TCS Daily


How China Can Rule the World

By Bill Costello - March 29, 2010 12:00 AM

Martin Jacques' new book, "When China Rules the World: The End of the Western World and the Birth of a New Global Order", is causing controversy. Is it possible that China will "rule the world" in the near future? Perhaps, but only if it's able to successfully transform from an industrial-based economy to a knowledge-based economy, and then transform even further to an innovation-based economy.

China is off to a good start. It now has the largest higher education system in the world. Five of its universities are in the world's top 100.

University enrollment has more than tripled since 2000. More university degrees are awarded in China than in the U.S. and India combined. Over the past decade, annual awards of doctoral degrees in China have risen sevenfold. China recently surpassed the U.K. to become the world's second-largest producer of academic research papers—and is on course to surpass the U.S. by 2020.

China thwarts the stereotype that Asians lack innovation; the nation's rich history includes the invention of the compass, gunpowder, papermaking, and printing. "The Art of War", widely accepted as a masterpiece on military strategy, was written by Chinese general Sun Tzu around 500 BC. Sun Tzu's creative strategies have influenced many notable figures, including the first emperor of a unified China Qin Shihuang, Japanese samurai Oda Nobunaga, French emperor Napoleon Bonaparte, U.S. general Douglas MacArthur, Chinese Communist leader Mao Zedong, and Vietnamese Communist leader Ho Chi Minh. In addition to its popularity among military theorists and political leaders, "The Art of War" has also been embraced by business managers.

More than 60 years before Genoese explorer Christopher Columbus landed in North America in 1492, Chinese admiral Zheng He had already completed seven great voyages, sailing into the Pacific Ocean, the Indian Ocean, and the Persian Gulf. This was made possible by cutting-edge technology used by the Chinese to build Zheng's junks, which were four times larger than Christopher Columbus' largest ship.

Dissatisfied with traditional martial arts styles, Chinese actor Bruce Lee created his own: Jeet Kune Do. It combines the best techniques from Wing Chun Kung Fu, American boxing, French fencing, and grabbling to create a highly efficient and practical style. Lee is considered the most influential martial artist of the 20th century.

Not content to serve as factory to the world, the Chinese government has been making enormous investments in its universities and stressing scientific and technological innovation. If China—with 20 percent of the world's population and a rich history of innovation—is able to usher in a renaissance of innovation, then it could possibly "rule the world" sooner than you think.


Bill Costello, M.Ed., is a U.S.-based education columnist, blogger, and author of Awaken Your Birdbrain: Using Creativity to Get What You Want. He can be reached at www.makingmindsmatter.com.
Tags:
Categories:

64 Comments

Capitalist culture produces a creative and productive world
When the Chinese Emperor saw and heard what his explorers had found out there in the barbarian world he had all the maps and ships destroyed and ships sizes thereafter limited. This may yet prove to be the pattern China follows depending on its acceptance of information flow.. freedom of thought. Communism playin in the background is well suited to stunt human growth.The most free society may well be the leading wealth creating one. Of course the US will need to keep on its present course of giving up its freedoms to clear the field for China to make gains uncompetitively. India too may prove a force for both good and leadership. Capitalism not only feeds, clothes, houses and employes, it makes for a society that basically wants to be left in peace to persue personal lives and ambitions...

China's Revolving Historical Cycles
Basically, China has suffered from the same plague for thousands of years.

When true economic growth occurs, the coastal regions gain a lot of wealth relative to the inland regions. This has historically caused a lot of political instability. The central government has the nasty choice of allowing it to continue to happen and lose more power as a result, or clamp down on the growth...sometimes hard. This becomes more of a problem when foreigners get involved, as they have since Marco Polo's time. The rich coastal provinces find that they have way more mutual interests with the foreign trade than they do with Beijing. This happened in the first half of the twentieth century up until the Communists clamped down in 1949 and onwards.

And it is happening now. Beijing issues directives but the local party hacks in Shanghai ignore them.

Come to think of it, the last quarter of the 19th century was no picnic either for the Chinese central government.

This has happened over and over again throughout Chinese history. It's like a curse. And until they can figure out a way to break it, they won't make it to superpower status no matter what all the ignorant Sinophiles write.

China is headed for either a break-up or a general weakening of the central government that will be just as bad, or the central government will retreat and clamp down. Either way, dreams of becoming a superpower will be dashed.

China runs the world now
To debate just who is on top, whether China or the US, you have to choose a parameter for measurement. If it's who has the most guns and bombs, that would be the US. But who has the greatest ability to earn real money? The answer to that is not subject to debate.

First I'd like to suggest that China has no great ambition to destroy their biggest cash customer. It's true, they do have an increasingly large national defense establishment. But they're growing that area for the same reason we've been doing so: such a course of action affords certain people great wealth and power.

And, since there's no way their publics would allow such a waste of their own earnings without some great shadowy threat being shoved in their faces, I think we'll see each of them pointing toward the monstrous threat posed by the other.

But that's the kind of thing policy makers on either side are hardly likely to take seriously. Really. They've gotten to where they are today by being a little brighter than the average light bulb.

Meanwhile, how do we 'defeat' the Chinese at their own game? I would suggest we work toward creating a positive trade balance-- one where we sold more US-made goods to the world than we bought from them. The dollar would return to health and we could start paying down our debts from our cash receipts.

Agreed?

You sure about that?
Considering what's been our experience over the past twenty years, would you in your expert opinion say that China was the one who turned its back on the world and refused to enter into trade relations with foreigners?

And would you also say that it was the USA who acted in a capitalist manner, by creating wealth through manufacturing and trade? If not, how do you figure that's what the two countries will be doing in the immediate future?

Your final comment is "Capitalism not only feeds, clothes, houses and employes, it makes for a society that basically wants to be left in peace to persue personal lives and ambitions..." Wouldn't that apply most clearly to the China of today?

Forces of government control vs free market productivity
The danger to China is its communist left and its nomenklatura (burocrats) exercising the powers of control over others they have and have represented. So far they are holding back, but for how long?
Ideological motivations against individualism and the differences it produces are a large piece of what the left, since the French revolution, Hitler Mao Pol Pot Stalin and Lenin call 'purpose' and have sought to destroy and have so far failed to do on a world scale... Largely, these days thanks to American resistance, thank God.

Wait a minute...
...First you scream and castigate the Evil Bankers on Wall Street for YEARS but now cede to the Chinese that they wins hands down when it comes to making money?

China excels in producing real goods and services, but not when it comes to making money. No export dependent economy does, really. That is why they E-X-P-O-R-T.

And the Chinese used unsterlized interventions to keep the exchange rate the same. They would immediately send back the dollars earned (minus those they needed for their own imports from the world) to the US sovereign debt market while creating the appropriate amount of yuan for the earning exporter to deposit at their local bank. Thus demand for dollars versus yuan and vice versa were in synch.

But they still created a lot of yuan, and the banks lent them to people/projects for shakier reasons than ours issued 'liar loan' mortgages.

So, the average percentage of bad loans in the portfolio of your typical Chinese bank is now over 50%, because they wasted it on their own bubble -- too many factories but also in real estate, especially. Their books are worse than even ours is.

Translation: They are even more dependent on us to keep the cash flow coming in to prop it all up than they ever were before.

"Meanwhile, how do we 'defeat' the Chinese at their own game?"

Why would we want to? We trade totally worthless -- and getting more and more worthless day after day -- pieces of paper (nobody earns 'real' money anymore, Roy. But you never can grasp that fact) for real goods and services from the Chinese. Why would we want to end that awesome scam? That's nuts.

Not that it won't likely end on its own. But until then, the party goes on. That is the American Way.

"The dollar would return to health and we could start paying down our debts from our cash receipts."

How would we 'pay down our debts from our cash receipts' from exports, Roy? The debtors in this country aren't the same as the exporters. Company X exports 100,000 widgets to China for Y amount of dollars doesn't help Bankrupt Sam in D.C. pay its debts, does it?

The government will get some of that in the form of taxes but so little compared to the debtload as to make the difference meaningless to even discuss.

There should be a separate sub-field of anthropology just to study the world you live in, Roy.

Theorizing about China
"The danger to China is its communist left and its nomenklatura (burocrats) exercising the powers of control over others they have and have represented. So far they are holding back, but for how long?"

It looks to me like you're so in love with your Grand Theory that you want to apply it to everything. China in fact had a revolution in thinking twenty years ago, when they figured out that Marxist economic theory wasn't making the economy go. So they tried a free market approach, encouraging individual initiative and allowing bright entrepreneurs willing to take some risks to get very rich.

Now they have a lot of millionaires and even a few billionaires. They didn't do that by being Marxists.

The people in power are the people in power. That's about all you can say about them. They're pragmatists who intend to stay firmly in control of the culture and call all the shots. But they're capitalist to the core. That's what's making them prosper.

In fact if there's one really true statement you can make about them it's that they have NO discernible ideological motivation. They're 100% pragmatist.

But you say "So far they are holding back, but for how long?"

Holding back from what? They've found a formula making everyone rich. It makes those at the top look good and it keeps those at the bottom from rebelling. So what impulse to change course could they possibly have?

What do I mean by 'we'?
"...First you scream and castigate the Evil Bankers on Wall Street for YEARS but now cede to the Chinese that they wins hands down when it comes to making money?"

You have a funny way of thinking. Both thoughts are accurate but one does not preclude the other.

The problem with Wall Street's evil bankers is that they play a zero-sum game. They are brighter than the common lot. So they make fabulous sums of money in ways that often weaken this country's grass roots economy. They do so by perpetuating a bubble-and-bust mode from which they emerge each time, unscathed. Meanwhile those of us who are not on the inside track lose trillions of dollars in wealth to them.

Contrast this with China, who makes its profit in the noblest of ways-- by giving good value, for which people under no compulsion to trade with them want to give up their money. That's about as good a version of capitalism one can find anywhere.

In fact I can find no way anyone could disagree with the nobility of their approach. It's certainly not their fault we're so bad at being us. It's like a bartender serving a chronic lush. The guy keeps putting his money on the table-- so what's a guy to do? You keep serving him.

2. "How would we 'pay down our debts from our cash receipts' from exports, Roy? The debtors in this country aren't the same as the exporters. Company X exports 100,000 widgets to China for Y amount of dollars doesn't help Bankrupt Sam in D.C. pay its debts, does it?"

