Milton Friedman Shows Why Trade Deficits Are Actually A Good Thing
One of the most common criticisms of the United States' current balance of trade is that we import more than we export; that this trade deficit is hurting our economy because foreign countries are "taking advantage" of us. However, that's simply not true when considering the economics of international trade.
As Milton Friedman explains in the video above, a trade deficit is actually a good thing for a country. It's a sign that a country is wealthy because there are more goods coming in than goods going out. Just like in a household, it is better for a country to have more coming in than going out.
When people talk about a favorable balance of trade; what does that term taken to mean? It's taken to mean that we export more than we import; but from the point of view of our well-being that's an unfavorable balance. That means we're sending out more goods and getting fewer in. Each of you and your private household would know better than that. You don't regard it as a favorable balance when you have to send out more goods to get less coming in. It's favorable when you can get more by sending out less.
What are your thoughts on Friedman's remarks? Discuss with us in the comments below!