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The author seems to gloss over the economy not being a zero sum game. As an example, since this is HN: the US creates a ton of startups. Any country that creat

The author seems to gloss over the economy not being a zero sum game. As an example, since this is HN: the US creates a ton of startups. Any country that creates new businesses is going to see foreign investment, which on paper leads to a trade deficit. Essentially, the US exports businesses to the rest of the world, but that is not tallied in a 19th century model for the trade balance of goods. However, it's arguably a better export that commoditized goods, from a margin standpoint. Overall these graphs change dramatically based on where the exact geographic boundaries are set and how one defines goods/services/investment. Clearly the US hasn't run out of cash and needed to massively print dollars to cover foreign debt, which would happen very quickly if the system were actually imbalanced.

bumby 1y ago
>However, it's arguably a better export that commoditized goods, from a margin standpoint. Importantly, this is the same dynamic that causes economies to move away from manufacturing towards service-oriented economies. Capitalism is going to chase higher margins, but there should be guardrails that mitigate the negative externalities of such behavior. Else we are left with an eroded middle class, lack of supply chain resilience, disproportionate costs for sectors that can’t chase geo-arbitrage, weakened national security manufacturing capacity, etc.
- palmotea 1y ago
  No. The US will win the next world war by replying on its advanced capabilities in restaurant work and business consulting.
  - kevin_thibedeau 1y ago
    The US will withhold their advertisements until they capitulate.
  - ijk 1y ago
    You joke, but wars are won on logistics. Famously, the US military can deploy a Burger King anywhere on Earth within 24 hours.
    - palmotea 1y ago
      > You joke, but wars are won on logistics. Famously, the US military can deploy a Burger King anywhere on Earth within 24 hours. But not only on logistics. If the "US military can deploy a Burger King anywhere on Earth within 24 hours," but little else, it's fucked. Right now its production base is so addled and weakened that it can't even sustain the wartime production really needed by Ukraine without cleaning out the cupboards. It has only enough missiles to last days in a high intensity conflict, and the lead time for more is years. It definitely can't win in a sustained conflict against China (who has 40-effing% of world manufacturing capacity.
      - goatlover 1y ago
        A sustained conflict with a nuclear power is a no go. The risk of nuclear escalation is too great.
        palmotea 1y ago
        > A sustained conflict with a nuclear power is a no go. The risk of nuclear escalation is too great. That was the rationale for letting the US military get into this state, but the conflict in Ukraine proved it to be unwise and founded on false assumptions.
        ikiris 1y ago
        When did the us join that conflict and when did it run out of tanks?
        sorcerer-mar 1y ago
        Huh? Ukraine isn't a nuclear state.
- pirate787 1y ago
  The US is manufacturing more than ever and is the second largest manufacturer in the world after China. The US middle class has actually "eroded" upwards -- our wealthiest population cohort has tripled in the last thirty years.
  - bumby 1y ago
    Counterpoint: We aren’t necessarily manufacturing the things that contribute to national security in the same way we were after WW2. The DoD has listed lost manufacturing capacity as a major risk. And I think you’ll need to elaborate more on your point about the middle class. Depending on how you measure it, people can move from middle class into upper class, but also into lower classes. Your post acts as if class mobility is only in one direction. A bifurcated distribution supports the point that the middle class is eroding.
  - jerkstate 1y ago
    That’s what the data shows until you peel back the covers and understand that nothing at all could be manufactured here at all without enormous imports of not just raw materials but partially completed goods. US manufacturing output looks large economically because it’s mostly final assembly of imported partially completed goods, but if you looked at the value added (manufacturing output minus imports) it would be much smaller than other countries like China which own entire supply chains.
    - sorcerer-mar 1y ago
      Outside of a few strategic industries or products, why is this bad?
      - aeternum 1y ago
        Because we can't actually make the strategic products. You might have a factory to assemble the highly strategic fighter jet in the US but it is problematic if you are dependent on foreign countries to source or manufacture the multitude of parts.
- hypeatei 1y ago
