Cybernetics
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What Trump says is for the common person to consume. His actions might not be as simple as what he says but the issues of America is not properly conveyed by Trump to his base.
To brush up on basic economics, simply put: savings gap = trade gap. What this means is that America cannot sustain a trade surplus until it has an overall surplus for its citizen population and government spending. It means no more deficit spending for the aggregate of the households and the government. Is that achievable in a short time span? As long as America overspends, the trade deficit will remain.
Balance of Value
If your nation spends more than it produces then you are borrowing (currency is a future claim on the economy) that value (in the form of goods and services) from elsewhere. For the US it is trading its currency for goods and services produced elsewhere to make up for the difference between domestic production (translates into domestic income and gov revenue) and consumption. The difference between domestic production and total consumption (including gov) results in this trade deficit.
Global Reserve Currency
The US is able to print seemingly excessive amounts of currency and not face hyper-inflation because the currency is not just circulated domestically (velocity of money had gone down since QE), it is mostly circulated externally. The countries that holds and uses large amounts of USD is what keeps this system functional especially when the system is under stress like during 2008 financial crisis, China is one of those nations. The reason why G-20 gained prominence after 2008 is because these mainly developing nations were seen as entities that could absorb the money printing resulted from various rounds of Quantitative Easing through their economic growth.
There is a good reason why America has a trade deficit, wanted one and cultivated a consumption heavy society for decades. It is how it achieves its global reserve currency status (after the basics have been covered). To be a global reserve currency the USD needed to be the source of currency for others and in the hands of others. How others (rest of world as a unit) acquire USD is through a trade surplus with the US. Here I'm referring to 2 systems: US and rest of world. A particular nation can acquire USD from other nations as well. Otherwise there would be a lack of USD in the global financial system and the USD won't be the dominant global reserve currency it is today. Trade deficit is one of the burdens of the global reserve currency structure that America set up. Of course it benefits immensely as well. If the situation gets desperate, America can give others free money but that could get of hand quickly leading to the death of the currency, birthing a new one.
Trump the Cure or Trump the Viagra Pill?
Trump is initiating macro industrial policy, attracting investment to America through various mechanisms to improve the situation but certain trends are hard to change because they are structural.
If he removes the trade deficit that will constrict USD supply for other nations leading to room for the rise of another competing currency or currencies. That will signal a great decline for America as a global superpower and future policy would certainly be revolving around a graceful retraction (not collapse), initiating a global realignment due to calculation changes of other nations. China would take advantage of this to a certain extent but it is unlikely for the Yuan to become a replacement by itself in the near future because it wouldn't be beneficial for China to do so. This is not the post WW2 environment. Thus I think Trump will try to mitigate the stress of the deficit on the population but not solve underlying issues of the deficit.
A major aspect of Trump is the function as the agent of stimulus. He is a stimulant for the economy, military, and morale to a certain extent. A stimulant only burns fuel faster, it doesn't solve the underlying problem of the fuel source acquisition. The stimulant aspect is what fulfils the orgasm of the MAGA supporters. It is human nature to want to feel young again, desiring to living in an America full of virility.
Yes, the desire for the old America does come from a practical place, people want good jobs but the definition of these good jobs are set by the memory of the old America lifestyle perpetuated in pop culture. Raising a family of 4-5, 2 cars, detached home in the suburb, and white picket fence fence. Why are these jobs gone, and why do third worlders have our jobs? Simply, you don't want to these jobs even if they were available, you'd rather be on benefits (redistributed gains from trade) and unemployed if that was the choice. In a globalized order that America setup, competition is global, these jobs don't pay for 2-3 kids, a wife, 2 cars, and a detached home in the suburbs of America anymore. You don't see common Americans campaigning to lower the minimum wage or eliminate it to become competitive. There is a solution: bring third world labourers in the millions to America and they must be illegals since legal ones have rights and require legal pay. This would contradict the MAGA vision, making it nonviable. Meaning America must import these goods that they don't want to produce.
Trade doesn't necessarily create more jobs, it creates better and higher paying jobs. For those that benefits from the international order, it feels like Trump supporters are babbling about crazy things. There is a clear geographic dimension to Trump supporters, which correlates closely with difficulty of access to the benefits of the international trading system. Urban and coastal see Trump and his base as a danger to America's (overall) pillars of power (they essentially want to end the current American order but won't say it or don't understand it yet). Urban economy is service heavy and America has a service trade surplus with China, thus they don't feel as big of a problem.
