The author seems to gloss over the economy not being a zero sum game.
As an example, since this is HN: the US creates a ton of startups. Any country that creates new businesses is going to see foreign investment, which on paper leads to a trade deficit. Essentially, the US exports businesses to the rest of the world, but that is not tallied in a 19th century model for the trade balance of goods. However, it's arguably a better export that commoditized goods, from a margin standpoint.
Overall these graphs change dramatically based on where the exact geographic boundaries are set and how one defines goods/services/investment. Clearly the US hasn't run out of cash and needed to massively print dollars to cover foreign debt, which would happen very quickly if the system were actually imbalanced.
I assume that the New York Fed would like Americans to be more patriotic, save more, and buy less cheap imported crap, that's why they wrote this article in this way. But it skates past a few key issues.
1. Consumption doesn't zero out, because domestic consumption in the USA is mostly spent in China, not in the USA. That is what contributes to the trade deficit, not lack of saving.
2. Asset price inflation contributes hugely to the money supply. Where is this in this equation? It's not saving, it's not investment, it's not consumption, it's mind boggling amount of money created from nothing. That asset price inflation is the true source of wealth creation and money supply growth, not bond sales, quantitative easing, or whatever.
3. Domestic saving is in no way equivalent to productive investment in the US economy. Are people keeping money in their mattress considered accounting discrepancies? Companies hoard cash like dragons. What investment in USA? Have you seen much new equipment or new factories? What investment means here is pumping up USA asset prices, it stretches the definition of the word investment to the absolute limit. Domestic saving just ends up as unused savings in an account somewhere, we don't have a good mechanism to put it to actual productive use.
4. The true role of the Federal Reserve is to stabilize and increase asset prices. Money can be easily created by stimulating asset price growth.
5. Funds from abroad don't finance business investment in USA. Investment is a very nice way to put it. They are foreign funds snapping up American real estate and other hard assets. Investment somewhat implies it will lead to economic benefits. Foreign ownership of American assets, companies and real estate is what "investment" means. It doesn't mean growth, it means shrinkage, I think the foreign owned assets tend to lose their value.
“deficits are also due to a persistent shortfall in domestic saving that requires funds from abroad to finance domestic investment spending.”
But why isn’t it: deficits are due to a persistent surplus in funds from abroad to finance domestic investment, perhaps because the economy produces high returns and welcomes foreign investment?
> Finally, achieving the goal of a smaller trade deficit will likely be painful
While true, this is economics in a bottle. A world war would also "likely be painful", and one would require factories on-shore and a devalued currency to improve ones odds. In a perfectly peaceful and massive and stable vacuum-world, being the global reserve currency and running a trade deficit and "raising the economy’s productive capacity" is much better than the alternative. Things aren't so simple.
What do you import, and from whom? Are your now unemployed working-class political benign or politically violent? Is your productive capacity capable of producing ships and missiles? Sure ad revenue is great, but can it intercept ICBMs?
If all goods are widgets and we're discussing economics without politics, this is completely spot-on. Alas...
> The saving gap framework helps clarify what trade policies can and can’t do. For example, a free-trade agreement encourages exports, and an industrial policy can foster a re-shoring of production to replace imports. Such policies influence the size and composition of cross-border trade, but the difference between imports and exports is only affected if these policies also change the gap between domestic saving and investment spending.
Is there research on the link between the availability of cheap foreign goods and domestic saving and investment? E.g. would people invest more domestically if they could obtain returns making domestically manufactured goods? Doesn’t the availability of cheap Chinese goods arguably suppress domestic investment? E.g. Apple investing tens of billions into its Chinese supply chain.
I’d also be curious why the EU doesn’t consistently run trade deficits.
Answer: because "trade deficit" is a 19th century concept that is no longer a complete view into how the modern international financial system works
The whole idea of balanced trade makes no sense at all.
Take New Zealand as an example. Last year the major import from NZ to the US was wine.
