Re:India may build new coal plants due to low cost despite c...
by imtringued on Monday April 19, 2021 @06:25AM
(#26861064)
It doesn't work this way from a macroeconomic perspective.
If a foreign nation runs a trade surplus and the US runs a trade deficit as a result, that means that spending by foreigners is smaller than their income, in other words, foreigners are saving money which they can invest in the USA. If they invest then the money flowing outside the US will also flow back to the US.
The Chinese buy US treasury bonds, that is where most of the USD China receives eventually end up. The government can issue debt to tap into the savings and invest them on behalf of the people buying treasury bonds. The investment will create new jobs and hopefully a return over the long term that beats inflation.
Of course the assumption was that the money is being invested. From what I have seen Donald Trump merely used the low yields on the treasury bonds to cut taxes for the rich. This will increase the corporate savings rate at the expense of the household savings rate. It's entirely possible that the additional savings end up in treasury bonds again and we are stuck in a loop.
If a foreign nation runs a trade surplus and the US runs a trade deficit as a result, that means that spending by foreigners is smaller than their income, in other words, foreigners are saving money which they can invest in the USA. If they invest then the money flowing outside the US will also flow back to the US.
The Chinese buy US treasury bonds, that is where most of the USD China receives eventually end up. The government can issue debt to tap into the savings and invest them on behalf of the people buying treasury bonds. The investment will create new jobs and hopefully a return over the long term that beats inflation.
Of course the assumption was that the money is being invested. From what I have seen Donald Trump merely used the low yields on the treasury bonds to cut taxes for the rich. This will increase the corporate savings rate at the expense of the household savings rate. It's entirely possible that the additional savings end up in treasury bonds again and we are stuck in a loop.