Below is a comment from my friend and co-author Fred Feldkamp -- Chris
On Thursday, Commerce Secretary Wilbur Ross made a speech that upset the Chinese delegation attending the periodic US/China discussion of trade issues in Washington DC. The point Wilbur Ross and others in the Trump administration appear to misunderstand is highlighted by the attached comment discussing events of the "mini-crisis" of July to September in 2007.
US financial markets began to fall apart in July 2007 as the housing "bubble" began to burst. People in DC were grumbling about China, in line with the mistake Sec. Ross made yesterday--they "blamed" Chinese trade deficits without understanding the "flip" side of trade imbalances.
On September 11, 2007, Ben Bernanke made a speech that included the first of the attached 5 quotes. That quote is an axiom of international accounting that the Bush administration in general, and Hank Paulson in particular, failed to grasp. They were mistakenly thinking in the same manner as Wilbur Ross stated yesterday.
Both China and Germany have been angered by Trump team statements about trade deficits NOT because they disagree with good US economists on what "should be." They disagree with Trump's team (including Ross) because what they are saying indicates that they are shockingly uneducated on the matters of basic economics by which Bernanke and others literally "saved the world" in 2007-9.
TRADE SURPLUSES AND DEFICITS, IN AND OF THEMSELVES, ARE SIMPLY ISSUES OF SUPPLY AND DEMAND. IT IS ONLY THE WAY NATIONS "INVEST" THE FUNDS WHICH NECESSARILY BALANCE TRADE SURPLUSES AND DEFICITS THAT CAUSE HARM. TRUMP, ROSS AND TEAM HAVE NOW PROVED THAT THEY DON'T GET IT.
The note attached does not touch on the current discussion. What it says is that "we've been on this path before."
We'd be idiots to accept what Trump and Ross are now saying because Bernanke was right in 2007. Bush and Paulson finally figured that out a year later, but by then the world was at the depths of the worst financial crisis in history. Obama's team proved they "got it" (Bernanke's point from his September 11, 2007, speech) when Obama named his economic team on November 20, 2008.
Because Paulson, Bush, Obama and Bernanke's successor (Yellen) all understood what Trump and Ross are now obviously missing, the world has now recovered from the Great Financial Crisis of 2008. By their now obvious stupidity, however, Trump, Ross and this new team seem destined to push the entire world right back into that 2008 "hole."
May God help us, please.