The major export from US to NZ was military hardware.
Now. Why should the dollar quantity of wine you buy from someone equal the dollar quantity of military hardware you sell them?
There really is no reason at all that the bilateral trade between countries should be balanced and therefore it's not reasonable to think that the aggregate trade with all countries should be balanced or that it would be more desirable if that were the case.
> Why does the U.S. always run a trade deficit?
For the same reason why I run a trade deficit with my barber and my grocery store.
This is incredibly well written.
The oil example is very compelling for import substitution. And the covid example is interesting in showing the savings rate only went up as an offset of gov spending.
I'd love to see a follow up on (a) is it important for the US to increase domestic savings and (b) what are the best policies to do so, and why are they the best?
I imagine blanket tariffs might actually increase the savings rate because they increase the cost of importing all goods when the domestic alternatives are either inferior or more expensive. But I'm curious if they are the best way to achieve the savings goal.
Can someone clear up if "services" are included.
I read quite often claims that state if services were included, the US would be in a trade surplus.
But in my own rudimentary research, it appears services are in fact included.
Can someone confirm.
Imagine the contrary. You send out enormous amounts of goods and services, and in exchange, you get less from the rest of the world. You get to pay more for everything, but certain industries get to export more volumes of goods.
Is this better?
It’s amazing how everybody misses the wood for the trees.
Where else is China et al going to sell all the stuff they can produce via their physical overinvestment that was driven by the “export led growth” mantra?
There is no untapped source of demand anywhere in the world. There isn’t the income. All they could do is produce less and cause their economies of scale to go into reverse.
So instead they sell stuff for accounting entries, which are then used on the asset side of their currency area balance sheet to justify issuing more of their own currency and maintain the circulation.
They could, of course, just buy the time currently used for producing excess exports and maintain the circulation in any case. But that would cause lots of people who are hard of accounting to get very upset.
So instead they continue with financial mercantilism, allowing everybody there to pretend that they are productively engaged, not metaphorically digging holes and filling them back in again.
And that would continue, thanks to those nations supplying the accounting entries and receiving all that nice output, but for somebody getting elected on the US side who actually believes the “lack of saving” line and decided to do something about it. To the loss of the US people.
Quite why he think that saying the US isn’t paying enough for Canadian lumber or Chinese cars is good for anybody is beyond me.
Another win for the Emperors New Clothes.
Why would you not if you don't incur in external debt doing so?
The real wealth is not dollars or pounds or whatever, the real wealth is goods and services.
Having access to goods and service is what gives you a better living standard, the money is just a way to exchange them and to store value.
The US has the privilege of having high international demand for its currency, as it is the default global reserve currency. Of course, it incurs some costs, like having to have the most powerful military in the world, being implicitly responsible for making sure navigation waters are free and unimpeded for commerce, and having to try to keep the powder keg from where most of the energy that runs the world comes from, the middle east, from exploding.
In exchange, if you want more oil? more steel? more children toys? more paint? more chips? You can just use your dollars to buy it, and thus making sure your citizens have access to an unimaginable amount of stuff and services.
You can make the world work for you in exchange for dollars. And the world can buy your advanced tech and services with those dollars, and can use those dollars to also buy things they need from other countries without a lot of the complication of multiple exchange rates and/or barter schemes.
And the best part? Your government can run a lot of programs and not care much about raising taxes, because all those sellers after they use part of the dollars for buying stuff from you and between themselves, will usually have some extra dollars that they are going to save for a rainy day. And what is the best way to keep those dollars safe? Well, buying american treasury bonds!
Yeah, you can exaggerate a little bit and end up deindustrializing yourself too much, or go too hard on the consumption frenzy thing and end up with too much trash, environmental issues and household debt. But those are problems that come from the abuse, from the over enthusiastic use of this privilege. And I hope they can be solved (don't ask my how).
