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Growing trade deficit is selling the nation out from under us (2003) [pdf]
- peterlada 1y agoBillionaire's take. Plutocracy works like that.
- rib3ye 1y agoHe is probably the American billionaire most aligned with American long term success - both in speech and action. I recommend deeper investigation.
- easton 1y ago(2003) (But still good.)
- yapyap 1y agoMaybe even better, the fact that an issue like that is still plaguing the country today, maybe even worse than at that point in time.
- FollowingTheDao 1y agoIt’s not good. Warren Buffett just says horrible things in a polite voice.
- deleted 1y ago[deleted]
- ggm 1y agoHe says when he thinks he's wrong. This is 22 years old. What does he think now?
- nosianu 1y agoHe is 94. No matter how much experience he has, I question the value of anything he might say these days, at least in comparison. There should be other people to listen to by now - probably even from his same organization, if you want to.
- deleted 1y ago[deleted]
- redwood 1y agoBrilliant. Competence. Why can't we have that. A much smarter approach to tariffs
- deleted 1y ago[deleted]
- gniv 1y agoWhen they talk about trade deficits do they take into account tourism and other cross-border services? Or is it just goods, and in that case why focus on goods?
- nashalo 1y agoOnly goods, at least for the EU the 100+B trade deficit for services in favor of the US is carefully left out.
- bhouston 1y agoThat is 100B of ideas for making a European competitor to US services that are soon to be tariffed.
- LatteLazy 1y agoGenerally they are just goods. It’s much easier to measure physical goods crossing customs. It’s very difficult to measure whether that guy in your restaurant was a tourist or not. And that’s the simple case believe it or not… This is one of the reasons service oriented economies seem to run huge deficits…
- tossandthrow 1y agoI reckon both Mastercard and Visa will give you really damn good proxies for cross border money flows.
- nosianu 1y agoI software and IT services (cloud) etc. "goods" or not here? As far as I know that very large sector is not included in that calculation. A follow up question is how US company subsidiaries located in Europe are counted - the gains all end up in the US eventually (or at the very least the money streams are under US control), but it does not count as a US export? I have sooo many questions. Everything is Microsoft and Co. in Europe and elsewhere, both the OS and things like AWS or Office 365 subscriptions.
- 1y ago
- zabzonk 1y agoStrange. I, as a UK citizen, don't seem to buy almost any physical USA goods at all.
- jxjnskkzxxhx 1y agoThere are valuable things out there other than "physical goods".
- zabzonk 1y agoWell, how are going to charge for them? For example, how to deal with Steam? most of the games I buy there (Baldurs Gate 3 for e.g.) are not made in the USA.
- orwin 1y agoAnd USA get 30% (or 20% depending on the studio) of the price you paid. Do you use Android, windows or Apple, or any licensed software?
- zabzonk 1y ago> any physical USA goods Do you see the word "physical" in my original comment? And me saying that I don't buy such things? I will admit to buying Intel CPUs, but aren't they manufactured in the Far East?
- sam_lowry_ 1y agoI am from EU and the only physical idem proudly wearing "Made in USA" label I saw over the years is the Urimat pad in public toilets. P.S. Upon inspecting my memory, I think the other one was an HP cesium clock, but that was many years ago.
- zabzonk 1y agoHP oscilloscopes were pretty good too, back when . But I haven't been there for many years, and I guess you can get good, cheap, LCD ones today for much less money. And rotating rusty hard drives, I suppose. But still all gone. And don't get me started on American urinals!
- earnesti 1y ago[flagged]
- bad_user 1y agoPlease leave AI slop out of the comments section. Thanks.
