This is the Kato Daily Podcast for Tuesday, December 26,

2003. I'm Caleb Brown. The myriad ways in which political classes

abuse statistics has somewhat confused the basic elements of

global exchange. Andres Freitag writing on behalf of the Cato Institute's

defending globalization project explains why it's helpful to understand how investment and goods and services

cross borders and why the world appears so bullish on the U.S. economy.

I have heard this maybe just the one time but it was Larry Cudlow the

reporter on CNBC years ago saying I love trade deficits because they cause the important word here is cause current

account surpluses can you help our listeners understand what he's trying to say and when why it is so

profoundly mistaken? I try to do that. A trade deficit means you buy more abroad than you sell to foreign countries.

A current account deficit or surplus is the sum of a trade balance surplus or deficit plus transfers and trade in services.

So that means either you have a trade deficit and a current account deficit or you have a trade

surplus and a current account surplus. So he was wrong because he mixed up the

different elements of the balance of payments and this is important to

understand that there's a a link between the current account and on the other

hand the capital account and this is mistaken by Mr. Cutler. So when we think about buying things abroad,

a lot of the critics of globalization will say,

we're sending them all of our money and we're getting stuff and this is a problem because

these foreign entities have a presumably a huge amount of US cash.

Help me understand what their complaint is.

Give the best presentation of that complaint.

The complaint is that with spending money abroad you can't spend the same amount of money at home.

...