Look: I am eager to learn stuff I don't know--which requires actively courting and posting smart disagreement.

But as you will understand, I don't like to post things that mischaracterize and are aimed to mislead.

-- Brad Delong

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Saturday, April 16, 2011

What the Hell?!? Friday - Quote of the Day - Balance of Trade Edition

I'm almost out of Friday, but just ran across this post which was making excellent sense until the final sentences.

Exports are real costs. Imports are real benefits.

OK -- this is in a specific context.  Though it looks like an absolutist kind of statement.  And maybe it makes excellent sense, too, but I just don't get it.   Does this suggest that running a large trade deficit is a good thing?

Somebody help me out here.  Meanwhile, I have a headache, and I'm going to bed.


The Arthurian said...

1. I'm trying to figure out your use of the word absolutist (as in "an absolutist kind of statement") as I have earned one or two of those myself. Perhaps you mean by it, something said boldly or with confidence that, in your view, doesn't merit such confidence. I can see that. I try to say things forcefully in my writing, to help get my point across.

2. I recognized the quote, but couldn't place it. Winterspeak. Yeah, he says things boldly and with confidence. Sometimes it helps make those things believable. The post at the link refers to atoms and sweat. I think Winterspeak introduced those terms in his of 12 January. That post might provide some context.

3. To answer your question: Yes, the quote implies that running a large trade deficit is a good thing. (I don't agree.)

I consider Winterspeak a mostly-MMT thinker. MMT people distinguish "real" from "monetary" (as I do) and they argue (as I do) that our problems have monetary roots. And then they say "absolutist" things like the currency-issuer can ALWAYS afford yadda-yadda. And then rational people (and also Austrians) think they're crazy.

But when you think the currency-printer can always afford whatever it needs, then one obvious conclusion is that they can just print whatever money they need to buy whatever they need. (This is where MMT is really weak, I think, But they would object to my phrasing of the obvious conclusion. And they would say it again, and it would still mean the same thing.)

Anyway, given that you can print all the money you need, exporting money becomes good, and exporting real things becomes bad, and importing real things becomes good. It all depends on a weak but boldly-stated premise. I'm picturing Charlton Heston in Planet of the Apes, hollering INSANITY!!!

How's your headache now, buddy?

Jazzbumpa said...

Art -

Thanks for pointing out that I need to define my terms. Though stating boldly and with confidence is, by implication, part of it, it's not the trust of what I'm getting at.

By Absolutist, I mean a statement that is made dogmatically, as if it were always and everywhere correct, irrespective of context.

I recognize that there are differing economic realms, where the behavior of measurable variables follow different sets of rules, analogous to Newtonian nd relativistic mechanics. Being against the zero interest bound is such a condition.

Many economists seem to believe that is something is true (or apparently true) in some place and time then it is an absolute. Your MMT reference is also an example.

I just discovered Winterspeak. Don't know much about him yet.

Spent the day at dance comp. Not the greatest headache venue.


BadTux said...

If you import more than you export, you end up with more "stuff" (real wealth) than the person exporting to you. If you look at "stuff" as wealth, rather than money as wealth, it makes a lot more sense. In that sense, anything you export is "stuff" (wealth) you don't have. A look at the comparative lifestyle of the average Chinese (net exporter) vs. that of the average American (net importer) should emphasize that -- the American has more "stuff" because the Chinese export their "stuff" rather than spreading it amongst their own citizens.

Of course, there's really only two ways to be a net importer -- con the other party into accepting worthless pieces of paper rather than things of actual value in payment for the goods being imported, or go into debt to the other party to be paid back later. By and large the U.S. is mostly doing #1, the con. This has mostly worked because of the dollarization of the world economy due to oil being denominated in dollars -- as more and more nations join the world economy, they've needed more dollars in order to dollarize their economy, and thus are willing to pay a premium for dollars. But sooner or later the world economy is going to lose its lust for dollars, and that scam's going to quit. At that point, things go all Ottoman on us...

- Badtux the Economics Penguin