Thank Goodness for Trade Deficits takes a contrarian look at modern-day mercantilism:
In truth, the problem with trade deficits has nothing to do with the deficits themselves, but instead with the media and political class that continue to misunderstand what they are. The very idea of a trade deficit is a misnomer in that as Irwin points out, ‘If a country is buying more goods and services from the rest of the world than it is selling, the country must also be selling more assets to the world than it is buying.’The Cato Institute’s David Boaz explained the above concept best in his 1997 book, Libertarianism: A Primer. Boaz noted that he ran up trade deficits with his grocer, dentist, and department store, all of which bought nothing from him. On the other hand, Boaz had a trade surplus with his employer, along with the publisher of his book. His point was that all trade must in the end balance, that we produce in order to consume, and that buyers of goods and services must have produced something of value in order to be buyers.
Taking the David Boaz example and applying it to the U.S. as a country, if our citizens are buying more TVs and DVDs from Japan and China, it can only mean that someone, somewhere is buying something of value possessed by U.S. citizens; giving them the means such that they can afford to be such aggressive consumers.