Farm Bailout Now Twice As Expensive As Auto Bailout

[Speedwell]

Is it bad for an economy to have a trade surplus of hundreds of billions? The nation will not prosper as well as those who deficit spend and have a deficit in the hundreds of billions?

Not necessarily. It depends on why it's happening and how long it goes on. Tariffs, on the other hand, come right out of the pockets of the consumers now.

 

[cow451]

The Treasury received stock in the companies in exchange for the money. And later sold that stock to recoup most of the investment.

With the farmers, we're not even getting soybeans in exchange for the money.

But we are getting the animal excrement. There. I said it. Someone had to. Happy, now?

 

[LostMarbels]

Not necessarily. It depends on why it's happening and how long it goes on. Tariffs, on the other hand, come right out of the pockets of the consumers now.

And a trade surplus goes right into the pockets of the suppliers. What is it your not getting here? I do not see how people think our own American economy receiving more capital than it spends is a bad thing.

If you have an item that has a fair market value of $10, and you trade it on the market for $8 but it only costs $0.01 to produce you have a fair trade. Your making profit, and they are buying at a wholesale price and still have $2 to charge on retail pricing. So they are making profit as well. But when you have the same $10 product that you are essentially giving away at a $1 billion loss, there isn't even any common sense in that, yet alone profit.

Even more so... where are you getting the one cent pr piece cost to even produce the item you are losing $1 billion in trade on? So you are needing additional funding to produce an item that creates no income, and puts you in arrears due to trading in a deficit. And this is compounded.... why even keep a plant open that cannot produce any income? How do you pay employees at a $1 billion loss? How do you pay power, mortgage, cost of production, insurance, etc? You can't. You're losing a billion dollars a year.

Why does this make sense to people? Why should America continue to do this?

 

[iluvatar5150]

And a trade surplus goes right into the pockets of the suppliers. What is it your not getting here? I do not see how people think our own American economy receiving more capital than it spends is a bad thing.

If you have an item that has a fair market value of $10, and you trade it on the market for $8 but it only costs $0.01 to produce you have a fair trade. Your making profit, and they are buying at a wholesale price and still have $2 to charge on retail pricing. So they are making profit as well. But when you have the same $10 product that you are essentially giving away at a $1 billion loss, there isn't even any common sense in that, yet alone profit.

Even more so... where are you getting the one cent pr piece cost to even produce the item you are losing $1 billion in trade on? So you are needing additional funding to produce an item that creates no income, and puts you in arrears due to trading in a deficit. And this is compounded.... why even keep a plant open that cannot produce any income? How do you pay employees at a $1 billion loss?

Why does this make sense to people? Why should America continue to do this?

It doesn't make sense. None of what you wrote makes sense. I have no idea what you're talking about in the second half of that post. We've explained trade deficits to you multiple times and you keep getting it wrong, describing it in ways that don't comport to reality at all. Things would make a lot more sense if you had a better understanding of how they work.

 

[LostMarbels]

It doesn't make sense. None of what you wrote makes sense. I have no idea what you're talking about in the second half of that post. We've explained trade deficits to you multiple times and you keep getting it wrong, describing it in ways that don't comport to reality at all. Things would make a lot more sense if you had a better understanding of how they work.

You are either wrong or being dishonest.

Explain to me how trading at a deficit is good for the economy and does not in anyway influence our national debt, or economic standing.

 

[iluvatar5150]

You are either wrong or being dishonest.

No, I don't think so.

Explain to me how trading at a deficit is good for the economy and does not in anyway influence our national debt, or economic standing.

Holy shifting goalposts, Batman! I thought I had a stiff neck from yesterday's lesson on the D'arce choke (and I do), but watching those goalposts fly by might do me even worse.

First of all, a trade deficit is not "trading at a deficit" nor is it necessarily losing money. It merely means that you're buying more than you're selling - and if you're talking about an overall deficit (vs a deficit with a single country), it probably means that you're taking on debt in order to do so.

