No Result
View All Result
SUBMIT YOUR ARTICLES
  • Login
Thursday, October 2, 2025
TheAdviserMagazine.com
  • Home
  • Financial Planning
    • Financial Planning
    • Personal Finance
  • Market Research
    • Business
    • Investing
    • Money
    • Economy
    • Markets
    • Stocks
    • Trading
  • 401k Plans
  • College
  • IRS & Taxes
  • Estate Plans
  • Social Security
  • Medicare
  • Legal
  • Home
  • Financial Planning
    • Financial Planning
    • Personal Finance
  • Market Research
    • Business
    • Investing
    • Money
    • Economy
    • Markets
    • Stocks
    • Trading
  • 401k Plans
  • College
  • IRS & Taxes
  • Estate Plans
  • Social Security
  • Medicare
  • Legal
No Result
View All Result
TheAdviserMagazine.com
No Result
View All Result
Home Market Research Economy

It’s Even Better Than A Consumption Surplus

by TheAdviserMagazine
5 months ago
in Economy
Reading Time: 3 mins read
A A
It’s Even Better Than A Consumption Surplus
Share on FacebookShare on TwitterShare on LInkedIn


Co-blogger Kevin Corcoran has an excellent recent blog post calling for rebranding the “trade deficit” away from its misleading phrasing and toward the more accurate phrasing of “consumption surplus.”  My beloved professors Don Boudreaux and Dan Klein have a similar proposal as well.  There is much merit in their arguments.  I argue that the situation is even better than they propose.

It certainly is true that consumption is the end goal of all production.  Without consumption, production is valueless.  We work in order to achieve some desired end, not the other way around.  But what is also valuable is investment.  Investment, to the economist, is not buying of stocks and bonds (although those are valuable activities as well), but rather purchases of capital equipment, homes, and other things that go into production.  More precisely, investment is “the production or construction of capital goods that provide a ‘flow’ of future service” (Economics: Private and Public Choice by James Gwartney, Richard Stroup, Russell Sobel, and David Macpherson, 17th Ed, pg. 137).  Investment, therefore, is key to fueling economic growth well into the future.

Imports exceeding exports necessarily means that more desired goods are flowing into the country.  Likewise, it means that more investment funds are flowing into the country as well.  Foreigners want American goods (we are the second largest exporter in the world at approximately $3 trillion worth of exports in 2023 alone), but they also want to put their savings into America.  A greater supply of savings means a lower interest rate (all else held equal).  Consequently, American firms and individuals can invest more than they otherwise would as the price of money falls.  This means more business creation, more homes, more college degrees, more retrofits, more upgrades, more research, more of everything that improves production, innovation, and general welfare.  Instead of the American production possibilities frontier being limited by domestic savings alone, it can be enhanced with foreign savings.  Trade lets us both consume beyond the production possibilities frontier and advance the production possibilities frontier.  All while using fewer resources.

Political efforts to reduce the trade deficit results in killing the golden goose.  Borrowing costs will rise, investment will fall, and so will the standard of living. We have seen these results with the trillions of dollars in wealth that was annihilated by the “Liberation Day” tariffs.  Treasury Bond rates have been increasing.  In turn, slower economic growth and higher borrowing costs will actively inhibit the Administration’s supposed goal of righting the fiscal ship. 

In short, I propose enhancing Kevin’s rebranding as “consumption and investment surplus.”  Trade deficits help Americans get wealthier not just now (consumption) but in the future as well (investment). 

PS. While working on my International Trade lectures for this semester, I came across an interesting paradox: Americans earn more on their investments abroad than foreigners earn on their American investments.  Yet, the trade deficit, and net investment position, are negative (implying foreigners are investing more in the US than the US is abroad).  What accounts for this paradox?  Risk.  The US is seen as a safe haven, so foreigners put their money here.  But Americans search out a combination of risk and safety, so they chase the higher interest rates abroad while keeping some here.  Consequently, American investments abroad earn a higher return than foreign investments in the US.  This position reverses in bad times: Foreigners end up earning more on their US investments than US citizens do abroad as the US citizens bring money back to safe havens and the riskier investments do not pan out.  See Why Does U.S. Investment Abroad Earn Higher Returns Than Foreign Investment in the United States? (CBO, 2005) and New Evidence on the US Excess Return on Foreign Portfolios (Bertaut, et al, 2024).



Source link

Tags: Consumptionsurplus
ShareTweetShare
Previous Post

Double Real Estate Tax Deductions with PAD |

Next Post

3 Altcoins to Sell in May And Go Away To Avoid Long-term Losses

Related Posts

edit post
Treasury Secretary Bessent says GDP could take a hit from the government shutdown

Treasury Secretary Bessent says GDP could take a hit from the government shutdown

by TheAdviserMagazine
October 2, 2025
0

Treasury Secretary Scott Bessent said Thursday that U.S. economic growth could be hurt by the government shutdown."This isn't the way...

edit post
Letting Markets Work: Urban Planning

Letting Markets Work: Urban Planning

by TheAdviserMagazine
October 2, 2025
0

For some reason, urban planning has become a hot topic on social media. Even more strangely, it has become ideologized....

edit post
James Comey Is Not an Innocent Victim of the Lawfare He Helped to Create

James Comey Is Not an Innocent Victim of the Lawfare He Helped to Create

by TheAdviserMagazine
October 2, 2025
0

The recent indictment of James Comey has galvanized the usual suspects of the Washington establishment, who have reacted predictably to...

edit post
How Climate Change Is Driving Home Insurance Turmoil

How Climate Change Is Driving Home Insurance Turmoil

by TheAdviserMagazine
October 2, 2025
0

This is Naked Capitalism fundraising week. 554 donors have already invested in our efforts to combat corruption and predatory conduct,...

edit post
Taiwan Forced To Move Chip Production To The US To Maintain Protection

Taiwan Forced To Move Chip Production To The US To Maintain Protection

by TheAdviserMagazine
October 2, 2025
0

Taiwan will lose protection if it fails to move semiconductor chip manufacturing to the United States. The nation must determine...

edit post
Shutdown Fed rate cuts

Shutdown Fed rate cuts

by TheAdviserMagazine
October 1, 2025
0

Federal Reserve Chair Jerome Powell speaks during a news conference following a two-day meeting of the Federal Open Market Committee...