  > weakened national security manufacturing capacity, What products specifically would be a national security concern? The CHIPS act was passed to revitalize semiconductor manufacturing because we rely heavily on Taiwan. From my understanding, we already have a lot of domestic manufacturers for various parts, who are too expensive for the average American but are the main suppliers to the DoD.
  - bumby 1y ago
    As mentioned in another post, the DoD lists lack of manufacturing capabilities as a growing risk. There are many small batch parts that the US could manufacture, but companies aren’t interested. There are also those items which they no longer have the capacity to make, or deliver. Ted Koppel’s book Lights Out gives examples of long lead time items that can’t be made in the US and we also lack the ability to deliver them because the necessary infrastructure is no longer there
deleted 1y ago
[deleted]
brad0 1y ago
There was another reply here earlier that was saying it isn't a trade deficit. I wanted to steelman the parent post: Foreign investment into USA companies reduces the USA trade deficit but it isn't tracked in traditional methods. I've heard that foreign investment in real estate generally isn't counted as each country owns properties equally between the two, so it nets out. I wonder if investments into companies is the same?
- chessgecko 1y ago
  It is tracked! there are a few different numbers. by the BEA: https://fred.stlouisfed.org/graph/?g=gX0f https://fred.stlouisfed.org/graph/?g=gX0f by the treasury: https://ticdata.treasury.gov/resource-center/data-chart-center/tic/Documents/shl2024r.pdf https://ticdata.treasury.gov/resource-center/data-chart-cent... It's a little hard to figure out how important it is, but there are "good" numbers.
- JumpCrisscross 1y ago
  > Foreign investment into USA companies reduces the USA trade deficit Other way. Foreign investment doesn’t touch the trade account but the capital account. When the company the foreign investor invested in buys stuff, that alters the trade balance depending on what they buy from whom.
testing22321 1y ago
> Clearly the US hasn't run out of cash and needed to massively print dollars to cover foreign debt Foreign debt is skyrocketing, with interest payments alone already becoming unworkable. Five or ten more years of this spells disaster, it’s totally unsustainable. Either something very drastic has to change, or that money printer will have to go into overdrive.
- analognoise 1y ago
  We could just massively tax the rich?
  - alexey-salmin 1y ago
    Only if you find a way to tax the rich in other countries. Taxing the US rich redistributes money within the country while the problem (or a perceived problem, depending on your stance) is that US bleeds money across the board.
    - analognoise 1y ago
      Is the the "rich people will leave" argument? I can't tell. If they're not willing to participate, I think we should call their bluff. We have helicopters and aircraft carriers, I don't think we couldn't track down a few rich tax evaders.
4fterd4rk 1y ago
[flagged]
- chris_va 1y ago
  (your comment reminds me of Monty Python's argument skit...) I am merely pointing out that the article, as written, glosses over an interesting an important detail.
treis 1y ago
Exporting business ownership when seen on a national level is just another form of debt. You're trading future production for stuff now. The fundamental problem is that the balance of goods flows into the US today. If debts and profits are going to be paid out eventually that will have to reverse. But it's going to be politically impossible for the US to ever send out 5-10% of its GDP in goods. That's the fundamental problem.
- Anon1096 1y ago
  You've fallen into the exact zero sum thinking trap that the parent comment mentioned. If investment causes the overall pie to be bigger, then both sides win with no tradeoff. > If debts and profits are going to be paid out eventually that will have to reverse. No it absolutely won't. The US exports financialization and technology services which don't show up on a trade deficit chart but do materially make the US and the world richer.
  - treis 1y ago
    (1) Perception is reality. The pie might be bigger and the US might be better off but that's not what people will act on. (2) Foreign debt is growing faster than the pie. It's an unsustainable situation. Debt as a percent of GDP has gone from 10% in 2000 to 30% today.
  - chessgecko 1y ago
    Or maybe a lot of it can't deliver returns in line with the current price. The world realizes that and stops sending us stuff for those investments. Then we're stuck with limited manufacturing, high inflation and relatively low ownership of our existing high value exports. If the pie gets bigger too slowly then I think we still lose.
  - cryptonector 1y ago
    > You've fallen into the exact zero sum thinking trap that the parent comment mentioned. If investment causes the overall pie to be bigger, then both sides win with no tradeoff. The economy is _not_ a zero-sum game. The world economy is _not_ a zero-sum game. Trade very much _is_ a zero-sum game because all the exports of all the countries have to be equal imports in the others -- worldwide imports and exports must net to zero. GP's point, if I understood it -and idk if it's correct-, is that to pay off our debt we'll have to export more than we import, but that the rest of the world will not allow that. The part of GP's argument that sounds like "zero-sum games" is about world trade, and world trade is zero-sum even though the world economy is not zero-sum.
