Trade

Economics is one of the most boring things in the world.

Unfortunately it is also one of the most important.

There is of course big economics and little economics.

Big economics are things like GDP, trade balances, fed interest rates, inflation, unemployment, etc.

Little economics are things we all deal with, effectively how much we have to pay out versus how much we take in.

We are all aware of the second, but many of us ignore the first.

Ignore isn't probably the right word, when we hear or read how unemployment is going up or down it tends to impact our optimism.

One of our most significant indicators is just that, consumer optimism.

Our economy is largely a consumer economy and the more consumers spend the better it is.

Which brings us to trade and trade balances.

Our economy is extremely large and trade is a relatively small part of it, about 10%.

Not insignificant and it isn't an isolated thing, it influences other area of the economy.

In can greatly influence little economics for certain people.

In most economic theories trade is a good thing since it allows for greater efficiency, by increasing competition which drives down prices.

Driving down prices is good for consumers (we live in a consumer society) but not so good for producers who are forced to compete.

The theory is that cheaper prices benefit everyone and competition eventually levels the playing field for all as everyone is forced to compete.

When you start ahead though, it creates a certain drag on your economy via trade deficits.

A trade deficit, effectively is a transfer of jobs and money to other countries.

The best way to address a trade deficit is to export more, which requires everyone to be more competitive.

The worst way is to adopt protectionist policies that drive up the cost of goods and services.

Lower prices allow spending on other items.  If the cost of an imported car is significantly lower, the money saved could allows for more spending on say household appliances.

Whether the imported car resulted in lost jobs is a matter of debate, but even if it did, the lower prices impact many more people and the money they spend creates more jobs than were lost.

As I said at the beginning, economics is boring and can become extremely complex, but trade creates more jobs than it costs.

Of course it depends on whose job we are talking about when you come right down to it.

If its yours, it is a horrible thing.