"Speaking of trade, Derek Scissors – writing in the Wall Street Journal – reports on a new study that finds an increase in private capital from China being invested in America. Such investments, of course, cause the U.S. trade deficit to rise. But this news is good. Contrary to the mistaken, mercantilist assertions of the likes of Donald Trump, Chuck Schumer, Peter Morici, and countless other politicians and pundits, these investments are evidence of America’s economic strength relative to that of China, and they are transactions that further strengthen the American economy. If private companies to which lots of investors are flocking are recognized as being economically promising relative to private companies from which investors are fleeing, why do people not apply the same logic to national economies? Surely national economies to which investors are flocking are economically promising relative to national economies from which investors are fleeing – despite the fact that the results of all this flocking and fleeing include an accounting fiction called “trade deficits” for the former countries and an accounting fiction called “trade surpluses” for the latter countries."
Saturday, July 16, 2016
We might have trade deficits with China but they end up causing more investment in the U.S.
See Some links from Cafe Hayek.