What a trade surplus doesn’t mean

Source: Cafe Hayek
by Don Boudreaux

“[T]he fact that Germany has a trade surplus while America has a trade deficit does not mean that Germans are richer than Americans. This fact merely means that, while we Americans currently invest outside of our country less than non-Americans invest in America, Germans currently invest outside of their country more than non-Germans invest in Germany. And because such balance-of-trade figures account only for international investment flows, they do not reveal the total size of investment holdings by the citizens of any given country.” (02/12/17)