Let's examine two versions of the pronoun 'we'. First, let's refer to 'we, the American taxpayer'.

We owe more money than we can possibly pay to cover Uncle's debts. But if we have orders coming in to build and sell more widgets, more of 'us' can be employed and pay our taxes in to Uncle. We even have money left over so we can support our families. And the company we work for makes a profit, on which it also pays in taxes. The national debt gets paid down faster and we gain a valuable reputation for being more responsible.

Now how about 'we, the American wage earner?

By mending our trade imbalance we transform ourselves from being unemployed victims of an unbalanced economy. We can pay our bills. We avoid losing our homes and autos, keeping those industries from collapsing. And we do so without recourse to entering into fresh debt. We do what Grand Dad used to do: pay cash instead of putting it on the tab.

And we do not constitute a burden on the public treasury, by requiring emergency payments in areas like unemployment or social services.

The debtors and the exporters are the same. We all work in the same enterprise. And central to our success or failure is our ability to work at a profit, not an eternal loss bankrolled by strangers. Whether one measures our success by the direction of our trade balance or by the amount of public debt, WE are the ones ultimately responsible for whether we sink or swim.

Governments that don't hold back a-historical
The US was founded by thinkers who did consider the state as a growing threat and so needing hindrences in Consitutional brakes on power and control.
Leftist doing what they are doing here and anywhere else is all I have warned about. Jefferson also considered these types perrinial threats.
Leftism is not capitalist to the core and so will one day reassert their grand vision of control... killing the golden goose.
The communist philosophers over there speak of communism re-emmerging after the capitalist stage is done still. Burocrats are not so patient nor idealistic and are subject to justifying their existences and jobs by the usual exertions we see through history and around the world. That may be enough to derail things or encourage a revolt of the clerics but it would move them into the phase we see occuring here and amongst the same types.

You mean it's better just to borrow and spend?
This is one I really have a hard time figuring out: "China excels in producing real goods and services, but not when it comes to making money. No export dependent economy does, really. That is why they E-X-P-O-R-T."

So you're saying an export model, where you (a) employ millions of people instead of letting them go hungry by (b) allowing entrepreneurs to accumulate and deploy capital in the free pursuit of personal profit, and then (c) accumulate enough of this capital that you can afford to comp your customers with the cash they just gave you, thereby allowing them to enter your thrall, is inferior to a business model that only (a) makes cheap debt available so people can buy more stuff made by someone else, thereby (b) hollowing out both your employment base and your revenue base and (c) putting your entire enterprise into the hands of the moneylenders you owe?

I don't think I would accept any free advice from you. This sounds pretty bad.

As for the worth of the current US dollar, I believe the value of any currency is determined by its users. So long as they continue to accept it, it has value. When the day comes that it doesn't, it won't.

But a tiny number of determined gold bugs switching to gold won't help a bit. If the dollar collapses from distrust, China, the US and most of the rest of the world will go down with it. That's why that dire prospect hasn't happened yet-- and may never.

More Roy Fantasy Economics
"But if we have orders coming in to build and sell more widgets, more of 'us' can be employed and pay our taxes in to Uncle."

Again, won't make a difference. And Uncle Sam doesn't care where it gets its taxes, either.

"more of 'us' can be employed and pay our taxes in to Uncle. We even have money left over so we can support our families."

So? Why are exports so special for that? Esp since a balanced trade account REQUIRES a likewise drop in consumption, which will cause job losses that will equal or exceed what the export industries will create.

"And we do not constitute a burden on the public treasury, by requiring emergency payments in areas like unemployment or social services."

Tell that to all the construction workers and mortgage brokers out of work. Their jobs aren't coming back.

"The debtors and the exporters are the same"

No, they are not. But of course you can't see that.

"We all work in the same enterprise."

No, we don't. Where do you come up with this collectivist BS, Roy? I mean, really?

"And central to our success or failure is our ability to work at a profit, not an eternal loss bankrolled by strangers.."

Issuing green pieces of paper or bits and bytes in the Fed Funds computers for real products is not a loss, Roy. It is one of the most profitable scams in history.

The only folks who will take the loss are the Chinese.

"Whether one measures our success by the direction of our trade balance or by the amount of public debt, WE are the ones ultimately responsible for whether we sink or swim."

Tell that to the folks in Iceland who are strategically defaulting en masse...and to the millions of Americans who will do so with their mortgages over the next four years or so. You really don't understand debt and money, truly.

When you owe the bank $1,000 and can't pay, then you are in trouble. When you owe the bank $100,000 and can't pay, then it is THE BANK that is in trouble.

That's what it all boils down to. Period. Every single time.

If the Chinese could 'sell' worthless bank notes for real goods, they'd do it in a heartbeat.
But they can't, so they export to get the money we issue.

We aren't in China's 'thrall'. You have this bad habit of crafting this imaginary world in your head and assume that is reality. It isn't.

"If the dollar collapses from distrust, China, the US and most of the rest of the world will go down with it. That's why that dire prospect hasn't happened yet-- and may never."

hahahah...here's a tip for you Roy: China will go down before we will.

"business model that only (a) makes cheap debt available so people can buy more stuff made by someone else, thereby (b) hollowing out both your employment base and your revenue base and"

Our employment base is hollowed out because of the ongoing socialist War Against Productivity & Prosperity. As long as our government continues to raise the cost of all productive inputs while simultaneously punish capital, that will be the case -- regardless whether or not we export more than we import or not.

You just twitch around with all the buzz words w/o a clue how you contradict yourself or how you can't tell the difference between apples and oranges.

They're not that dumb
"The US was founded by thinkers who did consider the state as a growing threat and so needing hindrences in Consitutional brakes on power and control."

Not so. Not at all. The United States was formed by people who understood that all those smaller states did not need to be dissolved, or to be kept weak and ineffectual. No indeedy. What they really needed was to be united under a larger, superior state. They wanted state power to be large enough to be effective in a world composed of large competing superpowers-- like France, Germany and Great Britain.

At the same time, they wanted to create a newer version, an improved state, a State 2.0. One in which it would be very difficult for a single group to consolidate dictatorial power. So they conceived the system of checks and balances, to replace the old style rule by cliques gathered around an autocratic king. That way they could retain ultimate control by the citizens themselves. In other words, they created a strong federal government that was also a working democracy.

You went to public school, I'm guessing. They really haven't done a very good job in teaching either civics or history to young people. Their brand of instruction gives rise to the creation of generations of unfulfilled scholars-- kids who fall under the spell of the first serious book they come across-- whether it's written by Karl Marx, Milton Friedman or Ludwig von Mises.

And so, otherwise bright young people fall under the spell of single-theory ways of interpreting societal evolution-- instead of understanding the whole width and breadth of history in all its contradictory complexity.

So, according to your theory, the Chinese MUST still be communists. And our own Founding Fathers MUST have been anarcho-minarchists. Because those ideas fit your theories. And there can be no other interpretation.

And it must follow, if we first posit that this crazy one size theory fits all, that as the Chinese are communists, they MUST intend one day to kill the golden goose of capitalism that's making them rich and powerful. Because that way, your unchallenged mental diagram sustains its supremacy above objective observational analysis.

So that is their destiny-- even though the Chinese government is now succeeding in controlling and directing the efforts of its herd beyond its wildest imaginings. They've found what the West found back in the days of the Enlightenment-- that an absolute monarch who holds utter sway over a herd of abject peasants stays much poorer than would a moderate, seemingly kindly old ruler who is overwhelmingly popular among a population of prosperous burghers who have no reason to challenge authority.

That's why authoritarian, dictatorial monarchies have been out of date since the fall of Nicholas II... other than in a handful of primitive backwaters like Zimbabwe and Cuba. The really hip governments all like to encourage their citizens to become rich, thereby enriching the empire immeasurably more efficiently.

Anyway that's the logical view. But you're telling me that the rulers of China are so dumb that once they arrive at the cusp of controlling the entire planet, by the ploy of gaining control over everyone's money, they must inevitably destroy their chance at superpowerdom... by wrecking it all and following the philosophy of some outdated and soundly disproven 19th century German philosopher.

As folks like to say around here... uh huh.

I think what may be fooling you is that China's now in transition. They've inherited one billion poor, feudal peasants, and they're trying to figure out the best way to transform them into entrepreneurs, managers and factory workers (as the other 300 million Chinese have already become). Meanwhile there's a collection of minority groups with aspirations for political independence-- Uigurs, Tibetans and the like, plus the educated liberals-- and these must all be severely repressed before they gain any serious degree of political control.

So at the same time, current China must be as politically repressive as it is economically progressive. In their own view, of course. The pigeon hole they fit into is a unique one, not fully expressed by any single label.

You could still save your somewhat tattered case for the eventual Triumph of Communism, though. You could provide us with the name of one of these guys: "The communist philosophers over there speak of communism re-emmerging after the capitalist stage is done still."

Make it someone influential. Someone Deng Xiao-Ping gets all his advice from.

The war on prosperity and productivity
The move to create middle-class entitlement mentalities will also lead to more progressive sand in the gears of progress as it bankrupts us all and corrupts whole sectors of the populous. Progressives will then blame the productive sector and tax and regulate it further for creating all these impediments to progressivism.
Limited government ideas such as our Founding Fathers will either find a place in the media and educational establishment, be explained and taught, or we will go into steep decline and class warfare. Declining standards of living and opportunity are simply the tradeoffs the left offers societies accepting that vision.

What do they really want?
In the first place, China doesn't have to exchange their products for foreign-made goods. They can already produce all the goods they need for their domestic market. What they're really good at is factory production at unbeatable cost.

So what do they want, then? They're exchanging their own locally made consumer products (which, having over a billion potential workers as their natural resource, they essentially make at no cost) for global politico-economic power. It seems like a really good exchange, from their point of view. It costs them nothing, and gains them control over the entire planet.

2. "Our employment base is hollowed out because of the ongoing socialist War Against Productivity & Prosperity."

Yadda yadda. We're not competitive, that's all. Suppose all the unions were crushed, and industry regulation went back to the laissez faire days of the 1880s. Every law got wiped off the books. We still couldn't compete with skilled Asian factory assemblers making $160 a month. Plus, the citizenry would revolt-- for real this time. We'd have a brutal depression on our hands, so bad that instead of 25 million unemployed there'd be a hundred million. All with the right to own guns.