Next Post
edit post
3 Altcoins to Sell in May And Go Away To Avoid Long-term Losses

3 Altcoins to Sell in May And Go Away To Avoid Long-term Losses

edit post
2025 Dividend Kings List | Updated Daily

2025 Dividend Kings List | Updated Daily

  • Trending
  • Comments
  • Latest
edit post
What Happens If a Spouse Dies Without a Will in North Carolina?

What Happens If a Spouse Dies Without a Will in North Carolina?

September 14, 2025
edit post
California May Reimplement Mask Mandates

California May Reimplement Mask Mandates

September 5, 2025
edit post
Does a Will Need to Be Notarized in North Carolina?

Does a Will Need to Be Notarized in North Carolina?

September 8, 2025
edit post
Who Needs a Trust Instead of a Will in North Carolina?

Who Needs a Trust Instead of a Will in North Carolina?

September 1, 2025
edit post
DACA recipients no longer eligible for Marketplace health insurance and subsidies

DACA recipients no longer eligible for Marketplace health insurance and subsidies

September 11, 2025
edit post
‘Quiet luxury’ is coming for the housing market, The Corcoran Group CEO says. It’s not just the Hamptons, Aspen, and Miami anymore

‘Quiet luxury’ is coming for the housing market, The Corcoran Group CEO says. It’s not just the Hamptons, Aspen, and Miami anymore

September 9, 2025
edit post
The NFL is launching professional flag football leagues for both men and women, Commissioner Roger Goodell says

The NFL is launching professional flag football leagues for both men and women, Commissioner Roger Goodell says

0
edit post
CAG Earnings: Key quarterly highlights from Conagra Brands’ Q1 2026 financial results

CAG Earnings: Key quarterly highlights from Conagra Brands’ Q1 2026 financial results

0
edit post
US moots 15% international student cap on institutions

US moots 15% international student cap on institutions

0
edit post
I replaced my mother-in-law’s roof without a contract — then she stiffed me for nearly K. What are my options?

I replaced my mother-in-law’s roof without a contract — then she stiffed me for nearly $20K. What are my options?

0
edit post
Treasury Secretary Bessent says GDP could take a hit from the government shutdown

Treasury Secretary Bessent says GDP could take a hit from the government shutdown

0
edit post
Bitcoin ETFs Soar With 6 Million Inflow as Ether ETFs Add  Million

Bitcoin ETFs Soar With $676 Million Inflow as Ether ETFs Add $81 Million

0
edit post
The NFL is launching professional flag football leagues for both men and women, Commissioner Roger Goodell says

The NFL is launching professional flag football leagues for both men and women, Commissioner Roger Goodell says

October 2, 2025
edit post
Bitcoin ETFs Soar With 6 Million Inflow as Ether ETFs Add  Million

Bitcoin ETFs Soar With $676 Million Inflow as Ether ETFs Add $81 Million

October 2, 2025
edit post
Nuclear fusion was always 30 years away—now it’s a matter of when, not if, fusion comes online to power AI

Nuclear fusion was always 30 years away—now it’s a matter of when, not if, fusion comes online to power AI

October 2, 2025
edit post
Expert breaks down the 2025 tax changes retirees should know

Expert breaks down the 2025 tax changes retirees should know

October 2, 2025
edit post
Jimmy Kimmel suspension hurts brand

Jimmy Kimmel suspension hurts brand

October 2, 2025
edit post
Treasury Secretary Bessent says GDP could take a hit from the government shutdown

Treasury Secretary Bessent says GDP could take a hit from the government shutdown

October 2, 2025
The Adviser Magazine

The first and only national digital and print magazine that connects individuals, families, and businesses to Fee-Only financial advisers, accountants, attorneys and college guidance counselors.

CATEGORIES

  • 401k Plans
  • Business
  • College
  • Cryptocurrency
  • Economy
  • Estate Plans
  • Financial Planning
  • Investing
  • IRS & Taxes
  • Legal
  • Market Analysis
  • Markets
  • Medicare
  • Money
  • Personal Finance
  • Social Security
  • Startups
  • Stock Market
  • Trading

LATEST UPDATES

  • The NFL is launching professional flag football leagues for both men and women, Commissioner Roger Goodell says
  • Bitcoin ETFs Soar With $676 Million Inflow as Ether ETFs Add $81 Million
  • Nuclear fusion was always 30 years away—now it’s a matter of when, not if, fusion comes online to power AI
  • Our Great Privacy Policy
  • Terms of Use, Legal Notices & Disclosures
  • Contact us
  • About Us

© Copyright 2024 All Rights Reserved
See articles for original source and related links to external sites.

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In
No Result
View All Result
  • Home
  • Financial Planning
    • Financial Planning
    • Personal Finance
  • Market Research
    • Business
    • Investing
    • Money
    • Economy
    • Markets
    • Stocks
    • Trading
  • 401k Plans
  • College
  • IRS & Taxes
  • Estate Plans
  • Social Security
  • Medicare
  • Legal

© Copyright 2024 All Rights Reserved
See articles for original source and related links to external sites.