| SamuelRSmith said: You can cut the trade deficit by cutting the budget deficit. Correct me if I'm wrong here, but isn't the budget deficit sustained by China buying a large chunk of it - which they do to keep their currency in a favourable position, harming US exports, and encouraging Chinese imports. |
The reason why economists state that government borrowing is bad, is that it sucks off money that would go into investing in other areas. If America didn't have the government debt, then all that currency China holds would have to flow somewhere. Very likely it would return back to America and they would buy up assets here. Eventually the trade deficit closes as the outflow of currency returns back to America to buy things. For all we know, the Chinese could end up buying up the roads, and police forces and also government buildings. They could also pay to have America change its constitution, so they could run non-Americans for different offices.
