You might add starting in "equilibrium" and changing something, like a larger budget deficit. I'm sort f allergic to cultural explanations, "Americans are consumers."
Making it a story of a response to a policy change is more interesting and in this case you get an additional effect. The higher deficit policy not only slows growth and creates a trade deficit, but also favors non-traded goods and services production over traded goods and services production.
"Our habit of spending rather than saving means that we don’t save enough to fund all the potential investment in the U.S. As a result, there are attractive investments in the U.S. just waiting to be funded."
One discordant note to this is that the earnings yield (the earnings/price ratio) of US stocks has been low relative to foreign stocks. Maybe it's because US companies can reasonably be expected to grow their earnings faster than foreign companies. But it could also be that people are over-investing in the US, driven perhaps by high historical returns or the glamor of the tech sector. Hard to know for sure.
Doesn't impact the overall explanation you. People do find US investments attractive for some reason. Why they are so attractive is less obvious.
Now do China, Andrew. Not only is China not "A country that’s friendly to the U.S. and has incomes and an economy that’s fairly similar to our own" they are absolutely hostile.
yet for some reason, the west, has ceded our most important infrastructure components to our Commie enemies, steel comes to mind. Think about the insanity of this. Bessemer was a Brit for heaven's sake and yet the Brits will no longer make any steel. This is pure insanity.
So, China, which makes 54% of the worlds steel, which is self-sufficient in their steel production as well, controls those who need steel, which is everyone.
While our trade deficit with Japan may not seem a bit deal, it's a HUGE deal when it comes to China and it's got to be rectified sooner rather than later.
Your points are why I didn't us China as the example, because they're distinct from the basic logic of how saving rates affect a trade deficit. I can understand tariffs used for strategic reasons. My point was that a great deal of our trade deficits come about simply because the US, in particular the US government, is a borrower rather than a saver.
Can't be explained too many times.
You might add starting in "equilibrium" and changing something, like a larger budget deficit. I'm sort f allergic to cultural explanations, "Americans are consumers."
Making it a story of a response to a policy change is more interesting and in this case you get an additional effect. The higher deficit policy not only slows growth and creates a trade deficit, but also favors non-traded goods and services production over traded goods and services production.
"Our habit of spending rather than saving means that we don’t save enough to fund all the potential investment in the U.S. As a result, there are attractive investments in the U.S. just waiting to be funded."
One discordant note to this is that the earnings yield (the earnings/price ratio) of US stocks has been low relative to foreign stocks. Maybe it's because US companies can reasonably be expected to grow their earnings faster than foreign companies. But it could also be that people are over-investing in the US, driven perhaps by high historical returns or the glamor of the tech sector. Hard to know for sure.
Doesn't impact the overall explanation you. People do find US investments attractive for some reason. Why they are so attractive is less obvious.
Untill recently, they were both safer from inflation and more liquid
Now do China, Andrew. Not only is China not "A country that’s friendly to the U.S. and has incomes and an economy that’s fairly similar to our own" they are absolutely hostile.
yet for some reason, the west, has ceded our most important infrastructure components to our Commie enemies, steel comes to mind. Think about the insanity of this. Bessemer was a Brit for heaven's sake and yet the Brits will no longer make any steel. This is pure insanity.
So, China, which makes 54% of the worlds steel, which is self-sufficient in their steel production as well, controls those who need steel, which is everyone.
While our trade deficit with Japan may not seem a bit deal, it's a HUGE deal when it comes to China and it's got to be rectified sooner rather than later.
Your points are why I didn't us China as the example, because they're distinct from the basic logic of how saving rates affect a trade deficit. I can understand tariffs used for strategic reasons. My point was that a great deal of our trade deficits come about simply because the US, in particular the US government, is a borrower rather than a saver.