Latest / Words & Numbers / Episode 436: What About Buying From China?

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Episode 436: What About Buying From China? · Words & Numbers

0:00
Hi, I'm James and I'm Anthony. And this is words and numbers
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brought to you by the fine people at Polyhimney.
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Keep in mind that it's like 115° out here and I'm losing my mind.
0:15
You're sitting in air conditioning.
0:16
It doesn't matter what it is out there.
0:18
My air conditioner broke the other day.
0:20
Oh no. Oh, that's very sad.
0:22
That wasn't great, and as luck would have it, it was still
0:26
under warranty. What were the?
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Odds of that? No.
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It cost me $65 to get it fixed. Nice, Yeah.
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So a. Little bit of little bit of
0:36
sunshine in otherwise dreary week.
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Yeah, Generally speaking, I I avoid warranties unless it's
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coming to to major household appliances.
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Yeah, this one, this one came with a 10 year.
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Warranty, yeah, yeah. And you'll get things like, you
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know what multi $1000 air conditioning unit that dies
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because some 98 cent circuit board went gluey.
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Yep. No, apparently this was a part
1:03
that the guy had on his truck that everybody goes through once
1:06
every couple of years. No big deal.
1:08
Yeah, but it's it seemed like an awfully big deal when I was
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sitting inside the house and it was about 88° in my office.
1:15
Anyway, what's new and exciting in your world this week?
1:18
Well, I've actually, I have a question for you and it, it
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surrounds this business about Marines carrying out and I'm
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just going to read the headline Marines carry out first known
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detention of civilian in Los Angeles.
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And of course, for some background, the the important
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thing here is this boils down to the Posse Comat Posse Comitatus
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Act that prohibits, except in extreme cases, the military from
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acting as a police force within US borders.
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And of course, the important thing here is that the the
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military are not trained in protecting people's
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constitutional rights like the police are.
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Actually, I heard a great story yesterday about police who were
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working with with some military guys.
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And this I think illustrates the difference perfectly.
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And the police said, and I don't know where this was and it could
2:15
be apocryphal, right? But the police said, we're going
2:18
into that house, cover us. And the, the, the the military
2:22
guys laid down suppressing fire. Yeah, sure.
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That's what it means, something very different.
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It means something very different to them than it does
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to the police who were asking, you know, watch out in case
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somebody tries to shoot us. Right, right.
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Radically different things, but the the nonsense going on with
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sending the military into California is patently illegal.
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OK, so let's start there. So clearly it's illegal.
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What are do you know, what are the conditions that the
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president's allowed to do this? I know some of them.
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He, he, he has to do it in concert with a governor.
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And the governor in question here is an interest which should
3:06
have shut it down right there. But the, the Trump
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administration continually declares that we have some sort
3:15
of emergency going on, right? That we're being invaded by bad
3:19
actors and this kind of thing, the thing that nobody sees when
3:22
they walk out the door, but that everybody is convinced it's
3:26
happening everywhere else. Right, right.
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And, you know, we've talked about that phenomenon before, so
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it's going to get shut down at some point.
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But the the weird thing, the terrible thing was that, you
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know, Trump was was talking about overturning the government
3:42
in California, which, you know, that's beyond the pale.
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You can't do that. So this the, the Posse Comitatus
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from what I looked up, says it applies not only to using the
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police, excuse me, not only to using the military in a, in a
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police role within the within the borders of the United
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States, but it also applies to using the National Guard, which
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which now calls into question this headline saying Marines
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carry out first known detention of civilian.
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Of course, it does say in Los Angeles, but several people I've
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read are saying, you know, this is unprecedented.
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This had never happened. And I'm thinking back to Alabama
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and segregation. Yeah, and, and I'm, I'm
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wondering, I mean, first time ever.
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Well, didn't we have a civil war?
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Yeah, true. Yeah, Civil war, of course, but
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but I'm sure that that that satisfies whatever the
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conditions are. Right.
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Yeah, I guess that's right. Yeah, that's right.
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Yes, that's correct. And and this happens, the
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possible Comitatus Act happens after the Civil War, I think for
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for all kinds of obvious reasons, right.
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It's 1878 when this one gets passed.
