Why Trade Deficits Matter
running huge trade deficits with the entire world year after year for decades. There are two exceptions to the understanding that bilateral deficits don’t matter. First, the content of trade can be important. For example, it is not in the interest of a large manufacturing economy such as the United States to ship basic materials overseas in exchang
... See moreRobert Lighthizer • No Trade Is Free: Changing Course, Taking on China, and Helping America's Workers
These trade deficits are self-reinforcing rather than planned. It’s not like the global reserve country necessarily decides to have persistent trade deficits. Using the United States as an example, if the whole world agrees or is forced to mainly use dollars to buy commodities and settle the majority of international deals, then there is naturally
... See moreLyn Alden • The Global Dollar Short Squeeze
The Triffin Dilemma Unfolds
In the 1960’s, economist Robert Triffin noted that global reserve currencies have to run large persistent trade deficits, which has been coined the Triffin Dilemma. If the reserve country doesn’t supply the world with a lot of their currency, then the world simply can’t use that currency for international trade, commodity
... See moreLyn Alden • The Global Dollar Short Squeeze
In recent years, however, the United States has run up massive trade and current account deficits with the rest of the world. The flip side has been the accumulation of large trade surpluses in other countries, most clearly in Asia. The U.S. deficits essentially amount to the United States borrowing money from the countries with trade surpluses, wh
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