Over at The Rational Capitalist, a sympathetic commenter, using the moniker C.W., wrote, “we are exporting inflation, in the form of our trade deficit.
“What is a trade deficit? How does it export inflation?
Surely the idea of a trade deficit disregards the principle of value-for-value trading, regardless of national borders?
Money is an abstract symbol of values traded (concretized as coins & notes). If a Chinese manufacturer obtains American money from an American, for goods the American has purchased, then the two men, and the two nations. are value even! There can be no deficit between them.
The trade deficit idea treats the American *dollar* as a concrete, and as an “American item” being depleted. It does not consider the value of the goods Americans have imported, & by which Americans will benefit.
Walmart, above all, has understood the economic meaning of Chinese labor, however implicitly, and capitalizes on it. Americans receive an enormous material benefit—whilst economists fret about a trade deficit with China. American lives are massively eased by the cheap Chinese products bought by American money. Despite talk of sweat shop labor, American money improves the lives of those Chinese. No, their lives do not match those of Americans, but their lives are improved because of Americans (despite the Chinese Communist government).
If there is any sort of deficit, would it not be a human-value deficit, on China’s part? China’s 2007 GDP/capita is ~ $5,000. The province of Guizhou, with 40 million people, is as poor as Nigeria or the Sudan at only $1500, see GDP/cap by Chinese province. Most Chinese labor for a few dollars a day, working Americans earn as much in half an hour.
C.W. may have a point about exporting inflation. Imagine measuring the economic impact of an increase in fiat American money on the economies of countries that are busy printing their own money?