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But what about the governor? I guess it was the governor of
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Alabama back in the 60s who called out the National Guard.
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Does this act, Posse Comitatus not apply to governors and their
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National Guards? I don't think it does.
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OK, so the governor's OK to do this.
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The problem is the president. And that all makes sense.
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That makes perfect sense to me. I mean, I'm not an expert on
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Posse Comitatus. It's not in my wheelhouse.
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It's certainly not in the years that I'm expert in, but there
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are exceptions to the the to the disability of the president to
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call the armed forces into into, into action.
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So there are exceptions, but none of them seem to apply here.
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In this case, yeah. And as we're having this
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conversation, by the way, and actually exactly, exactly as
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we're having this conversation, just 20 miles down the road from
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me, the president has the Army on parade in Washington, DC.
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This this is kind of autocrat slash dictator nonsense that
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we're getting into here. Yeah.
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And it's, you know, I'm, I'm not one to to side with the
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conspiracy theorists and all of that, but but I will say it's
6:12
very bad optics. And that's the kind of thing
6:15
that you expect from the leaders of North Korea and Russia.
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It it's only, it's only a conspiracy if it's a secret.
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You're right. Yeah.
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Yeah, we're. Seeing all kinds of things right
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out in the open. So, you know, when, when people
6:30
show you who they are, you should believe them.
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And that's what we're, I think we're looking at some real bad
6:35
news here. I don't know where or how this
6:39
stuff all ends, but none of it's going to end particularly well.
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And, you know, to make matters a little worse, less people think
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we're piling on to the Republicans, which we are,
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which, you know, spoiler alert, I'm probably going to do again
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in the foolishness of the week. But anyway, in Minnesota, we we
7:00
had actually a political assassination.
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What? This this this morning.
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What happened? Right.
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Somebody went well, as the right wingers like to like to say, and
7:12
I think they're correct here. A Tim Walz appointee showed up
7:17
and killed a high-ranking member of the Minnesota House of
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Representatives. Oh good Lord.
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And then and then tried to kill a senator as well.
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And that happened this morning. And, you know, between the
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military parade, the nonsense happening in California and the
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Israelis leveling parts of Iran, this Minnesota business, I had
7:37
to go searching for it. Yeah.
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It was buried five stories deep. How can a political
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assassination be buried? And yet that's where we are.
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So. Yeah.
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What can you do? I want to talk about something a
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little more lighthearted and. Just about anything would be a
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little more lighthearted. I guess that's right.
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But you, you know that I have been.
8:02
A little worried? About the possibility of what AI
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can accomplish. And every now and then we get a
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very, very good example of what AI cannot accomplish.
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And it makes me feel much safer because I don't know if you've
8:19
heard this story. It's new as of today, and we're
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recording this on June 14. A chatbot, ChatGPT, was put up
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against an Atari from 1978 to play a game of chess.
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Oh, and the 1978 Atari cleaned the clock.
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Yeah. Of of ChatGPT because it can't
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reason. Right.
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Yeah. It can.
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It can apparently know things, and it can sometimes get those
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things right and sometimes get them wrong, as as we've said
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many, many times. But here's a pretty good
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indication of what it can't do. Yeah, yeah.
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I I want to point out that I I don't.
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That to me doesn't say anything negative.
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If if anything I might say something positive about AI
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because the fact is Atari beats most humans.
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No, not a 1978 Atari. And it was set on an easy
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setting that only looked 2 moves into the field.
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Really. Yeah, that this was, as we like
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to say, we're in my old neighborhood ass whooping and
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and I'm I'm kind of happy about it, right?
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It it shows that all the things that people are concerned about
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with these large language models, those models probably
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can't accomplish. Yeah, I I suppose so.
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Maybe they can down the road, maybe they can down the road,
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but not right now. They're not even close.
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If you can't win a game of chess against a 1980 Atari set on the
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Easy mode, you probably aren't going to be taking over the
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world anytime soon. Yeah, and and only probably.
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But, you know, I'm I'm happy with.
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I'm happy with probably this. Of course, Aunt brings us to the
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foolishness of the week. I've already tipped my hand.
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Any ideas? Got a clue?
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What was the dumbest thing you saw?