mempko 1y ago
It's not a zero sum game over the long term, but at any moment it certainly is. At any moment there is a certain amount of money and generally it gets redistributed to the wealthy. So it's mostly zero sum. Yes the pie grows over time but the distribution gets worse over time. We call this inequality and it's growing.
hinkley 1y ago
Other countries federal reserves like to diversify into other currencies to help guard against hyperinflation. And the dollar is stable as currencies go, so people are happy enough to buy T bills but now there are a bunch of say Kronors the US government doesn’t know what to do with, so let’s buy some oil, fish, and steel to get it back where it’s going without fucking with the exchange rate.
csomar 1y ago
Capital investment are potential future negative outflows. They do not replace exports (goods and services). That is unless these investments are a scam (ahem), investors are probably expecting a yield in the future and to retrieve their investment. Movement of capital will be good if it was balanced, but it is not: https://en.wikipedia.org/wiki/Net_international_investment_position https://en.wikipedia.org/wiki/Net_international_investment_p... The US runs a NIIP of negative $27 Trillion. This is a consequence of the trade deficit as the deficit is being financed mainly with this money.
- chessgecko 1y ago
  Actually since the qe to fix 2008 foreign investors/governments cut down on bond buying. Treasury has foreign bond holdings up about 2T since 2014 and current account deficits sum to around 7T. Nowadays we're mostly selling companies and real estate. (though there was a nice jump in bond buying a few years when rates went up)
marcosdumay 1y ago
The author is talking about nominal-value market aggregates that always add up to 0, by construction, without alternative. The article is literally explaining why the US runs a deficit, and economic growth isn't really a part of that explanation.
ggm 1y ago
> The author seems to gloss over the economy not being a zero sum game. The current incumbent of the WH seems to think two things: 1) all games are zero sum games 2) he has authority to sack or functionally wreck any institution he likes without legal recourse. I would expect in the light of 2) it's possible people write as if 1) is being respected.
- aeternum 1y ago
  This is a common soundbite and an unfair simplification. Non zero sum games often still have winners and losers. Also a positive sum trade deal for both sides does not mean it is the best trade deal.
  - ggm 1y ago
    "best" is highly subjective. It certainly might not deliver the highest dollar value across the exchange. The reason for this highly unfair soundbite is that most international trade treaty processes are designed NOT to favour one economy over the others and use "most favoured nation" language to try and put equity on the table. Thats before the US enters the room: My reading online in years past says that every economy which did the TPP said it did better overall when the US walked away from that deal. Trump and his negotiators are not remotely interested in fixing problems globally, they're fixing their own vision of internal problems. A 10% across the board impost on goods coming in is frankly ludicrous, and the lack of awareness about how VAT/GST models work for importers and exporters in Europe and like economies is pretty stunning: In no way does VAT impose a burden on US incoming goods. it's neutral to all sources. Yet, Trump and his negotiators want to pretend they don't know that. I'm not an economist or a game theoretician. I'm fine with you correcting my simplified language, but I do not think it was unfairly applied to the current political situation. I'm a simpleton shouting about another simpleton: the one who thinks the only negotiation worth doing is one he "wins" in and for him, winning definitionally means somebody has to lose.
    - oblio 1y ago
      > Trump and his negotiators are not remotely interested in fixing problems globally, they're fixing their own vision of internal problems. Look at their pharma complaints. Pharma companies (many of which are American, but far from all) develop new drugs. In single payer systems, these behemoths have to go against state managed insurance systems, which generally set specific rules for purchasing (maximum price, etc). As these pharma companies WANT to sell in all the markets they can, they accept these rules. As a result, drugs made by them cost, let's say, $100 in those countries. In the US, where pharma companies are still behemoths, they can divide et impera insurance companies, so pharma companies pretty much impose their prices, leading to absurd stuff like fancier insulin costing $1000. Now, instead of working to reduce costs in the US, too, Trump & co want to INCREASE the cost of these drugs globally.

