Tuesday, March 13, 2018

The Balance of Payments Must Always Balance

Apparently Donald Trump didn't study Balance of Payments at Wharton because he is always wailing about a "trade deficit".  A trade deficit is always balanced by a surplus of foreign investment.
So, for example, if US businesses and consumers import more than they export, there is a corresponding increase in the capital investment from abroad -- e.g. buying the stocks and bonds of US companies, investing in US treasury debt. Why this would be bad is beyond me.


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