Explain why our economy in the US is so good when....?

Question

we have this huge trade deficit? Lots of companies have either moved out of the country or outsourced jobs. We have a lot of people loosing their jobs every day. With all of this going on, how is our economy doing so well? We also are borrowing so much money for this war, the largest debt in history. How can this all mesh together to come out a good economy? Please explain this.

Answer 1

Despite the job losses you see, our economy continues to create many more jobs than it loses. Since 2003, something like 7 million new jobs have been created in this country.

You always see the headline that Company X lays off 1,000 workers, but you never see the story about Companies Y and Z hiring 2,500 that year.

The trade deficit is an indicator that our country is producing so much wealth, that we can send that large amount of it to overseas for their products, and it still doesn't effect us much.

Yes, the gov't has been borrowing more, but believe it or not, the economy has grown so well over the last 3 years, that tax revenues have grown even faster. Our national deficit has been trending down for the last couple of years, and if it stays on the trend, the budget could be balanced right around November 2008.

The overall national debt is no biggie either. It remains at about 60% of GDP. Again, we've borrowed more, but the economy has grown well too. Rising tax revenues from a growing economy mean we can make those increased interest payments.

Basically, if you chart all this stuff, GDP, Tax Revenues, National Debt, Trade Deficit, etc., everything is going up, except the national deficit, which is declining. As long as the economy keeps going up, everything is good.

Answer 2

First, the whole point of the "economy" is to serve the needs of consumers. If you have ever traveled outside the US then you know the indisputable fact that the US economy serves its consumers FAR better than any other country's economy does.

But of course that's not what you mean. You're focused on the production numbers the press is obsessed with. Well, we import products to a degree that makes us wealthier, that's precisely why we do it. The US and its predecessor colonies have run trade deficits for most of the past 400 years, with the result that it has become the wealthiest and most powerful nation in history.

As part of the dynamism and organization of our current economy, we tend ever more to focus on using our valuable human resources to do things in America for other Americans, as opposed to assembling things to sell to other people. In fact we find it cheaper to import a number of things from other countries, so as not to tie up American labor satisfying those low level needs. The result is a rather trivial accounting sum called a trade deficit. So what?

The economy is emphatically very good, as proved by the very low unemployment rate, the decent GDP growth, mild inflation, low interest rates, record stock market, and the neat products and services so readily available. I'm not sure how many statistics you need to see to understand this. The economy is dynamic -- Some people lose jobs, many more get new jobs, and many jobs go unfilled. There are no longer many people who make buggy whips, and we're none the worse for it.

Answer 3

Huge trade deficit - that means that we are so wealthy that we have to buy stuff from other countries to meet our demand. Doesn't sound too bad to me.

Off-shoring - And yet, we have low unemployment and - something that doesn't get a lot of attention - high income mobility. Doesn't sound too bad to me.

People losing their jobs everyday - Yes. Joseph Schumpeter called this creative destruction. Read about it. People aren't losing their jobs because business is bad. People are losing their jobs because we're finding better ways to do their jobs. But, net-net we have created far more jobs than we've destoyed. So, likewise people are gaining jobs everyday.

Largest debt in history - Big deal. I believe we also have the largest GDP in history and by typical debt to income measures, we have much more debt capacity. I'll take out debt all day every day as long as I spend it on things that can pay returns in excess of the cost of debt.

