Since Donald Trump entered the political spotlight, questions on trade “imbalances” have certainly intensified. For my part in the debate, I’ve tried to remain somewhat agnostic. I simply don’t have enough facts to make a choice.

When I listen to Trump discuss trade with China, however, I am nearly certain that he, at best, stretches the truth through omission. It might be that he doesn’t understand that talking about the trade deficit as if it has any meaning in and of itself is like talking only about M, in MV=PY, without the V and PY, because it is only one side of the balance of payments. When he does this, it is wildly out of the proper context as to be laughable.

For the same reason one should not try to influence monetary policy after looking only at the amount of a QE program, one can’t make trade policy just by looking at the trade deficit. In either case, if it is tried, we might find a lot more damage inflicted than any intended aid.

If people are curious about the seemingly ongoing economic malaise many of us feel and suspect that it has something to do with “trade imbalances,” the best place to look, I think, would be at the investment limitations placed on the Chinese by the government. Because if the trade deficit has anything to do with economic problems, it must have as much to do with investment/savings imbalances – and we have a pretty good idea of the size of Chinese purchases of Treasury securities. Perhaps if the Chinese were allowed to buy other things, life wouldn’t seem so bad. Those purchases help balance the two sides of the current account and are therefore very large. It all goes to the Treasury where politicians have their way with it, and we know that bridges to nowhere and dumping it down the common core black hole are not particularly productive – if you get my drift.

That is the sort of stuff that really disgusts me, and I am more than a little annoyed with the damn lies the politicians and bureaucrats tell so that government takes the blame for nothing and nothing has to change. If something does change, it’s kabookie-theater band-aids that eventually come crashing down like the house of baling wire, bubblegum and cards that they once labeled as economic policy. Aren’t we all just a little tired of warmed over BS?? I know I am.

Advertisements