3. Capital is very far from being "punished". In fact it is being concentrated. How come Wall Street is in control, if your theory holds true that the commies have taken over the country? How come the top handful of traders there are still pulling down a cool one billion a year?

And how come they graduate from being succesful traders and fund managers to members of the White House staff? Have you ever done a google on Goldman Sachs plus Obama administration?

I didn't make it simple enough
Me: "But if we have orders coming in to build and sell more widgets, more of 'us' can be employed and pay our taxes in to Uncle."

You: "Again, won't make a difference. And Uncle Sam doesn't care where it gets its taxes, either."

I'm at a loss to figure out this kind of thinking. Are you telling me that Uncle Sam doesn't care one wit whether a person is unemployed and on the public dole, or whether he's employed and paying in taxes on a good salary, because either way he gets the same amount of tax revenue?

Maybe I should have made how this works clearer. Take Citizen A. He loses his house, goes bankrupt and stiffs his debt holders. He goes on relief, causing the federal and state governments to spend money on his unemployment benefits. His family goes on food stamps. From a fiscal point of view, the guy's a net loss.

Now comes Citizen B. He keeps his job, on which he pays taxes at all levels of government. He buys more stuff, keeping his neighbors employed. He keeps his home, keeping the mortgage and real estate industries healthy. He keeps values high for every sector of the economy-- AND he provides the government with a source of income.

Do you get it now? Even more simply, A equals bad. B equals good.

2. Iceland. They are not exactly "strategically defaulting". They are flat broke. They've got zippo. Nada. The Big O. They invested in the American economy, thinking it was safe. But they forgot that the shell game always works out better for the sheller than it does for the shellee.

3. I'm thinking that in your view, everything's working out fine so long as some small number of us are able to continue extracting wealth from the efforts of the rest. And any effort to reverse that process amounts to being un-American. Do you by any chance work on Wall Street?

An unbalanced equation
This comment seems illogical:

"Why are exports so special for that [to correct a trade imbalance]? Esp since a balanced trade account REQUIRES a likewise drop in consumption, which will cause job losses that will equal or exceed what the export industries will create."

You can correct a balance of trade deficit in either of two ways. Either you can restrict your consumption to fit your pocketbook, OR you can make more money. The latter would be a preferable outcome.

If you solve the equation for the general public's benefit, not just the benefit of the fortunate classes, you figure out at once that the best answer is not to let every area of the economy continue to contract, but to start something moving again. This was the contribution JM Keynes made to fiscal sanity.

So, as I've said many times before, you give your unemployed concrete workers all of America's broken bridges to repair. That brings the concrete factory back to life. It employs tens of thousands so their families dont end up on relief after having stiffed their creditors. It transforms welfare recipients into taxpayers.

AND, through the ripple effect of mutiple transfers of cash, it enables the people they buy from to pay taxes again, on the same dollars. And when they spend those dollars, more taxes yet are paid on them. So that after only five changes of ownership on these federally supplied dollars, around eighty cents has gone back into the money bin.

That's a really good return on investment. One thing I used to analyze before I retired was the amount of time it took for a capital investment to pay for itself. And my general rule of thumb was that a payback time of two years made a given course of action an excellent investment. Most companies would be happy with a 3-4 year payback. Not me.

In two years time, a government-issued dollar paid out directly in the form of wages comes back home in the form of taxes, with interest. And that's a fact.

Always forgeting individuals.
The Chinese are discovering they have had to compete for workers. Raising salaries, improving benefits to attract workers.
Now that they have started down this path, their people will revolt if the state tries to keep them poor slaves.
A Chinese company just bought Volvo. One reason is the demand for luxury cars is growing in China and the Volvo brand and technology could launch a new luxury brand.

Chinese prosperity
"The Chinese are discovering they have had to compete for workers. Raising salaries, improving benefits to attract workers. Now that they have started down this path, their people will revolt if the state tries to keep them poor slaves."

Very good-- you do read the news.

You could have added that the State, not being staffed by a bunch of dumbbells, makes no attempt to "keep them poor slaves". It would not be in anyone's best interest for them to attempt to do so.

Please don't forget that the Chinese State is very much like every other state in one important respect: they are trying to develop their nation in the very best way they know how. So should we be surprised that they're managing their collective enterprise so well that there's now a rising level of prosperity in China?

Here's a good article from 2006, a couple years after this labor shortage first manifested itself:

http://www.businessweek.com/magazine/content/06_13/b3977049.htm

Bureacratic tendencies and statist envy drives some ideologies
Our Founders were not interested in a power weilding unified system ruling beyond Constitutional enumerated rights, or in ruling the states or violating the tenth amendment, or establishing a democracy,but a Republic and a Federalist one. That sentence addresses most of your dogma and misunderstandings I hope. Democracy was the French Revolutions gig.. not ours... hence its progressive aims and destructive end.
Progressives have envied the centralized controls of the soviets and facist failed experiments and don't seem discouraged much today. Recharaterizing our sytem to a a central controlled fascist one.. 2.1 keeps Obama and the Dems busier and more open about it nowadays however.
As for those falling under the spell of Marx.. I have seen quite a few.. I too blame the unionized public education system and their miserable record, which seems incapable of challenging those ideas or impulses and seem themselves to favor central control to competition and excellence there as well. Perhaps this too is a bureaucratic impulse to protect and grow the monster they see as their benefactor. Same as the chinese communist parties and their attendent bureacracies.

Here is an excerpt from an expert in the communist's teetering position there and the money angle that may drive them to desperate measures... for which the golden goose is secondary or further down their list of concerns.

So far, the real glue that has held the CCP together is a vast patronage system that has been underwritten by a long period of economic growth. The regime has used its financial resources to balance domestic interests, satisfy different constituencies, and purchase the contingent support of China's social elites. But this patronage system is extremely expensive -- administrative expenses alone consume more than 20 percent of China's government budget, and over 40 percent of China's GDP comes from fixed-asset investments such as factories and warehouses -- a sector that is state-dominated and stuffed with pork. In other words, China's nonideological ruling elites have stuck with the party because it has been paying them off. But when economic hardship ends the easy handouts, the elites' support and loyalty to the system can no longer be taken for granted.
http://www.foreignaffairs.com/articles/64862/minxin-pei/will-the-chinese-communist-party-survive-the-crisis?page=2

and yet more Roy escapades from reality
"I'm at a loss to figure out this kind of thinking. Are you telling me that Uncle Sam doesn't care one wit whether a person is unemployed and on the public dole, or whether he's employed and paying in taxes on a good salary, because either way he gets the same amount of tax revenue?"

No, because your point was that exporting was somehow more valuable an economic activity than anything else, so that there would ooodles of money coming in.

But as I pointed out -- and you are still blind as a bat to see -- the more we export and the less we import means the less we consume, period. And millions of job exist for the consumptive industries in our economy that would get wiped out and not get replaced by enough exporting jobs.

Oh, and it still has nothing to do with the national debt. But you can't figure that out, too.

"Do you get it now? Even more simply, A equals bad. B equals good."

It's all about net aggregates. If there are too many As and not enough Bs, it is a net loss.

"They are not exactly "strategically defaulting"...uh-huh. Nice planet you live on. Totally at odds with this little thing like actual facts and reality. Sheeesh.

Icelanders have voted TWICE to tell the bankers to go to hell, Roy. Good for them.

Oh, and it still proves the whole point of why I brought up Iceland:
When you owe the bank $1,000 and can't pay, then you are in trouble. When you owe the bank $100,000 and can't pay, then it is THE BANK that is in trouble.

"I'm thinking that in your view, everything's working out fine so long as some small number of us are able to continue extracting wealth from the efforts of the rest"

Some SMALL numbers of us? Try the entire friggin country, Roy. All 300+ million of us. We all benefit from the 'exporting worthless pieces of paper for real goods' scam. All of us.

Being the issuer of the world's reserve currency gives us massive leeching rights, Roy. But since you don't understand the fundamental concepts of money, you never will get that.


Welcome to Roy's Export Utopia!
"You can correct a balance of trade deficit in either of two ways. Either you can restrict your consumption to fit your pocketbook, OR you can make more money. The latter would be a preferable outcome"

No. Because trade involves goods and services with money only being the medium of exchange involved. Making more money won't change that fact.

You are talking about balancing TRADE right? Or have you been wasting my time these last few posting because you can't grasp the above concept?

To balance trade, the side that is the net importer has to consume less and export more while the net exporter has to export less and consume more. Period.

Sheeeez!

"So, as I've said many times before, you give your unemployed concrete workers all of America's broken bridges to repair. That brings the concrete factory back to life"

Really? How does fixing bridges export anything? We export the bridges after we fix 'em, Roy? Unbelievable.

Will you please stay on topic?

"In two years time, a government-issued dollar paid out directly in the form of wages comes back home in the form of taxes, with interest. And that's a fact."

Yeaahhh...like it has for all that stimulus projects Obama has been spending...on road work and bridges even!

hasn't worked yet, Roy.

And less consumption means less consumption. Not just less imports people buy at Walmart but less consumption over all. Welcome to Roy's Export Utopia!

No Subject
" China doesn't have to exchange their products for foreign-made goods. They can already produce all the goods they need for their domestic market. "

Then why don't they?

And the statement "China doesn't have to exchange their products for foreign-made goods" is total baloney too. Where do they get their oil, wheat, beef, grain, rice and industrial chemicals and raw materials to feed their industrial machine? From the rest of the world.

Where to start?
You are correct in this statement: "Bureacratic tendencies and statist envy drives some ideologies". HOWEVER: China is demonstrably not ideological. It became obvious by the late 1980s, when they said they would depart from strict Marxism and pursue the capital formation-private enterprise model of development. They are pragmatic. They do whatever works.

Which in fact has been a central aspect of the Chinese character for the past several thousand years. China is a nation of successful merchants.

China is also historically a nation of bureaucrats. However that trait applies to nothing in this conversation. We're talking about development models and geopolitical strategies. Such concepts are alien to the bureaucrat.

"Statist envy"? I'm afraid this is some more of your conditioning manifesting itself. Likewise, it does not apply to the discussion.

