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PeakTrader said...

The benefits of U.S. international trade are much greater than the costs. Some benefits:

1. Social benefits (instead of social costs).
2. Lower prices.
3. Lower interest rates.
4. Higher profits.
5. Freeing-up limited resources.
6. Shifting resources into more profitable goods and higher paying jobs.

International trade generates a virtuous U.S. cycle of consumption-investment, because foreigners sell their goods too cheaply and lend their dollars too cheaply to maintain employment and buy commodities, e.g. oil.

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PeakTrader said...

The U.S. government failed, because up to $800 billion annual U.S. trade deficits were dollars shifted from the U.S. private sector to the U.S. government (into Treasury bonds) that weren't refunded to the U.S. private sector (e.g. in tax cuts).

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PeakTrader said...

China's growth-at-any-cost policy is a most inefficient system.

A country can double its real GDP and yet raise its overall standard of living by a much smaller amount, while adding much more to its trading partners standard of living.

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PeakTrader said...

It seems, U.S. producers and consumers are so uncertain whether the government restructuring of the economy will move forward or reverse course, after the big GOP win in 2010 and a possible big GOP win in 2012, that they are moving forward slowly or waiting it out.

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PeakTrader said...

A plausible forecast from a Dr Doom - Recessions in the U.S. and China:

A Gary Shilling, bachelor’s degree in physics, magna cum laude, from Amherst College, master’s degree and doctorate in economics at Stanford University.

Article excerpts Jun to Aug 2011

The U.S. Economy:

“I’m predicting another recession next year (2012).”

The economy, he says, is like a four-cylinder engine, and a recovery usually requires all four to be firing.

They are consumer spending, employment, housing and the reversal of the inventory cycle.

Shilling thinks only the last is really recovering.

A further 20% decline in home prices would raise the percentage of homes worth less than the value of their mortgages to a stunning 40% (Robert Shiller, co-creator of the Standard & Poor’s/Case-Shiller Home Price index, has a similar prediction).

If this happens, “you know what that will do to consumer spending,” said Shilling. “That’s a recession — an easy forecast.”

The Obama administration’s own attempt to “fix” the housing market — the Home Affordable Modification Program (HAMP) — was, in Shilling’s words, “a miserable failure.”

As for investing, Shilling has returned to an old favorite (as of June 24, 2011): the 30-year Treasury bond, which is currently yielding around 4.21%. “I think they’re going to 3%,” he said. “I think [the 10-year is] going to 2%.”

I hesitate to second guess him on housing, where his track record has been stellar.

China's economy-housing bubble-commodities bubble:

The hard landing that I foresee for China will probably prick the global commodity bubble, which is already showing signs of topping out.

Our own Fed, using much more sophisticated policy tools, has tried to slow an overheating U.S. economy 12 times in the post-World War II era. Eleven of those attempts failed and resulted in recessions.

What odds do you give the Chinese, who need to maintain an 8% GDP growth rate in order to employ new job entrants?

Speculation by multiple-home owners has pushed new apartment prices in Beijing from 32 times average aftertax income in 2006 to a ridiculous 57 times.

I’ve studied many bubbles over the years, and concentrated on predicting their demises.

Commodities show every sign of being in one.

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PeakTrader said...

Ronald Reagan earned a BA degree in 1932, which is equal to a Ph.D today.

Ronald Reagan on Franklin Roosevelt: The Significance of Style
08/20/08

Reagan was a New Deal Democrat. He joked that he had probably become a Democrat by birth, given that his father, Jack, was so devoted to the Democratic Party. The younger Reagan cast his first presidential vote in 1932 for Franklin Roosevelt, and did so again in the succeeding three presidential contests.

His faith in FDR remained undimmed even after World War II, when he called himself “a New Dealer to the core.”

He summarized his views in this way: “I thought government could solve all our postwar problems just as it had ended the Depression and won the war. I didn’t trust big business. I thought government, not private companies, should own our big public utilities; if there wasn’t enough housing to shelter the American people, I thought government should build it; if we needed better medical care, the answer was socialized medicine.”

When his brother, Moon, became a Republican and argued with his sibling, the younger Reagan concluded “he was just spouting Republican propaganda.”