If some idiot journalist mentions trade deficits without mentioning capital and current accounts I'm going to throw my keyboard in the lake. luckily there is no lake nearby. That "jobs before journalism" thread really confirmed what I always thought. J-schoolers know nothing!
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If you have a CURRENT ACCOUNT DEFICIT you will by definition have a CAPITAL ACCOUNT SURPLUS. This means we had to BORROW THE MONEY to BUY THE STUFF which created the TRADE DEFICIT. Does that sound smart?
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Alternatively, when we have a trade deficit - we give foreigners our currency - because we have to convert USD to their money. Then they have all this extra USD to do what....INVEST IN US ASSETS Like buy our property, buy up natural resources, buy over inflated real estate.
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does that sound smart? Trade deficits with China for example also mean that federal bond rates are kept low (China needs to invest that money somewhere) - so we are induced into borrowing even more money. does THIS sound smart?
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The United States has been the BUYER OF LAST RESORT for the world economy for decades. The result of this spending spree is our distorted inflated bubble like asset markets from bonds, to stocks, to real estate. Does THIS sound smart?
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As a commenter said, then we doubled down with TARP where we printed money to buy back our own over inflated assets! Brilliant!
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Guys, I'm not some dopey anon Twitter account telling you to reach for your dreams. I have a degree in Econ. I have a Masters in International Finance. I worked for an international hedge fund. I've studied this for my entire life. Don't listen to the dumb ass j-schoolers.
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Replying to @jackmurphylive
The missing piece of everyone’s trade model: tech hardware has enormous economies of scale; China used cheap labor and financial repression to basically force local manufacturers to catch up to/surpass the US.
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Replying to @matthews_bd @jackmurphylive
The Econ 101 model ignores economies of scale, and ignores supply chains—China has shifted supply chains to their country, and it’s going to be hard to shift them back. Doable, though!
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One thing becomes clearer by the day. America’s a country run by people talking on TV; China’s a country run by guys slaving over spreadsheets. Long term, it shows.
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