"Our Founders were not interested in a power weilding unified system ruling beyond Constitutional enumerated rights, or in ruling the states or violating the tenth amendment, or establishing a democracy,but a Republic and a Federalist one. That sentence addresses most of your dogma and misunderstandings I hope. Democracy was the French Revolutions gig.. not ours... hence its progressive aims and destructive end."

The first part is utter claptrap. The entire pursuit the Founding Fathers were engaged in was building the federal experiment. Such an ambitious attempt does imply some sort of power being assigned to central hands. So you're wrong there.

Having had an obviously inadequate grounding in this (again, I blame your middle school and HS history teachers for this) I guess you missed the central debate between Jefferson and Hamilton. The whole idea, as expressed in our Constitution, was to create a government answerable to the people. Which is to say, a democracy. They differed on who was to be included, with Jefferson wanting weak governing structures and Hamilton preferring strong ones. What we have at present is a relict of the compromise that was arrived at by all representatives present at the beginning.

You will also notice, if you should trouble to pursue the numerous papers that were drawn up at the time, the frequent use of the word DEMOCRACY. That should have tipped you off as to exactly what they were all discussing. If you have any spare time, try googling Jefferson vs Hamilton. See what we're all about.

The French Revolution was a very different thing. It was a direct precursor of the Russian Revolution, involving a small number of revolutionaries overthrowing the state by precipitating an ultraviolent class war. The only elements these two revolutions held in common were (a) idealism in the service of Man, not God or State, and (b) an intent to start anew, owing nothing to traditional political structures.

"Progressives have envied the centralized controls of the soviets and facist failed experiments and don't seem discouraged much today."

Couldn't be any further from the truth. Maybe if your definition of 'progressive' included Mussolini.

But if you confine yourself to those of us who self-identify as being progressive, you will find us all at the opposite end of the spectrum. That's exactly what we're NOT about. Maybe you're confusing us with 1960s-style liberal Democrats. Or guys like Richard Nixon, who 'forced' things on us like the onerous Clean Air Act. Would that be one of your "facist failed experiments"?

Everybody in the land wants some specific kind of place he can call his kind of nation. It's no more appropriate to say that the progressives want to force you to live their way than it is to observe that you and your kind want to FORCE us all to tolerate guns in the community, and polluted skies, waters and lands from a laxity of controls on industry, or severe sanctions against being able to terminate one's own pregnancy without interference by an oppressive State.

So quit it. We're no more intolerant of you than you are of us. And everybody would, or at least should, be happy if the other side doesn't start telling them how to live their lives-- or trashing the planet they both have to share.

Despite that, I'm thinking the only thing that will satisfy you and yours is total victory-- where the other side gets nothing. And that's a counterproductive stance. Ten thousand years of human history shows us that it never happens like that. Let a generation go by and those you defeated in bloody fratricide come back to ruin your life in like kind.

Let's grow up and tolerate one another. There's room here for both of us, if we broaden our outlooks and learn to tolerate differences.

However there is one thing that's non-negotiable. When the centralization of capital gets to the point where the rich are only getting richer while the poor grow more desperate, some counterforce is needed. We are only free morally to enrich ourselves as individuals once everyone's most basic material needs have been met.

It's a reasonable position. Accept it and you can be as free as you please.

One-party rule under threat?
I'm reading your Foreign Affairs article with some interest. First, it's interesting that you're reading the house bible of American Statist foreign policy.

But second, I think your interpretation of what the guy's saying goes well beyond his intention. He begins thus:

"If popular unrest is not a true threat to the party's continued rule, then what is? The answer could likely be disunity among the country's elite. Those who talk of China's "authoritarian resilience" consider elite unity to be one of the CCP's most significant achievements in recent decades, citing as evidence technocratic dominance, a lack of ideological disputes, the creation of standardized procedures for the promotion and retirement of high officials, and the relatively smooth leadership succession from Jiang Zemin to Hu Jintao."

There's one basic observation we can make about autocratic, one-party states. And that is, the preserve their rule by imposing a unified party line on the peasants and workers below, while behind the scenes there's a lot of factional infighting going on.

Periodically one clique will replace another. Mao, for instance, quickly became ancient history, as did the Gang of Four who stuck with him. And there's nothing to say that Deng will not some day be replaced by some new consensus-- although at present that doesn't seem at all likely. Deng and Hu have been the most successful (and popular) rulers they've had since the First Emperor, Shih Huang-ti, back in the first century AD.

However if the current crowd on top ever does get replaced, the likelihood is that it will be by another, similar, ruling clique. You'll still have a ruling party, only the party will have changed.

Given the character of their system it's unlikely that anyone will EVER decide to share power voluntarily, by opening up the Chinese state a multiparty system and giving the citizens the vote. It's alien to their culture. Such a democratic revolution could only come from below. And below, right now, there is no popular sentiment for forcing a revolution on the ruling class. People are happier with money and no political freedom than they would be with political freedom and no money. Or, needless to say, dead or in prison.

So who or what comes next, down the historical pike? They may keep the name of the party unchanged but the policy new, as happened after the Gang of Four was deposed. It was still called the Communist Party-- but it was no longer Marxist. Or, they may decide to give it some new name but keep the policies the same. They might, for instance, have a soft revolution in the name of the People's Democratic Party (albeit with no democratic element). Or the new generation might choose to call themselves the Progressive Party.

One name change is unlikely: they will not be using the Nationalist label. :)

IMO you put far too much store in the name. It really doesn't matter. The policy does matter-- and I'm thinking China will have gently autocratic one-party rule and laissez-faire trade with the world, as their basis for prosperity and stability, for the forseeable future. The patronage system described by Minxin Pei seems to be a very stable and satisfactory one.

At some distant point, when stability begins to become undone, we'll see the signs. Right now we don't.

Meanwhile their leaders will continue arguing amongst themselves while presenting a united front to the world. And this approach actually works much better for them than a two-party system featuring total opposition, gridlock and stasis works for us. And this statement of the author's is as true as it ever was:

"The current Chinese leadership is a delicately balanced coalition of regional, factional, and institutional interests, which makes it vulnerable to dissension. To most Western eyes, China is blessed with strong, capable, and decisive leaders. But to the Chinese leaders themselves, the situation looks somewhat different. Their resumés are remarkably similar, as are their records as administrators. No single individual towers above the others in terms of demonstrated leadership, vision, or performance -- which means that no one is beyond challenge, and the stage is set for jockeying for preeminence."

Bad logic
You lambaste me at length for refusing to concede this point:

"To balance trade, the side that is the net importer has to consume less and export more while the net exporter has to export less and consume more. Period."

Clearly not so. You can correct a trade imbalance EITHER by buying less stuff OR by selling more stuff. You don't have to do both at the same time.

Right now we're buying less stuff. China still wins, they're selling more to themselves and to others with bucks in their pocket. They have a robust manufacturing sector.

But this hasn't helped us much, because we do not. Even though we're buying less we're not selling much. So the result is not prosperity but a jobless recession.

Problems with the Euro might well give us a fortunate bounce. Then we could sell more stuff. And then buy more stuff-- because we'd have jobs again.

I really don't see the point of your obstinacy. Certainly you realize you've got it wrong here-- yet you persist.

And the hook you choose to hang your coat on is a petty shade of distinction over the word 'trade'. Now I'm sure you understood when I said that we could decide to "make more money" I was referring to selling more stuff to others-- didn't you?

Sure you did. Then why try to obfuscate? It's not like we're arguing before a jury and you can baffle them with BS. It's just you and me. And I can see you plainly.

So let's continue:

Me: "So, as I've said many times before, you give your unemployed concrete workers all of America's broken bridges to repair. That brings the concrete factory back to life"

You: "Really? How does fixing bridges export anything? We export the bridges after we fix 'em, Roy? Unbelievable."

We weren't just talking about our trade deficit. We were talking about the whole enchilada, including the federal debt. And my comment went toward employing more people, so they could pay more taxes, so the government had more revenue, so the Debt began to come under control. Due to the multiplier effect, one dollar spent correctly in being paid out in payroll, brings back more than one dollar within the following two years. And while it's out there it does good work.

As for the approaches taken by the current administration, they're poor ones. They haven't worked and can't work. I do not defend them as they haven't created many jobs, while still being very expensive.

Your counsel to the nation, on the other hand, is just for everyone to tighten their belts and start eating less. Together we can do it. Who needs jobs? And I'm saying that's a less satisfactory outcome-- although I'll concede that according to your damaged ideology, it's the only response possible.

Tell me about it
Me: " China doesn't have to exchange their products for foreign-made goods. They can already produce all the goods they need for their domestic market. "

You: "Then why don't they?"

They do. China imports a few luxury items like American autos because they like the brand names. But they don't have to. Most items in Chinese markets are locally made. They are self-sufficient, unlike ourselves.

Both emergent China (the 300 million with good jobs) and back-country China (the peasants) are finding more cool stuff to buy nowadays. As consumers, they all seem to be pretty happy right now.

You: "And the statement "China doesn't have to exchange their products for foreign-made goods" is total baloney too. Where do they get their oil, wheat, beef, grain, rice and industrial chemicals and raw materials to feed their industrial machine? From the rest of the world."

Those are not foreign-made goods. Those are what's known as 'raw materials'. A different category.

The context of my comment was that China has an abundance of one raw material: trained, competitive labor. So they can make anything they need. In fact they could make just about anything everyone needs, if it weren't for our "free trade" laws.

But they need raw materials-- and they can afford to import them in bulk. Plus, if you follow their foreign policy they've been cornering the market in essential raw materials by placing one foot in Africa. And they've been creating farm teams with even cheaper labor by placing the other foot into competing Asian countries like Cambodia and Vietnam.

Clever, these Chinese. They're well ahead of us.

My reality
You define me well, here: "..your point was that exporting was somehow more valuable an economic activity than anything else, so that there would ooodles of money coming in."

That's very true. When one lives in the world, if one isn't self-sufficient, weaving their own thread into clothing and building their own buckboards to ride in, one needs to put forth some product the world wants to buy. That's the only honest way to make enough money to buy the stuff one needs to sustain one's family.

Nearly every one of us knows that. What's your problem with it?

"But as I pointed out -- and you are still blind as a bat to see -- the more we export and the less we import means the less we consume, period."

Again, you've got some very serious logical problems. This is like that other thing you persisted in thinking was true, that one could invariably create demand merely by producing something.

