‘Twin Deficits’: A Tale of Fiscal Folly, Not Trade Failure
No notion in economics is responsible for more misunderstanding and misguided government policies than that of the “balance of trade” (or “balance of payments”). Rightly ridiculed in 1776 by Adam Smith as “absurd,” the so-called “trade balance” supplies protectionists with cheap yet convenient cover for their destructive interventions. The main reason is language: Saying that…