Michelle Obama is experiencing mild depression. If she can feel depressed, I feel better about my own malaise, especially about the state of the US economy. Without additional fiscal stimulus, we will experience an economic depression, a situation where the economy lacks its own ability to recover. There are other things to feel terrible about – unnecessary deaths, inequality, school-age children falling behind, and another generation likely to incur long-term effects from sustained, high unemployment. All these painful experiences are worsened as the economy tanks further. It’s helpful to remember Macroeconomics 101. The level of our nation’s Gross Domestic Product (essentially our national income) depends on the addition of four terms. Consumption of disposable goods like food, entertainment, and clothing. It is the dominant majority of our GDP, coming in at about 69% in Q2 of 2020 GDP. Government spending on things like…
The good, bad, and ugly of trade
Economists argue that trade is good, essential in fact to growing an economy. If you excel at growing tomatoes, and I carrots, we will each have a healthier and more plentiful diet by bartering carrots for tomatoes. Once you add in far more people (across the globe no less), more goods (beef, cars, iPhones), services, and a monetary system that converts the value of any item to a price, gains in our simple local barter example grow exponentially. The world benefits when people trade, exporting what they are uniquely good at and importing what others are more efficient at making. We end up with more goods and services at a lower price when trade crosses city, state, regions and national boundaries. But what is true in theory is not always true in fact. The theory of trade assumed scarcity of labor in developed…