I do not agree with most of this. I received my PhD and wrote on trade theory in 1977. I was in France in 1971 when Nixon closed the gold window...ouch.
I did the trade and current account forecasting at the NY Fed starting when Paul Volcker was president there. I was chief of the international financial markets division in the NY Fed and subsequently chief economist at NIkko Securities (US). I have traveled and worked internationally. and wrote under Max Kreinin, a well-known free trade enthusiast. So..I am no outsider to this. here is what I think... you need to answer -at least to convince me.
Why does the US have 33 straight years of current account deficits?
Why don't exchange rates move to eliminate or reduce the deficits, a theory USED TO teach?
US current account deficits, if they were a country, would be the 17th or so largest county in the world by GDP. US would be about 7th largest country by GDP. Why does the US import so much and export so little?
Isn't trade theory about more than cheap imports?
Isn't it true that if the dollar was supposed to adjust to reduce a current account deficit> to remedy the US deficit it would fall and import prices would rise! Doesn;t moving import prices higher align them more with a true free trade result at a time that exchange rates are dysfunctional?
Isn't trade supposed to be mutually beneficial?
Where is our export benefit?
Is this a Triffen problem? You know what that means...
Or is it some other reserve currency issue? I think countries use the US reserve currency story <as an excuse> to run their macroeconomic policies through their exchange rate to generate growth off of US imports <US Demand>.
This is NOT free trade- it is freeloading.
in robert Solow growth models there is a focus on intergenerational fairness in that mode. I-dot = S-dot <the time derivative of investment equals savings> . What about in trade? today's deficits ('fund' imports and substantially consumer goods and raw materials—benefits today's consumers, and IOUs are rung up to be paid by future generations—is that fair?
You say most workers are in service? Well, yeah! That's the problem! We are priced out of the goods sector < and yes, technology has also played a key role in reducing employment demands in the goods sector> .But is that a reason to give up?
I grew up in the Michigan Detroit area and suburbs. I worked on the assembly line and could make enough $$ in the summer to pay for college the next YEAR. Those days AND JOBS are gone.
Do we let currency manipulators run the show and determine what we can do?
This is not, and it has not been, free trade.
The theory of second best TEACHES us not to pursue 'first best' policy options if we are in a second best world because they will not lead to optimization. I'd say Trump has learned that lesson.
I do not agree with most of this. I received my PhD and wrote on trade theory in 1977. I was in France in 1971 when Nixon closed the gold window...ouch.
I did the trade and current account forecasting at the NY Fed starting when Paul Volcker was president there. I was chief of the international financial markets division in the NY Fed and subsequently chief economist at NIkko Securities (US). I have traveled and worked internationally. and wrote under Max Kreinin, a well-known free trade enthusiast. So..I am no outsider to this. here is what I think... you need to answer -at least to convince me.
Why does the US have 33 straight years of current account deficits?
Why don't exchange rates move to eliminate or reduce the deficits, a theory USED TO teach?
US current account deficits, if they were a country, would be the 17th or so largest county in the world by GDP. US would be about 7th largest country by GDP. Why does the US import so much and export so little?
Isn't trade theory about more than cheap imports?
Isn't it true that if the dollar was supposed to adjust to reduce a current account deficit> to remedy the US deficit it would fall and import prices would rise! Doesn;t moving import prices higher align them more with a true free trade result at a time that exchange rates are dysfunctional?
Isn't trade supposed to be mutually beneficial?
Where is our export benefit?
Is this a Triffen problem? You know what that means...
Or is it some other reserve currency issue? I think countries use the US reserve currency story <as an excuse> to run their macroeconomic policies through their exchange rate to generate growth off of US imports <US Demand>.
This is NOT free trade- it is freeloading.
in robert Solow growth models there is a focus on intergenerational fairness in that mode. I-dot = S-dot <the time derivative of investment equals savings> . What about in trade? today's deficits ('fund' imports and substantially consumer goods and raw materials—benefits today's consumers, and IOUs are rung up to be paid by future generations—is that fair?
You say most workers are in service? Well, yeah! That's the problem! We are priced out of the goods sector < and yes, technology has also played a key role in reducing employment demands in the goods sector> .But is that a reason to give up?
I grew up in the Michigan Detroit area and suburbs. I worked on the assembly line and could make enough $$ in the summer to pay for college the next YEAR. Those days AND JOBS are gone.
Do we let currency manipulators run the show and determine what we can do?
This is not, and it has not been, free trade.
The theory of second best TEACHES us not to pursue 'first best' policy options if we are in a second best world because they will not lead to optimization. I'd say Trump has learned that lesson.
Have you?
Respectfully,
Robert Brusca, PhD
Economist, NYC
Very happy that your posts have arrived on Substack! Would love to read more about concrete policies to help the middle class!