Quote:
Originally Posted by Clocker
Negative is not the desired outcome in and of itself. It depends on the the state of an economy and its composition. You will note that the high trade-deficit countries are largely well developed and relatively wealthy.
We are becoming more and more a service economy, and because of our evolved and successful status, a consumer economy. China is still a developing economy, based much more on production and investment rather than consumption.
China is still a trade surplus country because it is building a more capital intensive economy, and needs to sell more "stuff" in order to build up its internal investment. Because the US is an advanced service and consumer society, it is able to attract more foreign investment, like Toyota and BMW.
China needs to sell more than it buys in order to build its economy. We have the luxury of consuming more than we sell to others because that consumption attracts foreign investment. China is growing in that direction, which is why companies like GM are investing in plant and equipment over there.
We can have a strong economy with a trade deficit because that deficit is off-set by an equal capital surplus. We have consumer spending dollars flowing out of the country, but investment dollars flowing in, boosting the economy and creating jobs.
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Love the logic. You build wealth by having a trade surplus, based on manufacturing i.e. production. China is building wealth. Fact established wealth is built through trade surplus and manufacturing.
Where is this wealth coming from? Is it being transferred from the countries with trade deficits to the countries, like China, with trade surpluses?
According to some economic logic promoted here, the answer is resounding no. Wealth must not be a sum zero game, there is unlimited wealth. Countries build wealth without taking wealth from other countries. Absurd!
If one country is building wealth another country is losing wealth, bottom line. See the fall of the Roman empire related to loss of wealth. Unlimited wealth is an economic lie to foster the transfer of wealth from one populace to another.
