We can all do our part to keep SOME things in America!!!!

[gunderwood]

I just don't see that the course we are currently on, as working.



http://www.census.gov/indicator/www/ustrade.html

The Nation's international trade deficit in goods and services increased to $497.8 billion in 2010 from $374.9 billion in 2009.

For December, the trade deficit increased to $40.6 billion from $38.3 billion (revised) in November. Exports increased $2.8 billion from November to $163.0 billion in December. Goods were $116.6 billion in December, up from $113.7 billion in November, and services were $46.4 billion in December, virtually unchanged from November. Imports increased $5.1 billion from November to $203.5 billion in December. Goods were $170.1 billion in December, up from $165.0 billion in November, and services were $33.4 billion in December, virtually unchanged from November.

Overall, we are still importing more than we are exporting.

So they are giving us $500B a year?

Seriously, if we trade and we walk away with $500B a year of more stuff than they do, aren't they giving it to us? What those numbers don't account for is that the Chinese government is subsidizing us. They purchase raw materials with our dollars at market rates and then sell them to Chinese companies at sub-market rates. E.g. even though oil is at $100 a barrel, internally they are only paying around $40 a barrel. The $60 is just written off as a loss. Their government does this so their growth doesn't slow because as long as things are improving the people are happy to leave those Communists in power...if it stops, they have a problem.

In effect, yes, the Chinese are giving us and other countries free stuff with those policies. There are plenty of Chinese goods which cost them more to make (at market prices) than they sell them to us.

In a very real sense they are paying us to use their stuff.

Edit: If you want to give me free stuff, I'll gladly run a trade deficit with you.

[Yarddawg]

I guess that I am just not looking at it correctly. The way I see it, we are giving 500 billion less than we are taking in.

[gunderwood]

I guess that I am just not looking at it correctly. The way I see it, we are giving 500 billion less than we are taking in.

It's an artificial calculation which doesn't take into account many of the games some countries play to make things look better for them than they actually are. E.g. China. The problem is that they keep their side of the data close and only release manipulated numbers. In short, the numbers don't quite mean exactly that.

These two quotes say it all:

While an individual's balance of payments conveys exhaustive information about his social position, a group's balance discloses much less. It says nothing about the mutual relations between the members of the group. The greater the group is and the less homogeneous its members are, the more defective is the information vouchsafed by the balance of payments. The balance of payments of Denmark tells more about the conditions of the Danes than the United States balance of payments about the conditions of the Americans.

More nonsense has been written about balances of payments than about virtually any other aspect of economics. This has been caused by the failure of economists to ground and build their analysis on individual balances of payments. Instead they have employed such cloudy, holistic concepts as the "national" balance of payment without basing them on individual actions and balances.

http://mises.org/daily/2029

Perhaps it is best explained if you try to answer the question, what do those other countries try to do with the $500B? If the Chinese pile up the dollars and burn them, would you care? They would be destroying the money, but we can easily print more. No, just like in an individual exchange, you do the exchange because you plan on using that value in some manner. Much of the trade deficit which is real is used to subsidize developing industries, but ultimately those dollars return here.

Edit: Here is the conclusion of that author (the previous two are from two prominent economists of years gone by):

What matters for the process of wealth formation is the flow of real savings. The balance of payments statement doesn't provide such information. Consequently, it is not possible to determine the implications of a given state of the current account on the well-being of Americans without information regarding the state of the flow of real savings. Therefore various pessimistic assessments regarding the US economy, which are based on the state of the balance of payments, are likely to be without much foundation.

You can have a balance of payments which show a negative position for you, but actually have real wealth being transferred to you.

[dorminWS]

The Chinese are subsidizing our trade deficit with the low cost of their labor. So we are almost engaged in benefiting from the fruits of slavery. Of course, their people are so poor and deprived that even at the slave wages they make now, their life is much improved. But we aren't really getting a free ride. Because over time, the Chinese are exporting a vast amount of US wealth out of the country and converting it to US debt in the hands of the Chinese. And, by the way, they're also bidding up the price of resources we must buy like oil, copper, cotton, etc.; which inflates our costs and makes us even less copetitive in the global market. A few decades ago we had the Japanese turn the tables on us after scores of years during which we did the same thing with them that we are doing now with the Chinese. Then suddenly, the Japanese were buying up American landmarks with the trade-deficit-generaled dollars they held. But the Japanese were still our allies, and more importantly, were still dependent upon the continued viability of the USA to protect them from the Russians and the Red Chinese.

