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If individuals make up the U.S. economy, and they do, how can the U.S. run a trade “deficit”? This means that as far as individuals are concerned, all trade balances are It’s a useful question to ask if you remember what’s involved. We receive compensation for what we provide to the market.
However, the United States as a country still has a huge trade deficit. What’s the story behind this statistic? It’s quite simple. Imports and exports of shirts, socks, T-shirts, computers, and automobiles are included in these trade calculations, but exports of company stock are not included.
In that case, the United States could be said to be a magnet for the world’s savings. Workers and investment institutions around the world seek returns on their savings, and savers are most likely to achieve returns in U.S. companies. In other words, one of America’s biggest exports is the stocks of some of the world’s largest companies, but exports of U.S. stocks will no longer be counted in trade calculations. The US trade “deficit” is a function of huge savings inflows from around the world.
This is a beautiful story. And it’s a peaceful one.
Let’s start with beauty. For a long time, retirement was associated with death. In the words of the late great Florida State football coach Bobby Bowden, there’s only one big thing for him after he retires. Readers can probably guess what Borden was referring to.
Thankfully, things are different today. And that difference can be seen in aggressive retirement savings, not just in the U.S. but around the world. Globally, top U.S. asset managers, including Vanguard, T. Rowe Price, BlackRock, Charles Schwab, and many others, are increasingly setting up offices in countries around the world. Saving for retirement is a global concept. Because savers around the world know they want to be well taken care of in retirement. To put it more plainly, savers around the world are taking advantage of their savings so that the fruits of their well-invested savings can compensate for years of not working, cutting back on jobs, or pursuing entirely new careers. We hope to achieve impressive profits. A world increasingly defined by a life free from the financial pressures associated with life after work is a beautiful thing. If you’re confused, see Borden above.
There’s more. To find out why, never forget that no one saves or invests dollars, pounds, euros, yen, yuan, Swiss francs, or just names currencies. More realistically, savers are importing stocks from companies around the world, income streams from companies around the world, or both. And as the world saves more in pursuit of a better future, so too does its import of stocks and bonds from the world’s largest companies. This is your peaceful future.
Seriously, who among us would want the country we live in to be at war with another country where our savings are sleeping? Hopefully the question itself is answered.
Looking at the above question from a more historical perspective, the free trade movement has long been associated with the peace movement. And for obvious reasons. When trade between individuals around the world is free, individuals who trade freely have a deep-rooted interest in the economic health of other countries. Who would want to point a gun or a bomb at our best customer, who is also a great provider of productivity for goods and services, because he is our best customer? Who really? Free traders have long believed correctly that, given the enormous costs of war, the more interconnected the peoples of countries are in an economic sense, the more likely peace will be achieved.
What’s interesting is that retirement savings is a strong driver of the economic interconnectedness that free traders have always sought. When we save, we are simply exposing our wealth to the world to own the world’s progress. War naturally undermines the very global progress that investors seek. Yes, war is bad for savers.
Which brings us back to the beauty of saving for retirement. Our desire for global conflict diminishes precisely because our future comfort is rooted in the success of the companies and commercial agreements that define our global image. It’s way too expensive. My retirement savings are steadily increasing, and I’m getting more money with each passing day.
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