IOUSA

[JS80]

but the IOUs are worth less than the goods the chinese gave us. and with their currency they are importing our inflation and exporting deflation to us. some guy in china is sacrificing so this place can keep churning. why continue to do so? why continue to finance our debt? when they stop how will we keep going? what about all those dollars - what would happen if they sent them all over here right now?? the fact is we don't want them to do that, we want them to keep sacrificing for us, and giving us goods while we give them useless paper. we hope they stick it in a vault never to see the light of day again. it has been going on but it will not be going on forever.

Yup, the IOUs are worth less...meaning we sold our dollars to them while it was high. Now they have to buy US goods and services and investments for cheaper because the value of their dollar holdings went down. Advantage USA.

I don't think you still understand trade and currency. If there is a quick rush to redeem the dollars for something tangible, then the US GDP goes up. We increase our exports. EQUILIBRIUM. They can hoard all they want, but at some time they have to spend those dollars. US Dollars = US Goods.

Look, while we are buying Chinese goods and sending them dollars, the Chinese economy is booming. When the equilibrium tips and it's time for the Chinese to buy US goods and send us back the dollars, the US economy will boom.

why continue to finance our debt?

What is the alternative to financing our debt? If they all of a sudden say, ok fuck you we don't want to finance your debt we'll stop buying treasury bonds, what will the Chinese do with the US dollar? Hoard it under their mattress? Keep it in checking?

THEY HAVE TO BUY US GOODS! That is how trade works! US dollars are good for 2 things US INVESTMENTS or US GOODS. If they are done investing and decide to buy our shit...it's a WIN WIN situation.

Remember the furniture maker and t-shirt maker? At some time he will get sick of stacking up his IOUs while the tshirt maker is enjoying his furniture. When that time comes his only option is to trade back the IOUs for the tshirts.

 

[BoberFett]

Originally posted by: JS80

Originally posted by: BoberFett

Originally posted by: JS80
It's so sad that someone like Warren Buffet does not understand trade theory. But then again I'm not surprised...after all he's a stock picker, not an economist nor a leader of a Fortune 500 company.

Trade imbalance is not necessarily bad for the US. Every time we import something and export dollars, that is essentially acceptance by the counterparty that they will either 1) invest in the US with the dollars we just shipped over there or 2) purchase US goods with the dollars we sent them. There are only 2 ways to use US dollars, invest in the US or buy US good! If the chinese are so cheap that they are hoarding US currency under their mattress with low yielding US bonds, hey all the better for us. But if US investments are no longer beneficial to them they have to buy US goods or services.

If I make furniture and I "sell" it to you for an IOU, and you make t-shirts, at some time I have to buy t-shirts with you. Sure, I may trade that IOU to someone on the way, but that IOU has to be redeemed to the t-shirt maker. If the IOU never gets used, that means the t-shirt maker got the furniture for free.

China is the furniture maker and the US is the t-shirt maker. If China ends up never consuming US goods with it, they we just sent them pieces of paper for all their stuff. Sounds like a pretty good deal to me.

And the analogy of spending on a credit card is not a very good one. The US lasts longer than people and the economy can grow to perpetuity (along with the debt).

Or, if you're China, you don't actually buy any goods or services from the US. You just wait until the US is desperate and buy their assets out from under them.

Still want to pretend you know everything about international trade?

What is wrong with China buying US assets? What is Chinese USD reserve? like $1.3 trillion? What is the USD money supply? $11+ trillion? Total stock market value? $20+ trillion? Total residential real estate value? $15 trillion?

China is a far way from buying our assets "out from under" us. And it's called equilibrium. When the Chinese middle class grows they will demand more US goods and services and the trade will balance in our favor in the future.

I don't pretend to know everything about international trade but I know enough to know internet armchair economists like you don't know ANYTHING about it.

What's wrong with the Chinese buying assets? Do you not understand the difference between buying a finished good and buying the means of production?

They're not going to buy Ford cars. They're going to buy Ford.

That huge sucking sound you hear is money leaving our economy that's not going to come back.

 

[JS80]

What's wrong with the Chinese buying assets? Do you not understand the difference between buying a finished good and buying the means of production?