10:10
You got me. Because we're back to Donald
10:14
Trump, our president and big toe.
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And I'm going to give you the headline and we could dig into
10:19
it a little bit, if you like, from CNN.
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But this is not specific to CNN. There are many other outlets
10:25
reporting exactly the same thing.
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Trump has reported more than $600 million in income from
10:33
crypto, golf and licensing fees. So.
10:36
In in the past year. Yeah, so.
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If. You hear as I do from his
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supporters that he's so wonderful and loves us so much
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that he doesn't even take a salary that he donates it all
10:51
back. Once he going to be donating the
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600 million back. And the, the lion's share of
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this was from that fraudulent, I, I don't even know what to
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call it, idiotic cryptocurrency. That he he founded Trump with a
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dollar sign in front of it that that's not worth a damn thing.
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That's worth 600. Million but has earned him an
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estimated and I'm reading here $320 million in fees.
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Wow. And you know, this was what he
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was selling. Access.
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Remember, he had the big dinner at the White House for all the
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people who bought this nonsensical coin of his.
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It's a meme coin on a good day. I want there's got to be some
11:32
law against a president profiting on his being in
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office. Yeah, they're all kinds of laws,
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but you know, he doesn't. Follow them.
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But there's all Yeah. I mean, Congress we just got
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done talking about. And hold on, I guess this
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doesn't matter. Right.
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And the, you know, the only thing that holds a president
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accountable is Congress, right? And and those weasels aren't
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doing anything and will continue not to do anything.
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Well. Oh well, So what what we got
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today? What we talking about today?
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One of our listeners, Ethan and Ethan, I apologize because I
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tried to figure out your last name from your e-mail handle,
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but I'm, I'm not quite sure what that is.
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But our listener Ethan wrote and said, can you do an episode on
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imports versus GDPI was looking at some numbers and was
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astonished to discover that imports from China are less than
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2% of USGDP. He goes on with some other
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questions, but I mean that this is the, this is the, the deal.
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And I find this repeatedly with people there.
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People seem to think that that, you know, 1/4 of our GDP is due
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to buying stuff from China or selling stuff to China.
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It's, it's not the case. Well.
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Why don't you take a gigantic step backwards and tell people
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what GDP is comprised of? What?
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It's just one of those things we talk about a lot, but people
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probably don't know the details. Yeah, GDP is the is the total of
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all final goods and services sold in the country in a year.
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The easy way to think about it is if you went to every store in
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every city in every state and you bought everything that was
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for sale, bought all the cars off the new car lots, bought all
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the newly produced housing, everything, your total bill at
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the end of the day would be the GDP.
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It's a total amount of money we've spent.
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That's how the Chinese stuff gets into this.
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That's how the because some of the stuff we buy is.
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Because we. Buy it, Yeah.
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What what? What about stuff we export?
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Does that end up in GDP? Well, what happens is the stuff
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we export counts toward the GDP because it's stuff that we're
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we're we produced and we're selling.
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The stuff we buy from foreigners gets deducted because, yes,
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that's money we're spending, but we're not spending it on
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American goods and services. So you don't count that part,
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but you do count the stuff that the foreigners spend here
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because that's Americans producing stuff.
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So really what we're trying to get our heads around is how much
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is America produced? Right, but you can see where
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this is going to butt up against trade imbalance talk.
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Yeah. And I'm going to, I'm going to
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address that in the moment. Good.
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But. Very good.
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But one of the things that happens here is people.
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You'll know you're being bamboozled when people start
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pointing to numbers that are in dollars when they should be
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pointing to numbers that are percentages.
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So, you know, you talk about we, we bought, you know, so many
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billions of dollars from from China, You know, Chinese produce
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goods or what it what not. And what matters is not the, not
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the dollar amount that we bought, but what, how big is
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that compared to the economy. So let me give you some numbers
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here talking about imports. We'll stick with that for the
14:53
moment. We imported a total of three
14:58
almost $3.4 trillion worth of stuff from foreigners last year.
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3.4 trillion. That's a lot.
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That's. A lot.
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It is, and it's it's a lot. But our GDP is much larger, so
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that 3.4 ends up being just around a little bit over 10% of
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our GDP. So of every dollar that
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Americans spent, you can think of it this way, roughly $0.10 of
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that was spent on stuff that foreigners produced for.
