if you try it. I really can. If your premise is that the US has to run a government deficit because China runs a government surplus then the fact that the Chinese government doesn't run a surplus really sinks the whole line of thought. Again: government spending is not the same thing as the balance of trade. Japan runs a huge current account surplus, but has the highest ratio of government debt to GDP in the world.
  - bioemerl 4y ago
    The US has to have debt in some form. We chose for it to be in government debt because that's the least harmful place for it. It is a problem not because it's government debt, it's a problem because of the lost jobs. It's a problem because of our dependence on China for goods. It's a problem because it's inherently unsustainable debt no matter what form it takes.