The Chinese, when their day comes, won't worry about losing the USA's presence in the global balance of power. They'll welcome it.

[gunderwood]

The Chinese are subsidizing our trade deficit with the low cost of their labor. So we are almost engaged in benefiting from the fruits of slavery. Of course, their people are so poor and deprived that even at the slave wages they make now, their life is much improved.

In a very real sense, yes we are. The prices they charge us do not reflect the real value of the object due to their internal subsidies. I should note that the idea that it is slave labor is only from your reference of living in a first world country. We use to have child labor, working dawn to dusk, limited safety, etc. We did away with those things as we became wealthy because we could afford too. E.g. I don't have to work 12hrs a day because I can provide for my family just fine with 40hrs. In contrast, the Europeans consider our 40hrs a week and pitiful time off in much the same way as you view the Chinese labor. Of course much of that is only possible because we subsidize their defense which frees them to spend all of their wealth on quality of life improvements.

But we aren't really getting a free ride. Because over time, the Chinese are exporting a vast amount of US wealth out of the country and converting it to US debt in the hands of the Chinese.

A balance of payments is not wealth as noted above. Politicians want you to believe is so that they have a scape goat for our economic troubles, but the reality is that our troubles are a direct result of their central bank policies.

And, by the way, they're also bidding up the price of resources we must buy like oil, copper, cotton, etc.; which inflates our costs and makes us even less copetitive in the global market.

How is this any different than Europe, South America, Africa, etc. etc. Unless you are assuming we have some natural right to oil, copper, cotton, etc. than its just more competition for the use of limited resources. If you assume some right to it that is far worse than the previously mentioned "slave" labor as you are in effect saying that you as a citizen of America deserve to be rich and have all of these benefits for no other reason that you were lucky enough to be born here, while they should and must remain poor so that they won't use your resources. You deserve what you work for, which is ultimately a measure of how well you serve others.

The Chinese, when their day comes, won't worry about losing the USA's presence in the global balance of power. They'll welcome it.

There is a simply way to fix that, out compete them. Do what we do best which is innovate and do more with less. Our problem is not increased competition from others (to include the Chinese), but rather that our own monetary policies, which are set by the central bank, are manipulative to promote government values and hide their mismanagement.

The Chinese are simply taking advantage of our stupidity. If we are willing to give up and commit suicide, the Chinese are more than happy to purchase our estate.

[dorminWS]

Gunderwood, my boy, if you don't stop jumping so far and so fast to conclusions, you're gonna poke your eye out on one of them someday.

The Chinese are subsidizing our trade deficit with the low cost of their labor. So we are almost engaged in benefiting from the fruits of slavery. Of course, their people are so poor and deprived that even at the slave wages they make now, their life is much improved.

In a very real sense, yes we are. The prices they charge us do not reflect the real value of the object due to their internal subsidies. I should note that the idea that it is slave labor is only from your reference of living in a first world country. We use to have child labor, working dawn to dusk, limited safety, etc. We did away with those things as we became wealthy because we could afford too. E.g. I don't have to work 12hrs a day because I can provide for my family just fine with 40hrs. In contrast, the Europeans consider our 40hrs a week and pitiful time off in much the same way as you view the Chinese labor. Of course much of that is only possible because we subsidize their defense which frees them to spend all of their wealth on quality of life improvements.
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I'm not much of a hand-wringer on issues of social justice. Truth is, I couldn't resist the "slavery" comment because (1) it's true, and (2) I knew it would bug the heck out of some folks. I don't feel a bit guilty about the "slave labor" issue. Every country that has ever been a world power has benefited from the same phenomenon. And, as I said, the Chinese workers are better off. But Cheap labor and virtually nonexistent government safety and envireomental regulations are primarily driving the trade imbalance.

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

But we aren't really getting a free ride. Because over time, the Chinese are exporting a vast amount of US wealth out of the country and converting it to US debt in the hands of the Chinese.

A balance of payments is not wealth as noted above. Politicians want you to believe is so that they have a scape goat for our economic troubles, but the reality is that our troubles are a direct result of their central bank policies.