Some American economists say the solution is to tap into America's competitiveness as a services exporter and reach global markets (currently under utilised in some areas). Yes, it would make America more competitive overall but this only widens the income gap under the current model due to the skills gap. American economic model peruses efficiency unlike the German model with peruses development of human capital. Developing human capital internally to meet all demands is very capital intensive and renting human capital on a global market place is comparatively cheaper, America prefers the latter due to entrenched ideology of capitalism.
Trump the Viagra pill will make you feel amazing when he is active, but your underlying dysfunctions are not solved, could be even exacerbated. Or maybe the system is functioning exactly it should be, maybe America is not dysfunctional. Some people who were sold on the idea that they were part of this game will find out they actually are not.
Industries would likely increase in continental America over the next few years, increasing both household and government revenues. The issue with this or lack of contribution to the solution is the entrenched habits of the households and government bureaucracy, old habits die hard. Trump marketed his presidency based on "Make America Great Again", a play on nostalgia for the older folk and an sense of entitlement for the younger folk ("I should be able to enjoy the Good 'ol America like my daddy"). This entails a certain lifestyle and certain values, perpetuating old spending habits and pressure adding to trade deficits. More than half of American households have less than $1000 dollars in savings, any increase won't go to savings but to pay bills. American social safety net ensures consumers for the world market (Social safety net can be a topic for another day)
Foritifying the Pillars of MAGA (doubling down)
The pillars of American power would likely continue to be fortified over the coming years, contributing to the trade deficit. One of the major pillars is the military. Spending already increased with Trump in charge. It is a major aspect of government expenditures, and resulted in the massive government deficit. How does government deficit affect trade deficit when America doesn't buy weapons from others? Say you produce all weapons systems domestically, pay domestic contractors, etc. you retain your value domestically but that displaces economic activity from the civilian economy (you still need civilian goods to maintain a lifestyle), to make up for that displacement, you must either produce a lot more (sometimes not viable) or import civilian goods from other nations (usually cheap and efficient). America chooses the latter due to the large displacement of the Military Industrial complex upon the US economy and desire for efficiency. Of course aspects of the MIC acts as a catalyst for technology development but overall its been a sector of consumption.
America isn't going to sort out its trade deficit with the world until it sorts out its domestic finances, that's the core of it. I don't forsee an implosion (periodic crisis might happen) of the US order, it is undergoing a readjustment lasting for a century that will result in the decline of its empire (not destruction unless it miscalculates and overplays its hand at some point). The imperative for all proceeding administrations would be to make a graceful adjustment to new realities.
To brush up on basic economics, simply put: savings gap = trade gap. What this means is that America cannot sustain a trade surplus until it has an overall surplus for its citizen population and government spending. It means no more deficit spending for the aggregate of the households and the government. Is that achievable in a short time span? As long as America overspends, the trade deficit will remain.
Balance of Value
If your nation spends more than it produces then you are borrowing (currency is a future claim on the economy) that value (in the form of goods and services) from elsewhere. For the US it is trading its currency for goods and services produced elsewhere to make up for the difference between domestic production (translates into domestic income and gov revenue) and consumption. The difference between domestic production and total consumption (including gov) results in this trade deficit.
Global Reserve Currency
The US is able to print seemingly excessive amounts of currency and not face hyper-inflation because the currency is not just circulated domestically (velocity of money had gone down since QE), it is mostly circulated externally. The countries that holds and uses large amounts of USD is what keeps this system functional especially when the system is under stress like during 2008 financial crisis, China is one of those nations. The reason why G-20 gained prominence after 2008 is because these mainly developing nations were seen as entities that could absorb the money printing resulted from various rounds of Quantitative Easing through their economic growth.
There is a good reason why America has a trade deficit, wanted one and cultivated a consumption heavy society for decades. It is how it achieves its global reserve currency status (after the basics have been covered). To be a global reserve currency the USD needed to be the source of currency for others and in the hands of others. How others (rest of world as a unit) acquire USD is through a trade surplus with the US. Here I'm referring to 2 systems: US and rest of world. A particular nation can acquire USD from other nations as well. Otherwise there would be a lack of USD in the global financial system and the USD won't be the dominant global reserve currency it is today. Trade deficit is one of the burdens of the global reserve currency structure that America set up. Of course it benefits immensely as well. If the situation gets desperate, America can give others free money but that could get of hand quickly leading to the death of the currency, birthing a new one.
Trump the Cure or Trump the Viagra Pill?
Trump is initiating macro industrial policy, attracting investment to America through various mechanisms to improve the situation but certain trends are hard to change because they are structural.
