Trade Deficit Xfers Wealth From The 99% to The 1%

[Martin Hash]

Trade deficits are doubly bad for Americans because they enrich The 1% & foreigners at the expense of everyone else. For example, when China has a $100 billion Trade surplus, what does it do with it? Buy American assets? Do we really want major property & business ownership to be in the hands of foreigners whose national interest is not our own? However, taking care of assets can be troublesome & expensive so the other alternative for China is to buy U.S. Treasuries. But it's American taxpayers who ultimately pay that bill, so the Trade Deficit must be added to the cost of the cheaper goods, which is a wash, and who gets the difference? The 1%.

[SuburbanFarmer]

If we had a trade surplus, the consumer wouldn't see any difference in price. It just means that Chinese companies sold more shit to us than American ones sold to them.

[Martin Hash]

Think! I'm telling you something no one else is: trade surpluses don't generate Treasuries that need to be paid back.

[SuburbanFarmer]

Think! I'm telling you something no one else is: trade surpluses don't generate Treasuries that need to be paid back.

Those treasuries are the same debt, regardless of who happens to be buying them. It doesn't matter whether you sold 100 T-bills to a Chinese or American investor, the interest is the same. There is no other effect, except whom you happen to be paying that interest to.

It's a complete red herring to point at the number of Chinese buyers of debt, and pretend that our country is in danger because of it. It's not their fault. The government shouldn't be selling Trillions in fucking debt every year, in the first place. If a bunch of Chinese tycoons happen to want to buy that debt, it lowers the interest rate at the debt auction anyway. It's net neutral.

The underlying issue is that Chinese investors have a hell of a lot more money to throw around than they used to. That's a result of pathetic mismanagement of our domestic industries, and Chinese labor laws. It makes political sense to throw red flags around, because it scares people, and creates a foreign 'enemy' that earns votes.

Owning bonds does not confer ownership of anything, other than the debt, should the US government choose to continue paying it off. Failing to pay it off will piss off the Chinese, along with every other global investor that lent our government money - the vast majority of which are on Wall Street.

[Smitty-48]

Of the $20 trillion debt, only $6 trillion is held by foreign investors, but of the $14 trillion held domestically, it is not the case that the "vast majority is held by Wall St", the largest domestic debt holder is the Social Security Trust Fund holding $3 trillion, then the Federal Reserve holding $2.5 trillion, Office of Personnel Management holds $1 trillion, State and Local Government holds $1 trillion, Military Retirement Fund, Medicare, and Treasury holds another $1.5 trillion, individuals, non-corporate small businesses, and private pensions hold $2.5 trillion.

Banks, Insurance Companies, and Mutual Funds only hold about $1.5 trillion, so only about 10% of domestic debt, the vast majority; is held by American federal, state and local governments, Americans are by far and away the biggest holders of their own debt, not Wall St, and not the Chinese, Wall St and Chinese combined only hold about 25% of the debt.

The flaw in Martin's assertion is that it is somehow the Chinese propping America up, but that is not actually the case, Americans are propping America up, and if there was a haircut, it would be the American people taking it most of all, the American taxpayer pays the bill, because if he doesn't, he'd simply be defaulting against himself.

[SuburbanFarmer]

Where do you think the money on Wall Street comes from? The trustees of all those funds use investment brokers to manage the accounts and invest it. Those brokers are Wall Street. It's not savings accounts.

[Smitty-48]

Where do you think the money on Wall Street comes from? The trustees of all those funds use investment brokers to manage the accounts and invest it. Those brokers are Wall Street. It's not savings accounts.

But that money is not Wall St's money, that debt is not owned by Wall St, a default against that debt would not be a default against Wall St, and Wall St would not be the one's taking the haircut. In terms of actaul debt holdings, Wall St banks are only holding 10%, the American public on the other hand, is holding over 50% of the debt.

Even restructuring the debt, never mind defaulting, would impact on the American public more than anyone, more than Wall St and China combined.

[boethius]

The way you retire the debt is to print 20 trillion and send a check in the amount of 20 trillion / 330 million US citizens to each US citizen.

That will create inflation without hurting the average person because each person gets an equal chance to spend the new money.

Currently, the government prints money and gives it to Wall Street, who gsts the benefit of the first spend of money while the rest of us only get the inflation (and not the first spend).

[Smitty-48]

But they don't actaully give that much to Wall St, in comparison to what they give to the American public through their Federal, State, and Local governments, SS, Medicare, and pensions, Wall St has bought $2 trillion, the American public has bought $11 trillion, so you would be inflating against yourselves, you'd be worth the same amount, it would just be expressed as 22 trillion IOU's instead of 11 trillion, you could spend the money, but flooding the US with dollars would incite a comensurate increase in prices and wages, so you'd be no better off than you are now.

They've already done what you say to do, after they spent $11 trillion constant dollars on the Cold War, the net result was a stagflation crisis and interest rates went through the roof, then they turned to Wall St to try to get out of the trap, inciting the boom and bust cycle that you've been in ever since.

[Martin Hash]

The posts above are correct but off-topic. My OP title is: "Trade Deficit Xfers Wealth From The 99% to the 1%." That means they ARE important to consider.

p.s. Yes, I know Capitalism xfers money from the 99% to the 1%.