- forgotoldacc 1y agoA long time ago, Britain was the dominant economic power in the world. Britain had a massive trade deficit with India. It imported far more from India than it exported to India. But what Britain did was import massive amounts from India and made high value goods at home and provided high value services that couldn't be provided elsewhere. Should it have flipped the other way? In 1800, should Britain have suddenly shifted gears and started massively exporting to India in order to balance the trade? Sure, India was a colony and not a mere trading partner, so no need to argue about that. But the US is also an empire that has bases around the world and has many countries in an economic chokehold. The situation is similar in a modern context since official colonization is kind of gone. The US takes in lower value products from around the world and sells them back to the original country at a higher price due to some sort of added value. Should America do the opposite? Should we drop all of our high value scientific and medical research, drop our engineering, and go all in on making t-shirts to balance the trade deficit? Because we very well could do this. We could steal away the fine industry of Cambodia and Bangladesh and have them buy all our t-shirts and balance the deficit pretty quickly. But is that a long term benefit? Cambodia and Bangladesh are countries that can't really afford to buy massive amounts of American high tech exports or foods. But they're essentially colonies that export goods to other countries, and through accumulating wealth through that development, more people can afford to buy American high tech products. But we're demanding that these countries buy lots of American products now with money that they don't have. The only way to balance that is to make things they can afford. Which means low value items.
- mhogers 1y agoThe t-shirt metaphor is completely unjust - there is no value there for national security nor strategic autonomy. Consider instead: - Semiconductor low-end fabrication (Taiwan, Korea) - Basic electronics: circuit boards, USB devices, .. (China) - Auto parts (Mexico, China, Germany) - Generic drugs (India, China) The reality is that the US is not the ultimate global hegemon anymore and therefore offshoring industries cannot simply be viewed through an economic lens.
- spiderfarmer 1y ago
- xuki 1y agoCan someone explain to me how the US can reshore manufacturing without dramatically lower their standard of living? Maybe they can subsidize some essential industries but I can’t see a path to do it for everything.
- tokioyoyo 1y agoI started believing that all these, are just side effects of Americans and their leadership not accepting the loss of their global leadership to China. They know they can’t pull a Plaza Accord like they did with Japan in the 80s to slow they down. Now hoping for some hail marys. In the worst case, a good chunk of people will be poorer, less women with jobs, which should result in a bump in birth rates. No data points, but I like to entertain this.
- xuki 1y agoI believe whichever party attempts to do this will be voted out in 2 years. It's really really hard to get people to accept a lower standard of living. The only scenario I can think of is during wartime, but the US is pissing off all of their allies.
- gpderetta 1y ago> The only scenario I can think of is during wartime well, it is not surprising then that war seems to be a realistic possibility at the moment. (doesn't matter with whom, we have always been at war with Eastasia).
- tokioyoyo 1y agoLogical next move is to start the move. I’m just assuming that they will. I guess, the biggest problem is hoe vocal “the other side” is, compared to 10/20 years ago. Oh well, that’s what the citizens vited for, I guess.
- aleph_minus_one 1y ago> Can someone explain to me how the US can reshore manufacturing without dramatically lower their standard of living? A (very) partial solution is to build the factories at places where the cost of living for the workers is low. This way, the workers can maintain a higher standard of living at a constant salary.
- ok_dad 1y agoForeigners are always good as a target for blame, but much more wealth has been transferred from American workers to the Oligarch class than via trade deficits. What we have here is a class war, not a war against other working class people in other countries, but the wealthy are winning it without firing a shot.
- FollowingTheDao 1y agoSo who’s to blame for the trade deficit? I’ll tell you who. It’s all the companies he invested in and made billions of dollars off of. Because they all wanted to maximize their profit, so they ship their production overseas and now we have no choice but to buy “foreign goods“ from corporations that say they’re from the United States. Corporations don’t care about countries, they care about profit. Countries are prisonsfor the workers.
- randyrand 1y agoThe USA captures most of the value from selling iPhones worldwide, but yet the entire value of an iPhone counts only as a Chinese export. Something is not right with how we calculate these things.
- mysecretaccount 1y agoiPhone sales don't count as a US export when calculating the trade deficit? Does anyone have information on this? Seems like a major issue indeed.
- thefounder 1y agoOf course they don't because they are made in China. Do you think that Ford cars manufactured in Mexico count as U.S export?
- sam_lowry_ 1y agoNot only China but let us assume iPhones are made in China only. China gets a modest share of the profits, because Apple pockets the rest. Reinvesting a fraction in US and stashing most of the profits in banks across the world that use this money as leverage to buy US bonds, among other things.
- tzs 1y agoThey are assembled in China. Most of the parts are made elsewhere and shipped to China. Should the entire price of the phone count as a Chinese export?