The system actually works for anyone involved. Nobody is really interested on this de-dolarization stuff as long as America also doesn't abuse its power too much.
International commerce is a complex machine, and everybody depends on it, everyone know that changing the current system too much would disrupt international commerce for years. Yeah, in the long run, everything would converge to some new equilibrium, but nobody fucking knows what that equilibrium would be, if it would be stable, and crucially, how much time it would take for it to be achieved. As Keynes taught: In the long run we will be all dead.
No country wants their dollar reserves to become dust, especially not china, they sweated a lot to accumulate all those nice treasury bonds.
I think this model is useful on a theoretical level, but I think the fundamental relationship being made is backwards. Domestic savings being weak is an outcome, not an input.
Trading partners want to sell us goods for no more than our money. If we have nothing they want to buy, then the result will be a surplus of US currency out there. Parking it in US assets drives the cost of debt way down for the US, and the low rates disincentivize domestic savings.
"Always" being since 1977... prior to that we ran a surplus most years.
If one wants more equations one might take a look at https://unequalexchange.org/wp-content/uploads/2023/05/The-U... (PDF), Arghiri Emmanuel summarising some of his writings on unequal exchange.
> The saving gap perspective tells a contrary story. Investment spending would have been lower if not for the United States being able to borrow from the rest of the world. One can argue that this funding raised the economy’s productive capacity from what it would have been otherwise.
This sounds backwards, I suspect he's being a bit sloppy when he says that. To sustain the trade deficit it was necessary to enormously increase China's productive capacity so that they could build the goods that get shipped to the US. If the US wasn't running a trade deficit the number in the statistics might have been lower, but it is quite likely that the amount of productive capital actually built in the US would have increased and they might have the same amount of real stuff at the end of the day. They could have built a similar amount of production in the US, for example, instead of importing. The accounting identity for that might be a lower number but that doesn't immediately tell us anything about what the real outcome would have looked like.
It is like the situation where nominally China's economy is nominally smaller than the US's, even though as far as the economists can tell China produces more actual stuff. Accounting identities are so basic that they abstract out a lot of important detail vis a vis what an outcome looks like on the ground. Accounting identities always hold, so any situation that can theoretically occur will have a valid accounting identity. It doesn't make sense to rank outcomes by how high investment spending is, it is important to know what real changes would occur. Which identities can't tell us because they are general.
Obviously he is technically correct that he can argue that, but it is insinuating a relationship. This stuff is the bane of central planners, it is nearly impossible to tell in the abstract whether a change in accounting identities was good or bad for productive capacity.
The premise is false, and the billions of dollars spent by manufactures every year training foreign-market competitors had increased exponentially since the 1990s.
There is no fix for the world moving into its own derivative technologies, and simply abandoning increasingly hostile origin markets.
It is a complex situation, and throwing taxes/money at the issue is naive =3
Services aren't added in the equation. With services, like Netflix, Office365, etc, the US runs a trade surplus.
Dark matter in the American trade balance
https://www.gmexconsulting.com/cms/de/dunkle-materie-in-der-...
Translation: https://www-gmexconsulting-com.translate.goog/cms/de/dunkle-...
> Using national accounting, one can show deficits are also due to a persistent shortfall in domestic saving that requires funds from abroad to finance domestic investment spending.
But which is the cause, and which is the effect?
I've always disliked economics because it never seems to make much sense. The first equation in the article -- the basis on which the entire premise rests -- just feels wrong.
> Spending is either on the consumption of goods and services or investment spending on equipment, structures, and intellectual property products. Income is allocated to either consumption or to saving by households, businesses, and government. In a closed economy, spending equals income—that is, the sum of consumption and saving equals the sum of consumption and investment spending.
> Spending (Consumption + Investment Spending) = Income (Consumption + Saving)
> Because consumption drops out on both sides of the equation, investment spending equals domestic saving in the economy. This makes sense: the funds available to invest in productive projects have to come from domestic savers.
