Introduction I’m one of those who believe that all government intervention does damage to the market economy. Taxes shift costs and distort the allocation of resources. The government always implements regulations that waste resources or have no real justification. Most government deficits create an expansion of the supply of money, which has the same effect … Continue reading Trade Deficits, Tariffs, and Other Stupid Policies
Category: Trade
An Introduction to Trade Deficits
When President Trump threatened to impose tariffs on steel and aluminum, it triggered a blizzard of articles for and against the proposal. Instead of parroting what others have said, I want to give you the tools to understand the issue behind the proposed tariffs: “trade deficits.” Definition To discuss the issue intelligently, we must first … Continue reading An Introduction to Trade Deficits
Trade Balance and Math Quiz
Introduction Providing images (and videos) can raise provocative questions that words cannot. In this newsletter, I present an image that should prompt questions about the trade balance and the mathematical basis for determining U.S. trade policy. Trade Balance The following image shows the trade balance between the U.S. and China in 2001 and 2003. (I … Continue reading Trade Balance and Math Quiz
Complexity of Trade
Introduction I have argued rather strongly that the phrase "trade deficit" has no significant meaning. The fact that one party in a transaction gets goods or services and the other receives some form of money does not mean that either party is getting "ripped off." Much of this misunderstanding stems from a lack of understanding … Continue reading Complexity of Trade
Explain Trade Surplus
Definition What is a trade surplus? To begin this discussion, let's define "trade surplus" from the same source that I used for the definition of a trade deficit. A trade surplus represents a net inflow of domestic currency from foreign markets. It is the opposite of a trade deficit, which represents a net outflow and … Continue reading Explain Trade Surplus
Explain The Trade Deficit
The only thing negative about "trade deficits" consists of the name. Introduction What Is a Trade Deficit? A trade deficit occurs when a country's imports exceed its exports. A trade deficit is also referred to as a negative balance of trade (BOT). The balance can be calculated on different categories of transactions: goods (a.k.a., "merchandise"), … Continue reading Explain The Trade Deficit
The Fallacy of Trade Deficits
Introduction Deficit. The word alone creates a negative image. If you have a food deficit, you must be hungry. If you have a water deficit, you must be thirsty. If you have a financial deficit, you must be poor. Should we worry about the national "trade deficit?" This question contains two basic premises that require … Continue reading The Fallacy of Trade Deficits
Mistaken Philosophy
Mistaken Philosophy Introduction I would consider Claudius Ptolemy a very intelligent person. The Egyptian philosopher, mathematician, and geographer who lived over 2,000 years ago had what we would today consider a very strange view of the universe. The graphic representation below shows the beliefs of Ptolemy and many others about the structure of the universe. … Continue reading Mistaken Philosophy