- jfim 1y agoI was wondering the same thing and found this paper: https://www.sciencedirect.com/science/article/abs/pii/S1043951X20300262 https://www.sciencedirect.com/science/article/abs/pii/S10439...
- sandworm101 1y agoThe physical phone is a "good" that is exported from china. But the majority of the value for an iPhone is in the "services" rendered to that phone, which may be sold/exported from the US but can likely be shifted to other countries in order to avoided taxation/tariffs.
- borlox 1y agoSo, you don't want to have "the world" own shares of american companies? Okay, let europe just sell all their stocks and ETF. But also, let them build alternatives to all american products. Let them keep the money they are spending for their Windows and Office licenses, their Netflix and Disney plans. Let them no longer create ad revenues on youtube. Let them buy korean Samsung phones instead of american iPhones. Would that be a good deal for the american people?
- sjx24 1y agoYes? If the American consumer can benefit from more competition and has the ability to subscribe to British Netflix (Brit box?) and French HBO, and the existing monopolies had to work a bit harder for subscribers, that could be an improvement.
- illiac786 1y agoInteresting take. I would love to see more competition in the smartphone OS market for example, but the problem is that at the same time, the tariffs kill international competition…
- torginus 1y agoThis would be true for any other country, but the dollar is the world's reserve currency. The US can simply go 'money printer go BRR' and create money out of thin air, without devaluing the dollar too much, which it can exchange for physical goods. The US creates a 'trade deficit' by swapping things that have imaginary value for things that do not. Under these circumstances they'd be foolish on not running a trade deficit. But if Trump gets his way, that world will be soon over, and people will trade in whatever they have so will no longer be compelled to hold USD.
- collaborative 1y agoI don't understand how nobody in the media is talking about this. The world accepts the US as the producer of currency, trades energy in dollars, etc. The US gets to print money for free, how is that bad for the US? So far I can only see 2 reasons why Trump wants this: 1. He believes the US can force others to pay even more, via tariffs, and they will just accept it. No retaliatory tariffs. Kind of like how he says Greenland will be handed to the US no problem. Dishonest? Delusional? Bullyish? 2. The theory of him being a Russian asset is true, and this is the way for Russia to undermine the US while looking like Trump is rooting for the US. The real plan is for the world to drop the dollar. I don't like conspiracy theories but it just makes no sense otherwise
- deathlight 1y agoTrump has been singing the same tune for over 40 years. If he's an asset of anybody it's Lou Dobbs, not Putin.
- supermatt 1y agoIt seems like the way to "fix" a trade deficit is to create products the rest of the world actually wants to buy. The application of any reciprocal arrangement, whether tariffs or these ICs as proposed in the article only achieves "balance" through punishing others. Aside from the obvious consumer technology and software I am hard pushed to think of any USA produce I would buy that would meet the standards we have in the EU. The simple reality is that the USA consumes more than it produces.
- Crosseye_Jack 1y ago> create products the rest of the world actually wants to bu Exactly. Esp when you have the leader(s) of the US complaining that Europe doesn't buy US cars. Well in the UK smaller cars dominate the market where in the US larger cars do. On avg US cars are longer, wider, taller, and heavier. A lot of our roads (Cities and urban areas) were not designed for larger cars, even a Tesla smallest car, the Model 3 feels big on the road, well it feels big on the road to me.
- SiempreViernes 1y ago> The simple reality is that the USA consumes more than it produces. Indeed, and the US can afford this because it has concentrated a lot of the world's wealth within its borders. So it is not really clear what they want to fix.
- cantrecallmypwd 1y agoThis is the dilemma of spoiled rich kids who got too big for their breeches.
- wtcactus 1y ago“Buffett likened the situation to a wealthy family gradually selling off parts of its estate to sustain its lifestyle” Yet, actually the proper analogy, would be a wealthy family using their disposable income to buy products that make their life easier, and sometimes, even make them more productive so that they can have even more income.
- bhouston 1y agoI think we should expect the US to lose its reserve currency status if these tariffs continue and we should also expect its tax revenue to drop. The combination may make it more likely to see a US default on its debt as there will be less demand for its bonds around the world and less ability to pay high interest rates. Seems unthinkable I know but we are in weird times. If Trump doesn’t back down we may see a very interesting time in the US economy. I should point out that many oligarchs in Russia established themselves by making bold moves in the turbulent post Soviet times. This may be similar time period for the US where a new generation of winners emerge.
