The Payoff From Globalization

The Payoff From Globalization

I found this Washington Post article interesting and informative and relevant to past discussions here, so I thought I'd link it: The Payoff From Globalization

[R.Daugherty]

The Payoff From Globalization

Brian wrote: I guess I'm naive. Can you explain the difference between a trade deficit and a federal budget deficit and how EACH ends up being owed to "China and others"? Bonds are obvious, but perhaps you mean something else? Or, are you saying our government borrows money to buy things from the Chinese (and others)? Clue me in. Sorry for the late reply, Brian. I'm happy to say that after a year and a half layoff I'm back to work on the /400 again in RPG. I hope I never have to look for an AS/400 job again, or any job if free trade advocates have their way. The trade deficit, and not just a trade deficit, but one that Greenspan warns is unsustainable, is described by Greenspan in a speech in Germany and carried by the BBC News, as thus: "He focused on the financing of the deficit. In essence, a trade deficit needs to be supported by foreigners investing in the US. If they suddenly become reluctant to do so, the result in the financial markets could be either a sharp rise in interest rates or a fall in the dollar. There was also a call in Mr Greenspan's speech for the US government to tackle the deficit in its finances - or even move into surplus - as an effective way of tackling the trade gap." Foreigners investing in the US doesn't sound bad. What are they investing in? Now the Federal deficit comes into play. Buying US bonds the country sells to finance the deficit also doesn't sound bad, when Joe Sixpack and his kids and grandpa are buying US Savings bonds that we patriotically learned about as kids. Heck, the Treasury Public Debt department is in my hometown of Parkersburg, WV. I worked there a summer when the war ended ('74) and started college on the GI Bill learning computer programming. So everything ties together just hunky dory. So what's my problem? First of all, trade is two way. If it isn't two way, its importing or exporting. We're importing, and China and several other countries are exporting. There wouldn't be a trade deficit if they purchased American goods, made by American workers, sold by American companies. That would be trade, without tarriffs and quotas "free" trade. That would be a good thing and everything would be hunky dory. But they aren't doing that. What are they doing? They are explicitly not buying anything that can be copied. No software, books, movies, or anything else that can be duped, us included. Instead they are buying American federal deficit debt, those venerable US bonds we so patriotically believed in. Communist China and Saudi oil sheiks, yes, that same country the 9/11 terrorists came from, buying our US bonds. Why? Because they want a safe place for their money? Well, let's look for an answer a little more realistic. Part of the reason that Chinese goods are so cheap, besides peasant labor wages and no environmental restrictions, is an artificially manipulated Chinese currency made to stay relatively cheap compared to the dollar. How is that done? By buying dollars to prop it up. Yes, by buying our trusty federal deficit. So instead of buying American goods made by American workers and actually having "trade", free or otherwise, they and other foreign governments that export far more than they import from us buy our debt instead. The irony is that if they were buying American goods there wouldn't be so much debt. Workers would be working better production jobs, paying more taxes. Chinese currency wouldn't be artificially cheap against a dollar propped up by the Chinese, making Chinese imports more expensive and American exports cheaper. That's the way it's supposed to work, the balancing part of free trade when one imports much more than they export. But no balancing from Communists and oil sheikdoms. They make sure we can keep importing Asian manufactured products and Middle Eastern oil by lending us back our money, all the while keeping the dollar afloat. And if they stop? Stop anything, buying our debt, making products for us, sending us oil. What will we do? Left to an economic analysis on the order of free trade and marginal purchasing decisions and other wonders of economic thought some law of equilibrium will be invoked and all will be well, just some change averse Luddites to help across the threshold of the future. Not to worry, I'm sure. But this isn't just economics. It's politics and war and survival. China wants to attack and take Taiwan. The Saudi family could be overthrown by Jahadists. A disaster in the Middle East could disrupt oil shipments for months. What will we do? We haven't built an oil refinery or a nuclear plant in twenty years. We can't make what we used to when we did it to win a world war. We don't make anything anymore except savings bonds, to sell to Communists so they can prop up our dollar so everything we buy in Wal-Mart will be cheap, and made in China. And if anything goes wrong with a refinery, or an oil sheikdom, or countries willing to keep propping up the dollar, or the gleam in a Chinese eye looking at Taiwan, everybody will scramble to buy what's left of cheap oil and cheap imports. The good news is that we will learn to be self-sufficient again. We will need to be. We have decades of debt to repay. Unless we refuse to pay until they give Taiwan back. Ralph

