Posted on 10/03/2011 5:48:12 PM PDT by Kaslin
I pay a heck of a lot more to my landlord than I get in return. Is our relationship sustainable? Or should I buy some land that I cannot afford?
I'm not "giving out my gold", I'm exchanging it for beer. My beer purchases are much less than my annual income. Have been for many years.
Buying that German beer, you should hope you’re selling at least as much to Germany if you want the relationship to be sustainable.
No, don't sell a thing to Germany. Don't sell anything to my phone company or Commonwealth Edison either.
One can allow for indirect economic circulation, such as you buy from A who buys from B who buys from C who buys from you, but an ironclad rule is that giving out more gold than you get will eventually leave you un-rich. Especially if you are immortal, like a country.
Countries become "un-rich" by running budget deficits, not trade deficits. My country does not pay my rent, or buy my beer.
If the US runs a trade deficit of $1 jillion this year that means it has net doled out $1 jillion of cash (or IOUs) to the rest of the world. What happens if the US keeps that up every year? It has to print out $1 jillion (in IOUs if you must) for each such year to make up for it, doesn’t it?
I'm not spending your money, either.
I purchase less than I earn. I'm not getting un-rich. I could repeat it a few more times if that will make it clearer for you.
Yes, if the US government buys more than they take in, they must issue bonds. That still has nothing to do with my purchase of foreign beer.
If you refrained from the purchase of the beer and bought a domestic make (which doesn’t have to be a horse pi$$ mainstream brand) and if all else stayed the same (i.e. nobody else buys the beer you wouldn’t) then the US will have to issue that less in bonds.
Uh, no. That’s not the way it works.
Please walk through the steps and prove that.
How about making it easy, and presume nobody in the US buys anything German at all. (Tourism, etc. counts.) Now why they would choose to do so is another matter and I’m not saying they ought to. But it’s an oversimplified presumption to your oversimplified mind.
Then it would be impossible for the US as a whole to be spending anything in Germany.
Then whatever bonds the US must issue to make up for its net loss of cash, will not be due to having spent any cash in Germany.
Expand that to trade with the rest of the world.
What’s difficult to see?
Of course you’re going to be spritzenpoppen that this is impossible or at least highly undesirable.
Why are we talking about the US? I'm buying the beer, not the government or the country.
Then whatever bonds the US must issue to make up for its net loss of cash, will not be due to having spent any cash in Germany.
The cash belongs to me, not the US.
What’s difficult to see?
How my purchase leads to a government budget deficit. Try again?
I dunno, my company sells an awful lot of manufactured goods to Canada.
We need these agreements. We need to reward countries who will trade with us freely and punish those who do not (ie China, Japan) by denying market access.
Funny thing. Economics tells us again and again that free trade is the best trade policy due to comparative advantage and us “producing” by exporting (otherwise called the Roundabout way to wealth coined by an economist David Ricardo). Think about it... We give countries worthless pieces of paper. They give us cars, steel, etc. Sounds good to me!
Trade Deficits are also a good thing IF AND ONLY IF the excess imports that we bring in are used to INVEST in our future rather than fund current consumption (as it is now). Funding current consumption is unsustainable and will lead to a collapse.
It all depends on whether the deficit has been invested or has been used for current consumption. If invested, the proceeds from the investment will allow us to pay back the deficit amount AND our country will be better off. If used for current consumption, we spent the money, have nothing to show for it and still owe a big darn bill. Therefore, we must issue more debt in order to raise the funds to pay the current bills. Unsustainable.
Some folks run global corporations that deprive their own elite relatives in government of sustainable revenues—big revenues that would normally come from big, domestic manufacturing.
Those are worthless pieces of paper (our US dollar) only if the USA plans on defaulting on all the US Treasuries those nations have also bought. China has piled up a lot of worthless pieces of papers so is now able to exert more control over us. Obama bowed down to Hu Jun Tao last time they met
If you owe $400,000 worthless pieces of paper to your creditors do you plan on screwing them via a default?
Our typical 600 billion dollar annual trade deficit is very comparable to the Federal budget deficit. They are both huge and disgraceful numbers. In years like 2003-2007 we running trade deficits larger than the Federal budget deficit. We were running (roughly) 600 billion dollar trade deficits and 300 billion dollar Federal budget deficits
You’re back...you were gone for four months or so I figure your investments crapped out
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