But I never said that the trade deficit doesn't impact any of those things, and neither did you in the post I was responding to. (I honestly have no idea what your analogy was attempting to describe) As to whether or not the trade deficit is a good thing or a bad thing depends on the details of what makes up that imbalance, including the leverage afforded us by providing the world's reserve currency (which sort of locks us into running an overall trade deficit).

 

[Speedwell]

You are either wrong or being dishonest.

Or you don't understand the economics of international trade. But that's OK, Trump doesn't, either, which is why the farmers need a bailout and why our manufacturing sector is in a slump the last two quarters.

 

[LostMarbels]

No, I don't think so.



Holy shifting goalposts, Batman! I thought I had a stiff neck from yesterday's lesson on the D'arce choke (and I do), but watching those goalposts fly by might do me even worse.

First of all, a trade deficit is not "trading at a deficit" nor is it necessarily losing money. It merely means that you're buying more than you're selling - and if you're talking about an overall deficit (vs a deficit with a single country), it probably means that you're taking on debt in order to do so.

But I never said that the trade deficit doesn't impact any of those things, and neither did you in the post I was responding to. (I honestly have no idea what your analogy was attempting to describe) As to whether or not the trade deficit is a good thing or a bad thing depends on the details of what makes up that imbalance, including the leverage afforded us by providing the world's reserve currency (which sort of locks us into running an overall trade deficit).

The problem is your complete inability to commit to a definitive answer.

Yes, or No.

Almost no one falls for all that goal post crap now anyways. Those on the left will do anything to falsify what is stated by a person on the right.

What I am posing a simple. 5th grade simple. You cannot give more than you receive, buy more than you sell, and keep your doors open.

 

[essentialsaltes]

And a trade surplus goes right into the pockets of the suppliers. What is it your not getting here? I do not see how people think our own American economy [no, government revenue] receiving more capital than it spends is a bad thing.

Great, we'll raise taxes until we can pay for our government expenditures. Perfect way to balance the budget.

 

[LostMarbels]

Or you don't understand the economics of international trade. But that's OK, Trump doesn't, either, which is why the farmers need a bailout and why our manufacturing sector is in a slump the last two quarters.

So are you stating as a demonstrable fact, it is better for us to trade in a $419 billion deficit rather that a $419 billion trade surplus?

 

[LostMarbels]

Great, we'll raise taxes until we can pay for our government expenditures. Perfect way to balance the budget.

Better trade, more income. No need to raise taxes with more income to be taxed.

 

[Speedwell]

So are you stating as a demonstrable fact, it is better for us to trade in a $419 billion deficit rather that a $419 billion trade surplus?

Both could be harmful in the long run, but it would depend on the balance of investment capital as well as the balance of trade, and whether or not the trade was being carried on in a reserve currency like the dollar.

 

[iluvatar5150]

The problem is your complete inability to commit to a definitive answer.

Yes, or No.

Why would I give you a yes or no answer when you didn't ask me a yes or no question? (feel free to check previous posts if you don't believe me)

Almost no one falls for all that goal post crap now anyways. Those on the left will do anything to falsify what is stated by a person on the right.

???

I didn't falsify anything. Your posts are right there for everyone to read (#23 & #25).

What I am posing a simple. 5th grade simple. You cannot give more than you receive, buy more than you sell, and keep your doors open.

It's not simple; you only think it's simple; probably because you don't understand the complexities of it.

 

[LostMarbels]

Both could be harmful in the long run, but it would depend on the balance of investment capital as well as the balance of trade, and whether or not the trade was being carried on in a reserve currency like the dollar.

Ok cool. I only brought up capital in a basic sense. But now that you mention investment capital, whether the capital is based fixed assets, innovation, or in a business. Isn't America best served by investing into themselves? Or do you believe it is in the best interest of America to build up other countries capital?

 

[LostMarbels]

It's not simple; you only think it's simple; probably because you don't understand the complexities of it.

And yet you post absolutely nothing to illustrate that point.

You are smarter than me obviously. You have been telling me so for years. Illustrate your point. How is America better off by trading in a deficit rather than a surplus?

