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Thosten Polleit wrote recently for Mises.org
against the neccesity of US trade surpluses reversing accompanied by a
decline in the dollar:
As long as the United States is perceived by investors
as providing the market place with institutions that are conducive to free
market economies and which generate favorable growth and capital return rates
(compared to Europe and Japan for example), the United States will maintain
its position as a favored investment region. As a result, the United States
is likely to remain in a position to accumulate capital account surpluses,
with the external value of the greenback remaining under appreciating
pressure.
In a somewhat similar vein, Louis Vincent Gave (speaking on
Financial Sense News Hour about his new book) that the
US economy should be likened to a large hedge fund that takes in capital from
all over the world because it can allocate resources more effectively to
their highest-valued use and can specialize in high-margin activities like
product design while outsource low-value added manufacturing.
Frequent Mises.org
contributor Dr. Antony Müller writes in The US Trade Deficit:
to worry or not to worry? that it is not market forces at all that are
driving the trade deficit. It should not be looked upon as the outcome of
rational allocation of resources:
What's behind the massive capital flows to the United
States is not capitalist calculation, but the role of foreign central banks,
which are held to slow down the appreciation of their own currencies against
the US dollar. The repressed adaptation of the exchange rates favors the
export industries these countries. The US manufacturing industry is
shrinking, while that of the trade surplus countries is expanding.
and
Domestically, the US trade deficit has insufficient
national savings at its root. That, in turn, is the result of two other
factors: Low private savings result from high consumption relative to income;
and the negative public savings are the consequence of high government
expenditures relative to government income.
Trade deficits don't
matter as long as that there is someone who finances the debtor. The looming
problem, however, is the impact that these financial flows have on the capital
structures of the economies involved. Persistent imbalances bring about
changes in the composition of a country's production structure. Depending on
the duration and size of the imbalance, profound transformations of the
capital structures occur. The economy of the country with the trade deficit
is losing its manufacturing base while the country with the export surplus is
overextending its manufacturing industries. This, in itself would not be a
problem if the deficits were sustainable; but when the trade deficit comes
along with debt accumulation, there is a limit to this process.
The present circumstances are not sustainable and can go
on only until the interest on the debt compounds to the point that debt
service payments overwhelm the ability of the surplus country to sell more
goods. At that point, a rapid readjustment must occur.
Another Mises.org contributor,
Chris Mayer, is part of a panel discussion on this topic reported in today's
Rude
Awakening letter. Panelist Justice Little states
But when much of the world's capital is being parked in
US Treasuries rather than wealth-building entities, and when we are spending
like mad at home on flat-screen TVs and I-pods, and US stocks have dangerous
valuations and entitlement programs are looming large, it is hard to be
sanguine about the deficit. In this case, the capitalaccount surplus looks
more like a bulge of borrowed money,parked in Treasuries that could be
quickly 'unparked' at any given time.
Robert Blumen
Robert Blumen is an independent
software developer based in San Francisco, California
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