It _doesn't_ make sense. How is consumption on the income side of the equation? And even if that somehow did make sense, who is to say the consumption on the income side is the same as the consumption on the spending side such that they balance out?
Saving is deferred spending, meaning money is set aside temporarily. One might think of this like a "cash queue" where the velocity of money slows down for a while. Is the assumption that all saving takes place in banks where banks can lend it out? If I stuff cash in a mattress (saving), how can that cash be used for investing?
A more realistic version might look like this:
(fast)
Income --+--------------+-> Spending --+--> Consumption
^ | | |
| +--> Saving >--+ |
| (slow) |
| v
+---------------------- Investment and Production
EDIT: If I'm asking questions, saying I don't understand, and offering a counter-model, doesn't that count as adding to the discussion? If I'm operating under some misunderstanding, there are certainly others who have the same misunderstanding but didn't speak up.
If you buy things that are productive you come out ahead on a trade deficit. If you buy things that are consumptive you are pawning future productive capacity of the country. Every country does both, obviously, what matters is the overall balance. The US has notably (as in quantified by economists, civil engineers, people who study urban planning etc.) failed to invest in productive infra for quite a while now.
Trade deficit sounds bad, but it’s not always a problem. Other countries sell us stuff, then use the dollars to buy U.S. assets. It’s like we get goods, they get a savings account.
Countries want American assets - stocks, bonds, property (or abstract ownership in such property).
Countries acquire such assets with dollars. They need to get dollars. The acquire dollars by selling things Americans want, typically physical goods as Americans are very good at making the non-physical kind.
Unfortunately this incentivizes the never-ending march towards de-industrialization in the USA, as countries earn dollars by making things. They get more efficient every year, and more skilled, making more things, to acquire dollars.
That is, I would argue, the single biggest issue animating politics today. It is the argument against globalization, one that has not been solved, and the turmoil in politics across the West with gyrating governments is because voters continue to desire change, and solutions, which no party has yet solved.
Arguing that voters are "stupid" is itself stupid. Voters vote the way they vote. It is on elites and politicians to solve the problem of deindustrialization while maintaining the parts of globalization that are beneficial. If you want to wring your hands and blame the voters, that's fine, but in a democracy you should try to win votes and not call people stupid.
By "always" they mean since the 1970's of course.
More buyers than sellers.
The US runs a trade deficit because it runs a service export surplus.
If you only ever mention one of those, you are either just following a narrative or actively deceive others.
Because there is a fiscal deficit which requires borrowing, which means that new money is created. If the new money were spent only in the USA it would cause prices to go up a lot, so the money goes overseas so that the price increases are more moderate (arbitrage). Why is there a fiscal deficit? Because politicians want to win elections. If the fiscal deficit were ended then mathematically there could not be a trade deficit.
One reason is that certain goods like IP are excluded from trade figures.
I believe that most services are also excluded, but they may have changed that.
Transfer pricing screws up the numbers as well.
To maintain a global reserve currency, US must typically run a trade deficit to supply the world with enough of its currency for international trade and finance
From TFA: Spending (Consumption + Investment Spending) = Income (Consumption + Saving) so they conclude Savings = Investment Spending
How does savings become investment spending? Is that through borrowing? Who says borrowing is used for investment? Sure, it's not a great idea to borrow to spend but even corporations sometimes (do stupid things like) borrow to pay dividends which is not investment.
Trade deficit are sales envy. Value is exchanged. There is nothing wrong except the empire's unlimited greed to have it all.
this episode of EconTalk offers a lots more nuance than the posted article
https://www.econtalk.org/the-economics-of-tariffs-and-trade-...
My take is that the US likes to export US dollars... Then wealthy foreigners don't know what to do with them, so they pour them into the NASDAQ and NYSE and fill the pockets of US executives. The US can also leverage its powerful military to coerce artificial demand for USD within foreign nations to prevent it from being redeemed for US labor. Like how the US coerced Australia into a ridiculously expensive AUKUS deal; really, it's just a scheme to prop up USD and has nothing to do with submarines.
