This is the Cato Daily Podcast for Friday, August 15th, 2008. I'm Caleb Brown.

New Trade Deficit Numbers have given the presidential candidates the hook to sound off about America's place in the global economy.

According to Dan Griswold, Director of Trade Policy Studies of the Cato Institute,

the candidate's rhetoric is showing either a sharp display of ignorance or political opportunism.

Trade deficit's a much discussed and much misunderstood figure.

Funny, it isn't primarily driven by trade policy.

It's driven by investment flows.

You know, when you talk about the global economy,

there's really two huge markets out there. There's the market for goods

and services. We're trading wheat and computers and tourism and those sorts of

things. Then there's the market for assets.

Talking, Treasury bonds, stocks, real estate.

And those two markets overlap.

You know, when we go out and buy a $50,000 Japanese car they want something of value in return we can give them soybeans or

other things other goods and services or

We can give them an asset they can can buy an asset with it, which in which case, heaven

forbid we have a trade deficit, but we also have a surplus of capital flowing into the United

States. So the way to look at the roughly 700 billion dollar trade deficit that we have is that we have a 700 billion dollar surplus in foreign capital coming into the United States being invested in the

U.S. economy. So this helps understand why we have the trade deficit has almost

nothing to do with unfair trade and these sorts of charges.

It's all about national levels of savings and investment.

One of the chief criticisms I've heard many, many times about trade deficits is that they

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