I wish I could upvote this a hundred times. You cannot, by definition, simultaneously maintain a trade deficit and reduce the sum of public and private debt.
I hate to trot this link out again, but: http://internationalecon.com/Finance/Fch5/F5-9.php
back
2 comments
Of course this is OT because we are only talking about the public debt.
Unless you read the parent.
>We were merely reducing one kind of debt, namely debt held by the public. Total debt continued to increase.
Deficit's include investments. If China where to buy 100 billion in US stock and then receive payments on that stock forever it could maintain a continuous trade imbalance with minimal impact on the US economy over the long term. In the wider context, with continuous inflation the US can export an ever growing amount of USD without changing the ratio of USD in the US vs other countries. And in those terms there is little reason not to do so as long as other countries want USD. In some ways exporting constantly inflating USD is the best trade relationship possible because you get non US goods for what amounts to free money.