Sunday, January 31, 2016

The Incoherency of Trumponomics

I was flipping through the channels Thursday night during the debate and caught a bit of Donald Trump's counter-rally and noticed this little gem.

 China, this year in trade, will make over $500 billion in terms of our trade deficit. $500 billion. That's no partnership, and I'm a free trader, I love free trade, but we have to use our head and we use political hacks to negotiate with the Chinese and they have the smartest people, I deal with them all the time. I love the Chinese, they buy my apartments for millions. I have the largest bank in the world from China in one of my buildings. I love them. I'm not blaming the Chinese, I'm not angry at them I'm angry at our politicians, because we have people who are incompetent running our country. Why should we be losing in trade deficits $500 billion per year?

The ironic thing though, is how little Trump appears to understand what the trade deficit (more accurately called the current account deficit) is composed of. He is always stating in his usual bombastic overly simplistic terms as "winning" or "profit". It's not though, If China exports more goods to the US than we export to them, the difference isn't profit, it is dollars which they have to hold in some form other than an exported good, so it becomes some sort of security (usually Treasuries) or they keep the money in the United States and invest it in some sort of asset like real estate or a business, like, just picking a completely random example, the largest bank in China starting a branch in a building owned by Donald Trump.

Trump doesn't even realize that the money he is making off the Chinese, is the same exact money that he claims the Chinese are "making" off of us.

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