Suppose we find a way to export more to the world. That means we're making a greater profit. We can choose to spend that dividend on our labors EITHER by importing those things we want to buy (in which case we still will enjoy an improved trade balance) OR by embarking on an import substitution policy.

That second alternative would be an even bigger benefit to us, in terms of employment.

Of course, that's the theory. There's a profound constraint, and that's price. We can't compete pricewise with the Chinese. That's why we're in this pickle. And there's no popular taste for letting the dollar slide until our wages are at par with the Chinese (currently paying about a dollar an hour for factory work).

Finally, me: "I'm thinking that in your view, everything's working out fine so long as some small number of us are able to continue extracting wealth from the efforts of the rest"

And you: "Some SMALL numbers of us? Try the entire friggin country, Roy. All 300+ million of us. We all benefit from the 'exporting worthless pieces of paper for real goods' scam. All of us."

I'm referring to the centripetal force that draws our money upward, in the form of profits, and away from the bottom, where wages fail to keep pace with costs. Long run, this is unsustainable. One gets to the point where the peasants rise up in revolt.

Currently, out of those 310 million you refer to, the bottom one fifth has zero wealth. Or less. Another 26 million or so are unemployed. Let's add their families and make that around 80 million desperate people at the edge of homelessness and destitution.

So far that would be something like 140 million people NOT benefitting from the current economy. I think we're getting closer to a tipping point. And unless the current course corrects itself, I think both the Rs and the Ds are going down.

You keep going in circles over and over again with zero grounding in reality
"That's very true. When one lives in the world, if one isn't self-sufficient, weaving their own thread into clothing and building their own buckboards to ride in, one needs to put forth some product the world wants to buy. That's the only honest way to make enough money to buy the stuff one needs to sustain one's family"

So is drug dealing. Exporting is not inherently superior to anything else. In fact, it can be argued that it is worse since that which is exported is not being consumed by the exporting nation (hence proving yet again why exports = drop in consumption).

"This is like that other thing you persisted in thinking was true, that one could invariably create demand merely by producing something"

You mean Say's Law? It is true. That is why it is a 'law' and not a theory.

The more we export means the less we consume. A factory makes 1000 widgets in the US. That factory exports those to another country or sells them here, for internal consumption. If it exports the 1000 widgets than that batch of production does not get consumed in the US. Hence, we experience a drop in consumption. What is illogical about this?

Ahhh...I think I begin to see. You are so clueless of which you speak of that you don't realize that 'consumption' is tied to 'production'. Thus, you don't grasp the fact that the 'drop' is in one is always relative to the other. Thus, the drop in consumption is relative to the production. If it happens because production drops, that is one thing. If it happens because we export it, it is another. What benefit do we get from consuming less for the benefit of others unless it can translate into alternative means of consumption (imports that are needed, for example). Just exporting for the hell of it otherwise is not advantageous to any society.

"Suppose we find a way to export more to the world. That means we're making a greater profit."

No it doesn't. Japan, China and Korea all drove their export economies not for profits, but for cash. Germany is a net exporter and does do it for profits. But German consumption is way lower than it would be and that is how they do it. The Germans themselves are not better off.

All exporting does in a health economy is provide a means of trading for imports we need but don't have, like raw materials, oil, etc. For some nations, food.
That's the 'win-win' scenario.

But exporting just for 'more money' just means a forced cut in consumption. That's working more for less, Roy. Your average Chinese factory worker is forced to do that. Why should ours be? Especially when we get soo much for 'free' under the current reserve currency regime?

I'm not the one who is logically impaired here, Roy.

"I'm referring to the centripetal force that draws our money upward, in the form of profits, and away from the bottom, where wages fail to keep pace with costs."

Which just a bunch of socialist BS you obsess over continuously that has NOTHING to do with exports.

"Currently, out of those 310 million you refer to, the bottom one fifth has zero wealth. Or less. Another 26 million or so are unemployed. Let's add their families and make that around 80 million desperate people at the edge of homelessness and destitution."

So what? You still fail to make the case that exporting more will somehow help those people.

"Currently, out of those 310 million you refer to, the bottom one fifth has zero wealth. Or less. Another 26 million or so are unemployed. So far that would be something like 140 million people NOT benefitting from the current economy."

Total BS, Roy. First of all, you keep adding up the same people over and over again. It is a fair bet that the bottom 'one fifth that has zero wealth' are also comprised of the bulk of the unemployed, and vice versa.

Second, switching over to an exporting nation won't help them. Third, the economy doesn't exist to benefit people equally and never has. If it did and Roy's Wondrous Export Machine worked as you erroneously believe it would, then there would be no people in China 'not benefiting' from their export-led economy either. And we both know that is not the case.

"I think...I think...I think"

More like: "I imagine...I dream up...I pull out of my a--"

Assorted kudos and comments
First, I think I forgot to compliment you on using sources to bolster your arguments. This is a good thing and I would encourage it. The FA article was very informative.

I would like to briefly comment on its central tenet though, as I have a slightly different take on it. The author wraps his whole theme around this:

"Beijing is in trouble. The problems are numerous: China's exports are plummeting, tens of millions of migrant laborers have lost their jobs, millions of college graduates cannot find employment, industrial overcapacity is threatening deflation, and the once red-hot real estate sector has nose-dived. The country's faltering growth is posing the hardest test yet to the CCP's resilience."

First, are exports really plummeting? Sure they are. There's been a global recession, and a constricted dollar market for them. But does that mean they're making less stuff now? Let's take a look.

Here's a handy chart put out by the CIA factbook:

http://www.indexmundi.com/china/industrial_production_growth_rate.html

You see where growth was strongest during the red hot years, 2004 through 2007, 20-30% annually. But what was the growth rate in 2010? They currently seem to be growing at an eight percent rate.

That's one hell of a lot better than the USA. I haven't looked up our own current rate of increase in industrial production-- but perhaps you should.

It would also appear that the demand for such a hot rate of production could be their own internal market-- reinforcing a supposition many people have commented on. At any rate, export rates may or may not be "plummeting". But production continues to be up.

Now let's see whether "..tens of millions of migrant laborers have lost their jobs, millions of college graduates cannot find employment, industrial overcapacity is threatening deflation.."

Here's an article from Feb. 26, 2010, titled "Defying Global Slump, China Has Labor Shortage":

http://www.nytimes.com/2010/02/27/business/global/27yuan.html

It's worth quoting at length.

"GUANGZHOU, China — Just a year after laying off millions of factory workers, China is facing an increasingly acute labor shortage.

"As American workers struggle with near double-digit unemployment, unskilled factory workers here in China’s industrial heartland are being offered signing bonuses.

"Factory wages have risen as much as 20 percent in recent months.

"Telemarketers are turning away potential customers because recruiters have fully booked them to cold-call people and offer them jobs.

"Some manufacturers, already weeks behind schedule because they can’t find enough workers, are closing down production lines and considering raising prices. Such increases would most likely drive up the prices American consumers pay for all sorts of Chinese-made goods.

"Rising wages could also lead to greater inflation in China. In the past, inflation has sown social unrest."

So, in short, NO labor shortage, NO industrial overcapacity and NO threatened deflation. Quite the opposite in fact.

When we get our facts right, the right conclusions are very often inescapable.

Replacing unsourced theories with better ones
Your definition of the word 'proof' seems to be 'my opinion'.

You say "Exporting is not inherently superior to anything else. In fact, it can be argued that it is worse since that which is exported is not being consumed by the exporting nation (hence proving yet again why exports = drop in consumption)."

Of course we were discussing China. And China's the paramount example of a place whose wealth-creation model involved exports.

And in fact with all the money they've earned they're so prosperous now that there's a labor shortage and wages are increasing as a result. So consumption is INCREASING.

Let's restate our thesis then: "..hence proving yet again why exports = INCREASE in consumption."

You failed to include a reference to bolster your theory. Here's mine:

Defying Global Slump, China Has Labor Shortage

http://www.nytimes.com/2010/02/27/business/global/27yuan.html



Say's Law
It's charming how you can believe such an outlandish thesis just because someone once said it was a "law".

Me: "This is like that other thing you persisted in thinking was true, that one could invariably create demand merely by producing something"

You: "You mean Say's Law? It is true. That is why it is a 'law' and not a theory."

So using Say's Law I can observe that since the advent of the horseless carriage there has been a real slump in the production of horse collars and buggy whips.

Therefore it would be child's play for me to get in there, start up production and dominate the market. As many as I can produce, that would just stimulate the demand for more. Right?

How about loaning me some startup money, so we can go into business in buggy whips? It's a sure thing.

What's wrong with this?
I despair of ever educating you. And you really need it.

"The more we export means the less we consume. A factory makes 1000 widgets in the US. That factory exports those to another country or sells them here, for internal consumption. If it exports the 1000 widgets than that batch of production does not get consumed in the US. Hence, we experience a drop in consumption. What is illogical about this?"

What's wrong is that by exporting a product, one earns dollars. And with dollars, the world is at your feet. Everyone wants to sell you their wares-- because you can afford to buy them.

So let's restate your thesis: if one exports 1000 widgets and gets paid for them, one can experience an increase in personal consumption.

And its corollary: if one FAILS to export his widgets, he has to feed his family widgets until business turns up.

You have to work really hard to be this obtuse. Give it up, bro.

Better than Roy Logic (that is an oxymoron, btw)
"You lambaste me at length for refusing to concede this point"

No. I lambaste you for not understanding the point. You can't concede that which you do not understand.

"Clearly not so. You can correct a trade imbalance EITHER by buying less stuff OR by selling more stuff. You don't have to do both at the same time."

I never said that both happen at the same time. Not as far as one side concerned anyway.

But it automatically happens when one side does one unilaterally.

If we export more, that is production we do not consume ourselves. That means we consume less (a concept that you STILL can't get your mind to wrap around). Regarding individual trade items, that doesn't force the other guys to stop exporting unless the trade goods in question are 'import substitution' items -- which you haven't clarified that is what you mean but I have inferred as much in about 70% of what you keep babbling based upon context.

"Right now we're buying less stuff. China still wins, they're selling more to themselves and to others with bucks in their pocket. They have a robust manufacturing sector."

Good. That only proves my point.

But they are still dependent on exporting. Their net exports are still large and rising (just not as much).

"But this hasn't helped us much, because we do not. Even though we're buying less we're not selling much. So the result is not prosperity but a jobless recession."

