On Balance

Bad news folks; our overall trade deficit came in lower than anticipated in August. The good news however is, when we single out China, the trade gap continues to widen. Meaning we are still buying substantially more manufactured stuff from Chinese companies than Chinese citizens are buying from American companies.

Confused? For starters, there is no "trade deficit". The term itself is oxymoronic. How can you have "trade" and "deficit" at the same time? To trade is to accept one thing for another. No one, least of all a Chinese capitalist, would willingly trade an item for something of lesser value.

So then, a Chinese manufacturer is desperate to trade ceramic cups for little green pieces of paper. See the mismatch? They had to buy the materials, man the assembly lines, do the packaging, pay the freight, etc., while all we had to do was print a few notes. Are we getting a phenomenal deal or what?

Then, to top it off, to the extent that China isn't using all those dollars to buy toothpicks from Indonesia, because a company in Indonesia wants those dollars to buy software from Microsoft (okay, I guess we do have to make some stuff), we enjoy a huge Capital Account Surplus. Which accounts for the dollars the Chinese opportunist spends here on financial services, real estate, business acquisitions, t-bills, etc. You see, on balance, things are balanced.

So when White House hopefuls cry foul and accuse China of devaluing their currency (how dare they make the dollar stronger and things cheaper for you and me), while we print like mad, understand he's either not as well-informed as he would profess, or finds political expediency in the rhetoric and hopes you and me are none the wiser.

Ultimately, we don't need policymakers to be more pro-business---we have cronyism aplenty already---pro-freedom, on the other hand, is an across-the-board win!! Read again Doing Freedom...