The Payoff From Globalization

Thanks Dave. I actually knew that, but I was wondering how Ralph got to his "we owe them all" statement in the sense of the trade deficit. Brian

[David Abramowitz]

The Payoff From Globalization

B_Sing asked: Can you explain the difference between a trade deficit and a federal budget deficit In the simplest of terms:

[*]A trade deficit is the difference between total imports and total exports.[*]A budget deficit is the difference between government spending and incoming revenues.[/list]Naturally nothing is ever this simple. Dave

The Payoff From Globalization

I wish I were naive enough to believe that, Brian. China and others are loaning us back our money so we can keep buying from them with borrowed money, and most importantly, so we must buy from them, not much unlike becoming an addicted victim of a drug dealer.

I guess I'm naive. Can you explain the difference between a trade deficit and a federal budget deficit and how EACH ends up being owed to "China and others"? Bonds are obvious, but perhaps you mean something else? Or, are you saying our government borrows money to buy things from the Chinese (and others)? Clue me in.

or more likely, our downgraded population no longer can stomach the bill for Republican economic nirvana.

Downgraded population? Do you really mean that? In a relatively free market democracy, if the population "downgrades", wouldn't that be by its own choice? As a member of said population, wouldn't one want to prevent that by personally trying to excel in whatever environment confronted with? And by promoting the idea that others should be given the opportunity to do the same, without unnecessary obstruction? Don’t you think that by promoting protectionism, and therefore lack of excellence and innovation, one would be doing a disservice to the fellow "population"? If not, why not? It sounds simple enough to me. Expounding upon some of the quotes from your article citation, how will we protect textile workers when robots can do it all? How are/were people protected from IT innovations? "Sorry, you can’t make that interface. A person has to type that." Incidentally, the NYT had an editorial on CAFTA today. (Politically-necessitated disclaimer: I have not read CAFTA, and I’m not specifically referring to it in my words above).

[R.Daugherty]

The Payoff From Globalization

Brian wrote: "We owe them money, but I'm proud they have the confidence in us to lay their money down on us, at relatively low interest rates even." I wish I were naive enough to believe that, Brian. China and others are loaning us back our money so we can keep buying from them with borrowed money, and most importantly, so we must buy from them, not much unlike becoming an addicted victim of a drug dealer. Economic theory is fine, but even at that level you don't address the part that is supposed to make it work, the compensating factor, the crash and devaluation of our country when others quit lending us money to buy their cheap goods, or more likely, our downgraded population no longer can stomach the bill for Republican economic nirvana. I could go on, but I think this excerpt from a Washington Post article this morning sums it up nicely: www.washingtonpost.com - CAFTA in Peril on Capitol Hill - One Business Leader Gives Lawmakers an Ultimatum - By Thomas B. Edsall - Washington Post Staff Writer - Sunday, June 12, 2005 (excerpt) The possibility of defeat has pro-CAFTA leaders of U.S. business -- who see the treaty as a test vote for future, much broader, free trade negotiations -- deeply worried. "If we walk away from this deal, we walk away from years of investment and we walk away from extraordinary trade opportunities," Donahue (Pres. US Chamber of Commerce) said.... In a recent speech on behalf of the treaty, House Majority Whip Roy Blunt (R-Mo.) said, "Frankly, this is the model for a global economy." Jones (R-N.C), who has seen his state's textile factories and workforce devastated by foreign competition, rejected that analysis. "Enough is enough; we are losing the manufacturing base of this country," he said. Brown (D-Ohio) and Jones predicted the administration will begin offering special favors to wavering lawmakers. "They are going to open the bank for these guys," said Brown, citing past offers of bridges and other public works projects to win votes on controversial trade bills. Public Citizen, in a bid to weaken the administration's bargaining position, this week is to issue a report showing that 83 promises have been made to win trade votes over the past 15 years and that only 13 of them were kept: three of 53 commitments to change policies and 10 of 30 pork barrel commitments. (end excerpt) Ralph

The Payoff From Globalization

So cool! Thanks for sharing.