bumby 1y ago

>However, it's arguably a better export that commoditized goods, from a margin standpoint. Importantly, this is the same dynamic that causes economies to move away from manufacturing towards service-oriented economies. Capitalism is going to chase higher margins, but there should be guardrails that mitigate the negative externalities of such behavior. Else we are left with an eroded middle class, lack of supply chain resilience, disproportionate costs for sectors that can’t chase geo-arbitrage, weakened national security manufacturing capacity, etc.

palmotea 1y ago
No. The US will win the next world war by replying on its advanced capabilities in restaurant work and business consulting.
- kevin_thibedeau 1y ago
  The US will withhold their advertisements until they capitulate.
- ijk 1y ago
  You joke, but wars are won on logistics. Famously, the US military can deploy a Burger King anywhere on Earth within 24 hours.
  - palmotea 1y ago
    > You joke, but wars are won on logistics. Famously, the US military can deploy a Burger King anywhere on Earth within 24 hours. But not only on logistics. If the "US military can deploy a Burger King anywhere on Earth within 24 hours," but little else, it's fucked. Right now its production base is so addled and weakened that it can't even sustain the wartime production really needed by Ukraine without cleaning out the cupboards. It has only enough missiles to last days in a high intensity conflict, and the lead time for more is years. It definitely can't win in a sustained conflict against China (who has 40-effing% of world manufacturing capacity.
    - goatlover 1y ago
      A sustained conflict with a nuclear power is a no go. The risk of nuclear escalation is too great.
      - palmotea 1y ago
        > A sustained conflict with a nuclear power is a no go. The risk of nuclear escalation is too great. That was the rationale for letting the US military get into this state, but the conflict in Ukraine proved it to be unwise and founded on false assumptions.
        ikiris 1y ago
        When did the us join that conflict and when did it run out of tanks?
        sorcerer-mar 1y ago
        Huh? Ukraine isn't a nuclear state.
pirate787 1y ago
The US is manufacturing more than ever and is the second largest manufacturer in the world after China. The US middle class has actually "eroded" upwards -- our wealthiest population cohort has tripled in the last thirty years.
- bumby 1y ago
  Counterpoint: We aren’t necessarily manufacturing the things that contribute to national security in the same way we were after WW2. The DoD has listed lost manufacturing capacity as a major risk. And I think you’ll need to elaborate more on your point about the middle class. Depending on how you measure it, people can move from middle class into upper class, but also into lower classes. Your post acts as if class mobility is only in one direction. A bifurcated distribution supports the point that the middle class is eroding.
- jerkstate 1y ago
  That’s what the data shows until you peel back the covers and understand that nothing at all could be manufactured here at all without enormous imports of not just raw materials but partially completed goods. US manufacturing output looks large economically because it’s mostly final assembly of imported partially completed goods, but if you looked at the value added (manufacturing output minus imports) it would be much smaller than other countries like China which own entire supply chains.
  - sorcerer-mar 1y ago
    Outside of a few strategic industries or products, why is this bad?
    - aeternum 1y ago
      Because we can't actually make the strategic products. You might have a factory to assemble the highly strategic fighter jet in the US but it is problematic if you are dependent on foreign countries to source or manufacture the multitude of parts.
hypeatei 1y ago
> weakened national security manufacturing capacity, What products specifically would be a national security concern? The CHIPS act was passed to revitalize semiconductor manufacturing because we rely heavily on Taiwan. From my understanding, we already have a lot of domestic manufacturers for various parts, who are too expensive for the average American but are the main suppliers to the DoD.
- bumby 1y ago
  As mentioned in another post, the DoD lists lack of manufacturing capabilities as a growing risk. There are many small batch parts that the US could manufacture, but companies aren’t interested. There are also those items which they no longer have the capacity to make, or deliver. Ted Koppel’s book Lights Out gives examples of long lead time items that can’t be made in the US and we also lack the ability to deliver them because the necessary infrastructure is no longer there

