Recommended reading: Marc Levinson's "An Extraordinary Time - The End of the Postwar Boom and the Return of the Ordinary Economy" or my title: Why leaders try variations of the same thing and wonder why it fails every time. Link to Barnes and Nobel book store.

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International Trade

Trade Deficit Creates Subsidies

The fact people earning 10$/hour can afford many t-shirts means the low cost labor in Bangladesh - which means they make less than our working poor - makes our working poor wealthier than the Bangladeshi workers. Yet buying from Bangladesh increases our national trade deficit for which money is borrowed from the wealthy. This money borrowed from the wealthy to finance the t-shirts creates a subsidy lowering the retail price of the t-shirts.

Economics works in strange ways.

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International Trade

Most of what we call international trade is really just buying. That's why trade deficits are tracked.

I believe in free trade: what do you have to trade for what we got.

Adam Smith discusses trade deficits in terms of gold. Nevertheless, nothing much has changed. Importing products is consumption and never start a war when you have a trade deficit.

This becomes an interesting issue when everyone wants to export.