As our national debt grows and our dollar weakens

[nageov3t]

The dollar hit a ten month high today.

And it'a a fallacy that a weak dollar is necessarily bad. It helps industries that export-companies like Boeing, Catepillar, etc.

how can we realistically expect to boost exports when Chinese goods will perpetually be priced less than ours thanks to currency shenanigans, though?

 

[nonlnear]

how can we realistically expect to boost exports when Chinese goods will perpetually be priced less than ours thanks to currency shenanigans, though?

China's currency manipulation is a tiny part of why their prices are so low. A bigger part of it is that they are "saving" the cost of not raping their country in their rush to develop. The place is turning into a toxic at the hands of the industrializing bureaucrats to save the cost of improving their industrial processes. They have only just started to acknowledge their cancer cities, and who knows how many other similar public health crises they have created by their obsession with manufacturing.

I can't imagine ever wanting to go back to that wretched place. They have beautiful ultra-modern buildings erected in cities that you can barely see half way across. Some people call that progress or accumulating wealth. The USA could do exactly the same thing, currency be damned. All we would have to do to increase our trade surplus is stop charging for SO2 emissions, use Tupperware containers to store nuclear waste, deregulate trace heavy metals in consumer goods, and let feedlots and hatcheries dump raw sewage into the rivers. We would have a much more favorable trade surplus in no time, and other countries would be complaining about how cheap our exports are.

The grass is always greener, apparently even when it's browner...

 

[soccerballtux]

Who says manufacturing produces wealth? Design produces electronic devices that the world buys. China gets a fraction of it and we get the majority of it.

China has so many political problems, and they're stimulating their own asset bubble that's going to come back and bite them when nobody's demand kicks in to utilize all those factories they've been building.

You guys just don't get it, nobody is going to win this round. We're all in the spiral down together.

Basic economic theory says the three primary means of wealth production are manufacturing, mining, and food production (e.g. fishing, farming.) These three things create wealth where none existing before. Design is a means of secondary wealth production; i.e. adding value to a primary wealth production process.

I don't disagree that China has many problems, but at the end of the day China can stand alone except for oil production - I believe they are now a net importer of oil. If all foreign markets fail tomorrow, China has the capacity to be a self-contained modern economy; the USA no longer has that capacity.

Basic economic theory says no such thing, I'm sure I would have heard about it by now seeing as I have a minor in economics.

Manufacturing now includes things like the creation of software that runs on our computers. That increases our wealth. Just because you can't measure it in terms of "25% more widgets" doesn't mean it isn't wealth.

 

[dullard]

The grass is always greener, apparently even when it's browner...

:thumbsup:

I got a chuckle out of that line. It is quite true too.

 

[TheDoc9]

You could always apply to become part of the EMU, however, since your economy hasn't been good enough to even get close for the last 5 years they probably wouldn't accept you.

Greece is in the shitter because they need to adjust to the EMU rules, all in all, they have less of a debt than the US will have in the next 20 years regardless of what happens now.

Thing is, the EMU was good at tightening things up for nations within it, the US just ran with debt when you had the chance to fix your finances and now that you're in the shitter, you are REALLY in the shitter.

Even if things change, you'll still be in the shitter while the rest of the world is free to spend.

You do realise who is to blame for that?

The EURO is likely doomed and will potentially cease to exist in 20 years. The major players are exiting and not recommending it anymore, it's been declining for months and Greece is only the tip of the iceburg. If they do bail out Greece they're almost certainly screwed, not doing so only boosts the euro in the short term.

It wouldn't matter if the U.S. got into as much debt in relation to what Greece has, the U.S. can monetize the debt by printing dollars. Greece is forced to accept only what the EU will give it in terms of cash.

Also, I believe England is a member of the EU, although they are allowed to use their own currency (AKA: print their own money).

 

[werepossum]

Basic economic theory says no such thing, I'm sure I would have heard about it by now seeing as I have a minor in economics.

Manufacturing now includes things like the creation of software that runs on our computers. That increases our wealth. Just because you can't measure it in terms of "25% more widgets" doesn't mean it isn't wealth.

To some degree things like software creation are manufacturing, agreed - i.e. they take something and directly increase its value, or take nothing and create something of value. But design also includes things like machine design, engineering, architecture - things that don't directly produce wealth, but allow us to produce more wealth for the same investment in resources.

As far as spiraling down together, when I was in school it went something like this: Assume Americans want a product.
1) If the Chinese build it and we buy it, we have the product and they have the money.
2) If the Chinese build it and we don't buy it, we have the money but not the product.
3) If Americans build it, Americans have the product as well as the money paid for it.

Assuming that economic theory still teaches that money has no intrinsic value but is merely a placeholder for wealth, a convenient transfer mechanism, then option #3 definitely increases American wealth, option #2 has no change, and option #1 may increase or reduce American wealth, but will tend to reduce it because of the product motive. If there is no profit to a company, it will not make a product regardless of whether or not there is a demand, so option #1 will over time inevitably increase the wealth of the nation making the product exchanged. Admittedly this is a simplistic model that does not take into account the different costs of production, but I think you'll agree that if one country always sells you more than you buy, then that country will generally end up owning your companies and/or real estate. They have to do something with those dollars else they have no value.

 

[zephyrprime]

But recently I read something that said most of our long term debt recently has been purchased by the federal reserve system. Basically, we write paper to cover the cost of government, then we invent money to buy the paper. Maybe it's possible to ride this country all the way to the bottom, to the point where there is no stock, no land, no wealth left for foreign countries and companies to buy with their little green presidents, before the crash occurs. At that point I really think we'll have no choice but to become completely Communist, nationalize all the foreign-owned wealth, and start over as a third-world level country.

We print money to cover our expenses. Recently, the fed has been printing money (quantitative easing) to buy mortgage and government debt. One naturally wonders how is it that they can do something so egregious like this with such apparent impunity? Well, currently, there is very little commercial lending going on. Also, credit card debt is shrinking. And, mortgage debt is being issued but at a much slower pace than normal. All this adds up to DEFLATION. A lot of debt service being paid is creating deflation and is not being matched by equal new debt issuance which is inflationary. Into this void steps the government. Its stimulus spending and mortgage support is being financed by money printing from the Federal Reserve. Since the private sector of the economy is currently deflationary, the public sector can create and equal amount of inflationary force with net effect being close to zero. However, keep in mind that the money printing going on is not REAL money printing like they had in Zimbabwe. It's still debt based so the although it's strongly inflationary now for a short period of time, it's weakly deflationary for a long period of time thereafter. This will be a drag on the economy for a long time.

I wouldn't worry about turning communist though. Don't make the mistake of extrapolating current trends ad infinitum. The economy of the world contains many naturally arising countervailing forces. Debt is near it's breaking point all over the world. When governments turn private debt into public debt, you know that a credit crisis is underway. I expect devaluation to occur in the not distant future. What will trigger it though? It's hard to say. I've been boning up on my history to figure it out.