You prove my whole point w/o even realizing it. EVEN IF we suddenly became this super net exporting machine (which we won't, we can't), there will be more job losses from the fall in internal consumption than there ever will be generated from the rise in exporting of production. We'll become more poorer as a result. We will be in more alignment with the poor Chinese factory worker. That is an absolute given in order to bring about the exporting utopia you envision.

It will be a jobless recession super-sized, Roy. For a long time.

"petty shade of distinction over the word 'trade'. Now I'm sure you understood when I said that we could decide to "make more money" I was referring to selling more stuff to others"

No, you didn't mean that. Because if you did, you wouldn't have brought up money at all, because trade isn't about that. And my distinction is not petty but the standard one used by trade economists.

"Sure you did. Then why try to obfuscate? It's not like we're arguing before a jury and you can baffle them with BS. It's just you and me. And I can see you plainly."

Nice try to demonize me for your blunder, Roy. Didn't work.

"We weren't just talking about our trade deficit. We were talking about the whole enchilada"

No, we WERE talking about the trade deficit. Go back and re-read your tripe that started this thread.

"We were talking about the whole enchilada, including the federal debt. And my comment went toward employing more people, so they could pay more taxes, so the government had more revenue, so the Debt began to come under control"

Employing MORE people? From exporting. I already proved to you that we'd have to cut domestic consumption in order to raise exports. That requires even larger cuts in employment for consumption-related industries than gains in employment for export-related industries simply because the bulk of our employment right now is overwhelmingly in the consumption-related industries.

Eventually, the two will equalize roughly. But if you think it will be instantaneous and mostly painless, you're crazy.

"Due to the multiplier effect.."

There's no such thing as a 'multiplier effect'. At least not in the logic-free prognostications of one Roy Bean.

"Your counsel to the nation, on the other hand, is just for everyone to tighten their belts and start eating less. Together we can do it. Who needs jobs?"

Please stop lying about what my stance is. You can admit that you don't understand at all my stance, if you like. That would be a step in the more intellectually honest direction.

My stance is simple: Increase productive output across the board, period. That would increase employment, wages for those employed and thus meet ever growing demand for more consumption. To do that requires incentives for risk-takers and investors to make the capital investments necessary. Whereas our government is totally hellbent to do the opposite.

Whereas orienting our economy to withhold domestic consumption in order to export extra production is sheer stupidity. We should export only that which we absolutely have to and no more.

Thanks to the magic of having the rights to print willy-nilly the world's reserve currency, we get the de-facto seigniorage privilege of not having to export even the absolute minimum we need even then.

http://en.wikipedia.org/wiki/Seigniorage

And it would be absolute stupidity to deliberately end that party, as you would have us do.

But then again, you're the guy who thinks we can print money like crazy and that your 'wise men' in Congress will tax it out of circulation. Hahahahahahahahahah.


No end of good topics here
"So what? You still fail to make the case that exporting more will somehow help those people. (That is, our 26 million families with no source of income, and the additional sixty million with zero or less net worth.)

I know this is difficult material. But bear with me. The more we export product, the more we have to hire the unemployed to man our factories. And the more profit the profit seekers make, and the more wages the wage earners earn.

With all that NEW income, income they did not enjoy before they started exporting more, they can all BUY MORE STUFF.

So it's a win-win situation. Lacking that model for success, the United States has had to go to Plan B. We borrow money so we can buy more stuff.

BTW the Chinese laborer is in fact enjoying the benefits of the country's export-led economy. I suppose you didn't read the article I offered you. here it is again:

http://www.nytimes.com/2010/02/27/business/global/27yuan.html

Chinese wages are rising, industrial production is up, signifying a move to go into domestic markets and compensate for the global slump, and business there is booming. All from an export model you say can't work.

***

Finally a small matter. You say "..you keep adding up the same people over and over again. It is a fair bet that the bottom 'one fifth that has zero wealth' are also comprised of the bulk of the unemployed, and vice versa."

Nope. Back when we had something like full employment, around four percent unemployed, we already had the bottom 20% possessing no wealth. Or worse, being in debt. Many of these were employed but in a losing spiral, while others occupied the permanent underclass: in prison, in illegal occupations or just hanging out on the street with no prospects. Plus the infirm and indigent.

Add to their numbers the number who are currently actively seeking employment or who have been seeking and have given up. That's the additional 26 million of freshly (since 2007) unemployed. There's not a significant amount of overlap in the two sets.


Yeah...real 'clever'
"They are self-sufficient, unlike ourselves."

Translation: They are poorer because they choose be to 'self-sufficient'. Americans would never tolerate that.

"Those are not foreign-made goods. Those are what's known as 'raw materials'. A different category."

Not it isn't. We are talking about 'balance of trade' here. Imports can be widgets or services or raw materials. There is no 'category' to distinguish here.

"The context of my comment was that China has an abundance of one raw material: trained, competitive labor. So they can make anything they need."

Really? Without food or energy or cement or metals they can make anything they need? Out in the collective farms, perhaps.

"Plus, if you follow their foreign policy they've been cornering the market in essential raw materials by placing one foot in Africa"

They are buying up huge tracts of farms, too. And importing workers to work them. In Africa, the locals are ticked because that food is all being exported to China. They are literally starving because of the drop in domestic consumption.

But then again, you still refuse to acknowledge that increased exports automatically leads to decreased domestic consumption (unless total production is raised, which takes time and sometimes doesn't even happen -- like in Africa).

So what happens when the food riots get so bad that the government decides to nationalize those farms, uh? Or, they don't even go that far but simply ban the exporting of the farm goods? The Chinese won't look so damn 'clever' then, would they? Let's see how 'self-sufficient' the Chinese factory worker is when he starves in that case then.

The Chinese can make anything they want to, yes. But they are not self-sufficient as you believe them to be. Nobody really is except the North Koreans -- who deliberately practice economic autarky.

Reasonable questions
"You prove my whole point w/o even realizing it. EVEN IF we suddenly became this super net exporting machine (which we won't, we can't), there will be more job losses from the fall in internal consumption than there ever will be generated from the rise in exporting of production."

Explain to me again how we lose jobs when we have more orders for production. Doesn't a "super net exporting machine" mean we're employing more people?

And explain how we must necessarily consume less (our "fall in internal consumption") when more of us are employed and earning good income.

Finally, explain the logic of this:

"We should export only that which we absolutely have to and no more. Thanks to the magic of having the rights to print willy-nilly the world's reserve currency, we get the de-facto seigniorage privilege of not having to export even the absolute minimum we need even then. [...] And it would be absolute stupidity to deliberately end that party, as you would have us do."

You're saying it's a preferable model to just continue borrowing more money so we can buy more stuff on the cuff. Therefore there's no reason to ever actually have to earn it. Are you sure you really believe this? It doesn't sound very libertarian, or even Misian.

My view, some day our creditors are going to get tired of us if we don't make some tangible effort toward paying down our debts. And they're going to have other options, besides selling good product to us and getting their own money back in return.

A good start is correcting our trade deficit. Once it comes into balance the USD becomes a stable, risk-free currency. So yes, I recommend that we "end that party". Let's stop drinking before we pass out and our livers and kidneys collapse. Or, more likely, the bartender cuts us off.

Every last thing in these latest comments of yours just makes no sense. It puts those 'hahahaha's you like to put at the end of your posts into a clearer perspective.

Picking at nits
Your process is becoming clear. You have nothing substantive to add to the conversation so you are just trying to sow confusion, nit picking words to twist around.

Example: there is no contradiction between building an export-led economy, in which more finished goods are sold than raw materials are imported. If the dollar value of the exchange is positive in your direction, you're making a profit.

Any business person would understand that immediately. But perhaps instead you are some kind of MBA.

Let's take Britain or Holland as our examples. Didn't they set out to conquer the world by much the same means as does China today? They imported raw materials and exported finished products. How badly did they do with that model?

All your other arguments stem from the same approach: find something that can be taken out of context and expand on it. The low-IQ crowd will follow you just fine, and hoot and holler. If that's what you want, great. Go to it. But don't imagine you're fooling anyone with a basic intelligence.

"But then again, you still refuse to acknowledge that increased exports automatically leads to decreased domestic consumption (unless total production is raised, which takes time and sometimes doesn't even happen -- like in Africa)."

Earn lots of money and you don't even have to produce anything. Look at our bond traders for the prime example. They are a wart on our industrial body. Yet they can afford to buy anything they want-- and still have some billions left over.

You're thinking there's a finite pie in some given country, and any time you sell a part of it you're getting poorer. This is such antiquated thinking that by the time of Rome, great fortunes were being made on the Silk Road selling Chinese goods to the West.

And with every bale of silk cloth they exported, the poor Chinese had less silk to eat. Such fools.

The sky is blue Roy...google you're own references if you are blind to that fact
"And China's the paramount example of a place whose wealth-creation model involved exports"

They used it to blow on their own bubble. More real estate development they don't need and more factories that can't make a profit.

It's as bad as us using hot cash to build more houses than we needed.

"And in fact with all the money they've earned they're so prosperous now that there's a labor shortage and wages are increasing as a result. So consumption is INCREASING."

It is. Gradually and in some places very much so. But so it did in Silicon Valley during the dot.com bubble.

China is on the cusp of a bubble meltdown that will make our mortgage mess look like a walk in the park.

"Let's restate our thesis then: "..hence proving yet again why exports = INCREASE in consumption."

That only means they are exporting less or will soon have to or that they are importing more thus negating the effect that exports have.

"You failed to include a reference to bolster your theory"

Uh...I don't have to Roy. It is established economic fact...unlike the prattle the socialist NY Times yaps about. Even Paul Krugman doesn't dare try to put any of this op-ed garbage in any papers he puts forward for peer review by serious economists.

Roy is now pulling an Obama and lying about Say's Law. (typical)
"So using Say's Law I can observe that since the advent of the horseless carriage there has been a real slump in the production of horse collars and buggy whips."

In which case all you would do is prove you are either an idiot or that you are deliberately trying to mischaracterize Say's Law. I'll be nice and blatantly accuse you of doing the latter.

"Therefore it would be child's play for me to get in there, start up production and dominate the market. As many as I can produce, that would just stimulate the demand for more. Right?"

On Planet Roy. Now I know you are deliberately mischaracterizing Say's Law.

