Daily Archives: 26 February 2025

Some Thoughts on our Trade Imbalance

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Phil Gramm and Donald Boudreaux had an extensive op-ed in last Thursday’s Wall Street Journal. I have a couple of thoughts on their piece.

Overall, they presented a typical argument regarding international trade balances, and it was sound as far as it goes. However, I’ve never seen an argument for or against US trade deficits/surpluses that take into account the dollar as the world’s reserve currency.

For international trade, how much, really, are local currencies traded for dollars in order to purchase American goods and how much are local dollars traded for foreign currencies in order for Americans to buy foreign goods? How much of those currency exchanges are really just taps of the foreign nation’s dollars held as reserves and similarly replenished into those reserves through ordinary trade-of-goods-and-services exchanges? In other words, how much to buyers and sellers themselves do the currency exchanges and how much of those currency exchanges are actually done from government to government out of government reserve holdings?

Maybe a lot is government to government, maybe a little, but the question needs answers.

Also this:

Has the expansion of global trade “hollowed out” US manufacturing, as Joe Biden claimed in 2022? No. US industrial production today is more than double what it was in 1975, the last time we ran a trade surplus.

What is produced by today’s “industrial production” compared to that of 1975? Or immediately after WWII? That never gets specified. Nor does “industrial production” ever get normalized to account for changes in technology and manufacturing techniques.

A similar definition disconnect exists for services.

Until those specifications are made, claims of industrial production or services changes in either direction are meaningless.

Why Not?

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The press’ “government officials” now say that President Donald Trump (R) is planning to eliminate the US Postal Service’s Board of Governors and fold the USPS into the Department of Commerce. On the other hand, a “White House official” says that’s not so.

For the hyperventilators in the audience, here is the sum and total of what our Constitution says about a postal service. It’s in Article I, Section 8:

[The Congress shall have Power…] To establish Post Offices and Post Roads

Nothing in there about establishing or maintaining a postal service, only the post offices, useful for dropping off and collecting mail and packages for transporting over those post roads—of latter which we have an enormous network of roads over which to carry that mail and those packages, along with extensive railroad and air shipping networks capable of the same. Those post offices are directly analogous, and no more useful than, FedEx and UPS drop-off and pickup offices.

A move to consolidate the USPS into Commerce has the potential of reducing duplicative governance. It also would give those with commerce expertise—to the extent such exists in the Federal government—control over what is, essentially, a commerce enterprise—the movement as shipper of First Class mail and packages as well as intermediary shipper of other shippers’ packages.

Of course, the better move would be to completely privatize the USPS and let it compete with existing shippers for the movement of all mail, including First Class, just as it does now with packages. USPS already has a serious advantage in such competition: a last mile network that reaches every household and business in the nation, which none of its potential competition (with the possible exception of Amazon, for its own exclusive use).

Still, consolidation would be a good start.