Adding Balance
8 December 2006
Editor, The Washington Post
1150 15th St., NW
Washington, DC 20071
Dear Editor:
Robert Samuelson is misled by the terms "trade deficit" and "trade imbalances" ("Dangers in a Dollar on the Edge," Dec. 8). As he himself notes, one reason for America's trade deficit is the great attractiveness to foreigners of dollars and dollar-denominated assets. Americans give foreigners financial security in return for imports. No real imbalance here.
Also, Mr. Samuelson is mistaken to say that foreigners' demand for U.S. assets - by boosting the dollar's purchasing power - helps American consumers but not American producers. Because at least half of all American imports today are intermediate components, raw materials, and capital goods, a strong dollar unquestionably helps many American producers.
Mr. Samuelson should take to heart Adam Smith's recognition that "Nothing, however, can be more absurd than this whole doctrine of the balance of trade."
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Editor, The Washington Post
1150 15th St., NW
Washington, DC 20071
Dear Editor:
Robert Samuelson is misled by the terms "trade deficit" and "trade imbalances" ("Dangers in a Dollar on the Edge," Dec. 8). As he himself notes, one reason for America's trade deficit is the great attractiveness to foreigners of dollars and dollar-denominated assets. Americans give foreigners financial security in return for imports. No real imbalance here.
Also, Mr. Samuelson is mistaken to say that foreigners' demand for U.S. assets - by boosting the dollar's purchasing power - helps American consumers but not American producers. Because at least half of all American imports today are intermediate components, raw materials, and capital goods, a strong dollar unquestionably helps many American producers.
Mr. Samuelson should take to heart Adam Smith's recognition that "Nothing, however, can be more absurd than this whole doctrine of the balance of trade."
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Posted by Don Boudreaux on
Sunday August 19, 2007 at 10:13am