- blurbleblurble 1y agoAre they really winning though or are they actually just rotting in a hell of their own making? Something to consider. Money can't buy you love.
- iNic 1y agoInteresting, and worrying at the time, but he clearly turned out to be wrong. The trend never stopped [1] and is not obviously responsible for any negative economic trend. The trend has continued [2]. The thing to worry about is probably not that it is happening, but who is holding these investments. [1]: https://www.bea.gov/data/intl-trade-investment/international-investment-position https://www.bea.gov/data/intl-trade-investment/international... [2]: https://fred.stlouisfed.org/graph/?g=1HrHY https://fred.stlouisfed.org/graph/?g=1HrHY
- energy123 1y agoThe way he views net investment and net foreign ownership seem wrong. He uses the analogy of a farm owner selling bits of their farm to fund their trade deficit. But in the real world, it's not zero sum like this. The pie isn't fixed to the size of the farm. New companies serving new needs can be created. If you're a poor country wanting to escape poverty, you want FDI to be high because you realize it's not zero sum. Yeah, foreigners now own 20% of your stock market due to negative net investment, but it's now 1.5x as big so your slice increased in size to 0.8*1.5 > 1 and everyone is happy. Given this, I struggle to understand if his argument still has merit. He has a point about national debt but it's not a new one.
- tdullien 1y agoThis. There is a joke that Germany delivered Porsches in the 1990s and hot .com stocks in return, and then until 2008 they got CDOs in return. And t-bills -- the US has been a major exporter of TBills. Fwiw, the US has a big surplus in services,so it'll be interesting to see if other countries retaliate against that.
- rib3ye 1y agoIt's moments like right now that the white collar class seems forget the wealth inequality in the US that's been widening over the last 50 years.
- iNic 1y agoYes, but also the story is not that simple. The share has actually been growing since 2010: https://fred.stlouisfed.org/series/WFRBSB50215 https://fred.stlouisfed.org/series/WFRBSB50215
- contravariant 1y agoHonestly I may just be missing the point, I'm not an expert on economic theory, much as I would like to be. But wouldn't literally selling the country imply the biggest possible trade surplus? It's all export and no import.
- u_sama 1y agoOP, did you also read Gray Mirror this morning. Curtis Yarvin went onto defend the IC idea this morning as a way to defend nascent industries (new industries). Interesting article, also presented the ideas of mercantilism of Friedrich List (originator of the Zollverein idea).
- TaurenHunter 1y agoThank you for that! I didn't know about Yarvin nor List. I will try to find out more. https://graymirror.substack.com/p/implementing-market-balanced-trade https://graymirror.substack.com/p/implementing-market-balanc...
- gargan 1y agoBusiness people don't necessarily make the best economists or politicians, that's the main lesson from the last few years to me.
- RGamma 1y agoMy main lesson is that in (esp. macro) economics nobody knows what's really going on. Too many, too diverse things happening at breakneck speed.
- horsawlarway 1y agoThis is roughly where I've settled as well. Economics likes to present the facade of a hard science with equations and rules - but macro economics simply doesn't work the same way as physics, and pretending that your equations are going to be a crystal ball has so far proved mostly bullshit. Too many things depend on decisions made by actors acting under very complex and dynamic social constraints, rather than predictable rules. The end result is that several decades after something happens - we're ok at examining the social/political influence of the time on macro economics, but that insight doesn't do much for us now because circumstances are changing at a pace that has rendered any intuition utterly obsolete.
- cantrecallmypwd 1y agoThat's a vague and unconvincing chicken little argument for not making models using the wealth of open and for-purchase data that's available and understanding the limitations.
- cantrecallmypwd 1y agoThere's an American monetary economist living in Poland who does a good job of explaining things. "Econ Lessons" on YT.
- ruxkor 1y agoThis article was printed on November 10th, 2003 (!).
