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You misunderstood: balanced trade is about the sum across all countries, not necessarily between any two countries. There can be a trade imbalance between NZ an
by _1tem 1y ago
You misunderstood: balanced trade is about the sum across all countries, not necessarily between any two countries. There can be a trade imbalance between NZ and the US without an overall trade deficit in either country. The point is, that NZ might sell wine and buy fighter jets, but they have to sell enough wine to the rest of the world to pay for the fighter jets, then their trade is balanced. There’s no problem if they have an imbalance of trade with the US as long as it’s balanced overall.
- seanhunter 1y agoI didn't misunderstand at all. There is no reason to expect bilateral trade to be balanced and thus there is no reason to expect the aggregate of a large number of bilateral trade relationships to be balanced. "Nothing, however, can be more absurd than this whole doctrine of the balance of trade, upon which, not only these restraints, but almost all the other regulations of commerce are founded. " Adam Smith, "Wealth of Nations"
- _1tem 1y agoThe problem with trade deficits is that you eventually run out of money. It’s basic math. In what universe can you just keep spending more than your earn?
- seanhunter 1y agoWhy do you run out of money in a trade deficit? Your entire economy isn’t just import and export. You have a domestic economy and a services economy as well. Perhaps you don’t think Adam Smith could do basic math.
- bryan_w 1y agoDomestic production of things that (usually services) continues to grow the money supply