QUESTION: Mr. Armstrong, you have said that we have lost manufacturing because of taxes rather than tariffs. I believe you also said that a trade deficit is not a bad thing under your capital flow analysis. Can you please explain this? The press seems to say the opposite, but they are political fake news.
Thank you
GG
ANSWER: There are two account balances: the capital account and the trade/current account. Just because we have a trade deficit does not mean that it is negative for the economy. That is offset by the capital account, which is money coming in that is (1) foreign capital investing in the USA, from treasuries, shares, to real estate, and (2) US companies bringing capital home. Under Ronald Reagan, we had a rising trade deficit, but the economy was booming.
Volcker’s insane interest rates attracted foreign capital, causing the dollar to rise dramatically and sending…
