The clock is ticking for USA....

[whocares]

Not at all pretty, but I have a hunch that I'll see it in my lifetime.

My point about stock valuation wasn't really to say it was threatening but rather the pointlessness of such system. The stock market is a zero sum game, for every winner there is also a loser (plus whatever the broker takes out of it). All to what point?

We are building needless complexity into our financial systems and complex system are prone to spectacular failure. Yeah it's going to be a crappy day when it comes. I just hope I have enough assets in the right places on that day.

well, i was just responding to the kind of discontinuity that'll end american style dollar based world economy and the chinese urge to see something like that happen.

stock markets are benign and won't bring about something like that. credit and currency derivative markets will.

 

[CardSharp]

Trade deficit is total export minus total import.

A company that has a large revenue deficit is one that has expenses much higher than revenue.

A large company should have both large expenses and large revenues when these are subtracted from each other they produce a small deficit. Strong but large companies have a small deficit.

The only companies with large deficit's are startup companies and companies on the verge of collapse (General motors)

This is like watching two blind men fighting...

 

[CardSharp]

well, i was just responding to the kind of discontinuity that'll end american style dollar based world economy and the chinese urge to see something like that happen.

stock markets are benign and won't bring about something like that. credit and currency derivative markets will.

What do you think a new currency system will look like?

 

[TorontoNoctis]

Not exactly correct.

should be "and everything to do with an attempt to inject money into the system during a credit crisis" not recession.

"It's called economy of scale" - you've misused the phrase here as economy of scale actually has a technical definition. No doubt you've heard it before so that's why you used it.

Economies of scale - Wikipedia, the free encyclopedia

Bernanke injected the money to prevent a depression. You can claim it was unnecessary and only a credit crisis all you want, but Bernanke and other economists thought the situation far more serious. Saving the world economy isn't overstating.

Chinaowns claims that the size of an economy has nothing to do with the size of the trade slurpus/deficit. He does this in an attempt to avoid the fact the UK has a far smaller economy than the USA so he can abuse statistics and state the USA is in a deep crisis because according to him it has a 12 times greater trade deficit than the UK. I was reminding him that a larger economy has lower cost per unit and therefore size of economy is linked to trade deficit. This isn't a misuse of the definition but rather applying the definition to an abstract situation because concepts in economics are linked. Of course I don't expect someone who cherry picks statistics like Chinaowns to understand this .

 

[gambit]

This is like watching two blind men fighting...

More like a blind man criticizing Usain Bolt.

 

[Chinaownseverything]

Bernanke injected the money to prevent a depression. You can claim it was unnecessary and only a credit crisis all you want, but Bernanke and other economists thought the situation far more serious. Saving the world economy isn't overstating.

Chinaowns claims that the size of an economy has nothing to do with the size of the trade slurpus/deficit. He does this in an attempt to avoid the fact the UK has a far smaller economy than the USA so he can abuse statistics and state the USA is in a deep crisis because according to him it has a 12 times greater trade deficit than the UK. I was reminding him that a larger economy has lower cost per unit and therefore size of economy is linked to trade deficit. This isn't a misuse of the definition but rather applying the definition to an abstract situation because concepts in economics are linked. Of course I don't expect someone who cherry picks statistics like Chinaowns to understand this .

A smaller country will have lower costs but they will also have lower revenues (GDP and exports). Subtract these two low numbers from each other and you get a small deficit like the deficit that the UK has now.

 

[whocares]

What do you think a new currency system will look like?

can't say. even the professional economists don't know how all of this works. i don't want to see a discontinuity induced political standoff.

if that happens, its just impossible to predict what the economists and politicians will hash together internationally.

i sincerely hope that currency and debt issues are resolved in a non crisis way.

 

[TorontoNoctis]

P.S. Why does a Mao worshipper like Chinaowns care about trade slurpus anyway? I thought the whole point was self-reliance and independence, so Chinaowns should hate trade slurpus. Does he not realize that by employing many Chinese in factories producing goods which only Americans will consume, if Americans one day decide to not consume many Chinese will be out of work? Or does he automatically assume there are other buyers?

