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Remember my Saturday post chiding Nobel Prize-winning economist and New York Times columnist Paul Krugman for trafficking in an all-too-common version of fakery on trade economics?  In it, I took Krugman to task for blaming U.S. trade deficits on America’s low savings rate.  The relationship between the two, I observed, is a mathematical identity.  Therefore, it says nothing about causation either way.  Here’s the link:  https://alantonelson.wordpress.com/2014/06/21/whats-left-of-our-economy-paul-krugmans-a-fake-onomist-on-trade/

Well, scarcely three days later, I’ve encountered ran into another example of such trade fake-onomics.  While examining my Twitter feed this AM (@AlanTonelson) I was alerted to Alan Beattie’s article in the Financial Times on the perils to Britain of a free trade agreement with the United States being touted by the United Kingdom Independence Party as a replacement for its trade arrangements with the European Union:  http://www.ft.com/intl/cms/s/0/ad96b8d8-fadb-11e3-8959-00144feab7de.html?siteedition=intl#axzz35P6ZJo3u

According to Beattie, such a deal would leave Britain “Isolated and vulnerable,” in part because Americans were such shrewd trade negotiators.  Needless to say, I found Beattie’s fears incomprehensible, and sent him this tweet to explain why:  <blockquote class=”twitter-tweet” lang=”en”><p><a href=”https://twitter.com/alanbeattie”>@alanbeattie</a&gt; W/respect, if US such a tough <a href=”https://twitter.com/hashtag/trade?src=hash”>#trade</a&gt; customer to negotiate with, why is its <a href=”https://twitter.com/hashtag/deficit?src=hash”>#deficit</a&gt; so high? <a href=”http://t.co/XjYHgI8Jpb”>http://t.co/XjYHgI8Jpb</a&gt; <a href=”https://twitter.com/hashtag/UKIP?src=hash”>#UKIP</a></p>&mdash; Alan Tonelson (@AlanTonelson) <a href=”https://twitter.com/AlanTonelson/statuses/481440894303088642″>June 24, 2014</a></blockquote>
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And as predictably as a clock, here’s how Beattie replied:  <blockquote class=”twitter-tweet” data-conversation=”none” lang=”en”><p><a href=”https://twitter.com/AlanTonelson”>@AlanTonelson</a&gt; Because its savings rate is so low. Basic macro.</p>&mdash; Alan Beattie (@alanbeattie) <a href=”https://twitter.com/alanbeattie/statuses/481470838756343808″>June 24, 2014</a></blockquote>
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As I mentioned in my original post, I have no problem with anyone arguing that low national savings rates cause or contribute to trade deficits.  And I have no problem with anyone claiming that standard economic theory attaches little importance to trade deficits, unless they get completely out of hand, and views unfettered trade as a major economic good.  My problem is with those who argue that this theory holds low national savings rates to be responsible for trade deficits.  And if you care about debating issues in accurate and intellectually honest ways, you should, too.