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Finance Glossary

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Trade Deficit

Definition:

Like a wart. A bad thing if you have one. It happens when you are paying more cashola to buy things from a given country than receipts you are getting in cash FROM that country for selling your shizzel to them.

Example

For decades, America gathered most of the natural resources it needed to build cars.... from America. We made our own steel, tires, leather, rear-view-mirror-fuzzy-dice, etc. We then sold that car to Europeans and Asians and made a friendly killing. We had balanced trade in those days where we were King of the Castle. 

Then bad things happened: we lost our dominance in the auto industry; our cost of labor skyrocketed relative to that in emerging countries so we lost a lot of our industries; and we never even made it to the finals of the World Cup. 

Today, more wealth leaves the U.S., buying things from China and other countries, than wealth comes in. We are have a trade deficit with China.

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