I would have thought principle of self-reliance would mean making goods for Chinese. I guess I don't understand Mao .

 

[gambit]

P.S. Why does a Mao worshipper like Chinaowns care about trade slurpus anyway? I thought the whole point was self-reliance and independence, so Chinaowns should hate trade slurpus. Does he not realize that by employing many Chinese in factories producing goods which only Americans will consume, if Americans one day decide to not consume many Chinese will be out of work? Or does he automatically assume there are other buyers?

I would have thought principle of self-reliance would mean making goods for Chinese. I guess I don't understand Mao .

That is exactly the point that the Chinese members here either deliberately ignored or simply do not understand. That China's current economic prosperity NEEDS a consumer base from China's large labor pool and that base is conveniently US. Yes...China can negotiate with/for other consumers but the North American continent offered China the most concentrated and willing buyers in one place in terms of ease: US and Canada. Whereas China would have to negotiate with multitudes of governments in Europe and Africa, for examples.

 

[Chinaownseverything]

I thought the whole point was self-reliance and independence

That is the philosophy of Juche it is only practiced by North Korea, Communist China relied on trade partners

Juche - Wikipedia, the free encyclopedia

Does he not realize that by employing many Chinese in factories producing goods which only Americans will consume, if Americans one day decide to not consume many Chinese will be out of work? Or does he automatically assume there are other buyers?

How international trade works is this

Japan ships over a PS3 to the USA

The USA gives Japan $300, the dollars are just a "I owe you"

10 years later the USA ships machine parts worth $300 to Japan

Japan gives back the $300 that the USA gave to them 10 years ago

Now the USA has an OUTSTANDING trade deficit that has grown every year.

Balance of trade - Wikipedia, the free encyclopedia

The U.S. has held a trade deficit starting late in the 1960s. It was this very deficit that forced the United States in 1971 off the gold standard. Its trade deficit has been increasing at a large rate since 1997 [38] (See chart) and increased by 49.8 billion dollars between 2005 and 2006, setting a record high of 817.3 billion dollars, up from 767.5 billion dollars the previous year.[39]

The graph indicates that, as Frédéric Bastiat predicted, the deficit slackened during recessions and grew during periods of expansion. Also of note, many economists calculate trade deficits and/or current account deficits as a percentage of GDP. The US last had a trade surplus in 1975.[40] Every year there has been a major reduction in economic growth, it is followed by a reduction in the US trade deficit.[27]




So what does this mean? this mean that their are many countries holding onto their "I owe you's" from the USA. Why are they holding this? because USA produces nothing that they want. Compare that to Japan where every country is demanding Japanese goods and products, this is why Japan has a large trade surplus.

This is what seperates a wealthy country from a poor country, a country like Mexico does not generate desirable goods and services as desirable as a country like japan. Therefore Japan will enjoy a higher standard of living because they hold "I owe you's" from so many countries.

A large trade deficit is bad because eventually other countries will come to the conclusion that the USA will never produce valuable goods and services that they desire this will cause the dollar to drop to near worthlessness.

If the USA collapses China will just start shipping their products to some other country and taking their "I owe you's" and hopefully this other country will have or eventually develop something that China wants.

 

[gambit]

A large trade deficit is bad because eventually other countries will come to the conclusion that the USA will never produce valuable goods and services that they desire this will cause the dollar to drop to near worthlessness.

If the USA collapses China will just start shipping their products to some other country and taking their "I owe you's" and hopefully this other country will have or eventually develop something that China wants.

Wrong...This is based upon a simplistic understanding that all countries produces and desires the same items of the same quality. Technologically advanced countries produces different goods than technologically inferior countries. Simple goods such as textiles can be imported from rising economies and this can contribute to a trade deficit. But does that mean the US is incapable of producing simple textile goods if necessary?