[David Abramowitz]

The Payoff From Globalization

http://www.merlenormanstudio.com/mn-9046/ Dave

The Payoff From Globalization

Hi Ralph. I was waiting for your reply. ;-) Many/most countries are much more open than they used to be. I'm not an international economist, but I'd say China is definitely more open than they used to be. As is Russia and a large percentage of the former Soviet Republics. They tried the managed economy and it didn't work. France and Germany and others are also not having very good success with their more managed/socialist economies. Reducing barriers increases efficiency in use of resources, producing a more positive result. It's cheaper to get things done, so more gets done. I'd highly suggest watching Commanding Heights from PBS (Netflix has it). It's a great backgrounder on how the world has changed in recent times. It has changed. From my understanding, free trade is something that most politicians agree on, at least in principle. That's how we got to this point - not through those scary evil Republican puppetmasters pulling the strings, but through a general understanding of the benefits of free trade. The devil (aka politics) is in the details of implementation, but I think we got here through the actions of both Dems and Reps. I hate our debt too, and I will vote for those who will reduce it by reducing spending (just talking about it doesn't count). I think it would be funny if the Dems turned around in 2008 and ran on things like fiscal restraint and border enforcement. Man would that catch the Reps off guard, eh? Think it could happen? Brian P.S. We owe them money, but I'm proud they have the confidence in us to lay their money down on us, at relatively low interest rates even.

The Payoff From Globalization

David said:

The lunches are $.25, because of the philosophy that there is no such thing as a free lunch.

and Chuck said:

the IRS audited them and claimed that they would hit the employees with unearned income taxes for the free lunches

The IRS always makes sure that there's no such thing as a free lunch, eh? I'm surprised they would let them get away with a $.25 valuation, though. They usually want things like that valued/taxed at "fair market value". Or perhaps that IS fmv? ;-) Brian <-- retraining to be a tax geek

The Payoff From Globalization

David, MN is a fine company. The story I heard about the lunches is that they were once free but the IRS audited them and claimed that they would hit the employees with unearned income taxes for the free lunches. So, they started charging. But, I like your version better. chuck Opinions expressed are not necessarily those of my employer. "David Abramowitz" wrote in message news:6b25b04a.8@WebX.WawyahGHajS... > Chuck, almost everything you said is absolutely true. > > The lunches are $.25, because of the philosophy that there is no such > thing as a free lunch. They are good by cafeteria standards but not > gourmet. > > My first trip to California, ever, was to take POS training at Merle > Norman headquarters. I was most impressed by the organization, and the > agenda. There are good people there. > > My wife stayed on an additional two weeks for itensified cosmetics > training, and returned completely prepared for the opening. > > Tuesday marked our six-month anniversary. More on this later, and when > appropriate. > > Dave

The Payoff From Globalization

'U.S. is a country of laws and not morals' This is true. It is also true that the U.S. laws are based of a certain set of morals with a prescribed policy of 'tolerance' not acceptance of every other one. And who will say it ain't so?

[David Abramowitz]

The Payoff From Globalization

B_Sing wrote: I wish you great success in that and everything. Thank you. I deeply appreciate it. So far it has been a struggle, but that's the way with most retail businesses. It will be a while yet before I will be able to stop the bleeding, but it is a damn good product line, it is a good store, and I have good people working there. More later. Dave

[David Abramowitz]

The Payoff From Globalization

Chuck, almost everything you said is absolutely true. The lunches are $.25, because of the philosophy that there is no such thing as a free lunch. They are good by cafeteria standards but not gourmet. My first trip to California, ever, was to take POS training at Merle Norman headquarters. I was most impressed by the organization, and the agenda. There are good people there. My wife stayed on an additional two weeks for itensified cosmetics training, and returned completely prepared for the opening. Tuesday marked our six-month anniversary. More on this later, and when appropriate. Dave

[R.Daugherty]

The Payoff From Globalization

Brian wrote:Over the course of the last 100 years, those advocating closed economies have had their due and have not succeeded in providing the same benefits of an open economy. From your talking points, Brian, I take it Communist China was one of those closed economies in the last 100 years. Is China still one of those closed economies you refer to or now "open"? India? Are there any "open" economies in the world besides Republican run America? I doubt it. And we owe them all money. Or rather we have bequeathed to our children and grandchildren the grim lesson of Republican economics. Ralph