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

The balance of payments is precisely about wealth. It is the transfer of weath from us to them and from them to us in the form payment for goods and services. A negative balance constitutes a net transfer of wealth. Central bank policies impact this, and may motivate it sometimes. But the prime mover of US/Chinese trade is cheap labor and low-to-nonexistant regulatory costs. Chinese coal (for instance) is cheaper than dirt compared to US coal. In China they have many times the mine fatality rate. No doubt the social cost to the Chinese workers in terms of black lung and other preventalble injuries and illness is vast. But those costs are deferred, for the time being, and will be borne by the Chinese in the future. In the US, the cost of environmental and safety regulations vastly inflate the cost coompared to China. And US miners, thanks to the UMWA, make as much money as a lot of professionals. Do I advocate lowering our standards to China's? NO (before you accuse me of that). I'm merely expositing the reasons for US/China trade balances.

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And, by the way, they're also bidding up the price of resources we must buy like oil, copper, cotton, etc.; which inflates our costs and makes us even less copetitive in the global market.

How is this any different than Europe, South America, Africa, etc. etc. Unless you are assuming we have some natural right to oil, copper, cotton, etc. than its just more competition for the use of limited resources. If you assume some right to it that is far worse than the previously mentioned "slave" labor as you are in effect saying that you as a citizen of America deserve to be rich and have all of these benefits for no other reason that you were lucky enough to be born here, while they should and must remain poor so that they won't use your resources. You deserve what you work for, which is ultimately a measure of how well you serve others.

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

Again, I'm not preaching on social justice or American exceptionalism or any of that other stuff. I'm merely observing the facts. China and India are compounding our economic problems in the US by bidding up the price of basic commodities. In the past, we didn't have them competing to anywhere near this degree and they didn't have the resources. Now they do. To a large extent, it is because we are enriching them through our trade with them. Is that right? Is that wrong? It doesn't matter. It just IS. This is the natural economic order of things. We can mitigate the effect if we have the will. So far, our governing bodies have not demonstrated nearly enough of that.

Do we have a right to raw materials and commodities? We do if we can get them. I don't know where you came up with this business about me thinking we had a superior right to resources. It may be you're so used to hearing people whine about the way things are that you just assumed I was, too. There's no disagreement between us here - except that you imagined i was whining. You need to watch that. Probably comes from living up there in Northern Virginia with all them whiners. To be effective in competing for these assets we must reorder our priorities. Do I want to see the USA remain the world's only superpower with worldwide influence and a standard of living that is the envy of the world? YOU'RE DANGED RIGHT I DO. I want my grandchildern to enjoy the plaenty and prosperity that I have. But that we have no God-given right to it is precisely the point. We've got to win the fight for it. Pappy used to say you couldn't win a fight unless you did more than half the fighting. We, so far, haven't even gotten up off out lazy @sses and come to the fight, much less put on the gloves.

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

The Chinese, when their day comes, won't worry about losing the USA's presence in the global balance of power. They'll welcome it.

There is a simply way to fix that, out compete them. Do what we do best which is innovate and do more with less. Our problem is not increased competition from others (to include the Chinese), but rather that our own monetary policies, which are set by the central bank, are manipulative to promote government values and hide their mismanagement.

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

It doesn't matter how hard you compete in the hatchet fight if everybody has a hatchet but you. We need to bring our hatchet to the fight. If we don't stop our government from debasing our currency, we've got no hatchet. The monetary policy machinations of the central banks in this hatchet fight metaphor would equate to no more than dulling one corner of the hatchet bit. As for innovation, we are (or at least have been) good at that. But we have lost an important edge. There is a statistic out there that goes something like "India and China graduate more homors students every year in the sciences than the US has graduates". (They haven't debased their education establishment with a milstone like the Federal Department of Education.) I'm not whining about what we haven't got - I'm just noting that we are at a disadvantage and we can fix it IF WE HAVE THE WILL. The problem most certainly is that the Chinese and Indians are competing with us, and they are whipping our @ss! Monetary policy is only a small part of why they are able to compete. If they didn't have enough American Dollars piled up from their surplus of trade with us to burn a wet mule, it would matter little what the exchange rate was between dollars and yaun.

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

The Chinese are simply taking advantage of our stupidity. If we are willing to give up and commit suicide, the Chinese are more than happy to purchase our estate.

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On this, we are in complete accord. I would add that in addition to our stupidity, they are taking advantage of our laziness and general ignorance of economics and the international monetary system.

[gunderwood]

@dorminWS No need for smugness.

I'm not much of a hand-wringer on issues of social justice. Truth is, I couldn't resist the "slavery" comment because (1) it's true, and (2) I knew it would bug the heck out of some folks. I don't feel a bit guilty about the "slave labor" issue. Every country that has ever been a world power has benefited from the same phenomenon. And, as I said, the Chinese workers are better off. But Cheap labor and virtually nonexistent government safety and envireomental regulations are primarily driving the trade imbalance.

