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Framing the 'Trade Deficit'

Posted By Don Boudreaux On March 21, 2006 @ 11:52 am In Myths and Fallacies,Trade | Comments Disabled

My friend Jack Wenders [1], Emeritus Professor of Economics at the University of Idaho, notes this passage in a recent AP report:

The U.S. must borrow more than $2 billion per day from foreigners to finance its huge trade deficits.

Jack’s reaction to this typical way of framing the so-called ‘trade deficit’ is noteworthy:

Maybe a better way of putting this would be to say: "Foreigners must sell the U. S. more than $2 billion per day in goods and services to finance their huge purchases of U.S. assets."

Exactly correct.

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[1] Jack Wenders: http://www.webpages.uidaho.edu/~jwenders/

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