David Altig says the trade deficit is bad. “[F]oreigners do not provide us with more goods than we provide to them out of the goodness of their hearts. They do so because they expect to be paid back sometime in the future….”
But libertarian Don Boudreaux says don’t worry be happy. “It’s the free market, stupid.” Well, that’s not exactly what he says, but I think that’s what he means.
I like to think of dollars as a product we produce, much like Saudi Arabia produces oil or South Africa produces gold. When you look at it this way, the trade deficit is a really great deal because it costs us nothing to “manufacture” dollars, but we’re getting a lot of really good stuff in return for them.