They're not going to buy Ford cars. They're going to buy Ford.

That huge sucking sound you hear is money leaving our economy that's not going to come back.

So American companies are allowed to buy foreign companies but Chinese can't buy american companies? :roll:

So what are you so worried about? So what if a Chinese fund purchases Ford? How does it negatively affect us? How is foreign investment a negative?

GDP = C + I + G + NX

I = INVESTMENTS.

 

[mikedev10]

Originally posted by: JS80

but the IOUs are worth less than the goods the chinese gave us. and with their currency they are importing our inflation and exporting deflation to us. some guy in china is sacrificing so this place can keep churning. why continue to do so? why continue to finance our debt? when they stop how will we keep going? what about all those dollars - what would happen if they sent them all over here right now?? the fact is we don't want them to do that, we want them to keep sacrificing for us, and giving us goods while we give them useless paper. we hope they stick it in a vault never to see the light of day again. it has been going on but it will not be going on forever.

Yup, the IOUs are worth less...meaning we sold our dollars to them while it was high. Now they have to buy US goods and services and investments for cheaper because the value of their dollar holdings went down. Advantage USA.

yes, advantage usa - they got screwed. so why continue to keep getting screwed? they have lived beneath their means so we can live beyond ours - do you think this will continue on in perpetuity?

I don't think you still understand trade and currency. If there is a quick rush to redeem the dollars for something tangible, then the US GDP goes up. We increase our exports. EQUILIBRIUM. They can hoard all they want, but at some time they have to spend those dollars. US Dollars = US Goods.

yeh, we can give them all that stuff we make. except what we are best at making and exporting is inflation. i don't think you understand currency, what happens to the purchasing power of a dollar when the trillion we expect them to keep locked in a vault forever come back home to roost? us dollars = failed promises of equal productivity.

Look, while we are buying Chinese goods and sending them dollars, the Chinese economy is booming. When the equilibrium tips and it's time for the Chinese to buy US goods and send us back the dollars, the US economy will boom.

why continue to finance our debt?

What is the alternative to financing our debt? If they all of a sudden say, ok fuck you we don't want to finance your debt we'll stop buying treasury bonds, what will the Chinese do with the US dollar? Hoard it under their mattress? Keep it in checking?

THEY HAVE TO BUY US GOODS! That is how trade works! US dollars are good for 2 things US INVESTMENTS or US GOODS. If they are done investing and decide to buy our shit...it's a WIN WIN situation.

Remember the furniture maker and t-shirt maker? At some time he will get sick of stacking up his IOUs while the tshirt maker is enjoying his furniture. When that time comes his only option is to trade back the IOUs for the tshirts.

so the world figures out this stuff is rapidly approaching toilet paper, and they collectively buy a 500 billion harleys with their trillions of dollars. we get a wicked loss in purchasing power for each dollar, and nobody is left to lend money to a government that spends more than it takes in. so the fed just prints some money to make up deficits and some inflation steals the purchasing power out of all the existing dollars. we end up living below our means because we have been living above them.

your example fails because the iou is backed by a commodity. good example if our dollars were backed by gold, or we even at least really followed a strong monetary policy that just focused on protecting the currency.

your iou is worth 1 t-shirt. its purchasing power is 1 t-shirt.

usd iou is worth 1 usd iou. its purchasing power is 1 usd iou. its purchasing power is determined by the supply and demand for ious. supply is large and growing. demand is stagnant to growing much more slowly than supply.

 

[JS80]

yes, advantage usa - they got screwed. so why continue to keep getting screwed? they have lived beneath their means so we can live beyond ours - do you think this will continue on in perpetuity?

It's chinese culture to hoard money and be cheap. But once they realize that you can't just hold t-bonds and have to buy US goods, it will benefit the US. So no, I don't think it will continue on to perpetuity, but when the time comes it will benefit the US.

yeh, we can give them all that stuff we make. except what we are best at making and exporting is inflation. i don't think you understand currency, what happens to the purchasing power of a dollar when the trillion we expect them to keep locked in a vault forever come back home to roost? us dollars = failed promises of equal productivity.