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Us I I find that to be shockingly low.
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It's it tends to be lower than people expect given what you
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hear in the news, but it gets even better than that.
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Of that total $3.4 trillion of stuff we bought from foreigners,
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only 14% of it we bought from China.
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So when you do the math, you're down to our imports from China
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being roughly 1 1/2% of our GDP. And that, that's interesting.
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We were talking a little bit earlier and in response to
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everybody's idiotic Facebook posts and I keep swimming
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upstream on these things. I don't know why I'd bother, but
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they're they people who consistently call for putting
16:14
some sort of complete and total stop on the importation of
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Chinese food because apparently the American farmer needs that
16:23
protection there. We only import 2% of our food
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from China. Yeah, 2% of our food.
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Yeah, right. So everywhere where we're
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looking around, these are the kind of numbers we're seeing,
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yeah. Yeah, that much makes sense.
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Do you know offhand where the vast majority of our trades come
16:41
from? Is it Mexico and Canada?
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I do. I've got 2 numbers here.
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If you still sticking, let me let me.
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Guess because I think it's going to be.
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Imports for the moment. Yeah, we import from and I have
16:56
to think it's Canada, Mexico, maybe the UK, maybe Australia
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and somewhere right through continental Europe into Central
17:08
Europe. Yeah, almost right.
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So in order starting from the biggest, we're talking about
17:14
imports. Most of our imports come from
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Mexico, so 16% of that 3.4 trillion.
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So roughly looking at the math here, about half a trillion
17:24
dollars we spend on Mexican products.
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That's number one. Number two is China, and that's
17:30
under half a half a trillion dollars per year.
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Then comes Canada, Germany, Japan, Vietnam, South Korea, so.
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We're not importing much in terms of our GDP.
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No, no, no, we're, we're not. You know, Mexico is, you know,
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our the number one place we import stuff from.
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And that's still only 1.8% of our GDP.
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It's not even breaking 2%. Yeah, that, that's really
17:58
something. And then when you get down to
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this is the top what, 123-4567? The top 7 #7 is South Korea.
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You get down to South Korea and it's the amount we import from
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them is 1/2 of a percent. So functionally, functionally
18:16
nothing except some washer dryers and and some cars.
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Yeah, Now, you know, we import some important stuff from them
18:23
that makes our make our lives much better.
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But The thing is, our economy is so gargantuan in comparison to
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that, that it ends up being a drop in the bucket.
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Well, given these numbers that you're you're laying out on the
18:36
table for us, why on earth? Or maybe how would be the the
18:42
better word to use here? How on earth did it get to be
18:45
the case that we have nothing but national hand wringing about
18:49
imports? Oh yeah, because in I'll, I'll
18:52
talk. Maybe I should talk about that.
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Now the the problem is people have a misunderstanding of what
19:01
it is to have a trade deficit not in.
19:03
Part of that misunderstanding may come from using the term
19:05
deficit, because we use the term deficit and talking about the
19:08
budget that the government is spending more than it brings in.
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Yeah, and we understand. Deficits are always.
19:13
Bad. That's bad, right?
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And so when you hear trade deficit, you just think, well,
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that's the same kind of vadnais. It just applies to trade.
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And it's not, it's a completely different thing going on here.
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It just happens to be the same word.
19:25
So we really shouldn't have used that.
19:28
Word now we should have come up with something better.
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And and the the weird thing is, you know, some years ago it was
19:36
all the the rage on the left to buy local and, you know, people,
19:40
people on the right said, well, that's stupid.
19:42
If I can get a better product at the from the next town or the
19:46
next state over, I'm going to do that.
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Why should I pay more for something that isn't as good
19:51
just because it was produced three blocks away from me?
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That's the bi local. For us, Aunt, the left and right
19:57
have switched places, yeah. Well, yeah, because this whole
20:00
business about, well, we shouldn't have a trade deficit.
20:02
It's the same exact thing as BI local.
20:05
It's just you've defined what local means differently.
20:09
That's right. And you know, I I remember
20:11
seeing a sign that said, wouldn't it be great if I could
20:16
grow tomatoes and trade them with you who grew lettuce?