"How about loaning me some startup money, so we can go into business in buggy whips? It's a sure thing."

While there are idiots who will give you that money, they would not be doing so in keeping with Say's Law.

what is wrong is that you either don't read or don't get it.
"What's wrong is that by exporting a product, one earns dollars. And with dollars, the world is at your feet. Everyone wants to sell you their wares-- because you can afford to buy them."

So? That only means we are exporting to buy imports. That kind of defeats the purpose when one is trying to 'align' the nation to be an 'export driven economy'. You have to have to be a net exporter -- you export more than you import. To be roughly in trade balance, you export about enough that you import. But that is only in monetary terms, not total trade good tonnage.

"So let's restate your thesis: if one exports 1000 widgets and gets paid for them, one can experience an increase in personal consumption."

Yup...esp with regards to America and Americans. Because otherwise we'd be 'exporting' crappy pieces of paper called 'dollars' that are inherently worth nothing for real goods and services. Why export real goods compared to that?

"And its corollary: if one FAILS to export his widgets, he has to feed his family widgets until business turns up"

I never said that. I clearly said that the widgets can be sold for export or for domestic consumption. You quoted that part, or did you conveniently forget about all that?

Here, let me repeat this for you since you didn't read it the first time (even though you quoted it):

"The more we export means the less we consume. A factory makes 1000 widgets in the US. That factory exports those to another country or sells them here, for internal consumption. If it exports the 1000 widgets than that batch of production does not get consumed in the US. Hence, we experience a drop in consumption. What is illogical about this?"

And if there is no demand for widgets domestically, the factory can retool to produce something else that is. Either way, production is oriented for meeting the demands of domestic consumption.

For things that we demand but don't/can't produce ourselves, we then import. 'Demand' can mean many things. Clearly 99% of the items sold at WalMart could be produced here. But then they wouldn't be nearly as cheap. So, our demand in this case is for CHEAP goods.
Thus, we import.

Let me make this real easy for you, Roy. We are already a net exporter! Yep! That's right! We are the world's number one exporter of reserve currency. Everyone all over the world wants it and we are more than glad to export it. It is CHEAP currency...cheaper than anything you can find for sale at WalMart. Because it is so cheap it we can almost consider it to be free goods!

And in return, we get to buy all kinds of crap we otherwise couldn't afford UNLESS we endured drastic cuts in domestic consumption to switch production to exporting. Oh, we could ameliorate that pain by simply executing Say's Law and drastically increase production at the same time. Then the jobs would be plentiful as you say.

But that would require a government that isn't so hellbent on ruining the private sector and turning us into the next failed European PIIG state.

So, scratch Say's Law and go back to the 'pain' part of things.

That is what you keep advocating. Probably out of ignorance because no matter how much I explain the basics to you you refuse to accept them. You are the blind man who refuses to accept that the sky is blue when I tell him it is ... and then demands references to 'prove it'.

A promise to pay
Either you're feigning intentional ignorance or you're convinced of a fiction.

Me:"What's wrong is that by exporting a product, one earns dollars. And with dollars, the world is at your feet. Everyone wants to sell you their wares-- because you can afford to buy them."

And you: "So? That only means we are exporting to buy imports. That kind of defeats the purpose when one is trying to 'align' the nation to be an 'export driven economy'. You have to have to be a net exporter -- you export more than you import. To be roughly in trade balance, you export about enough that you import."

Regular people do export (sell) their product in order to import (buy) the product of others. That's what we do. And nations do the same thing individuals do.

All your finagling over our exporting dollars in return for goods is obfuscating the issue. When we talk of a trade balance we normally mean "as denominated in dollars (or other currency).

And we can have different strategies to achieve whatever it is we want. Someone who wants to have more stuff than he can afford maintains a negative trade balance. He'd rather be in debt to another than to do without his precious stuff. That's us.

Or, we might prefer being a lender. We might intentionally carry some profligate customer so we could use his debt to us to achieve political ends-- power over him. That's China.

It's the same way the mafia gets someone in their pocket. The strategy is nothing new.

Every one of my comments here goes to the point that we would be healthier as a nation if we were to stop putting all our purchases on the cuff and begin paying for them. Because the more we pay them down the less we are in thrall to our creditors.

It would be hard for you to disagree with this. It's not only the standard definition of fiscal health, it's the one heartily recommended by the Friedman school-- not to mention the Austrian school.

And the key concept is that our pictures of dead presidents are not goods. They're chips that can be exchanged for goods-- or for other things of value, like services. They're a promise to pay. They are not actual payment. Payment consists only of things that have intrinsic worth.

The minute our trading partners figure out that our chips aren't worth very much because we have nothing much to give them, we're in trouble. Otherwise I might be happy with your notion that we can just print money til the end of time, and everyone will be happy to accept it.

As for references, you don't provide them because evidence is not necessary to your belief system. I do because I prefer evidence-based explanations of the way things work.

Roy gets caught again
"The more we export product, the more we have to hire the unemployed to man our factories."

hahahahahahah....oh my! That was a good laugh! Thank you Roy. I needed it. The only 'folks' who will man our factories will be robots, Roy. Because that will be the only way we could compete against cheap factory workers in China or Honduras or Vietnam.

"And the more profit the profit seekers make, and the more wages the wage earners earn."

Riiight. You have directly said otherwise in your personal War Against Profits & Capitalists on these forums for YEARS. Nice try to pull a Saul Alinksy on us, Roy.

"With all that NEW income, income they did not enjoy before they started exporting more, they can all BUY MORE STUFF."

Like what? The stuff they made and what others have made and was exported to China, Roy. Thus the prices will have to rise in order to meet the resulting domestic demand.

"So it's a win-win situation. Lacking that model for success, the United States has had to go to Plan B. We borrow money so we can buy more stuff."

No, we 'recycle' money the Chinese 'earn' by exporting to use in this charade called 'borrowing'. When the music stops Roy we'll be the ones with all the goods and years of higher resulting lifestyle under our belts while the Chinese will be left holding worthless pieces of paper.

Works for me.

"BTW the Chinese laborer is in fact enjoying the benefits of the country's export-led economy. I suppose you didn't read the article I offered you. here it is again."

Because that is from the NY Times...a paper that will no doubt 'claim' that unemployment numbers will have fallen because of the scam of including 1 million temporary census workers in the count.

And because you are pulling the same scam here:

"The immediate cause of the shortage is that millions of migrant workers who traveled home for the long lunar New Year earlier this month are not returning to the coast. Thanks to a half-trillion-dollar government stimulus program, jobs are being created in the interior."

Yeah...same thing. The government is paying them to not return so now there is a purely LOCAL labor shortage. Only there, they aren't called 'census workers'. Wow!

I can't believe you. I just can't. What? You thought you'd get away with such a fraud? Really?

"All from an export model you say can't work."

Who said anything about it not being able to work? I didn't. I just said it was inferior to the gig we have by comparison. And you can't prove otherwise while I can.

For bootstrapping a nation up from third world poverty, exporting to Uncle Sugar is the way to go. But, we aren't a third world s-hole and there's no Uncle Sugar for us to export our way to prosperity to. And why would we? We are already prosperous.

I suppose that if aliens showed up and offered all kinds of cool things to trade to us, we'd go back to the export model to pay for those goodies. Because then we would no longer be the Prosperous Ones. They will be.

"we already had the bottom 20% possessing no wealth. Or worse, being in debt. Many of these were employed but in a losing spiral, while others occupied the permanent underclass: in prison, in illegal occupations or just hanging out on the street with no prospects. Plus the infirm and indigent."

So? Whether we export or not won't change any of that.

Or did you actually think that? Hahahahahahahah! Oh man. You crack me up.

Lessee: For my new Export Factory, do I pay for another robot that can do the job of 20 disciplined super workers who never need sleep, food, family time, time to waste dealing with Roy's rants on TCS, bathroom breaks or even to go home?

Or do I hire 40 undisciplined losers from the dregs of our society instead? Wow...dunno about you, but if I can't get the robots I'd rather import illegals or outsource it all before I go with the Roy Plan.

And that exactly what was done, is being done now and will continue to be done. Except on Planet Roy, maybe.

Nothing reasonable about your questions at all.
"Doesn't a "super net exporting machine" mean we're employing more people?"

No, because we would no longer be consuming more than we ourselves will produce. Again, all the jobs out there for the consumption of goods and services or the direct production for said consumption is the bulk of all jobs in our economy.

To realign those to exporting would mean a fall in production for consumption. A lot more jobs would be impacted negatively in the NET difference.

Think of it in terms of your precious 'money multiplier', Roy. I think that is m-m thing is totally bogus, but the end and NET effect will be the same.

"You're saying it's a preferable model to just continue borrowing more money so we can buy more stuff on the cuff. Therefore there's no reason to ever actually have to earn it. Are you sure you really believe this? It doesn't sound very libertarian, or even Misian."

We do earn something...profits for issuing ultra-cheap pieces of paper that are in high-demand world wide. They sell better than all the Playboy centerfolds ever issued all together. And what does Mises or libertarianism have to do with any of this?

"My view, some day our creditors are going to get tired of us if we don't make some tangible effort toward paying down our debts. And they're going to have other options, besides selling good product to us and getting their own money back in return."

What 'other options', Roy? Tell me all about them. Really. I'm going to enjoy shooting most of them down. Probably all of them down. Why? Because I suspect those 'other options' will be grounded in assumptions you have that are just false.

"A good start is correcting our trade deficit. Once it comes into balance the USD becomes a stable, risk-free currency. So yes, I recommend that we "end that party".

That's not surprising that you would want to inflict untold misery on hundreds of millions of Americans -- all out of some misguided sense of illogical utopian views grounded in ignorance and totally defying the laws of economics or just plain reality.

Seriously, that is what you are advocating.

"Every last thing in these latest comments of yours just makes no sense."

Nope. Everything I said made sense. You just can't grasp what I said. At all.

Roy: a low IQ-crowd of One
"You have nothing substantive to add to the conversation so you are just trying to sow confusion, nit picking words to twist around."

Uh, no. The only thing you can accurately accuse me of doing is repeating myself because you can't grasp what it is that I have been saying.

"there is no contradiction between building an export-led economy, in which more finished goods are sold than raw materials are imported. If the dollar value of the exchange is positive in your direction, you're making a profit. Any business person would understand that immediately. But perhaps instead you are some kind of MBA."