Answer 4

The economy is doing good because the government is propping it up. Remember that it is to the benefit of the government to have a healthy economy so as to maintain a docile citizenry obedient to it. Imagine how the people will react if the economy collapses. A disgruntled populace is the worst enemy that the government fears the most. The reason the Republicans lost the past elections is because the people has lost their trust in the current administration.
The reason we have this huge trade deficit is because the
people of other nations we sell our products to have lost their trust on the quality and dependability of the products we manufacture. We use to be the leader in almost every product we sell, but now that has changed. People would rather buy Japanese or Korean or other products than buy American made goods. Even our own citizenry would rather buy i.e. Japanese or Korean made cars than American made ones. Japanese buy Japanese, Koreans buy Korean products, Americans buy foreign goods. Add to this the fact that we are outsourcing jobs that deprive local labor of income to fire up the local economy.
The war is another reason why the government has to prop up the economy. The billions of dollars spent waging this war is depraving the US economy of the resources that could have been used for social services, education, and others that could benefit us more. How is it done? Print money. Who prints the money? The government. That is why the US dollar has been steadily losing value compared to foreign currencies.
Other countries are beginning to doubt the dollar's ability to hold it's value, what with trillions and trillions of dollars floating worldwide. Figures can be manipulated. Economic performance could be interpreted in a million ways, media could be used as a tool in painting rosy pictures of how the economy is doing. But in the end, it is you, the ordinary people, the consumer, the working man who really knows how the economy is doing. Ask yoursel this question "Do I feel better off today than a year or two years ago? Has there been an improvement in my standard of living?"
You've got your answer..
POSTSCRIPT: Remember the tv commercial of this guy atop a riding lawn mower mowing his expansive lawn with his mansion like house as a backdrop? He's saying that he lives in a good area in an upscale neighborhood, sends his children to the best schools, holds barbecue in the backyard every now and then, drives a big SUV and is even a member of the local country club.. In the end , he asks a question which he answers himself. "How do I do it?" he asks.. to which he replies, "I'm in debt up to my eyeballs. Some one please help me." If our government spending continues without letup at a pace where our economic growth cannot keep up, you might as well call the man UNCLE SAM...

Answer 5

"..the largest debt in history.."

Sad but true.. it is just a matter of time before reality sets in.. the current US economic situation is hardly sustainable for years much less decades to come.

A severe market correction will prove to all the high and mightys, and those walking around with their heads in the clouds.. that other alternatives are about to be implemented.

Expect massive inflation because most historical fiat monetary systems have been inflated away into oblivion. Makes it much easier to pay back worthless debts.

This government has hinted at flooding the market with cash to keep the economic system well oiled.

Keep an eye on the price of basics i.e. loaf of bread, gallon of milk or gasoline, price of a new average car, price of a new average home.

Also watch the spot price of an ounce of gold. It is directly linked to all those people in the know, it tells the undeniable story of world market forces at work.

Answer 6

hmmm, as to trade deficit, even if american companies move out of the U.S. and put their plants in other countries, they are still American companies. This means most of the money they earn they would still bring to the U.S. and spend it there hence a vibrant economy. A lot of trade not seen in the import export trade matrix is not seen such as forex investments, finance investments, etc. This still earn a lot for american captilists...though so much money is borrowed to finance the war it still goes to the american economy since producers of the U.S. military machine are all americans. So the money itself goes back to the economy hence it is vibrant....

Answer 7

It being "good" depends on your viewpoint - who gets the money, where it is going, etc.

We have effectively maxed out our national credit cards, taking tax cuts at the same time we're increasing spending.

This would be the equivalent of me either losing my job or taking a salary cut, and at the same time, racking up my credit cards. My neighbors will look and say "wow, he must be doing well - a new big screen tv, a BMW, and so forth", but it only LOOKS good. In reality, I'd be close to the edge.

So it "looks" like we're doing well, but we have incredible deficits AND debt, horrible trade imbalances, the dollar is ranking well below most other currencies.

Any real economist would take issue with the contention that the economy "is so good".

We'll get the bill soon enough, don't worry.

Answer 8

You are thinking in reverse terms... The U.S. can have a trade deficit precisely because its domestic economy is good. Essentially, foreigners who like the state of the U.S. economy buy a lot of U.S. assets (bonds, stocks, land, real estate, privately-held companies, etc.), which gives Americans cash they can blow on imports...

Answer 9

We've pretty much had a trade deficit for the past 6 decades.

Tell you what -- your initial question assumes a trade deficit is bad. Can you tell me why?

The rest of your questions are nonsensical and asinine, so I'll focus on the original question so that you aren't embarrassed.

Answer 10

Youre asking for an extremely long and complicated answer.

Take an economics class or two. It wont hurt ya.