WBTPO: The state of the trade industry

Learn all about how the trade industry in India is faring with the global pandemic around. Find out more here at WBTPO. The current status of the trade industry in India is extremely grim.

In fact, this could be one of the worst… “Black Swan Events” in the history of the world! Trade is the life-blood of any economy. The very survival of an economy depends on its ability to export. When a country exports… everything… comes together. Food is grown, factories are built, jobs are created and the money from exporting is used to import raw materials, pay for the food and equipment needed to grow/manufacture more goods and so on. This positive feedback loop is what makes an economy strong. When one country starts to export more than it imports, the surplus is called “exports of the surplus”. For example, let’s say the U.S. is importing 100 units of product from some country called “China” and at the same time exporting 200 units of product to some other country called “Germany”. In this case, the U.S. would have a trade deficit with China (100 – 200 = – and a trade surplus with Germany (200 – 100 = ). Now let’s say China, in turn, has a trade deficit with the U.S. Of course, the Chinese government doesn’t let this happen.

Summing up all three countries’ trade imbalances (China with the U.S., China with Germany and Germany with the U.S.) we end up with the following: In plain English, what this means is that China is running massive trade deficits with the U.S. and Germany and Germany is running a trade surplus with the U.S. What happens when one country runs a trade deficit is it ends up with lots of “dollars”, but hardly any “goods”. This can create a rather unpleasant situation. Imagine you go shopping for a new house and you keep seeing signs saying “$89,000 House for Sale” and “$99,000 House for Sale” and “$109,000 House for Sale”. This would make you pretty nervous, wouldn’t it? You’d probably start looking for another sign. Or maybe a different realtor. Another problem created by a trade deficit is the “debt trap”. When a nation with a trade deficit goes shopping for products, it ends up spending a lot of money on U.S. debt instruments. For example, let’s say the U.S. has a trade deficit with Germany of $10,000 per day. In one week, this would amount to 90,000 German Deutschmarks. To purchase 90,000 DM, the U.S. would have to sell approximately $900,000 worth of U.S.

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