 

[Chinaownseverything]

Wrong...This is based upon a simplistic understanding that all countries produces and desires the same items of the same quality. Technologically advanced countries produces different goods than technologically inferior countries. Simple goods such as textiles can be imported from rising economies and this can contribute to a trade deficit. But does that mean the US is incapable of producing simple textile goods if necessary?

Can the USA produce textiles that can perform on the international marketplace?

No because somebody else is willing to do it cheaper.

Right now the USA is in a massive deficit because nobody wants to buy the advanced goods or services that the USA produces like cars/loans/electronics etc... but the USA cannot produce simple goods that are cheap enough to make a profit due to high GDP.

The USA trade debt has been doing nothing but increasing year by year.

If this trend of producing nothing valuable continues the USA will eventually be wittled down to a country like Mexico due to the falling value of the US dollar making their imports more expensive due to a large history of unpaid debt.

 

[gambit]

Can the USA produce textiles that can perform on the international marketplace?

Who said we need to?

No because somebody else is willing to do it cheaper.

Access to any market, not just US, is a privilege, not a right. Trade is a privilege, not a right. You have the right to initiate trade but not the right to force me to trade with you. So just because someone else can produce something at less cost that does not mean we must grant you access. That restriction is part of protectionism.

US hits out at China over protectionism - Telegraph

"US companies operating in China are not granted the same degree of openness and fair treatment that foreign companies, including private Chinese companies, receive in the US market," he added.

Right now the USA is in a massive deficit because nobody wants to buy the advanced goods or services that the USA produces like cars/loans/electronics etc... but the USA cannot produce simple goods that are cheap enough to make a profit due to high GDP.

The USA trade debt has been doing nothing but increasing year by year.

If this trend of producing nothing valuable continues the USA will eventually be wittled down to a country like Mexico due to the falling value of the US dollar making their imports more expensive due to a large history of unpaid debt.

This is from 1998 but remains instructive nevertheless...

The Causes and Consequences of the U.S. Trade Deficit -- June 11, 1998

The second myth is that trade deficits are caused by a lack of U.S. industrial competitiveness. This myth has been refuted by the stellar performance of the American economy, which today is the envy of the world. Since 1992, the U.S. trade deficit has tripled. During that same time, U.S. industrial production has surged 24 percent and manufacturing output 27 percent. The American people sell more goods and services in the global marketplace than people of any other country.

 

[waraich66]

Who said we need to?


Access to any market, not just US, is a privilege, not a right. Trade is a privilege, not a right. You have the right to initiate trade but not the right to force me to trade with you. So just because someone else can produce something at less cost that does not mean we must grant you access. That restriction is part of protectionism.

US hits out at China over protectionism - Telegraph

This is from 1998 but remains instructive nevertheless...

The Causes and Consequences of the U.S. Trade Deficit -- June 11, 1998

Agreed China cant over take US but Arab oil rich countries can reduce 10 trillion dollar US economy to 50% by stop selling their oil in US dollar.


Mahathir Mohammad: "Yes, there is of course, to this thing. When you do something to the United States they are going to retaliate. But the United States is not as powerful as it's made out to be. It is, for example, a bankrupt nation. It owes the world $14 trillion, and it is truly able to finance itself and the war and the supply of arms to Israel, through the money that is lent to the United States by rich countries, some of which are Muslim countries. And if you stop using the U.S. dollar... Even if you want to sell oil, you can continue to sell oil, but insist on being paid in euros, or yen, or whatever... If you do that, then the U.S. dollar will not be half the value that it has today, and if it doesn't have the value that it has today, it cannot spend money producing arms and supporting aggressive actions by the Israelis."

http://www.memri.org/report/en/0/0/0/0/0/0/1854.htm

 

[gambit]

Agreed China cant over take US but Arab oil rich countries can reduce 10 trillion dollar US economy to 50% by stop selling their oil in US dollar.

Only naive children talk about Arab unity.