"we are best at making and exporting inflation" i don't even know how to respond to that. Americans will benefit when Chinese start to consume more US goods. Our decrease in purchasing power will be offset by the demand in US goods. When the trillion comes home to roost? You mean when they start buying Fords? US exports: agricultural products (soybeans, fruit, corn) 9%, industrial supplies (organic chemicals) 27%, capital goods (transistors, aircraft, motor vehicle parts, computers, telecommunications equipment) 49%, consumer goods (automobiles, medicines) 15%

Currently only 6% of our exports goes to China. When the trade equilibrium tips in our favor that percentage will go up.

so the world figures out this stuff is rapidly approaching toilet paper, and they collectively buy a 500 billion harleys with their trillions of dollars. we get a wicked loss in purchasing power for each dollar, and nobody is left to lend money to a government that spends more than it takes in. so the fed just prints some money to make up deficits and some inflation steals the purchasing power out of all the existing dollars. we end up living below our means because we have been living above them.

Yes they will buy $500 billion harleys.

your example fails because the iou is backed by a commodity. good example if our dollars were backed by gold, or we even at least really followed a strong monetary policy that just focused on protecting the currency.

Having the IOU be floating makes my argument stronger. Let's say the IOU originally started off at 1 IOU = 10 tshirts. Now it's worth 5 tshirts TO THE FURNITURE MAKERS (decrease in value to the tshirt maker doesn't affect him). At the place of trade Tshirt maker owed 10 shirts, now he only owes 5. Advantage Tshirt maker.

 

[mikedev10]

well i guess the t-shirt maker should just fire up the laserjet and print his and his children's way into wealth then right?




i think this is what i believe about trade, and what you do not.

http://www.freerepublic.com/focus/f-news/1053684/posts

 

[imported_Baloo]

A billion? Most expensive movie in history.

 

[mikedev10]

i don't think my post reads as that the movie cost 1 billion to produce.

 

[JS80]

Originally posted by: mikedev10
well i guess the t-shirt maker should just fire up the laserjet and print his and his children's way into wealth then right?




i think this is what i believe about trade, and what you do not.

http://www.freerepublic.com/focus/f-news/1053684/posts

Here is where Buffett utterly fails understanding of trade theory:

So the Thrifts change strategy: Though they continue to hold some bonds, they sell most of them to Squanderville residents for Squanderbucks and use the proceeds to buy Squanderville land. And eventually the Thrifts own all of Squanderville.

He's assuming that the trade imbalance will perpetuate indefinitely. He's also assuming that our economy is so pathetic that China eventually earns enough to purchase a majority stake in the US. He does not forecast the shift in the trade balance when the Chinese middle class grows.

And even so, let's assume the worst case scenario. Let's assume that the Chinese somehow hoarded enough USD to equivalently buy half of all US assets. What happens when all of a sudden there is a rush to buy US assets? US asset prices go up, all US asset holders (majority americans) benefit. In fact, many can choose not to sell and just hold. The government can pass laws to restrict foreign ownership of US assets, which would cripple the value of the Chinese USD reserve.

We concurrently invested our surplus abroad, with the result that our net investment -- that is, our holdings of foreign assets less foreign holdings of U.S. assets -- increased

So Buffett thinks it's OK for US to invest in foreign countries but not OK for foreign countries to invest in the US? Lame.

His solution to balance the trade deficit:

We would achieve this balance by issuing what I will call Import Certificates (ICs) to all U.S. exporters in an amount equal to the dollar value of their exports. Each exporter would, in turn, sell the ICs to parties -- either exporters abroad or importers here -- wanting to get goods into the U.S. To import $1 million of goods, for example, an importer would need ICs that were the byproduct of $1 million of exports. The inevitable result: trade balance.

How is that any different than a tariff? It isn't. The only difference is that the tariff proceeds are going to private exporters. Democrats would yell "Corporate Welfare" and the global trading parters would get pissed and place their own tariffs.

