Free and balanced trade is beneficial.
Trade imbalance may be harmful to trading countries.
1. Balanced trade means consumers do not borrow money from foreign countries. When borrowing money, fixing the interest rate is important. (Adjustable rates are dangerous because the burden goes up dramatically as the interest rises as show below.)
American consumers were not prepared for sudden increases in interest rates. We should have arranged fixed rate mortgatges. Also, we need to save more.
2. Gramm-Leach-Bliley Act (1999) act was signed into law by President Clinton in November 1999. This act (Phil Gramm initiated the bill) deregulated the banking and finance industries, making mergers much easier in these industries. This act repealed the Glass-Steagall Act of 1933, which controlled speculation. The adverse impact of GLBA was not foreseen.
3. (built-in) Incentives to cheat. CEOs and top managers get stocks as compensation. They have incentives to overstate profits, which raise the value of stocks when they sell stocks. They have incentives to invest in assets which raise profits in the short run but lowers them in the long run. In 2007, CEOs of the biggest companies in the US received$6.4 billion as compensation, about $12.8 million per person, more than 100 times the wage of the lowest paid employees in those companies. In other countries, CEOs get much less. Compensations of CEOs should be regulated (no stock options. Some portion of their salaries should be paid later and depend on the performance of the companies for a few years.)