- thefounder 1y agoThis looks like the end of story is that the US will consume less, "more expensive" and home made. I think it will have disastrous consequences for the U.S IF the rest of the world keeps trading free. There will be more jobs in the U.S but in the end will become a more inefficient market.
- tonyedgecombe 1y agoThat wouldn't necessarily be a bad thing if it meant a flattening of inequality however I don't think that is on the cards.
- thefounder 1y agoI think the inequality could be even higher because the rich can simply move the investments aboard while the working people have no real choice but “enjoy” the local economy.
- cantrecallmypwd 1y agoNo need to "think". These policies are all magnifying stagflation. Recession if not depression. There won't be anything to buy because America doesn't have much of a manufacturing supply chain, isn't willing to pay workers enough, and prices are rocketing to the moon such that Americans won't buy domestic or imported goods. Domestic producers, having less international competition, will raise prices leading to a massive similar price-profit contributing 60% of inflation post-pandemic in the K-shaped recovery. The soonest manufacturing could be setup in America is 3 years, but this is work American corporations don't want to pay workers fair wages for.
- simonebrunozzi 1y agoThere should be a (2003) at the end of the post title.
- JimBlackwood 1y agoA [2003] tag in the title would be appropriate.
- kymki 1y agoAs a European this whole debate i sickening. Trade deficit is a blunt and ineffective way to model international trade on this level, but it is easy to point at and say "look at this large bad number!" which is exactly what is going on. People are primed to interact with that through social media, etc. The American trend currently is that any trade deficit is bad. It simply isnt. It is idiotic to state so. The whole point of unequal import and export is that every single country should not strive for importing as much as it exports across all sectors. It is extremely inefficient for every country to specialize in everything equally. What then is the point of international trade? I produce steel, you produce tractors, your neighbor produces wheat. We have mutual dependence across our specializations in the market. What is missing from the debate is that import/export equilibrium should be achieved on a global level, not on a national level. This is taking something that is a healthy driver for international trade and framing it as if trade partners are forcing others to sell out cheaply. They aren't. They have found their niche. Find yours or step back.
- wiz21c 1y ago> It is extremely inefficient for every country to specialize in everything equally. Except when you have to produce gazillions of CO2 to move things around or when the "efficient" countries are those who don't look at the health of their workforce...
- avodonosov 1y ago> What is missing from the debate is that import/export equilibrium should be achieved on a global level, not on a national level. On global level it's always balanced. (How can it be otherwise?)
- TaurenHunter 1y agoInteresting! Aren't Europeans known for their sectors of the economy that are heavily protected by tariffs? Common Agricultural Policy? Tariff rate for cars of 10% (compared to US' 2.5%)
- thehappypm 1y agoIt’s hard to find your niche when your major trading partners are manipulating their currency and applying tariffs on you
- kryptiskt 1y agoI'd have expected better from Warren Buffett. It's not a zero-sum game, the developed countries running chronic trade surpluses like Germany and Sweden (my home country) are fooling themselves, because the only way they can do that is by putting a brake on domestic consumption by keeping wages low. Everybody in the EU would be better off if those countries actually let their consumers spend the money that they're hoarding. All of that spending wouldn't go on foreign goods, so it would even benefit their own producers as well. Yet German politicians indoctrinated in stupid frugality (that once had a point, but is completely outdated) continue to scold countries that run trade deficits in order to buy German goods instead of suffocating their economy and making it even worse for everybody, especially Germany.
- cantrecallmypwd 1y agoThis. The problem with looking at trade deficits is that they are comparative trade phallus envy that somehow "demand" regulatory "action" when others don't buy enough of our stuff. How dare them! These deeply-unpopular actions alienating allies certainly won't motivate them to purchase more but than can and will convince them to purchase a lot less. Losing customers abroad who don't want American stuff and losing customers at home who can't buy stuff from elsewhere or stuff from home since prices shot up and they were laid off. Nothing good will come of any of this because the leader is, no doubt, using breaking things for personal gain and to weasel their way into staying in power indefinitely by creating protests and/or war to justify it.