 

[iluvatar5150]

Ok cool. I only brought up capital in a basic sense. But now that you mention investment capital, whether the capital is based fixed assets, innovation, or in a business. Isn't America best served by investing into themselves? Or do you believe it is in the best interest of America to build up other countries capital?

We're able to run up debt because other countries are willing to invest in us.

And yet you post absolutely nothing to illustrate that point.

You are smarter than me obviously. You have been telling me so for years. Illustrate your point. How is America better off by trading in a deficit rather than a surplus?

I never said that we're better off by running a trade deficit. I said that it depends on what's causing that deficit. Our status as the world's primary reserve currency basically guarantees that we run a trade deficit because foreign nations want to hold onto dollars as a store of value, which then causes the value of our currency to rise relative to theirs.

Understanding the Roots of the U.S. Trade Deficit | St. Louis Fed

Being the reserve currency has its privileges and costs - Equitable Growth

As those links point out, there are upsides to being a reserve currency, including reduced transaction and borrowing costs, increased liquidity, reduced exchange rate risk, and greater political leverage.

 

[Speedwell]

Ok cool. I only brought up capital in a basic sense. But now that you mention investment capital, whether the capital is based fixed assets, innovation, or in a business. Isn't America best served by investing into themselves? Or do you believe it is in the best interest of America to build up other countries capital?

Which they then invest in the US? Sure. That could be quite a good thing.

 

[Belk]

And yet you post absolutely nothing to illustrate that point.

You are smarter than me obviously. You have been telling me so for years. Illustrate your point. How is America better off by trading in a deficit rather than a surplus?

Perhaps this will help?

Why trade deficits aren't so bad

A country like the U.S. runs an annual trade deficit with a partner country when Americans buy more goods and services from the partner than they sell to it. As a result, money flows out of the U.S. to the country, which sounds bad.

But that’s not the end of the story. Those foreigners with the trade surplus – let’s say in China – now have extra saving that needs to be put to work. A lack of productive investment opportunities at home means they look to other countries – like the U.S. – to profitably use their money.

In other words, money flowing out to pay for imports flows back in to help pay for productive investment in new capital. The U.S. is an appealing place for the Chinese to put their money because the U.S. is really good at producing capital goods. Put another way, it has a comparative advantage in investment.

 

[LostMarbels]

Our status as the world's primary reserve currency basically guarantees that we run a trade deficit because foreign nations want to hold onto dollars as a store of value, which then causes the value of our currency to rise relative to theirs.

Our money is still a fiat system. The value of fiat money is derived from the relationship between supply and demand, and the stability of the issuing government, rather than the worth of a commodity backing it as is the case for commodity money. However, by creating more capital in America and physical commodities you create both actual wealth, and stability. Since economic stability is a primary factor in the valuation of fiat money it stands to reason to be more stable.

borrowing costs

Due to interest it is always better to be the one giving the loan.

As those links point out, there are upsides to being a reserve currency, including reduced transaction and borrowing costs, increased liquidity, reduced exchange rate risk, and greater political leverage.

Being a reserve currency only means other countries use your money to trade internationally. Meaning that England could by Italian goods in USD. Also to remit
international debt obligations, or to influence their domestic exchange rate. However Fiat money is inconvertible and cannot be redeemed. This only works if the system is stable and people find the currency valuable. Holding more capital still makes sense.

 

[iluvatar5150]

Due to interest it is always better to be the one giving the loan.

That’s not necessarily true. If you have investment opportunities with higher rates of return than your loan interest, you’re better off taking out a loan and investing the money.

Being a reserve currency only means other countries use your money to trade internationally. Meaning that England could by Italian goods in USD. Also to remit international debt obligations, or to influence their domestic exchange rate. However Fiat money is inconvertible and cannot be redeemed. This only works if the system is stable and people find the currency valuable. Holding more capital still makes sense.

Fiat money is capital. Those commodities fluctuate in value, too, often much more than a fiat currency, and certainly more than those that serves as reserve currencies.