The US has long been playing a game where they give other nations currency that it prints out of nothing on the pretext that this currency can be redeemed for something of real value, but then goes to great lengths to ensure that those foreign nations never actually redeem the currency. This is the 1971 gold crisis in a nutshell. Now the trade deficit in fiat money is just a continuation of this scheme... Backed by even less value. That's why it feels like western economies are being hollowed out. The US economy has been hollowed out and taking its allies down with it.
It's kind of ridiculous how much backlash Trump was getting for trying to do something that is both sensible and necessary. To restore the real economy.
Empires have perverse incentives to be extractive and monopoly building.. and its war and conflict and resulting elite exchange/ land redistribution that rearranges the lottery once more.
A trade deficit is a boon for the investor class. The foreign bid makes US assets trade at prices above the level they would if the US ran a trade surplus.
Why is this even a question? I run one hell of a personal trade deficit with Costco and Safeway, because they have groceries and supplies I need to buy, and I have money to give them. Countries are no different.
The whole point of free trade is a win-win game. Someone has stuff/services you need, and you're willing to pay for them. In the end, everyone is happier than before.
wow, China’s internal-external internet separation policy really makes it difficult for people outside the country to truly understand what’s going on inside.
In the news: Everything is out of whack and we're waiting for the next blowup. Who will hold the bags this time?
There is no trade deficit if you consider the dollar is the goods that US exports to other countries.
I always thought the plan was we give them pieces of paper for their stuff. Then if we ever needed to we could say those pieces of paper(or bits in a computer) are no longer worth anything unless you're a citizen. But I had a bunch of gift certificates for ChiChis when they went out of business, and I have been jaded to this sort of thing ever since.
I saw a comment here or reddit that basically said that trade deficits aren't real anyway since we're essentially exporting dollars and importing goods. It changed how I thought about these trade deficits a bit. I wasn't overly concerned in the first place, since it seems like a right-wing boogeyman than an actual problem, and also being a country and mostly imports high end finished goods seems like winning at capitalism.
We have a service based economy. Or a debt service based economy.
Because America is rich and they like to buy things.
More disposable income/debt in the US (in general).
Because it can.
I wish someone would explain to Trump that decades of low tariffs and trade deficits is what has (had) cemented the US at the center of global trade, with all of the many benefits that comes with. Getting the rest of the world on board with the US-centric economic order has been THE American project of the last 80 years, it's been astoundingly successful, and Trump appears intent on ending it.
Because USA makes garbage
I think what the US administration hasn't realized yet is that the world isn't interested as much in oil anymore.
Previous wars were fought to combat the dropping prices of oil, and to remove influence of the Middle East (e.g. Qatar politics, UAE, Iraq, Iran etc).
Trump is stuck with an industry that hasn't realized what's going on: The new currency is not oil, not tech and electronics, it's energy.
China realized its dependency on oil a long time ago. Take a look at their geopolitical shift in regards to South China Sea expansions to take back control of the trade routes going through the straits in the West and through Taiwan. In parallel, China tries to remove its dependency on oil and coal altogether as much as possible and invests into solar power like no other nation.
Then you look at the Middle East, which is now the replacement for Russia in terms of gas and oil delivery. Russia lost its geopolitical influence on a lot of nations who are now customers of nations in the Middle East, which also removes influence and control of the US, which hurts it too.
Then you have oil trades from Russia to the remaining nations. The ruble doesn't go down further because Russia _forces_ nations to trade its oil and gas in Rubles. They do it for exactly that reason. Why do you think Russia invaded from the East, when from the North and West would have been much easier? What do you think is there? Exactly, the oil fields for which the deal went to Western companies literally two weeks before Operation Z / the invasion.