- unyttigfjelltol 1y agoWarren's plan was to sell to exporting nations import credits (ICs) that are less fundamental than national bonds, and that diminish intergenerational unfairness from foreign real estate holdings. The proposal sounds like a gentle version of capital controls or outright bans on foreign land ownership, which US trading partners implemented. The irony of course is that Warren is a leader of the very business community that struck this Faustian bargain, and he probably accumulated a fair quantity of land and bonds through exactly this process. He's basically pleading with politicians to change the math so he can make money a way that is better for the nation.
- yonran 1y agoI think the parable of Squanderville and Thriftville is interesting and it reminds me of the chapter of Henry George’s Progress and Poverty that also warns that renters can be a slave to the landowner (https://www.gutenberg.org/cache/epub/55308/pg55308-images.html#Page_345 https://www.gutenberg.org/cache/epub/55308/pg55308-images.ht...). I’m wondering to what extent is Squanderville a warning against monopolies and private property in land, as opposed to a warning against debt and trade deficits? Would Land Value Tax fix this?
- layer8 1y agoYesterday I learned that being the world’s reserve currency goes hand-in-hand with a trade deficit: https://en.wikipedia.org/wiki/Triffin_dilemma https://en.wikipedia.org/wiki/Triffin_dilemma. And the US profits immensely from that status of the USD.
- avodonosov 1y agoSo he says foreigners buy US assets for the dollars US pays them for their goods, and that's the problem - the US being sold out. My question: don"t these foreigners become Americans in a sense? E.g. by holding shares of US companies they have common interests with other shareholders. Upd: I mean, if considering nation as a partnership, those new asset co-owners are new parnters. Does it imply old co-owners are deluted? Only if the total value of assets is not growing proportianally to the new shares.
- rib3ye 1y agoUntil they become majority shareholders or outright owners. In the short-term it may turn out to be fine, but over the long run, you have to pray the foreign owners' values are aligned with American success (keeping Americans employed, building value and not asset stripping the company). Though I will admit recently I don't even feel like even American owners' values are aligned with American success.
- dachworker 1y agoAmericans should study Germany and Japan. Do their economies look healthy? Are those manufacturing jobs attractive? Are the Germans and the Japanese richer? Do Germany and Japan have good economic prospects? I'll spare you the research. The answer is, "No". Turns out, having an economy based on manufacturing high-end door knobs in 2025 is not great. Economic growth and innovation is not there, because there is so much growth and innovation that you can eke out of high-end door knobs. These enterprises are great for the families that own them, but they employ a relatively low number of workers, those jobs do not pay that much, and they exist is a steady-state. Well, only until China and India figure out how to also manufacture high-end door knobs.
- weatherlite 1y ago> Do their economies look healthy? It's all relative. Relative to what? I think its healthier than it would have been had there been no manufacturing at all. > Are those manufacturing jobs attractive? Not all but some are for sure. I'm sure there are enough people working for Volkswagen, BMW or Bosch that earn well and prefer working for them than doing something else. > Are the Germans and the Japanese richer? Again, richer than what? I think they're richer than they would have been had they not been manufacturing anything. If you're asking whether they're richer than Americans, no they're not, but that's mostly due to historical reasons (U.S dollar is the world reserve currency).
- dachworker 1y agoOK, let's put it this way. You would struggle to buy a house if you worked at VW assembling cars. You would be able to rent an apartment and have a relatively good if modest existence. Nothing close to what Americans are able to afford. But if you wanted to create blue collar jobs and if the government was going to step in and contort the economy with heavy handed measures, anyway, then just setup a public works program and build a bunch of housing, build and maintain energy and transport infrastructure, build climate mitigation projects. That would actually address a real demand and make a whole lot of sense.
- 1y ago
- anothernewdude 1y agoHe is wrong in one major respect, but I see economists do this frequently with GDP - American companies aren't. They aren't solely American companies - they (or at least the large ones worth mentioning) have overseas components to them. Sometimes majorly so. So those foreigners who own parts of "American companies" are really owning parts of international companies.
- ucha 1y agoYou can have growing deficits without actually "selling the nation" when you account for growth and inflation. Say foreigners own 50% of US assets. When someone creates in the US a company ex nihilo and sells 10% of it to foreign investors, even though foreigners bought more US assets, this new wealth creation causes the % of foreign-owned US assets to diminish. When foreign investors own US bonds, as inflation increases and the money supply increases, they end up owning less in real terms. This doesn't account for investments that are limited in quantity such as real estate. Also just because those are opposing forces, doesn't mean that foreign ownership wouldn't increase. As a matter of fact, when looking at the foreign ownership of US stocks, it has been steadily increasing.
