My friend and I recently got into a debate about the trade deficit. He thinks that trade deficits do not matter and that even if it did we can export technology and software, instead of actual consumer goods, in order to try to make up for it. What points should i use to show that trade deficits do indeed matter. Thanks.
most alleged trade defecits are fictional, no?
Imports constitute exports. The US has no trade imbalance, it just has attracted a large market for T-Bills, hence it doesn’t really matter. Just for the know, basically no Austrians care about the trade balance because of the aforementioned statement, imports constitute exports. I think it would be an intelligent choice for you to read ECONOMICS IN ONE LESSON by Henry Hazlitt, which can be found in any bookstore.
America’s is importing more than it exports. How is that fictional?
how can America import any more than it exports? are foreigners giving goods to us for free, or in exchange for things we are sending them (exporting) ?
So there is no way that America can import more than it exports under any circumstances?
i guess it could commit fraud. (there are arguments to say that it has).
but its kind of a sideshow.
edit,
or the possibility as stated above that there are charitable foreigners donating stuff to Americans in exchange for little or nothing( i.e. they are williong to pay more than what they think the american goods are worth, and the more they are willingto pay is them being charitable)
How does debt play into this? if at all.
In the short term, obviously it can
But this just shows foreign confidence that the dollar will continue to be able to purchase real goods and services
In the long term exports = imports
Otherwise one country’s subsidising the other.
Nope. However one could argue that the T-Bills we gain as exports are not real economic goods for the American people in the sense that they are the instrument of tyranny. However, that is a seperate debate.
Thanks for the info!