I think it is just as well for the City and the world of high finance that I lost all interest in matters fiscal after completing an A-level in economics.
Supply and demand, the multiplier effect, macro and micro economics, bull and bear markets. Basically understood. Fast forward from long ago last century to the present day… bond yields, derivatives, interim permissions, net FDI balances. Nope, not a clue.
Thus one goes to the wise men of economic interpretation, in hope of light being shed, and what do you find? A man I regularly turn to for elucidation last week had a fit of the nonsenses. Digesting Donald Trump’s trade threats, he came up with: “Deficits and surpluses must necessarily sum to zero.” A few paragraphs later, he was back on familiar ground: “In other words, the two effects will net to zero.” I’m not saying that this is complete tosh, but it certainly smells rather off.
Off? It’s a statement of the bleedin’ obvious. As Bootle says:
This isn’t exactly the justification that president Trump gives for his actions, nor indeed does it reflect what he seems to understand about international trade.
He seems to believe that the trade balance is like a company’s profit statement. Exports are good and imports are bad. Accordingly, if your exports exceed your imports then you are “winning” and if your imports exceed your exports then you are “losing”. Moreover, he seems to believe that this is true even on a bilateral basis. This is the economics of the madhouse. Since deficits and surpluses must necessarily sum to zero, the implication of Trump’s economic philosophy is that international trade brings no net benefit for the world as a whole.
Quite clearly true, no?