Broker Check

Managing Your Trade

| April 16, 2018
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“All change is not growth, as all movement is not forward.” Ellen Glasgow

I imagine most of you have never sold any goods to your favorite restaurant. Meaning, each time you eat there you are adding to your personal trade deficit, with that establishment. Your favorite meal for its set price may be a fair trade of product and service for price. You may wish the price was a little lower, but you eat there anyway because no-one else makes quite the same delectable dish. Recently on a trip, my family ran into a little diner, where breakfast was so “reasonably priced” we sort of had a three-course meal and then skipped lunch. The value of the trade can only be perceived by you, in your actions. I will not pay $30 for an omelet, but at $5.50 I just might get two and save one for later. Trade is a choice, made on many levels.

A trade deficit with your favorite restaurant or gas station is not by definition a bad thing. Other factors determine the good, fair, or poor values of trade deficits or surpluses. If you eat three meals a day every day at that same restaurant, there might be a trade deficit concern. One, how much of your budget is going to one entity, and what happens if they close? Is your budget, health, or hunger at risk? Yes, at least at a higher risk. For the restaurant, if they are a successfully operation, they are at a trade surplus with you, but at low risk. If you stop eating three meals a day there, the staff may miss you, but at the end of the month the accountant will have no idea. Now if the same restaurant was on shaky financial footing, then the trade surplus with you means they are at high risk. If you get sick or stop eating there, that loss of daily income may well cause them to close or create some other economic hardship.

Should the government step in and manage your Eggs Benedict, Filet Mignon or Fish-filet trade deficit? How about your doctor based on a health concern? Or your spouse and kids? They want to eat as well, or at least eat with you…. Oh, and if you decide to turn your backyard into a tomato farm and start selling said surplus tomatoes to your favorite restaurant, now you have a different trade relationship. Let’s not even think about selling your tomatoes to a competitor restaurant who pays higher price, yet you won’t eat their Linguini Bolognese. After all your Bolognese trade pattern is already established, right….?

Yes, this is a simplistic way to think of big unilateral trade. Trade on the national and international level can be very complex. You on the other hand, control your side of the supply/demand curve. Try to keep a balanced budget, and create a personal economic surplus, by managing your trade. Have a great week.

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