The U.S. persistently runs a trade deficit because it consistently spends more than it produces, relying on foreign capital inflows to finance the difference. This isn't necessarily a bad thing. The global desire to hold U.S. dollars and invest in American assets, both public and private, allows the U.S. to consume and invest more than it otherwise could, effectively borrowing from the rest of the world at attractive rates. This foreign investment supports U.S. economic growth. Conversely, the counterpart to the U.S. trade deficit is a surplus in other countries, allowing them to export goods and services to the U.S. and accumulate U.S. assets. This interconnectedness highlights the role of global capital flows and savings imbalances in shaping trade patterns, rather than simply reflecting unfair trade practices or a lack of competitiveness.
El Salvador has repealed the Bitcoin Law, ending Bitcoin's status as legal tender after a two-and-a-half-year experiment. Citing the cryptocurrency's failure to attract foreign investment and stimulate the economy as promised, the government officially reversed course. While the law initially aimed to modernize financial services and lower transaction costs, it ultimately resulted in significant financial losses for the country. The move effectively removes the requirement for businesses to accept Bitcoin as payment.
Hacker News commenters generally expressed a lack of surprise at El Salvador abandoning Bitcoin as legal tender. Many saw the initial adoption as a publicity stunt driven by Nayib Bukele, and predicted its failure from the start due to Bitcoin's volatility and unsuitability for everyday transactions. Some pointed out the lack of infrastructure and technical understanding within the country as contributing factors. A few questioned the veracity of the "failed experiment" narrative, suggesting the move might be politically motivated or that Bitcoin adoption continues despite the official change. Several criticized Bukele's authoritarian tendencies and questioned the overall impact on the Salvadoran economy.
The website "WTF Happened In 1971?" presents a series of graphs suggesting a significant societal shift around that year. Many economic indicators, like productivity, real wages, housing affordability, and the gold-dollar relationship, appear to diverge from their post-WWII trends around 1971. The site implies a correlation between these changes and the Nixon administration's decision to end the Bretton Woods system, taking the US dollar off the gold standard, but doesn't explicitly claim causation. It serves primarily as a visual compilation of data points prompting further investigation into the potential causes and consequences of these economic and societal shifts.
Hacker News users discuss potential causes for the economic shift highlighted in the linked article, "WTF Happened in 1971?". Several commenters point to the Nixon Shock, the end of the Bretton Woods system, and the decoupling of the US dollar from gold as the primary driver, leading to increased inflation and wage stagnation. Others suggest it's an oversimplification, citing factors like the oil crisis, increased competition from Japan and Germany, and the peak of US manufacturing dominance as contributing factors. Some argue against a singular cause, proposing a combination of these elements along with demographic shifts and the end of the post-WWII economic boom as a more holistic explanation. A few more skeptical commenters question the premise entirely, arguing the presented correlations don't equal causation and that the chosen metrics are cherry-picked. Finally, some discuss the complexities of measuring productivity and the role of technological advancements in influencing economic trends.
Summary of Comments ( 181 )
https://news.ycombinator.com/item?id=44040407
HN commenters largely discuss the role of the US dollar as the world's reserve currency in perpetuating the trade deficit. Several argue that the demand for dollars globally allows the US to consume more than it produces, as other countries are willing to hold onto dollars, effectively financing the deficit. Some point out that this system, while beneficial for US consumers, could lead to instability and inflation. Others discuss the impact of foreign investment in US assets, contributing to the demand for dollars and further fueling the deficit. A few commenters also mention the role of US military spending and its impact on global trade dynamics. Several commenters express skepticism of the article's explanation, arguing that it oversimplifies complex global economic forces.
The Hacker News post titled "Why Does the U.S. Always Run a Trade Deficit?" linking to a Liberty Street Economics article, has generated a moderate number of comments, sparking a discussion around the complexities of trade deficits, their relationship with the US dollar's reserve status, and potential implications.
Several commenters point out the connection between the US dollar's role as the global reserve currency and the persistent trade deficit. One commenter explains that foreign governments accumulate US dollars as reserves, effectively exporting capital to the US. This inflow of capital allows the US to consume more than it produces, resulting in the trade deficit. Another commenter adds that the demand for dollars to settle international transactions further contributes to this phenomenon. This line of reasoning suggests that the trade deficit is a natural consequence of the dollar's dominance, not necessarily a sign of economic weakness.
A related discussion thread explores the implications of this arrangement. Some commenters express concern about the potential long-term consequences of a sustained trade deficit, raising the possibility of a decline in the dollar's value and a shift in global economic power. They argue that relying on foreign capital inflows makes the US vulnerable to changes in global sentiment and economic conditions. However, other commenters counter that the benefits of having the world's reserve currency outweigh the risks, highlighting the flexibility and influence it affords the US in international markets.
Another commenter challenges the prevailing narrative, arguing that focusing solely on the trade deficit is misleading. They suggest that a more comprehensive analysis should consider the overall current account balance, which includes factors like net income from abroad and unilateral transfers. This broader perspective, they argue, provides a more accurate picture of a country's economic interactions with the rest of the world.
Some commenters delve into the nuances of international trade and capital flows. One commenter explains how the mechanics of international trade necessitate a corresponding flow of capital in the opposite direction. Another commenter elaborates on the role of financial assets, pointing out that a trade deficit can be financed by the acquisition of foreign assets by US residents, further complicating the picture.
While some commenters focus on the macroeconomic implications of the trade deficit, others offer practical examples and anecdotes. One commenter shares a personal experience of purchasing imported goods, illustrating how individual consumer choices contribute to the overall trade balance.
The overall tone of the discussion is thoughtful and nuanced, with commenters presenting a variety of perspectives and engaging in respectful debate. While there's no clear consensus on the causes or consequences of the US trade deficit, the comments offer valuable insights into the complexities of international economics and the challenges of interpreting economic data.