20:20
No, that'd be horrible. That's that's the dumbest damn
20:24
idea I've heard in a long time. Because look, that's why we have
20:29
money. So you don't have to do that.
20:31
Well, yeah. And more than that, I'm no good
20:33
at growing lettuce and you suck at growing tomatoes.
20:36
We neither one of us has any business doing that.
20:39
No, that that. That's right.
20:41
And when you really step back and, and look at how an economy
20:45
works, right, it's comparative advantage.
20:48
You're good at a couple of things that I'm not good at at
20:51
all and vice versa. And we make up for each other's
20:56
shortcomings and trade. That's exactly, that's exactly
21:00
what it is. The same thing that goes on you
21:02
as an individual. You, you specialize in
21:05
something. I'm good at giving lectures on
21:07
economics. And so people pay me to do that.
21:10
And I don't grow my own food because I'm horrible at that.
21:12
But I'll pay somebody who is good at that, who in turn will
21:15
listen to my lecture in economics because he's not good
21:17
at that. But I am right, You all do.
21:19
And you do that on a country level also.
21:22
Probably not going to work out exactly that way, but your, your
21:25
point is taken right? Because when you when you look
21:27
at what, 350 million people each doing what they need to do to
21:32
get to tomorrow, which frankly is difficult most days, it's
21:38
interesting to see just how much activity emerges.
21:42
Yeah, it's a tremendous amount of activity.
21:44
In total, we import $3.4 trillion.
21:49
Last year we exported another 2 trillion.
21:52
So you're at like 5 trillion right now of trade going back
21:56
and forth. And and what is our GDP?
21:59
Our GDP is about 30 trillion. So that's roughly what, 6 times
22:05
our federal budget? Our federal budget, Yeah, that
22:08
sounds like 5, yeah. Yeah, I.
22:14
Think you're right? Yeah.
22:15
Because of because of all those massive doge cuts that.
22:18
Happen, right, right. But, but here's the thing, let's
22:21
go back to your your observation that, you know, the the reason
22:25
trade works is because each country produces the thing it's
22:29
good at and someone's going to look at that and say yeah, but
22:32
in the case of the United States, we're importing more
22:36
than we're exporting. So there's this giant sucking
22:40
sound to the tune of over $900 billion a year leaving the US
22:46
because we buy more from foreigners and foreigners buy
22:49
from us. Well, Aunt, that must be exactly
22:52
why we've become so much poorer every year.
22:56
Right. Oh wait, we haven't at all.
23:01
Yeah, I was looking at that. By the way, what's?
23:04
Really going on? Excuse me, What's really going?
23:07
On I was looking at, on another project I'm working on the full
23:11
time median weekly earnings in the US and they're up since
23:18
2020. So since right before COVID,
23:21
they're up something like, I want to say 7% more than
23:25
inflation. And that's wages, not
23:29
compensation, right? Yeah, that's wages, not
23:32
compensation. Through compensation you're even
23:34
better still, but that's seven per up 7% above inflation.
23:38
So Despite that everything that went on 2022, we're actually
23:41
we're better off. But nonetheless, that's a
23:43
separate. Topic.
23:44
That's that. That's impressive enough.
23:46
And you know, if there are people out there hiring, I'd
23:49
like to talk to them because I'm not 7%.
23:52
Up. Well, let me.
23:53
Right. And that's that's generally how
23:55
this works, right? I mean, not everybody wins,
23:57
right? And.
23:57
Remember, and that number I quoted, that's not the average.
24:00
So it's not like Bill Gates pulling that number up.
24:02
That's the median. That's the guy.
24:04
In the middle median, do you know what the average is off the
24:07
top? Of your, I don't know, I don't
24:08
know. I'd imagine it's higher than
24:10
that. I I always like to look at.
24:12
Both numbers, yeah. Whenever I can, yeah.
24:14
That's telling. But but median?
24:17
Maybe you could talk about this for at least a second.
24:20
Is is median a better measure of most economic things?
24:25
Or is the mean or average the better measure?
24:28
It depends on what you want to do.
