Deficit Owls | Real Terms Of Trade: Imports are a Benefit, Exports are a Cost @deficitowls5296 | Uploaded September 2016 | Updated October 2024, 9 hours ago.
Warren Mosler and Professor Stephanie Kelton discussing the real terms of trade. When we import something from a foreign country, we get the thing and they get dollars. When we export something to a foreign country, they get the thing and we get their currency. Which one is better for us? Imports are goods and services that we can consume but didn't have to work to produce, while exports are goods and services that we had to work to produce but don't get to consume. So from the point of view of our society as a whole, exports are a cost, while imports are a benefit.
If we are net exporting (meaning we're exporting more than we import) then the amount we produce but don't consume is greater than the amount we consume but don't produce. This is called a trade surplus, and from a "real" point of view, it is a burden. If we are net importing (meaning we're importing more than we export) then the amount we produce but don't consume is less than the amount we consume but don't produce. This is a trade deficit, and from a "real" point of view, it is a benefit.
People sometimes say we should run a trade surplus so that our exporters can sell more abroad, and therefore create more jobs, known as "market advantage," and that this is good for the workers and the economy. Well, if the choice for the workers is exporting or unemployment, then maybe it is, but there's no reason we have to be forced into only those two options. To eliminate unemployment, the government could implement a Job Guarantee program, and put the unemployed to work doing useful tasks in their communities. (Learn more about that here: youtube.com/watch?v=KSw0ROvM6QM&index=17&list=PLZJAgo9FgHWZzhpkjtMxIwZns26A0OdFz)
Also, under a gold standard there was a fear of running trade deficits, because countries would transfer gold to pay for trades. So running a trade deficit meant you were slowly (or rapidly) losing gold reserves to other nations. But since we abandoned the gold standard in 1971, this isn't a concern anymore. If we run a trade deficit, other countries accumulate dollars, in the form of reserve accounts at the Federal Reserve. We get goods and services, they get numbers on a spreadsheet.
So in that case, a trade surplus is clearly a net negative for society, and only a benefit to the profits of our exporting firms.
See the whole video here: youtube.com/watch?v=ba8XdDqZ-Jg
Like Deficit Owls on Facebook: facebook.com/DeficitOwls
Warren Mosler and Professor Stephanie Kelton discussing the real terms of trade. When we import something from a foreign country, we get the thing and they get dollars. When we export something to a foreign country, they get the thing and we get their currency. Which one is better for us? Imports are goods and services that we can consume but didn't have to work to produce, while exports are goods and services that we had to work to produce but don't get to consume. So from the point of view of our society as a whole, exports are a cost, while imports are a benefit.
If we are net exporting (meaning we're exporting more than we import) then the amount we produce but don't consume is greater than the amount we consume but don't produce. This is called a trade surplus, and from a "real" point of view, it is a burden. If we are net importing (meaning we're importing more than we export) then the amount we produce but don't consume is less than the amount we consume but don't produce. This is a trade deficit, and from a "real" point of view, it is a benefit.
People sometimes say we should run a trade surplus so that our exporters can sell more abroad, and therefore create more jobs, known as "market advantage," and that this is good for the workers and the economy. Well, if the choice for the workers is exporting or unemployment, then maybe it is, but there's no reason we have to be forced into only those two options. To eliminate unemployment, the government could implement a Job Guarantee program, and put the unemployed to work doing useful tasks in their communities. (Learn more about that here: youtube.com/watch?v=KSw0ROvM6QM&index=17&list=PLZJAgo9FgHWZzhpkjtMxIwZns26A0OdFz)
Also, under a gold standard there was a fear of running trade deficits, because countries would transfer gold to pay for trades. So running a trade deficit meant you were slowly (or rapidly) losing gold reserves to other nations. But since we abandoned the gold standard in 1971, this isn't a concern anymore. If we run a trade deficit, other countries accumulate dollars, in the form of reserve accounts at the Federal Reserve. We get goods and services, they get numbers on a spreadsheet.
So in that case, a trade surplus is clearly a net negative for society, and only a benefit to the profits of our exporting firms.
See the whole video here: youtube.com/watch?v=ba8XdDqZ-Jg
Like Deficit Owls on Facebook: facebook.com/DeficitOwls