deleted 1y ago

[deleted]

brad0 1y ago

There was another reply here earlier that was saying it isn't a trade deficit. I wanted to steelman the parent post: Foreign investment into USA companies reduces the USA trade deficit but it isn't tracked in traditional methods. I've heard that foreign investment in real estate generally isn't counted as each country owns properties equally between the two, so it nets out. I wonder if investments into companies is the same?

chessgecko 1y ago
It is tracked! there are a few different numbers. by the BEA: https://fred.stlouisfed.org/graph/?g=gX0f https://fred.stlouisfed.org/graph/?g=gX0f by the treasury: https://ticdata.treasury.gov/resource-center/data-chart-center/tic/Documents/shl2024r.pdf https://ticdata.treasury.gov/resource-center/data-chart-cent... It's a little hard to figure out how important it is, but there are "good" numbers.
JumpCrisscross 1y ago
> Foreign investment into USA companies reduces the USA trade deficit Other way. Foreign investment doesn’t touch the trade account but the capital account. When the company the foreign investor invested in buys stuff, that alters the trade balance depending on what they buy from whom.

testing22321 1y ago

> Clearly the US hasn't run out of cash and needed to massively print dollars to cover foreign debt Foreign debt is skyrocketing, with interest payments alone already becoming unworkable. Five or ten more years of this spells disaster, it’s totally unsustainable. Either something very drastic has to change, or that money printer will have to go into overdrive.

analognoise 1y ago
We could just massively tax the rich?
- alexey-salmin 1y ago
  Only if you find a way to tax the rich in other countries. Taxing the US rich redistributes money within the country while the problem (or a perceived problem, depending on your stance) is that US bleeds money across the board.
  - analognoise 1y ago
    Is the the "rich people will leave" argument? I can't tell. If they're not willing to participate, I think we should call their bluff. We have helicopters and aircraft carriers, I don't think we couldn't track down a few rich tax evaders.

4fterd4rk 1y ago

[flagged]

chris_va 1y ago
(your comment reminds me of Monty Python's argument skit...) I am merely pointing out that the article, as written, glosses over an interesting an important detail.

treis 1y ago

Exporting business ownership when seen on a national level is just another form of debt. You're trading future production for stuff now. The fundamental problem is that the balance of goods flows into the US today. If debts and profits are going to be paid out eventually that will have to reverse. But it's going to be politically impossible for the US to ever send out 5-10% of its GDP in goods. That's the fundamental problem.

Anon1096 1y ago
You've fallen into the exact zero sum thinking trap that the parent comment mentioned. If investment causes the overall pie to be bigger, then both sides win with no tradeoff. > If debts and profits are going to be paid out eventually that will have to reverse. No it absolutely won't. The US exports financialization and technology services which don't show up on a trade deficit chart but do materially make the US and the world richer.
- treis 1y ago
  (1) Perception is reality. The pie might be bigger and the US might be better off but that's not what people will act on. (2) Foreign debt is growing faster than the pie. It's an unsustainable situation. Debt as a percent of GDP has gone from 10% in 2000 to 30% today.
- chessgecko 1y ago
  Or maybe a lot of it can't deliver returns in line with the current price. The world realizes that and stops sending us stuff for those investments. Then we're stuck with limited manufacturing, high inflation and relatively low ownership of our existing high value exports. If the pie gets bigger too slowly then I think we still lose.
- cryptonector 1y ago
  > You've fallen into the exact zero sum thinking trap that the parent comment mentioned. If investment causes the overall pie to be bigger, then both sides win with no tradeoff. The economy is _not_ a zero-sum game. The world economy is _not_ a zero-sum game. Trade very much _is_ a zero-sum game because all the exports of all the countries have to be equal imports in the others -- worldwide imports and exports must net to zero. GP's point, if I understood it -and idk if it's correct-, is that to pay off our debt we'll have to export more than we import, but that the rest of the world will not allow that. The part of GP's argument that sounds like "zero-sum games" is about world trade, and world trade is zero-sum even though the world economy is not zero-sum.

