Wednesday, February 8, 2017

That $500 billion foreign trade deficit

According to today's Wall St Journal  that's how deep in the hole we are.  Our imports were $500 billion more than our exports.  In short, the rest of the world shipped $500 billion worth of goods into America and America shipped them zilch.  Since people don't like to ship goods and not get paid, presumably we sent $500 billion in cash to pay for this stuff. 
   $500 billion is a lot, even for a US GNP of $17 trillion.  And we have been doing this for at least 20 years, maybe more.  How does it work? 
   Do we merely print an extra $500 billion dollars?  The US greenback is desired all over the world, and we can probably get away with printing a whole lot of 'em before foreigners wise up and stop accepting them.
   Do we have some invisible export that earns us $500 billion a year?  Does tuition paid by foreign students to US colleges count as exports?  What about royalties for Hollywood movies, video games, pop music, Superman comic books, and other stuff? Does all that count as exports?   Do foreign stock purchases on the NYSE or NASDAQ count?
    Something else?
    The point is, we have been running humongous trade deficits for many many years and it keeps on running.  Somehow the international books get balanced and we don't run out of money.  It would be nice to know how this really works 

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