Buffets goal would have been to increase exports while maintaining imports - but the exact opposites would probably happen; exports would remain stagnant while imports drop. Cheap imports drop = inflation. Well, at least he admits the biggest flaw:

There is no free lunch in the IC plan: It would have certain serious negative consequences for U.S. citizens. Prices of most imported products would increase, and so would the prices of certain competitive products manufactured domestically. The cost of the ICs, either in whole or in part, would therefore typically act as a tax on consumers.

This Buffett article further reinforces my view that he is an economic retard.

 

[mikedev10]

why is there a shift in trade balance when their middle class grows?

swfs are buying up american goodies now, and they seem to be getting fire sale prices not haha gotcha really high prices. and how would we benefit if they bought the shit out of everything at once and introduced a lot of money back into circulation that had been previously sitting around in reserves? if we put up protectionist policies what does that do the value/demand for the dollar? why ever buy our debt if all we are going to do is screw you multiple times for being a sucker to do so in the first place.

 

[JS80]

Originally posted by: mikedev10
why is there a shift in trade balance when their middle class grows?

swfs are buying up american goodies now, and they seem to be getting fire sale prices not haha gotcha really high prices. and how would we benefit if they bought the shit out of everything at once and introduced a lot of money back into circulation that had been previously sitting around in reserves? if we put up protectionist policies what does that do the value/demand for the dollar? why ever buy our debt if all we are going to do is screw you multiple times for being a sucker to do so in the first place.

Please name recent asset sales to swf's for fire sale prices.

 

[mikedev10]

well a stroll through the paper and you will already see what they are buying or thinking about buying, save any protectionist acts we may enforce. there is some rumbling about that unless they are foolish enough to invest in our insolvent banks. then come on in, swfs!

our assets are already cheaper due to the strength of their currency - the fire sale will come when this inflationary recession gets under way.

 

[nageov3t]

saw it tonight with the SO -- the movie itself was purely 'meh,' but I thought the town hall Q&A with Warren Buffet et al afterwards was pretty great.

it's inspired me to think that maybe I need to put more effort into my savings (you know, so they can be worthless with inflation). it did sorta put the hubbub over Iraq war spending into perspective, though, when compared to other government programs.

 

[JEDI]

wonder when this will hit DVD?

 

[Craig234]

Originally posted by: Deeko
Won't be seeing it. I think RP is psycho, and I despise all political movies like this. A libertarian version of a Michael Moore movie? Oh I'm sure that's fantastic.....

You make Paris Hilton look like a Nobel Prize winner. You 'despise' all political movies. You have sbout as much use for them as the proverbial fish has for a bicycle.

It really raises the question such a person so against political education spends time in P&N. I think pro sports are a terrible waste, but i don't spend a lot of time in NFL forums.

 

[ebaycj]

Originally posted by: JS80
This Buffett article further reinforces my view that he is an economic retard.

Come back to us and tell us this when you are the head of a highly prestigious, highly reliable investment company valued at $150B+. That is the point at which you will have earned the right to judge Mr. Buffett's economics.

 

[BansheeX]

JS80, what would happen if China depegged from the dollar and spent all 1.5 trillion of their dollar reserves? Who would come out worse? Them with their factories, savings, and appreciating currency, or us with our service jobs, debt, and sudden hyperinflation?

The fact is, the trade deficit is incredibly important. China basically traded us a lengthy consumption binge based on savings they loaned us in exchange for our factories and dollars. If the above scenario happened, they would go from exporting to consuming their own production with an appreciating currency. We would go from importing products to complete and utter squalor. With a depreciated currency, wouldn't be able to outbid for imports. With no domestic manufacturing, we wouldn't be able to replace those products. With no savings, it would take a long time to have anything to start building them.

 

[Deeko]

Originally posted by: Craig234

Originally posted by: Deeko
Won't be seeing it. I think RP is psycho, and I despise all political movies like this. A libertarian version of a Michael Moore movie? Oh I'm sure that's fantastic.....

You make Paris Hilton look like a Nobel Prize winner. You 'despise' all political movies. You have sbout as much use for them as the proverbial fish has for a bicycle.

It really raises the question such a person so against political education spends time in P&N. I think pro sports are a terrible waste, but i don't spend a lot of time in NFL forums.

You're a sad little man. I know more about politics than you. End of story, goodnight.