mempko 1y ago

It's not a zero sum game over the long term, but at any moment it certainly is. At any moment there is a certain amount of money and generally it gets redistributed to the wealthy. So it's mostly zero sum. Yes the pie grows over time but the distribution gets worse over time. We call this inequality and it's growing.

hinkley 1y ago

Other countries federal reserves like to diversify into other currencies to help guard against hyperinflation. And the dollar is stable as currencies go, so people are happy enough to buy T bills but now there are a bunch of say Kronors the US government doesn’t know what to do with, so let’s buy some oil, fish, and steel to get it back where it’s going without fucking with the exchange rate.

csomar 1y ago

Capital investment are potential future negative outflows. They do not replace exports (goods and services). That is unless these investments are a scam (ahem), investors are probably expecting a yield in the future and to retrieve their investment. Movement of capital will be good if it was balanced, but it is not: https://en.wikipedia.org/wiki/Net_international_investment_position https://en.wikipedia.org/wiki/Net_international_investment_p... The US runs a NIIP of negative $27 Trillion. This is a consequence of the trade deficit as the deficit is being financed mainly with this money.

chessgecko 1y ago
Actually since the qe to fix 2008 foreign investors/governments cut down on bond buying. Treasury has foreign bond holdings up about 2T since 2014 and current account deficits sum to around 7T. Nowadays we're mostly selling companies and real estate. (though there was a nice jump in bond buying a few years when rates went up)

marcosdumay 1y ago

The author is talking about nominal-value market aggregates that always add up to 0, by construction, without alternative. The article is literally explaining why the US runs a deficit, and economic growth isn't really a part of that explanation.

ggm 1y ago

> The author seems to gloss over the economy not being a zero sum game. The current incumbent of the WH seems to think two things: 1) all games are zero sum games 2) he has authority to sack or functionally wreck any institution he likes without legal recourse. I would expect in the light of 2) it's possible people write as if 1) is being respected.

aeternum 1y ago
This is a common soundbite and an unfair simplification. Non zero sum games often still have winners and losers. Also a positive sum trade deal for both sides does not mean it is the best trade deal.
- ggm 1y ago
  "best" is highly subjective. It certainly might not deliver the highest dollar value across the exchange. The reason for this highly unfair soundbite is that most international trade treaty processes are designed NOT to favour one economy over the others and use "most favoured nation" language to try and put equity on the table. Thats before the US enters the room: My reading online in years past says that every economy which did the TPP said it did better overall when the US walked away from that deal. Trump and his negotiators are not remotely interested in fixing problems globally, they're fixing their own vision of internal problems. A 10% across the board impost on goods coming in is frankly ludicrous, and the lack of awareness about how VAT/GST models work for importers and exporters in Europe and like economies is pretty stunning: In no way does VAT impose a burden on US incoming goods. it's neutral to all sources. Yet, Trump and his negotiators want to pretend they don't know that. I'm not an economist or a game theoretician. I'm fine with you correcting my simplified language, but I do not think it was unfairly applied to the current political situation. I'm a simpleton shouting about another simpleton: the one who thinks the only negotiation worth doing is one he "wins" in and for him, winning definitionally means somebody has to lose.
  - oblio 1y ago
    > Trump and his negotiators are not remotely interested in fixing problems globally, they're fixing their own vision of internal problems. Look at their pharma complaints. Pharma companies (many of which are American, but far from all) develop new drugs. In single payer systems, these behemoths have to go against state managed insurance systems, which generally set specific rules for purchasing (maximum price, etc). As these pharma companies WANT to sell in all the markets they can, they accept these rules. As a result, drugs made by them cost, let's say, $100 in those countries. In the US, where pharma companies are still behemoths, they can divide et impera insurance companies, so pharma companies pretty much impose their prices, leading to absurd stuff like fancier insulin costing $1000. Now, instead of working to reduce costs in the US, too, Trump & co want to INCREASE the cost of these drugs globally.