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TRADE DEFICIT: Formally termed a balance of trade deficit, a condition in which a nation's imports are greater than exports. In other words, a country is buying more stuff for foreigners than foreigners are buying from domestic producers. A trade deficit is usually thought to be bad for a country. For this reason, some countries seek to reduce their trade deficit by--

establishing trade barriers on imports,

reducing the exchange rate (termed devaluation) such that exports are less expensive and imports more expensive, or

invading foreign countries with sizable armies.

U.S. Trade with China
(billion dollars)
Year	1991	1992	1993	1994	1995	1996	1997	1998	1999	2000
U.S. Imports	19.0	25.7	31.5	38.8	45.5	51.5	62.6	71.2	81.8	100.1
U.S. Exports	6.3	7.4	8.8	9.3	11.7	12.0	12.9	14.2	13.1	16.3
Trade Deficit	12.7	18.3	22.7	29.5	33.8	39.5	49.7	56.9	68.7	83.8

WEALTH: The net ownership of material possessions and productive resources. In other words, the difference between physical and financial assets that you own and the liabilities that you owe. Wealth includes all of the tangible consumer stuff that you possess, like cars, houses, clothes, jewelry, etc.; any financial assets, like stocks, bonds, bank accounts, that you lay claim to; and your ownership of resources, including labor, capital, and natural resources. Of course, you must deduct any debts you owe.
VALUE ADDED: The increase in the value of a good at each stage of the production process. The value that's being increased is specifically the ability of a good to satisfy wants and needs either directly as a consumption good or indirectly as a capital good. A good that provides greater satisfaction has greater value. In essence, the whole purpose of production is to transform raw materials and natural resources that have relatively little value into goods and services that have greater value.
SERVICE: An activity that provides direct satisfaction of wants and needs without the production of a tangible product or good. Examples include information, entertainment, and education. This term good should be contrasted with the term good, which involves the satisfaction of wants and needs with tangible items. You're likely to see the plural combination of these two into a single phrase, "goods and services," to indicate the wide assortment of economic production from the economy's scarce resources.

Wealth is created only by engaging in value-added activities. By the same token, Service sector activities do not create wealth, they merely transfer, redistribute and eventually dissipate wealth as consumption. Thus, as value-added activities move offshore and the U.S. labor force shifts to the Service Sector, wealth is dissipated, not created. And the U.S. standard of living declines as a result.

Hahaha! Boy, you need to take a course in economics! So, let me get this straight, there is no value added from education? Tell me, what are a hundred factories worth without an education system? Answer: Nothing! Value is not a tangible object. It is an individual's set of preferences, of choices about having this rather than that. Anything can have value, including physical objects or services. The fact that something is tangible does not mean it has value. A sculpture may be very valuable to one person and worthless to another. And the same is true of a course on how to build a nuclear reactor. The idea that wealth is derived from physical objects is the same flawed Marxist reasoning that productivity is the result of muscle labor, and that intellectual endeavors are essentially worthless.

Service sector activities do not create wealth, they merely transfer, redistribute and eventually dissipate wealth as consumption

Completely wrong. What is the difference between a) fixing a broken car so it runs like new and b) taking steel and plastic and making a new car ? How about renovating an old house vs. manufacturing a new one ? If the US had better investment advisors (service) they would not have wasted trillions of dollars building (manufacturing) telecom plants and facilities and internet and wireless infrastructures. Here services were more important than manufacturing because the services could have saved trillions, the manufacturing and building wasted trillions. Services are just as important as manufacturing.

SERVICE: An activity that provides direct satisfaction of wants and needs without the production of a tangible product or good. Examples include information, entertainment, and education. This term good should be contrasted with the term good, which involves the satisfaction of wants and needs with tangible items. You're likely to see the plural combination of these two into a single phrase, "goods and services," to indicate the wide assortment of economic production from the economy's scarce resources.

So, let me get this straight, Hollywood produces "entertainment" and sells movies all over the world making billions of dollars and this doesn't create wealth?

Wealth is created only by engaging in value-added activities. By the same token, Service sector activities do not create wealth, they merely transfer, redistribute and eventually dissipate wealth as consumption. Thus, as value-added activities move offshore and the U.S. labor force shifts to the Service Sector, wealth is dissipated, not created. And the U.S. standard of living declines as a result.

If we didn't have any "value-added" activities left in the U.S., we wouldn't need to import steel, or make any, so why do we need steel tariffs?

Hey WG let us not forget that included as "exports" during the 90's were the complete factories that went over to China. I kid you not.

Wealth is created only by engaging in value-added activities. By the same token, Service sector activities do not create wealth, they merely transfer, redistribute and eventually dissipate wealth as consumption.

While the service sector is definitely overrated by most economists, it can certainly create wealth. It can attract foreign capital, and information is value adding.

Wealth is created only by engaging in value-added activities. By the same token, Service sector activities do not create wealth, they merely transfer, redistribute and eventually dissipate wealth as consumption. Thus, as value-added activities move offshore and the U.S. labor force shifts to the Service Sector, wealth is dissipated, not created. And the U.S. standard of living declines as a result.

Willie this is your best post ever. I'm curious, how does wealth get dissipated?

These service sector people buy tangible goods, don't they? The income they receive for producing the services you disparage doesn't get placed under their mattress, does it?

How about the saintly U.S. autoworker who makes good old American cars with American steel? When he takes his paycheck and hires a babysitter for his kids so he can go to the movies with his wife, is that money he paid dissipated?

If the babysitter takes the money she earns and buys a car that the automaker built, is the wealth suddenly undissipated?

Despite several decades of US manufacturing being exported to places like Taiwan, S. Korea, etc., the US standard of living today is higher than ever and America's per-capita GDP is higher than ever. 36 years ago, which is about when US manufacturing started to go to places like Taiwan and S. Korea, America's per-capita GDP stood at just $3,400 but today is 10 times that. If anything, being able to buy low-cost goods from low-cost Asia improved America's standard of living by allowing Americans to save money by buying such-lost goods -- money that Americans could put to other uses. Low-cost Asia has allowed Americans to get more bang for their buck. Low-cost Asia is like a huge "tax cut" for Americans over the past several decades. In addition, for any American to complain about his standard of living today is quite ridiculous when America has the highest standard of living in the world.

When you speak of "wealth generation," I assume you're speaking of actual profit generation because wealth comes directly from profit. The entire service sector doesn't merely transfer wealth, but the profit motive drives service sector businesses to engage in their respective businesses. And when service sector businesses try to generate profit, they inevitably generate wealth. If there were no profit to be made and wealth to be generated in the service sector, service sector businesses would have no reason to engage in those businesses at all. But since they do generate profit and real wealth, that's why they engage in the service sector businesses in the first place.