1. What are you? Some kind of a bone head?
2. Gramlich is notoriously incompetent.
3. Economics doesn't work in the way portrayed in the quantitative way presented in college text books.
The link between budget and trade deficits can be seen most naturally through the national income accounting framework.
There is no direct connection between trade deficit and budget deficit. In fact, there is no determinate connection between the two as history has shown. For example, in the late '90s Clinton admin ran a huge trade deficit while his Congress passed tax laws that brought the budget into balance. Also, there's no "national income accounting framework".
Any saving the nation does finances either private domestic investment directly or the accumulation of claims on foreigners.
Savings, national or otherwise, can't be determined. Much of savings exists in goodwill. Goodwill represents sunk effort and degrees of confidence where capital is used rather than sits idle. When savings are used they can take a form that counts them as expenditures.
Further, money savings exist in many forms which from era to era may or may not be counted.
This means that national saving--the sum of private and government saving
Government doesn't save. If government saves, why does government run a budget deficit? The only answer is that government doesn't save. Oh, you must mean that government impounds for future expenditure.
--equals private domestic investment plus that period's accumulation of claims on foreigners, or the trade surplus.
There's no connection between what a nation saves and its net foreign transactions because savings are internal but foreign transactions are external. Does a counting of savings include eurodollars?
The trade surplus can also be thought of as net foreign lending.
This is a macroeconomic error, an academic error, and an error of categorical mixing. Consider. There can be large trade deficit and large net foreign lending, and there can be trade surplus and large net foreign borrowing. The other two combinations can occur too. All four combos have existed randomly across history.
All of these relationships are accounting identities--true at every moment in time apart from data inconsistencies captured by a statistical discrepancy.
Then how could economists claim that trade deficit causes the dollar to decline?
The only formula that's true in this arena is S = I, and even that is fraught with ambiguity. Reminds me of the ambiguity in physics surrounding the Principle of Equivalence. Putting BD and TD in there is like adding numbers to pencils and then equating the sum to the sum of numbers and rocks. The academics argue that pencils can be used to draw rocks and so there is always a surplus of rocks.
The rest of what was posted contains nothing but misleading, false sentences that aren't worth a rat's ass. For example, "National saving is the only way a country can have its capital and own it too." What an idiot.
Don't post any more idiocy here. In fact, don't post here. I want to get rid of all the idiots that keep showing up. |
