Food For Thought on the Trade Deficit


Scott Sumner:

Suppose an asteriod destroys the rest of the world. By definition our trade deficit falls to zero. I say our GDP falls sharply. I assume the trade deficit worriers would say it would increase, because we’d have no trade deficit.

I don’t really think that’s fair as a riposte to people worried about the US-China exchange rate, but it’s certainly a striking reminder that there are multiple dimensions to this.