24:30
If, if I'm looking to do some calculations to say the typical
24:35
taxpayer pays this and there's 100 million typical taxpayers,
24:40
so multiply 1 by the other and I get an answer.
24:42
If that's the kind of thing I want to do, I want to do some
24:44
math with it, then I need the average.
24:47
If on the other hand, I want to talk about the typical taxpayer,
24:51
as in who do I expect to see on the as I'm walking down the
24:55
street there? You want to use the median.
24:57
So neither one is the right answer.
24:59
It depends on what you want to do with it.
25:01
But let me go back to this thing because we, I had mentioned that
25:05
part of the problem here is we use this term deficit and people
25:09
immediately think it's a problems.
25:11
We got this almost almost $1 trillion trade deficit.
25:15
And, you know, others who want to egg them on will say, talk
25:18
about the giant sucking sound of all this money leaving the
25:21
country. And you're left with this
25:23
picture of like a draining bath tub as dollars just keep leaving
25:28
the US and going to the rest of the world.
25:30
And I tell you, every one of those dollars that leaves turns
25:34
around and comes back, it just comes back in a different form.
25:38
So what what's going on here is when we calculate the trade
25:42
deficit, we're looking at a specific set of things.
25:46
We're looking at final goods and services produced.
25:50
Well, goods and services. So, you know, all that falls
25:54
into that. What we're not including here
25:56
importantly our financial transaction.
26:00
Why? Why aren't shares considered
26:04
goods? Well, they are considered goods.
26:06
Financial transactions are go into a category by themselves.
26:09
So you talk about financial markets and goods markets,
26:12
they're two different things, right.
26:14
But but when it comes to what we come to talking about trade and
26:19
trade deficits and trade surpluses, what we economists
26:22
are trying to get our heads around is the flow of goods and
26:26
services. There's also a flow of finances
26:29
and we deal with that separately.
26:31
So we are we do pay attention to it.
26:33
It's just that the rest of the of of the world, the non
26:36
economists only hear people talk about trade deficits and think
26:39
that that's the entire story that are missing that well,
26:43
we're not talking about, we haven't included financial
26:45
markets here. That's another thing.
26:46
So all of those dollars that leave the country come back in
26:49
the form of foreigners purchasing stocks and bonds in
26:54
American companies. And we should stop here for a
26:56
second, because there's going to be a subset of the American
27:00
population who hears that and says, Yup, China is buying all
27:05
the American companies just like they're buying all the American
27:08
farmland. But that's not actually what's
27:11
happening at all. No, I mean, it's not.
27:13
I suppose you could, if you dug, you could look at a particular
27:18
company that historically was owned by Americans and now it's
27:22
majority owned by foreigners. And I will tell you that that's
27:26
going to be rare. And now you, you know, you'll
27:28
get foreigners investing in U.S. companies just like all the rest
27:31
of us invest in U.S. companies. But what's happening when they
27:35
do that, I claim, is that we, we're actually exporting
27:40
something very important that we don't classify as an export.
27:45
And that's our entrepreneurial talent.
27:48
You can't export entrepreneurship.
27:50
It's one of the things we're really good at, by the way.
27:53
You can't export it, but you can export the fruits of it.
27:56
That's ownership in American companies.
27:59
Yeah. And that ownership is capital
28:03
that allows for reinvestment. Right.
28:06
Yes. So when you when you see
28:08
foreigners, let's just say Chinese people buying Walmart,
28:12
that makes Walmart better positioned to to achieve its
28:16
long term goals because it has a a pretty vast amount of capital.
28:22
Yeah, it it On the one hand, to the extent that Walmart captures
28:25
some of that money, Walmart gets better off.
28:28
But another group of people who are better off are American
28:31
investors. So if I own shares of Walmart
28:34
and the Chinese come along and they want to buy up shares and
28:38
they're willing to offer a higher price, I sell to them.
