PeakTrader.com

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PeakTrader said...

The E.U. fiscal crisis increased demand for U.S. dollars and Treasury bonds.

Falling exports and rising capital inflows should benefit the U.S.

Americans will work less for foreigners and the cost of capital will be cheaper.

It's better to exchange worth less paper assets for goods rather than goods.

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gettingrational said...

If yuan revaulation is slight then let the market decide and not the central planners of the PRC.

Trading jobs for goods is preciously insane. If the yuan rises through market forces then U.S. goods and services have more a chance in the PRC.

The argument that worthless dollars are exchanged for goods is vaucuous and deceitful. The holders of massive amounts of dollars have many avenues to put them to work including: buying commodities, foreign companies (in part or whole)and avoiding internal bank crises through off-balance sheet funding, with foreign reserves, of PRC state owned enterprises.

Let's move on to the realities of a new century with market driven opportunities for all and not the chosen few in both the PRC and U.S.

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PeakTrader said...

Gettingrational, the real economy shows the U.S. has consumed much more than produced each year, since it became an open economy, around 1980. In 2006, the U.S. consumed $800 billion more than it produced.

How is that possible? Because foreigners are losing real wealth not trading their goods for U.S. goods through inflation, low interest rates, and currency exchange rates.

The U.S. has no control over poor foreign economic policies. European countries are on the verge of default and Adam Smith's mercantilism is summed up well:

"Wealth of Nations represents a highly critical commentary on mercantilism, the prevailing economic system of Smith's day. Mercantilism emphasized the maximizing of exports and the minimizing of imports. In Wealth of Nations, one senses Smith's passion for what is right and his concern that mercantilism benefits the wealthy and the politically powerful while it deprives the common people of the better quality and less expensive goods that would be available if protectionism ended and free trade prevailed."

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gettingrational said...

Peak Trader, Your quote about Adam Smith and mercantilism indicates feirce objections to PRC trade policies, correct?

How did the U.S. consume $800 million more then it produced in 2006? HMMMMM? That year being the peak of home equity loans based on high estate values? Yes, that is the reason and not some convoluted "free goods" from the PRC.

Consumer borrowing provides funding for consumption > production, pure and simple.

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PeakTrader said...

Gettingrational, if I borrow $1,000 from you to buy your goods and pay you back $500, then I received some free goods.

That's why the U.S. has been able to consume more than produce each year over the past 30 years.

When China buys your inputs at high prices to produce output at low prices, to the point of exporting 40% of its economy, then the Chinese masses cannot afford many goods at world prices.

The communist elites have turned the Chinese masses into slaves and when social costs are taken into account, improvements in their living standards have been much smaller than the 12% annual growth rates suggest.