Is a trade deficit good or bad?

Discussion in 'Economics' started by Remiraz, Jun 3, 2006.

  1. Remiraz


    Anyone knows any formal Economics?

    Is a trade deficit good or bad. Why? I would have thought (in the spirit of Milton Friedman) the state of the trade account doesn't matter.
  2. OK,
    Except for the fact that you will have to work (much) harder to pay back your debt-holders with (much) depreciated dollars.
    Unless of course you keep inventing gimmicks to keep on piling up debt for another 50+ years.
    One day the devil will get you though.

    In the olden days, before good ole Friedman one used to believe that: "A people goes the way its money goes". :(
  3. It's good as long as people have confidence in the dollar. If that confidence diminishes, then everything will be thrown into a depression. Everybody has to "play nice".
  4. this confidence depends on the outlook for 1) the budget deficit 2) the NIIS... reason people look at the TB is in relationship with NFSP, that provides some measure of that confidence in terms of 'real' money flows... TB on its own, negative or positive, is not a concern...
  5. NIIS ...NFSP ?
  6. Trade deficit means we're using goods and services produced by others. Eventually we or our children will have to pay back those goods and services with hefty interest charges. Frankly I fail to see a scenario under which it can possibly be good.
  7. NIIP sorry... net international investment position... NFSP: net foreign securities purchases... just google them...
  8. impressive... another beer?
  9. rosy


    you have to understand how the deficit numbers are computed. a US company that outsources everything and then imports the final product adds to the trade deficit.
  10. That assumes you are paying the debt-holders back in something other than dollars.
    #10     Jun 3, 2006