I know this is a bit old however:
Quote:
Originally Posted by legoboy792
We are currently in major debt with China, and we should take some action for this. Problem is how can we do this. My first suggestion would stop putting things we get from china on credit or stop getting things at all. if anyone has any other ideas post your comment now.
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1. The biggest problem here is that you're assuming there's a problem, which allows you to use circular logic. The first thing you should be asking is "is there a problem?"
Why do people even trade in the first place? By the logic of what a trade deficit is, my family has one with our grocer, but we still go every week! Surely there must be a reason why people would do things like this even if it doesn't benefit them.
Would somebody agree to a voluntary transaction if that person thought were to lose out by accepting? No. And that's the thing about trade: people trade to make themselves off. If two parties are trading, there must be a feeling of mutual benefit.
So how does this principle change at all when we're changing money and IOUs for hard goods?
The Chinese are doing it because they feel like the American currency will be worth something in the future. The Americans are doing it because they want cheap goods, allowing then to spend on other things (including more cheap goods!). Both China and America are trading because they feel that it will be mutually beneficial. And I'd say that individuals know quite a lot about what is in their own interests. Unless by some anomaly, both China and the United States are likely benefiting more than either is losing out.
2. Not buying things from China would exponentially increase the price of the goods we buy every day. It's easy to say, "stop buying things from China." But it'd be hard to do, even if there were more manufactured goods made in America. After all, the significant reduction in costs
is why foreign manufactured goods won out over American goods.
I agree with Adam Smith:
"There is no commercial country in Europe of which the approaching ruin has not frequently been foretold by the pretended doctors of this system, from an unfavorable balance of trade. After all the anxiety, however, which they have excited about this, after all the vain attempts of almost all trading nations to turn that balance in their own favor and against their neighbors, it does not appear that any one nation in Europe has been in any respect impoverished by this cause."