- rib3ye 1y agoI feel like a lot of people are really getting stuck on the Trump stuff and missing Buffetts core argument. Here's a pretty simple guy: When the US has a trade deficit with China, it tries to balance that out by issuing debt in the form of treasuries. As more treasuries get issued to foreign nations, the risk to American sovereignty increases. People really forget Japan's blitz on US real estate and businesses in the 80s and the drastic actions of that era the US took to knee-cap Japan.
- snowwrestler 1y agoAmerican sovereignty is a matter of geography, firepower, culture, and law. It’s not easy to threaten. And private trade deficits are not balanced by sovereign debt, they are balanced by private debt and foreign direct investment, which don’t threaten sovereignty. The 1990s U.S. reaction to Japanese business success was primarily driven by popular xenophobia, not economic analysis. It was resolved by the dotcom bubble, an explosion of American innovation that changed the conversation. Not by government policy.
- rib3ye 1y agoIt's hard to ignore the implosion of the Japanese real estate bubble as a contributor of receding Japanese influence in the US since then. The Plaza Accords are widely attributed to this.
- snowwrestler 1y agoMaybe hard to ignore in Japan. In the U.S., their success was based on their leadership in technology innovation, not real estate. Leadership which was eaten by the U.S. tech industry starting in the late 90s.
- tzs 1y agoIf a country decides that it is important to not be a net importer the method to achieve that proposed by Buffett in the article is infinitely better than the way Trump is going about it. Essentially what Buffett suggests in the article is a cap and trade system on imports. To import $X worth of goods the importer must have $X worth of ICs (import certificates), which consumes those ICs. ICs are created when exporters export, with each dollar of exports creating a dollars worth of ICs. ICs are tradable so an exporter does not have to use the ICs created by their own exports. They can sell them to importers. Note that under this system it is perfectly fine to have a trade deficit with any given country, as long as their are trade surpluses with other countries that balance it. Trump wants trade with each country to be balanced (or a surplus). Consider this hypothetical. • Country A needs to import some natural resource. They import it from country B and use it to manufacture something. • Country B doesn't need anything that A makes, but does need something from country C. • Country C doesn't need anything from B, but imports the thing A is manufacturing. If Trump were running country A he would view this as A getting ripped off by B. Under Trump logic B would be getting ripped off by C, and C would be getting ripped off by A, but he wouldn't care about the former and would probably by bragging about the later but not calling it a rip off. One of the big reasons money was developed in the first place was so goods did not need to be balanced between each pair of traders. Before money if a farmer had chickens and wanted a goat he had to find someone who wanted chickens and would trade a goat for it. If the only guy with goats he could find didn't want chickens but wanted a pig the farmer was out of luck, unless he could find someone who had a pig and wanted chickens. It can keep going...maybe pig guy wants a cow so now the guy with chickens also needs to find someone who will trade a cow for pigs. Money made it so trades become money for goods instead of goods for goods. Chicken guy just needed to find someone with a goat for sale for money instead of finding someone with a goat who specifically needed chickens. Same thing applies to trade between countries, and for some inexplicable reason Trump wants it to work like the old chickens for goat days.
- TaurenHunter 1y ago> what Buffett suggests in the article is a cap and trade system on imports. A H1B visa but for goods instead of people...
- CMCDragonkai 1y agoThe US exports alot of virtual goods, that is like technological services. I reckon non-US countries should start tariffing all US based internet services as a reciprocal tariff if there's a trade imbalance between goods versus services.
- rsanek 1y agoIt's interesting how similar the Trump plan is to the one Buffett suggests. Clearly it trades simplicity of implementation for flexibility. It seems to me like there are two major differences: doesn't incentivize exporters as much, since they don't receive ICs; and punishes imports from some countries more than others vs. all having the same IC market price applied. Also interesting to update some of the numbers from the doc. Buffett mentions the $2.5t net foreign ownership vs. $12t in total US stocks in 2003; the values are now $26t vs. $62t.