So this thread
is about the trade deficit? I'm confused are we talking about the trade deficit or the budget deficit? Its important not to confuse the two.
Well on to the trade deficit... I don't like to argue by discrediting an author, but after 30 min of searching for michael hodges this is all I could find on the fellow.
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Michael Hodges (email), educated in physics and a retired business executive, has developed extensive research regarding long-term economic & education trends in America as author of the Grandfather Economic Report series.
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So the man has "been educated in" physics and was a business executive. He has no formal education in economics as far as I can tell. I don't know how much stock I would put on a man I'm not sure knows what he's talking about. He says:
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America now runs massive deficits. If a country runs a trade deficit, it is borrowing from the rest of the world so that it can spend in excess of its own production. This means the USA is less competitive than before.
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Not exactly true, We are not borrowing from the world. We are buying imports. It is also not a governmental issue, it is a private one. Private companies are importing foreign goods to sell to americans. The americans are buying the goods and the money makes its way to the producer. There is no borrowing, The government does not go in debt because of a current account deficit. We just buy more than we sell overseas. This also does not mean we are less competitive in an overall sense. As you can see from the graph below industrial production has contiued to climb even during times of historically high trade deficits. High trade deficits do not mean we are losing "industrial might" or "competativeness"
A current account deficit (trade deficit) means we have a capital account surplus - we are investing more capital than we are saving.
One of the biggest factors in the trade deficit is importing foreign sources of energy, i.e. oil. More domestic production of oil would go a long way to help the trade deficit. Relaxing the regulations on domestic exploration and extraction of oil is a place to start. So is alternative fuel sources, alcohol (ethanol) for one, and I'm an advocate of it. There are plenty of farmers on subsidy that wouldn't have to be if we switched from gasoline to alcohol. But thats for another thread I suppose.
The point I'm trying to make is that running a trade deficit may sound bad, but in actuality it is not the end of the world. You have a better standard of living because of it.