Saturday, February 23, 2019

My Personal Trade Deficit Is Killing Me

By Robert Higgs

A few days ago, my lunch was as follows. Besides some Chilean grapes I had acquired via Lucio and a host of other, unknown middlemen (gracias al Mano Invisible), I had some homemade Oaxaca-style cheese and some homemade tortillas I purchased from local people who peddle their products along the beach road. (Oh, yes, I seasoned my quesadillas with some very tasty locally made salsa picante de habanero y pina.) Well, so what?



You see, it got me to thinking. I am running a terrible trade deficit with the local Mexicans. I keep giving them pesos, and all they give me in return are delicious foods and very helpful labor services from time to time. As President Trump would tell you, this is an awful situation for anyone to be in.

If I’m ever going to be as prosperous as Trump is making the USA, I will have to find a way to get the local people to buy my consulting services, while I buy nothing from them. By accumulating a pile of worthless pesos—as worthless as the foreign currency payments that U.S. exporters gain when they only hoard them, rather than using them directly or indirectly to finance imports—I will make myself Great Again.

I may get pretty hungry in the process, but what the hell, I’ll be as Great as Trumpian America. After all, as any mercantilist will tell you—and Trump tells you incessantly—the only thing that matters is getting a lot of money by selling to foreigners, whereas getting a lot of foreign-made goods and services is a terrible thing.

Robert Higgs is Senior Fellow in Political Economy at the Independent Institute, author or editor of over fourteen Independent books, and Editor at Large of the quarterly journal The Independent Review

The above originally appeared at the Independent Institute.

4 comments:

  1. Yep, Bob's a great teacher. And having grown up in the Central Valley, I'll bet his Spanish is pretty good.
    He and Fred Reed make a pretty good tag team.

    ReplyDelete
  2. The problem, I assume, with this comparison is that while Higgs runs a trade deficit with the local Chileans, he simultaneously runs an even greater trade surplus with other entities that require his services. The U.S. runs a net trade deficit in the hundreds of billions of dollars, and finances it partly by taking on ever increasing debt. Correct?

    ReplyDelete
    Replies
    1. There is no real comparison, because "the US" is not an economic entity like Higgs is. "The US" doesn't really run a deficit or surplus of any kind (unless you want to look at transactions between the US government and other governments); individuals and businesses in the US trade with others across political borders, and none of them care about surpluses and deficits because each voluntary exchange makes them better off (ex ante). The US government might track whether those under its rule are buying or selling, but economically it's meaningless. It would be as meaningless as your town tracking whether its residents in the aggregate run a surplus or deficit with the residents of the next town in the aggregate; who cares?

      Delete
  3. I think Higgs stole this Bastiat-like rhetorical trick from me! (not really...lol).
    For many years I've attacked the notion of tariffs and trade imbalances, by asserting that there is a trade imbalance between me and my grocer: Over the years, I've bought WAY more stuff from him than he ever bought from me! And now, to offset the imbalance, I've imposed a tariff as a way of discouraging my wife from so readily purchasing from our grocer any more: Henceforth, all groceries bought by my wife from that grocer and coming into my household, will be subject to a stiff tax; Maybe that will be punishment enough upon my grocer, and will convince him to change his ways and buy my services.

    ReplyDelete