Mainstream theory concludes that the overall trade

Mainstream theory concludes that the overall trade
by ufl (2024-02-21 07:54:11)

In reply to: Thanks. Unfortunately, not much consensus here and posted by Raoul

deficit has nothing to do with the factors you list. They determine what stuff we import and export rather than the amount by which one exceeds the other.

The trade (current account) deficit is determined by saving (including government dissaving) and investment. If you want a little evidence that this story is right, go back a few years. It was pointed out a couple of decades ago that the U.S. was a massive importer of oil. One story that was out there went like: "If we could reduce our dependency on foreign oil, that would largely eliminate our trade deficit".

We did and it didn't.

Replies:

So as long as we are running huge government deficits - Raoul 2024-02-21 08:51:16
- That's the basic idea - ufl 2024-02-21 09:15:11
  - Good stuff. * - Raoul 2024-02-22 08:30:56