28:41
I make money because I've now sold the stock for more than I
28:44
bought it from. And what am I going to do with
28:45
it? You know, a lot of times, not
28:48
all the time, but a lot of times, you'll get somewhere
28:50
else. Yes, I'll invest it in a
28:51
business somewhere else. Somewhere else and that's, I
28:54
mean that's generally once your money goes into investments, it
28:58
tends to stay there. And that's the key that we we
29:02
have this idea that the foreigners will buy up all the
29:05
American companies. And if I ask you to name what
29:09
are the biggest, most influential American companies
29:12
today, people are going to say things like like Microsoft and
29:16
Apple and Tesla. All of those companies didn't
29:20
exist 40 years ago. In fact, if you take the top
29:24
five companies that are worth, I think they're worth a total of
29:27
around $20 trillion. But the top five American
29:30
companies, the average age of those companies is less than the
29:35
average age of Americans. They're actually younger than
29:38
Americans. Wow, how about that that that's
29:41
really quite interesting. You know, another group that
29:45
benefits are the workers, the people who work at Walmart,
29:49
right? That as money comes into the
29:51
company, they will benefit from that as.
29:54
Well, as Walmart expands, what's it going to do?
29:56
It's going to hire Americans. That's who's here, right?
29:59
That's right. So in in a lot of ways what
30:01
we're doing is sending some of the risk of doing business to
30:06
foreigners. Oh yeah, very much so.
30:08
And I'm. I'm fine with that.
30:10
They want to take on a fair amount of risk to invest in our
30:14
economy. That sounds like a win win.
30:16
Yeah. And what's happening here, Will,
30:20
we will grow companies because that's one of the things we're
30:23
really good at. And then we in effect export
30:26
them by selling them to selling shares them to foreigners.
30:29
And then we turn around and we grow more.
30:31
And so this, this claim that well, the, the foreigners are
30:35
going to buy up all the American companies.
30:37
It's like saying, it's like being concerned that the
30:39
foreigners are going to buy up all the American corn.
30:42
That's ridiculous. Yeah, right.
30:43
More than all all the all the iPhones.
30:47
Right. Yeah, Wait, go ahead, buy all
30:48
the American corn. We'll grow more and we'll sell
30:50
that to you as well. That's what we do with
30:52
companies. Yeah, I'd I'd be only too happy
30:55
to sell everything I had if I were in business.
30:58
Now let me give you some numbers here.
31:00
And again the disconnect is economists talk about goods and
31:05
services on the one hand, we talk about financial markets on
31:08
the other. And non economists hear us
31:11
talking about goods and services and think that's the whole
31:13
universe of stuff. And so they see a trade deficit
31:16
there and they lose their minds. Here's some, here are the
31:18
numbers. This is as of last year, we had
31:21
a trade deficit of $920 billion. So we bought $920 billion more
31:29
of stuff from foreigners and foreigners bought from us.
31:32
That's goods and services. But we had a $1.3 trillion net
31:38
foreign investment. That is, foreigners invested
31:41
$1.3 trillion more in American companies than Americans
31:46
invested in foreign companies. Well, we got to stop talking
31:48
about that. Yeah, well, you see, but that
31:50
that's all, all that money that you saw being sucked out to the
31:54
trade deficit, all of it plus more came back in through the
31:58
financial surplus. Yeah, but that reality isn't
32:02
going to benefit any of the hostile people on either side of
32:06
this equation. Oh no, no, but hostile, hostile
32:09
people are going to be hostile regardless of what you say.
32:12
Well, and, and it, it's not just that right, but I'm, I'm
32:17
becoming increasingly convinced that people are just unwilling
32:23
and will remain unwilling to listen to evidence.
32:27
I think that they just, they just don't care about evidence.
32:31
And and I've given let. Me throw this out.
32:34
Go ahead, go ahead. Well, look, this is just a a
32:37
kind of an off the cuff observation, but do you remember
32:40
when Al Gore as Vice president was going on and on and on about
32:46
how once that information superhighway was available to
32:50
everyone, most of our problems would be solved because the
32:54
world would have all this information?
32:56
Well, look out your window. It's worse than ever.
32:59
Yeah. Nobody lists we.
33:00
We use these tools to lie to each other.
33:04
It it's, I think it's worse than that, James.
33:06
It's not just that we use it to lie to each other and there is
33:08
that you'll get some false information out there.
33:11
I think the larger problem, not to say that's not a problem, but
33:14
I think the larger problem is selective hearing.
