SADLY, A LIGHT RINSE SUFFICES:

My Falling Trade Deficit with Safeway (John Tamny, 12/19/07, Real Clear Markets)

In his book Labyrinths of Prosperity, Canadian economist Reuven Brenner professed that, "Macroeconomics is a tautology and a myth, a dangerous one at that, sustaining the illusion that prosperity is necessarily linked with territory, national units, and government spending in general."

Perhaps nowhere is the absurdity of macroeconomics more apparent than in the discussion of the trade deficit. To read the vast majority of media accounts concerning the number, a country is better off economically if its trade deficit is falling, while it faces future economic pain if its deficit is rising.

The problem here is that countries do not for the most part engage in trade. Individuals trade with other individuals, and once that reality is considered, the very notion of a deficit when it comes to the beneficial exchange of goods becomes ridiculous.

While the word brainwashing is perhaps too extravagant when applied to the notion of trade deficits, it could be said that readers of the mainstream media have been bombarded so consistently and so long about the major negatives of trade imbalances, that the debate is now settled. Our alleged trade imbalances will eventually destroy our economy.

The above idea makes for good headlines, but if we as individuals stop and think about how we go about our daily lives, we’ll quickly see that what has the media and many economists so hot and bothered is quite irrelevant. It is, because in the end, all trade must balance.