Geopolitics is meanwhile all about energy. And that's what the US totally slept in and is now paying the bill. But what do you expect being the only nation producing cars exclusively for their own market because nobody else can pay the price to drive a V8 without a catalysator anymore?
The US is a nation stuck in the past, and the pointless hostilities towards surrounding nations won't even help fixing the problem. It would have been a much smarter choice to find reasons for going to war with Qatar or UAE. Just from the perspective of what a "smart bully" would have done. Alternatively investing all budgets into wind and solar energy to make up the losses would have been more future proof, too, and literally the strategy that all other peaceful nations are going for.
Guess the Republicans at the wheel are too busy to throw piles of shit into the crowd, huh? Fear sells easier, after all, I guess.
The US has large trade deficits because US leadership uses the lucrative US market as a diplomatic reward. By "leadership" I mean the governing interests of the US, not merely its political class.
The history of this is long, going back to the 19th century, but it became a major diplomatic tool after WW2. As the US sought to secure allies after WW2, it used the incredible wealth of its population as a carrot to gain and ensure compliance of foreign nations. Japan is an obvious example: the recovery and prosperity of Japan was the direct result of deliberately utilizing the US domestic market to create demand for Japanese products. The result is well understood today: Japan thrived as it claimed enormous shares of US electronic, automotive, machine tool, and other sectors of the US economy, and the US secured a strategic ally in the Western pacific, where it has hosted vast military resources for going on 75 years now.
This practice has continued unabated ever since, with Trump being effectively the only significant impediment to have ever emerged. In the 1990s the rationale for MFN status for China was "human rights." China was expected to comport with some notion of human rights and, in turn, China would join the long list of MFN status nations. Again, trade with the US as a diplomatic reward for some US prerogative.
All of this is incentivized by the fact that, aside from approval from the US Senate, the US president has the exclusive prerogative to negotiate trade deals with little to no limits on the terms. The president can do this without passing any bills in Congress, allocating any budgets, winning any court battles, etc. Just negotiate a trade deal, get it approved by the Senate, and shazam: you've changed the world. This is further incentivized by "fast track" authority for the executive, which has been US law since 1975.
Finally, this is all lubricated by the ability to ship vast quantities of cargo from distant locales at low cost. This part really spun up in the 1960's with the US driven standardization of containerization. With this affordance in hand, it became feasible to leverage low cost foreign resources on a large scale, and US captains of industry now had a solution to relieve themselves of high costs in the US: labor costs, regulatory costs, taxes, etc.
With industry and government fully aligned based on independent interests, the trend became the dominant factor of global economics: the world literally runs on US trade deficits.
This has been a one way street for coming up on a hundred years now. It isn't terribly surprising that the pendulum is, if not yet swinging back, at least slowing its present direction. I suspect this part might be hard to understand for those that frequent a site like HN, but the bottomless well of US wealth is basically gone now: much of the population of the US lives a sort of high tech subsistence lifestyle, and it's not difficult to imagine the day when their access to credit will effectively stop. That will happen in parallel with the collapse of government finance in the US, which basically creates a new benchmark for the concept of "clown world" with every passing day.
So there is a hard expiration date coming for all of this.
Because there are 1) willing exporters of US dollars USD (the US federal government USG ultimately, and US citizens in the final analysis); and 2) willing users of USD - us non-US-ian people around the world.
When I sell stuff to someone in the UK, then pounds are fine as means of exchange. When I sell the same someone around the world, then the transaction not being domestic, the cash part that is 1/2 of it (or 1/4 if you want to look at it in a way of transaction = quartet of {stuff,cash,buyer,seller}) and it can be in any currency of any country. It helps if it is the country of the buyer or the seller, but in general it is neither.
I prefer US Dollar to Zongoan Vonga, b/c:
1) USG typically does not devalue their USD much, I don't have to rush to exchange the USD for something else. Or if you want - most others devalue theirs more.
