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Tuesday, September 8, 2015

Trade Deficit of the US vis a vis China/Japan...

I have always had difficulty understanding the mechanics of this phenomenon. Let me start with the following quote from wikipedia.. >Since the mid-1980s, the United States has had a growing deficit in tradeable goods, especially with Asian nations (China and Japan) which now hold large sums of U.S debt that has funded the consumption.[5][6] The U.S. has a trade surplus with nations such as Australia. The issue of trade deficits can be complex. To stupid old me, this is confusing. It paints the picture of the Chinese government buying treasuries (US debt) and giving the US government toasters. But governments don't exchange currency for toasters. Private merchants exchange currency for toasters. Can someone trace the mechanics of this "trade deficit" out so I can understand what's going on? How does the Chinese government end up with stockpiled dollars and the US government end up with citizens who have consumed a bunch of toasters without having to work so relatively hard for them?

link: http://ift.tt/1LiFCi2