… is from page 7 of Richard Salsman’s paper, “Alexander Hamilton As Economist: A Proper Verdict,” which is a chapter in the hot-off-the-press book Unsung Heroes of the Market: The 24 Underrated Economists You Need to Know – a volume edited by Robert Whaples, Christopher Coyne, Gregory Robson, and Diana Thomas:
He [Hamilton] knew that a capital surplus (net inflow), mirroring a merchandise deficit, was akin to an international vote of confidence in the United States.
DBx: Hamilton was correct. Private investors do not knowingly invest in declining industries or economies. They invest in industries and economics with promise.
This truth that was understood by Hamilton is no less real and relevant today than it was in the late 18th century. Yet President Trump and countless other protectionists – left, center, and right – incessantly repeat the myth that U.S. trade deficits are a signal that the U.S. is “losing” at trade, either because of our own incompetence or inadequate savings, or because of perfidious foreigners taking advantage of Americans.
I repeat: No economic concept is responsible for more confusion and lousy policy than the so-called “balance of trade.”
