Raymond Richman - Jesse Richman - Howard Richman
Richmans' Trade and Taxes Blog
Donald Trump closing on leaders in Republican race
Republican voters may have a choice on trade this primary season. Donald Trump, the first of the undeclared Republican candidates for president to call for tariffs on China, has moved up to fourth place among Republican candidates according to the Newsweek Daily Beast Poll. Here are the Republican leaders:
In the general election, here's how the top four would do:
The Republican nomination is still wide open. It is not even yet clear which of these candidates will actually be in the race.
Comment by jg bennet, 2/29/2011:
The largest transfer of wealth in history has gone from the American Middle Class into the pockets of despots & multinational corporations due to our trade policies.
Since 2007 we have sent the Chinese over 1 trillion dollars of our money in a dollar draining (never to return) negative trade deficit.
US World trade deficit from 1987 – 2010
Negative 8.8 trillion dollars
Trump wants our money back!
DOLLAR DRAIN DEFINITION
The accepted dollar drain definition applies to economies throughout the world, not only those using the dollar as a unit of currency. Dollar drains are trade deficits that result when imports exceed exports in monetary terms. For instance, a country that imports more goods from overseas than it exports to foreign countries is, in effect, sending its currency overseas in return for those goods. This can lead to a shortage of currency in circulation at home, creating a tight money situation in which companies have difficulty obtaining the loans and funds they need to grow or to continue operations. Consumers feel the effects of dollar drains as well, since they cannot obtain loans for the purchase of property or for other immediate needs; a shortage of currency in the home economy affects every aspect of that economy.
MAJOR RISKS OF DOLLAR DRAINS
A ready supply of circulating money is necessary for economies to engage in setting monetary policies; loosening or tightening the supply of money in the market is one of the most important tools government has in determining fiscal policy. When there is a shortage of currency in the economy, the government cannot exercise this control over the economic situation. If the dollar drain continues for a significant length of time, the government may be forced to curtail foreign purchases or to borrow heavily from other countries in order to meet its obligations. This can lead to inflation and devaluation of the currency on the international FOREX market.
**Most analysts believe the long-term solution to dollar drain is to promote and encourage consumers to purchase goods manufactured in their own country where possible; this can stem the flow of currency out of the country and lessen the trade differential over time.**
Response to this comment by carlo olivero, 3/2/2011:
Journal of Economic Literature:
Atlantic Economic Journal: