CHAPTER5

Global Whirlwinds

Why We Are All in This Together

In the previous chapter, I noted that it was both natural and mistaken to look upon the finances of a country as if it were a household. It is equally misleading to think that a country’s finances can be viewed in isolation from those of all other countries it trades with and in which it invests money or raises capital. Yet that is precisely what the political class and the general public naturally do.

Global Trade Is Not a Zero-Sum Game

The basic math is simple. If one country sells more stuff to another country than it buys in return, a trade deficit arises in the first country and a trade surplus in the second. These add up to zero, being mirror images of each other, and it is natural ...

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