It is cheap labor, but it is not slave labor. Slave implies they don't receive the benefits of the their work or that they are free to go work elsewhere. It isn't slavery, it is just what happens in all developing countries. We use to have similar standards and wages in this country, but decided we didn't want them to continue so we did away with them. I.e. we valued our time off or safety more than the work so in order to get people to work in those fields or long hours, standards had to rise. This is tightly correlated with worker productivity. Government and union supporters are always at a loss to explain this because it started several decades before they intervened. If anything, government simply acknowledge that which was already occurring.

The balance of payments is precisely about wealth. It is the transfer of weath from us to them and from them to us in the form payment for goods and services. A negative balance constitutes a net transfer of wealth.

If you had bothered to read the link I posted or researched how trade imbalances are calculated you would realize that it isn't. Here a simple example why:

Let's say that I wish to purchase bullets from you. You, being desperate for jobs, decide to really push the price and undercut everyone to insure you are the primary provider of bullets. Let's say the nominal price of bullets is $200 per 1k (which is what Rick and everyone else is selling them for), but you can use cheap labor and even be subsidized by your government so that you can bring that price down to $100/k. I buy $100 of bullets from you. Now, you have $100 and decide to purchase something from Yarddawg with that $100 dollars. Let's say yarddawg is selling oil and you buy one barrel for $100. I now have bullets, you have oil and Yarddawg has the $100. Yarddawg decides he wants to invest in the future and after much research learns of Gunderwoods Advanced Barrels out of VA. He decides to invest the $100 in my company.

Who is carrying the inbalance of trade? Well, if I say gunderwood and yarddawg are American's and you are Chinese, then nationally there is no trade in balance. However, as the first quote I used was from Mises who was pointing out that the aggregate doesn't tell you much. Technically, I have a negative balance while yarddawgs is positive and you are neutral. However, if I say gunderwood is American, you are Chinese and yarddawg is European, then I carry a negative national trade balance, you are neutral and only yarddawg is positive. If I say gunderwood is American and both you and yarddawg are Chinese, then you both have positive trade balance and I have a negative.

Not every transaction counts as trade and how you draw boundaries changes who carries the arbitrary payment imbalance. Nothing about the transfer of actual wealth changed one bit! Yarddawgs investment doesn't count as trade, its on another accounting sheet. Let's look at wealth.

How was wealth transferred? You received oil and I received bullets and yarddawg had $100 dollars. At first glance we all got "equal," but different wealth transfer, but that isn't quite true is it? You only received oil, but I not only got bullets, I also received a $100 investment which if I use wisely will make me far in excess of $100. Granted, I have to "pay" some of that to my investor (yarddawg), but he also is bearing the risk for me. I get my bullets and the $100 invested into my company. In terms of real wealth, yarddawg and I killed you in this transaction. Now add in the fact that one of the reasons you were able to sell them to me for only $100 vice the market rate of $200 was because your government took your taxes/funds and bought the raw materials for those bullets at market prices and sold them to you at subsidized prices! I really got more like $200 of bullets for $100 and $100 invested into my company!

This actually isn't too far off from what really happens. Like I've said many times, those dollars ultimately end up back here, but they just don't end up on the accounting sheet. This is particularly true when you consider international corporations. Let's say that I use yarddawgs investment wisely and become a multi-billion dollar international corporation (Gunderwoods Advanced Barrels). As a huge international corporation I hire 100 of the best scientist and engineers around and pay them on average $1M a year. Now, to keep costs down I outsource manufacturing to you in China. I pay 1,000 workers $100 a year to make the barrels. Since only my IP flowed into China and doesn't count as trade, but real barrels flowed out and were sold to Americans, I just created a negative trade balance between the United States and China! However, if you look at the actual wealth being created and transfered my US employee's are getting not only larger shares, but more total. Of course I am also transferring real wealth to yarddawg regardless of if he is American, European, or Chinese, but none of it counts as trade. Accounting is not wealth.

Again, payments are merely accounting which is not a measure of actual and total wealth transfer at all. The trade deficit isn't calculated like you assume and it doesn't mean what you think it does or what politicians want you to think it does. What's being bought and why is far more important and simple accounting arbitrariness. It's all about scape-goating our economic problems.

