Friday, November 10, 2017

Not about profit-loss

Don Boudreaux has been (almost daily) punching away at protection and the crony capitalism involved.  Here is a sample.

Almost daily we hear that Wharton grad Trump sees the balance of trade (and the "trade deficit") as the economy's (the country's?) profit-loss statement.  This mistake pops up in almost all of his remarks on trade, including who is"winning" and who is "losing."  But this silliness is picked up by many others. Whether it is Fox News or the PBS News Hour, the talk is the same. What will we do about that perennial trade deficit?

Smart people should know better. The U.S. dollars that foreigners accumulate eventually come back. Either via trade or via investment. Capital "imbalances" and trade "imbalances" cancel each other almost every day because exchange rates are always adjusting. There is no reason for panic or anything like it. Instead, celebrate that there are the adjustments and responses throughout.  Each of us benefits via the links to the world's sellers and the world's investors.

The economic ignorance goes way beyond Trump and his followers.  That's the problem.