At an individual level selling off all your assets to consume today seems like a reckless long term plan. Even if you believe that your creditors will have no leverage to seize those assets, it’s a risky gamble. I knew someone that ran up a bunch of credit card debt and managed to get away with not paying most of it, but I wouldn’t recom…
At an individual level selling off all your assets to consume today seems like a reckless long term plan. Even if you believe that your creditors will have no leverage to seize those assets, it’s a risky gamble. I knew someone that ran up a bunch of credit card debt and managed to get away with not paying most of it, but I wouldn’t recommend it.
I think people feel the same about selling all the nations assets to the Chinese to fund consumption. Yes, in theory the treasury could just say one day “we default on any treasuries currently owned by China” to avoid paying those debts and what are they going to do about it, but I think you can agree that has a lot of potential impacts and it’s not something people are in a mood to try out.
So yes we could think about trade deficits as the equiviliant of “tribute” because we are selling them “assets” we will just seize if we ever feel like it. But the actual process seems a lot messier.
This isn’t to say I think we should be in a trade war with China. I would like to buy a cheap EV. But I’d rather pay for it the same way I pay for my car, with cash or at least a loan I can reasonably afford.
At an individual level selling off all your assets to consume today seems like a reckless long term plan. Even if you believe that your creditors will have no leverage to seize those assets, it’s a risky gamble. I knew someone that ran up a bunch of credit card debt and managed to get away with not paying most of it, but I wouldn’t recommend it.
I think people feel the same about selling all the nations assets to the Chinese to fund consumption. Yes, in theory the treasury could just say one day “we default on any treasuries currently owned by China” to avoid paying those debts and what are they going to do about it, but I think you can agree that has a lot of potential impacts and it’s not something people are in a mood to try out.
So yes we could think about trade deficits as the equiviliant of “tribute” because we are selling them “assets” we will just seize if we ever feel like it. But the actual process seems a lot messier.
This isn’t to say I think we should be in a trade war with China. I would like to buy a cheap EV. But I’d rather pay for it the same way I pay for my car, with cash or at least a loan I can reasonably afford.