2) USG has not deleted and re-issued their USD even once so far afaik. Other countries do it more often.
3) Everyone else uses USD already. It's easier if it's one currency sufficing for all trade.
4) Often I don't produce oil, and oil is easiest to pay by with USD. Not impossible with others, just more difficult.
5) US banks allow me to hold USD in accounts outside of US. They don't ban me to take the USD in- or out- of US.
6) With USD in hand I can buy lots of stuff US produces, plus I can buy US assets - property, financial assets etc. US does not discriminate against me johnny-the-foreigner much, they are mostly relaxed in that respect. Other countries have all manner of rules that amount to: they'll basically steal their currency off you, or make it worthless to you by making you unable to claim the goods & services that are nominally sold in that currency.
Before people pipe in how US is terrible in this and that - above is all *relative* to all other options all other currencies available. This is from to top of my head, I'm sure I made some error and there is more.
Because the USA has more money than other countries. People outside the US can't afford to buy our products, but we can afford to buy theirs. This is ideal for many people in the US who want cheap $200 flat screen TVs in every room of their house.
This isn't good for unskilled labor in rural parts of America, often in swing states. Manufacturing had always been a place for high school grads to have a decent career. Those days are over with, but politically they decide the election.
Getting real physical products in exchange for imaginary numbers and services is a good deal? We sell a lot of software?
Nationalism
I'm surprised to not see nationalism talked about. The topic of trade deficit seems to be less about economic reasons and more about a political movement towards nationalism.
This can be seen in Europe right now, as well as India and Brazil - where those respective governments have taken actions that strongly favor local/in-country based companies over foreign.
And it appears the current US administration is taking a similar approach.
[dead]
Because most major countries devalue their currency vs the US Dollar, making imports more expensive. Like tariffs.
[flagged]
Too much consumption versus production. One component is the ever ballooning government debt. Essentially in 'trade deficit' the thing that is not taken into account is one very big export article of the US. Pieces of paper with 'IOU' written on them. The whole Trump trade war is the completely preposterous thing of spending more in the shop than you can afford and then blaming the shop for taking advantage of you. This is the concept of 'responsibility' as it appears to exist in Mr. Trumps bug ridden brain.
the United Stares biggest import ton for ton was (maybe still), oxygen, it looks to be impossible to search for, as of course the only returns are for profit making companys, not anything so trivial as the atmosphere, which realy just makes the point that the whole concept of money and economy exists in a special bubble, where control of the naritive is what realy counts
Because US-ians want to buy cheap sh*t in Walmart. On the whole, they seem to prefer cheap to durable/costs more. So USD flow to places with cheaper goods and then flow back as investments.
amazing how successfull the "deficit" narative is for the country that somehow gets the largest share of the worlds real comodities and goods shipped to it's shores in exchange for some "currency" pulled strait from the iether! and as someone said, If I owe a thousand dollars, it's my problem, but if I owe 5 million, it's the bank's problem, so I think it is a good idea for me to run a bit of a personal "deficit", you know just to do my part, and be a good citizen, hard as it is to take all that stuff, someone has to do it, but realy it's not fair, no not fair to get all the stuff and hand out IOU's for some stuff that I just have to mark up a bit, no not fair, all the time and trouble marking my stuff up, in fact I think I need to be compensated for marking my stuff up
Using a national currency as the de facto global reserve guarantees a trade deficit for that country.
No one else can manufacture USD's, so other countries have to acquire them by shaping their economies to supply goods and services demanded by the US. They can then use these earned dollars to transact with other countries, as the US itself insists they do.
For the US, this is a simple trade off - gain massive political influence (and market intelligence - all USD transactions go through US institutions regardless of where those transacting partners are located), at the expense of hollowing out domestic industry and running a deficit in physical goods traded.
The solution is a non-national global reserve, calculated on a basket of national currencies. This was Keynes argument at Bretton Woods, but the US would not have it then, and does not want it now.