33:17
We have a tendency to only listen to the information that
33:21
confirms our predispositions. Actually, I think you've put a
33:27
happier spin on it than I did. And we're going to have to think
33:30
about that as we spoiler alert, write our next book, which is
33:35
starting to happen right now. And it's going to be about
33:38
exactly this kind of thing. So you know where where we end
33:43
up with this, I don't know. But as we said before, and as we
33:47
said right before we wrote the last book, wherever the truth
33:50
goes, that's where we go to, whether it's what we thought was
33:53
going to be the case or not. And I would I would impress upon
33:57
other people to maybe take this perspective as they do their
34:00
own. Work but let me under, I don't
34:02
know underline something here people, I think I think people
34:05
today are too hard on us today. We look back 200 years and we
34:11
say well, but people were reasonable back then and they
34:14
had. Reasonably discourse slavery
34:16
back then. Yeah, but, you know, in terms of
34:18
discourse, people were reasonable and they were looking
34:21
for truth in all of this. And let me underline something,
34:24
which is this. There's an observation bias
34:27
because lunatics today can have their voice heard by millions of
34:32
people. We all have access to the
34:33
Internet. We can blog, we can create
34:35
videos and all of this. And so you today, you hear the
34:39
intelligent people and you hear the lunatics, you hear the truth
34:42
and you hear the falsehood all at once.
34:45
From 200 years ago, it was expensive to record your, your
34:50
thoughts. Of course, the only way to do it
34:52
was in print. It was expensive to do that.
34:54
And furthermore, the only copies that people retained were the
34:58
ones that weren't of the lunatics.
35:01
And so consequently, you look back 200 years, say, well, they
35:03
were all smart and they were reasonable.
35:04
No, that those are the only people you happen to hear.
35:08
And let's not forget a bunch of people were excluded from
35:12
political discourse. Yeah, yeah.
35:14
And there's a bunch of people we didn't hear.
35:16
It was kind of, you know, I'm going to play fast and loose
35:19
with some, some words here, or at least one.
35:22
It was an aristocratic man's game, right?
35:26
And OK, I understand that we don't want that and that offends
35:30
our contemporary sensibilities. But there's an upside and a
35:34
downside to most things, and there's an upside and a downside
35:39
to democratizing political discourse.
35:41
On the upside, more people can take part.
35:44
On the downside, more people. That's right.
35:47
That comes both ways, yeah. And I, you know, I don't know
35:50
how else to, to lay it out there, but when you start
35:53
thinking about trade and trade policy, which is generally what
35:57
we're talking about today, what do you see?
36:00
You see a lot of misinformation, a lot of.
36:03
Willful. Misinformation where people are
36:06
told what the right answer is and choose not to believe it
36:09
anyway. Well, that that's going to be a
36:13
a problem, isn't it? And when you look at trade, any
36:16
rational person, and I mean this excludes some economists, I
36:20
guess, but not many, any rational person can look at
36:23
human trade and understand that's one of the greatest
36:26
things we ever came up with. I don't know if it's the
36:30
greatest thing, but boy, it's in the running.
36:34
Yeah, and anybody? Who might be the greatest?
36:36
Anybody who says differently, I challenge you to perform the
36:39
experiment yourself. Spend a year, don't buy anything
36:43
from anyone, but produce everything you need yourself and
36:48
you will mimic exactly what the world looks like when a country
36:51
refuses to trade with anyone else.
36:53
You actually won't, because you'll starve to death.
36:56
Right. Yeah, yeah, the country does
36:58
have it a little bit better. Little bit better.
37:00
You will, in fact, starve to death if you behave that way.
37:04
And that's all the time we've got this week on Words and
37:07
Numbers. Until next time, be sure to
37:09
follow us on Twitter. Handles are in the show notes.
37:12
Join Words and Numbers backstage, the Facebook group
37:14
where the conversation continues and.
37:16
Send us e-mail wordsandnumberspodcast@gmail.com.
37:20
Until next week, try to be nice to one person.
37:23
One person who doesn't deserve it, Just one.
37:26
And who knows, it may turn into a trend.
37:28
Give it a shot, you might feel good about yourself.
37:30
You could say you tried. You tried.
37:32
That's right till next week. Can't take it easy.
37:34
See you next week, James.