No, because consumption for such a society would have to fall. And our society in particular would have to experience a pretty rough ride making that adjustment at that. Some 'profit'.

"Let's take Britain or Holland as our examples. Didn't they set out to conquer the world by much the same means as does China today? They imported raw materials and exported finished products. How badly did they do with that model?"

Yeah. Tell us Roy, how did the conquered natives benefit? Also, they did that to build wealth. We did the same thing. But once you become wealthy, the law of diminishing returns sets in.

And none of them had a lock on the greatest export of all: A world wide fiat currency used in almost all international trade. The equivalent in their day would have been the Philosopher's Stone.

"All your other arguments stem from the same approach: find something that can be taken out of context and expand on it"

No, all of them have been like explaining things to a child, because the child hasn't learned anything about economics, or money or anything else. All the child knows are myths he was told by his nanny who doesn't know jack either.

"Earn lots of money and you don't even have to produce anything. Look at our bond traders for the prime example. They are a wart on our industrial body. Yet they can afford to buy anything they want-- and still have some billions left over."

Exactly. That is what we are. Rich enough where we are getting to the point where we don't have to produce anything for the rest of the world. So why bother?

"You're thinking there's a finite pie in some given country, and any time you sell a part of it you're getting poorer."

No, I am thinking that when you have to produce more goods for less consumption, then you ARE getting poorer.

When you are already poor, then you don't have much of a choice. That is one of the fundamental reasons why it sucks to be poor, Roy. (in case you haven't figure even THAT one out, yet).

Was any of what I just wrote taken out of any context? Can't have the low-IQ crowd kept in the dark now, can we?

"This is such antiquated thinking that by the time of Rome, great fortunes were being made on the Silk Road selling Chinese goods to the West"

Ahhhhh...so we just wave our magic wand and declare something is 'antiquated' and that means it doesn't exist anymore or somehow doesn't 'apply' anymore. Talk about low-IQ thinking, Roy.

"And with every bale of silk cloth they exported, the poor Chinese had less silk to eat. Such fools."

If you thought they ate the silk, then it is you who is the fool. Everyone else reading this knows that they wore it as clothing. That is why it was cultivated in the first place.

Talk about low-IQ crowd. That last one proves who is in the low-IQ crowd around here for sure.

No, economists don't look at the dollars
They look at equivalent values. 'trade weighted' values.

What part of production does a nation export versus import. Money has nothing to do with it.

"All your finagling over our exporting dollars in return for goods is obfuscating the issue"

No it doesn't. Because that is exactly what we do. If we didn't, we'd have had to dedicate a lot more of our production of real goods to exports in order to trade for the imports we wanted.

"Regular people do export (sell) their product in order to import (buy) the product of others. That's what we do. And nations do the same thing individuals do."

That's your problem right there. You can't quite grasp the simple fact that we are not 'regular people'. Not the US of A.

"And we can have different strategies to achieve whatever it is we want. Someone who wants to have more stuff than he can afford maintains a negative trade balance. He'd rather be in debt to another than to do without his precious stuff. That's us."

Normal people, yes. That is true. See about about your problem with comparing us to 'normal people'. We are not even a 'normal nation'.

"Every one of my comments here goes to the point that we would be healthier as a nation if we were to stop putting all our purchases on the cuff and begin paying for them"

How? Why pay for the milk when we can get it free?

"It would be hard for you to disagree with this. It's not only the standard definition of fiscal health, it's the one heartily recommended by the Friedman school-- not to mention the Austrian school"

Not it doesn't and it has nothing to do with any 'school'. These are simple, observable facts.

"And the key concept is that our pictures of dead presidents are not goods. They're chips that can be exchanged for goods."

They are both.

You DO realize that the bulk of dollars exported are used to for international trade not involving the US? You DO know that, right? Nigeria gets dollars for its oil and buys buses from Fiat in Italy with them. Nigeria can use any euros it has but can use dollars just fine. All exchange rates are not two currencies value to each other, but both their value to the dollar. What Nigerians can not use is their own currency. Not even Japan can do that despite trying. The Europeans try to do it and have had some limited success in trade they dominate.

You DO know all of this, right?

Therefore, there is demand for more dollars with increased world trade. And we oblige by meeting that demand. Very little of those dollars are actually redeemed for US goods. Most of it that does get redeemed is for investing in the US.

So, that is our 'niche. Napa exports wines. Florida exports oranges. We export dollars.

"They are not actual payment. Payment consists only of things that have intrinsic worth."

For everything BUT dollars, Roy. That's the beauty of it.

"The minute our trading partners figure out that our chips aren't worth very much because we have nothing much to give them, we're in trouble. Otherwise I might be happy with your notion that we can just print money til the end of time, and everyone will be happy to accept it."

They know all about it and are envious of us for having the ability to provide the world's reserve currency. That is one of the reasons the Euro was formed. But until the day comes that the dollar is de-throned, we get to live off easy street.

"As for references, you don't provide them because evidence is not necessary to your belief system. I do because I prefer evidence-based explanations of the way things work."

I don't have to provide references, as my goal has never been to compensate for your poor education. My goal has been to illustrate to others just how clueless you are.

And, I am not your 'google *****'. Look this up yourself. What's the matter? Your fingers suddenly broken and you can't type? Here is nice first place to go:

http://en.wikipedia.org/wiki/Reserve_currency

Well, well, well...looky here. In the second paragraph:

"This permits the issuing country to purchase the commodities at a marginally lower rate than other nations, which must exchange their currency with each purchase and pay a transaction cost. For major currencies, this transaction cost is negligible with respect to the price of the commodity. It also permits the government issuing the currency to borrow money at a better rate, as there will always be a larger market for that currency than others."

Chinese Capitalism...
Why is it that so many of us imagine that the Chinese practice of financial capitalism is somehow not competitive or indeed not even capitalism at all?

This is a fundamental misunderstanding regarding our own game...that we are destined to lose if we let the Chinese catch up. They are already not making the mistakes Japan made in 1985 and they seem unlikely to repeat ours of 2008 when their time comes to transition into something better...while we sit here smug with our superior ideology.

Money has everything to do with it
I suppose this explains everything. You're looking at this as an economist, while I'm looking at it as a participant in the economy.

So that while I understand I'm operating underwater when I take in $50K while spending $90K, you just have to "trade weight" all your values and the problem goes away.

That doesn't work in the real world. Continue spending more than you earn indefinitely, as expressed in dollar bills, and in time your creditors tire of you. I'll guarantee that.

But for you, unpayable debt is a great invention. In your own words "Why pay for the milk when we can get it free?" So keep on keeping on. It works fine-- right up to the point where one day it doesn't work.

Consistent to the bitter end
You're trying your best to disprove the manifestly obvious. But not everyone is dazed by the brilliance of your words.

Here: "The more we export product, the more we have to hire the unemployed to man our factories."

Response: "hahahahahahah....oh my! That was a good laugh! Thank you Roy. I needed it. The only 'folks' who will man our factories will be robots, Roy. Because that will be the only way we could compete against cheap factory workers in China or Honduras or Vietnam."

So we can correct a trade imbalance without having to hire anyone new? My my. I thought we might do it by offering a product that can't be duplicated by the competition. Like food. In manufactured goods we're knocked out of the water until wages approach par (the gap is now marrowing).

And here: "And the more profit the profit seekers make, and the more wages the wage earners earn."

Response: "Riiight. You have directly said otherwise in your personal War Against Profits & Capitalists on these forums for YEARS. Nice try to pull a Saul Alinksy on us, Roy."

Hmmm. I believe I recall saying that I WAS a business owner, for a number of years. As such, I recall saying also that I "heartly endorse" the concept of profit. The only thing I disapprove of is exorbitant profit-- that made at the employee's burden. I like a fair deal-- which would entail both adequate profits and acceptable wages.

And here: "With all that NEW income, income they did not enjoy before they started exporting more, they can all BUY MORE STUFF."

Response: "Like what? The stuff they made and what others have made and was exported to China, Roy. Thus the prices will have to rise in order to meet the resulting domestic demand."

An obvious fact is that a majority of consumers will prefer the cheaper of two comparable products. All we need do is to find some area where we can compete by offering something low wages can't undercut. Food, cheap energy, raw materials-- these are all things in demand by the rest of the world.

How does Germany do as well as it does, with their wages above ours and the Euro so high? The obstacles can certainly be surmounted.

http://www.tradingeconomics.com/Economics/Balance-of-Trade.aspx?Symbol=DEM

And here: "BTW the Chinese laborer is in fact enjoying the benefits of the country's export-led economy. I suppose you didn't read the article I offered you. here it is again."

Response: "Because that is from the NY Times...a paper that will no doubt 'claim' that unemployment numbers will have fallen because of the scam of including 1 million temporary census workers in the count."

Your dismissal of content because it was printed in the NYT is ludicrous. You don't need to even think about it-- you can just dismiss it on its face.

Every fact in any article ever written can be verified by doing a bit of work. You haven't done that work. It comes from your general distrust of unpleasant facts.

Rising wages in China have been very well reported on, in every area of the world business press. Also, you can combine China's eroding balance of trade since the 2007 meltdown with their continued increase in production and DEDUCE that something's happening to all that product.

It's being sold in China, to Chinese consumers with money to spend on optional purchases.

I could go on. But it wouldn't matter. Your mind is closed and you'll say anything to avoid accepting that your analysis doesn't address the real issue. China's on top. We exist at their pleasure.

Here's a good example
"there is no contradiction between building an export-led economy, in which more finished goods are sold than raw materials are imported. If the dollar value of the exchange is positive in your direction, you're making a profit. Any business person would understand that immediately. But perhaps instead you are some kind of MBA."

To which you reply "No, because consumption for such a society would have to fall. And our society in particular would have to experience a pretty rough ride making that adjustment at that. Some 'profit'."

You still haven't given us any good reason to believe that. Whereas elementary reason tells us that when a factory, or a nation, or an individual, is bringing in more income than it's expending, it can give its workers more in wages. And in fact in China's case, business has been so good they can't get enough workers to fill their orders-- so they've had to boost the incomes being offered them.

That means they can buy more stuff. It really does.

Tell us how more income equals less consumption again. And how you know of some law telling you it "must" be that way.

TCS Daily Archives