Again, I'm not preaching on social justice or American exceptionalism or any of that other stuff. I'm merely observing the facts. China and India are compounding our economic problems in the US by bidding up the price of basic commodities. In the past, we didn't have them competing to anywhere near this degree and they didn't have the resources. Now they do. To a large extent, it is because we are enriching them through our trade with them. Is that right? Is that wrong? It doesn't matter. It just IS. This is the natural economic order of things. We can mitigate the effect if we have the will. So far, our governing bodies have not demonstrated nearly enough of that.

Yes, it is the natural order of things, but you are wrong about our government being able to do anything about it with one exception. The only thing the government can do is allow our supply to come on the market they are artificially, though government fiat, limiting access too. As it is the natural order of the world, anything the government dreams up will cost us more resources to implement than the positive impacts it may have.

Do we have a right to raw materials and commodities? We do if we can get them. I don't know where you came up with this business about me thinking we had a superior right to resources. It may be you're so used to hearing people whine about the way things are that you just assumed I was, too. There's no disagreement between us here - except that you imagined i was whining.

I wasn't assuming a thing about you. I was simply laying out the options for interpretation and awaiting your response as to which was correct. I purposefully laid out the positive before the negative because that was the likely interpretation. Touchy much?

If we don't stop our government from debasing our currency, we've got no hatchet. The monetary policy machinations of the central banks in this hatchet fight metaphor would equate to no more than dulling one corner of the hatchet bit.

Yes, we must stop the debasing of the currency. I think it is more than you are letting on as that debasement is having negative impacts and distortions throughout the whole economy. Realize that debasement really implies we have no idea as to what the real value of anything actually is.

As for innovation, we are (or at least have been) good at that. But we have lost an important edge. There is a statistic out there that goes something like "India and China graduate more homors students every year in the sciences than the US has graduates". (They haven't debased their education establishment with a milstone like the Federal Department of Education.)

Yes, we simply don't value achievement anymore. Instead it is popular to pull those who have done more than us down. Just listen to a Democrat whine about the rich.

I'm not whining about what we haven't got - I'm just noting that we are at a disadvantage and we can fix it IF WE HAVE THE WILL. The problem most certainly is that the Chinese and Indians are competing with us, and they are whipping our @ss! Monetary policy is only a small part of why they are able to compete. If they didn't have enough American Dollars piled up from their surplus of trade with us to burn a wet mule, it would matter little what the exchange rate was between dollars and yaun.

Yes they are kicking our butts in many things. The monetary policy does more than just exchange rates. In fact, it directly impacts our value assessments and it is no wonder we don't value the future since we've spent decades convincing ourselves that we can do last centuries jobs and still be #1 by debt financing everything. I'm not saying it is everything, but the ability to artificially inflate how things should be, from government welfare, to infrastructure, to housing, to you name it, through debt has severely impacted our ability to see causal relationships between our actions and outcomes. We don't invest in education like we should (not money which we burn at a stupid rate) because if you join the union you can make $100k a year, drive a Lexus, living an a McMansion, etc. spinning lug nuts! We don't know how to value things!

Of course, that isn't all of it. There are many other aspects of it, but monetary policy has allowed us to avoid reality for so long we convinced ourselves the lie was reality.

[gunderwood]

This is one of the simpler definitions:

The difference between the volume of a country’s exports and its imports. An excess of exports means that a country has a trade surplus. An excess of imports means that the country has a trade deficit. The balance of trade measures goods and services. The balance of trade is part of the balance of payments, a measurement that isn’t given much scrutiny by the financial markets. The balance of payments is much more comprehensive than the balance of trade because it includes investment income flows and transfer payments. The U.S. Department of Commerce releases monthly data on the United States’ trade balance.

http://invest.yourdictionary.com/trade-balance

It's accounting which is d*cked up by various government policies and reality. It doesn't mean what you think it does!

[zephyp]

This is one of the simpler definitions:

The difference between the volume of a country’s exports and its imports. An excess of exports means that a country has a trade surplus. An excess of imports means that the country has a trade deficit. The balance of trade measures goods and services. The balance of trade is part of the balance of payments, a measurement that isn’t given much scrutiny by the financial markets. The balance of payments is much more comprehensive than the balance of trade because it includes investment income flows and transfer payments. The U.S. Department of Commerce releases monthly data on the United States’ trade balance.

http://invest.yourdictionary.com/trade-balance

It's accounting which is d*cked up by various government policies and reality. It doesn't mean what you think it does!

+1...consider something simple like unemployment which is "officially" at 8.9%...we all know its a lot higher than that for various reasons...

http://articles.moneycentral.msn.com/le ... -rate.aspx