Downsides of an export economy

[Victor Galis]

Following up on this, Japan's February exports dropped 49% versus February 2008. Over the last few days, there's been lots of talk about China leading us out of the recession, but I don't buy it one bit -- it must be experiencing much the same decline as Japan.

http://online.wsj.com/article/SB123794147736232741.html

I suspect the fact that China produces a lot of cheap stuff and Japan produces relatively more luxuries would justify some of that difference. It's not just cars.

Keep in mind that some discount retailers domestically haven't seen the same fall in sales as the average. Some of that fall in Japanese exports is people switching to cheaper alternatives.

[Naked Gents Rut]

I suspect the fact that China produces a lot of cheap stuff and Japan produces relatively more luxuries would justify some of that difference. It's not just cars.

That's not how it works at all. A large percentage of Japanese exports are components and other intermediate good that are shipped to China for final assembly. A massive fall in Japanese exports will invariably be accompanied by a fall in Chinese exports.

[RGBVideo]

we can afford

i don't think you understood.

if neverending trade surplus is the default state to be desired, how come every nation in the world doesn't have a trade surplus?

[rtwinger]

A trade deficit means you want more than you have presently, but can afford to import goods, which is good in the short term but bad in the long run. A surplus is bad in the short term, since you are producing more goods than are required in your nation, and devalues your currency, but good in the long run because it prevents budget deficits.

[Felch]

how come every nation in the world doesn't have a trade surplus?

Because it's zero-sum. For every dollar in surplus, another country has a dollar in deficit.

[notyoueither]

i don't think you understood.

if neverending trade surplus is the default state to be desired, how come every nation in the world doesn't have a trade surplus?

I don't think you understand.

Where do you suppose the raw materials for factories, home building, energy, food, etc. come from?

Canada imports more finished goods and services than are exported. The bulk of our export surplus is in raw materials for the rest of the world.

Would you prefer food and energy shortages?

[Victor Galis]

i don't think you understood.

if neverending trade surplus is the default state to be desired, how come every nation in the world doesn't have a trade surplus?

I think the answer to that is pretty obvious .

Canada imports more finished goods and services than are exported. The bulk of our export surplus is in raw materials for the rest of the world.

But you have to realize Canada is fairly unique in being a rich economy based on exporting raw materials.

[notyoueither]

I do.

He doesn't.

[KrazyHorse]

Both of you are retarded.

VJ's right.

Lord, how I hate saying that.

[notyoueither]

So Saudi Arabia has done something wrong?

[KrazyHorse]

A trade deficit means you want more than you have presently, but can afford to import goods, which is good in the short term but bad in the long run. A surplus is bad in the short term, since you are producing more goods than are required in your nation, and devalues your currency, but good in the long run because it prevents budget deficits.

A trade surplus prevents budget deficits?

[KrazyHorse]

So Saudi Arabia has done something wrong?

By doing what? Investing much/most of their oil money offshore, making other countries' workers more productive instead of investing it at home making their own country's workers more productive?

Yes.

[Naked Gents Rut]

VJ's right.

Lord, how I hate saying that.

I may have to put you on ignore for that.

[notyoueither]

By doing what? Investing much/most of their oil money offshore, making other countries' workers more productive instead of investing it at home making their own country's workers more productive?

Yes.

No. In exporting far more in value than they ever could dream of needing in imports.

[KrazyHorse]

Thanks but those are exactly the same thing. That's a simple accounting relationship.