so everybody's talking about trade wars
and trade deficits what do people get
wrong about trade deficit I wrote a
piece actually on my LinkedIn blog a few
weeks ago called my trade deficit with
Costco I think it's a really it's a good
way of looking at this
I wrote trade deficit Costco I buy a lot
of their stuff they don't seem to want
to buy what I have to sell which is
basically investment insight but I run a
trade deficit with almost everybody I
run a trade deficit with Whole Foods I
run a trade deficit with CVS the only
people that I run a trade surplus with
are JPMorgan Chase my employer but
that's actually okay because overall I
run a run a trade surplus and I don't
really care who I run the trade deficit
with so I think that's the first thing
you know we focus on we've got it we've
got a real problem with China we got a
problem with Jeremy he doesn't matter so
long as it overall we run a trade
surplus we wouldn't have a problem but
of course we don't
but then that gets the second point you
know why do I run a trade deficit with
Costco or why do I you know why do
people get into problems in which
they're buying a lot of things from one
group and and not selling them it's
because I overspent and as a nation we
overspend the reason we have a trade
deficit is actually because we have a
budget deficit if you think about it
this way you go to the private sector
you've got the public sector your trade
if the private sector more or less pays
its way if we if we fund our investments
our savings but if the government runs a
big budget deficit if it spends a whole
pile more that's taking in taxes then we
as a nation will live beyond our means I
think this is so important it's not a
matter of tariffs it's not a matter of
the dollar if we run a big trade or
budget deficit if we continue to buy
more stuff the government does and it
takes it in taxes we will run a trade
deficit so if we want to fix our trade
problem we've got to start by fixing the
budget deficit and to take your analogy
further if when is it okay to run a
budget deficit or a trade deficit as an
individual another foreign nation it's
actually a very good point because they
you know now I suppose I do overall I
run a trade surplus and that and that's
good but you know 20-30 years ago it was
a younger man I actually ran a trade
deficit I was borrowing money every year
just to fund my expeditions to Costco
because I wasn't getting paid enough but
that's ok because I knew that over time
I'd get paid more and that's actually
true for example emerging market
economies it's OK for them to borrow a
whole pile of money to grow their
economies it doesn't because they're
young they've got plenty of room to grow
we are an old mature economy our
economic growth is going to be
2% in the long run in this kind of
economy and with so many people retiring
we actually should be running a budget
surplus and a trade surplus we should be
storing up money to pay for our
retirement and of course we're doing
exactly the opposite
[Music]