Why trade deficits aren't automatically bad

[Xiahou]

I've said it before and I'm saying it again: Trade deficits are not always bad and certainly arent the barometer of economic health that the media pretends they are.

Favorable Deficit

[yesdachi]

I think they are a bit more optimistic about a scale that is still rather unbalanced, even after reinvestment, than I am.

[Xiahou]

It's not about optimism or pesimism to me. While the amount we import has grown, our own economic output has also grown at a pace greater than that of our peers. Trade deficits are no more a sign of economic weakness than surpluses are of economic strength.

[Red Peasant]

Hmm, I wonder if you would swallow this if it was a Democratic administration running up such huge deficits?

Somehow, I think not.

[Atilius]

Hmm, I wonder if you would swallow this if it was a Democratic administration running up such huge deficits?

Red,

It's awfully difficult for any administration to control trade balances. It's possible to make the balance of trade more favorable by devaluing the currency or imposing import restrictions, but this causes other problems and invites retaliation from one's trade partners.

The balance of trade is more a result of individual and corporate purchasing decisions.

[Red Peasant]

Yeah, but this reeks of political spin.