Buffett explains what a trade deficit is in layman’s terms…
“In effect, our country has been behaving like an extraordinarily rich family that possesses an immense farm. In order to consume 4 percent more than we produce — that’s the trade deficit — we have, day by day, been both selling pieces of the farm and increasing the mortgage on what we still own.”
He goes on to explain why the US can spend like crazy…
“…we can behave today as we wish because our past financial behavior was so exemplary…”
…and warns that it will be over – sometimes.
“…our national credit card allows us to charge truly breathtaking amounts. But that card’s credit line is not limitless.”
AND he actually proposes a solution!
“We would achieve this balance by issuing what I will call Import Certificates (ICs) to all U.S. exporters in an amount equal to the dollar value of their exports. Each exporter would, in turn, sell the ICs to parties — either exporters abroad or importers here — wanting to get goods into the U.S. To import $1 million of goods, for example, an importer would need ICs that were the byproduct of $1 million of exports. The inevitable result: trade balance. ”
Buffe, we love ya! Now, let’s hope there will soon be a US president that has the balls to actually do something!