If he removes the trade deficit that will constrict USD supply for other nations leading to room for the rise of another competing currency or currencies. That will signal a great decline for America as a global superpower and future policy would certainly be revolving around a graceful retraction (not collapse), initiating a global realignment due to calculation changes of other nations. China would take advantage of this to a certain extent but it is unlikely for the Yuan to become a replacement by itself in the near future because it wouldn't be beneficial for China to do so. This is not the post WW2 environment. Thus I think Trump will try to mitigate the stress of the deficit on the population but not solve underlying issues of the deficit.
A major aspect of Trump is the function as the agent of stimulus. He is a stimulant for the economy, military, and morale to a certain extent. A stimulant only burns fuel faster, it doesn't solve the underlying problem of the fuel source acquisition. The stimulant aspect is what fulfils the orgasm of the MAGA supporters. It is human nature to want to feel young again, desiring to living in an America full of virility.
Yes, the desire for the old America does come from a practical place, people want good jobs but the definition of these good jobs are set by the memory of the old America lifestyle perpetuated in pop culture. Raising a family of 4-5, 2 cars, detached home in the suburb, and white picket fence fence. Why are these jobs gone, and why do third worlders have our jobs? Simply, you don't want to these jobs even if they were available, you'd rather be on benefits (redistributed gains from trade) and unemployed if that was the choice. In a globalized order that America setup, competition is global, these jobs don't pay for 2-3 kids, a wife, 2 cars, and a detached home in the suburbs of America anymore. You don't see common Americans campaigning to lower the minimum wage or eliminate it to become competitive. There is a solution: bring third world labourers in the millions to America and they must be illegals since legal ones have rights and require legal pay. This would contradict the MAGA vision, making it nonviable. Meaning America must import these goods that they don't want to produce.
Trade doesn't necessarily create more jobs, it creates better and higher paying jobs. For those that benefits from the international order, it feels like Trump supporters are babbling about crazy things. There is a clear geographic dimension to Trump supporters, which correlates closely with difficulty of access to the benefits of the international trading system. Urban and coastal see Trump and his base as a danger to America's (overall) pillars of power (they essentially want to end the current American order but won't say it or don't understand it yet). Urban economy is service heavy and America has a service trade surplus with China, thus they don't feel as big of a problem.
Some American economists say the solution is to tap into America's competitiveness as a services exporter and reach global markets (currently under utilised in some areas). Yes, it would make America more competitive overall but this only widens the income gap under the current model due to the skills gap. American economic model peruses efficiency unlike the German model with peruses development of human capital. Developing human capital internally to meet all demands is very capital intensive and renting human capital on a global market place is comparatively cheaper, America prefers the latter due to entrenched ideology of capitalism.
Trump the Viagra pill will make you feel amazing when he is active, but your underlying dysfunctions are not solved, could be even exacerbated. Or maybe the system is functioning exactly it should be, maybe America is not dysfunctional. Some people who were sold on the idea that they were part of this game will find out they actually are not.
Industries would likely increase in continental America over the next few years, increasing both household and government revenues. The issue with this or lack of contribution to the solution is the entrenched habits of the households and government bureaucracy, old habits die hard. Trump marketed his presidency based on "Make America Great Again", a play on nostalgia for the older folk and an sense of entitlement for the younger folk ("I should be able to enjoy the Good 'ol America like my daddy"). This entails a certain lifestyle and certain values, perpetuating old spending habits and pressure adding to trade deficits. More than half of American households have less than $1000 dollars in savings, any increase won't go to savings but to pay bills. American social safety net ensures consumers for the world market (Social safety net can be a topic for another day)
Foritifying the Pillars of MAGA (doubling down)
The pillars of American power would likely continue to be fortified over the coming years, contributing to the trade deficit. One of the major pillars is the military. Spending already increased with Trump in charge. It is a major aspect of government expenditures, and resulted in the massive government deficit. How does government deficit affect trade deficit when America doesn't buy weapons from others? Say you produce all weapons systems domestically, pay domestic contractors, etc. you retain your value domestically but that displaces economic activity from the civilian economy (you still need civilian goods to maintain a lifestyle), to make up for that displacement, you must either produce a lot more (sometimes not viable) or import civilian goods from other nations (usually cheap and efficient). America chooses the latter due to the large displacement of the Military Industrial complex upon the US economy and desire for efficiency. Of course aspects of the MIC acts as a catalyst for technology development but overall its been a sector of consumption.
America isn't going to sort out its trade deficit with the world until it sorts out its domestic finances, that's the core of it. I don't forsee an implosion (periodic crisis might happen) of the US order, it is undergoing a readjustment lasting for a century that will result in the decline of its empire (not destruction unless it miscalculates and overplays its hand at some point). The imperative for all proceeding administrations would be to make a graceful adjustment to new realities.
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