PeakTrader.com

[administrator]

Rufus II said...

They sell, we buy. We run out of money, they loan us money to buy more. We get nervous, they pat us on the head like the confused, insecure, dull little urchins we are and we sign on the paper. More credit.

Then, we belong to them forever.

It must be something we drank; we couldn't have been Born this stupid.

-------

PeakTrader said...

Rufus II, your statement should say (based on the data and fundamental economics):

They sell too cheaply. So, we buy too much. Then they loan too cheaply. So, we borrow too much. We're thankful for the free goods and free money.

Will those foreigners be our slaves forever?

It must be something in the education, because we weren't born this smart.

To induce U.S. demand, foreigners have to give-up producer surplus to the U.S. (i.e. increase U.S. consumer surplus), and find ways to increase producer surplus (for the U.S.) to sustain U.S. demand (year-after-year, decade-after-decade, because of diminishing U.S. marginal utility).

However, that doesn't show up in trade balances.

So, the U.S. may actually have trade surpluses, with the rest of the world, instead of trade deficits.

I stated before:

If someone is willing to sell you something for half price, you may not buy twice as much.

You may buy three times as much (given your budget constraint).

So, for example, you'd "import" three units for $15 and "export" one unit for $10, creating a $5 trade deficit.

However, you really exchanged your $10 good for three $10 goods, or $30, i.e. a $15 surplus (because you paid $15 for $30 worth of goods).

Yet, your trade deficit is measured as $5.

Also, foreigners lend the U.S. $100 to buy their exports. However, the U.S. pays them back less than $100, through differences or changes in inflation, interest rates, and currency exchange rates, which induces U.S. spending and borrowing.

The U.S. may borrow $100 today, then owe $99 (in real terms) a year later, $90 five years later (through compounding), $75 ten years later, etc. to maintain the virtuous U.S. cycle of consumption-investment in the long-run.

The U.S. has become a "black hole" in the global economy, attracting imports and capital, and even attracting the foreign owners of that capital themselves.

---------

juandos said...

"Will those foreigners be our slaves forever?

It must be something in the education, because we weren't born this smart"...

You're kidding, right PT?

I think the realities are quite different:

http://www.youtube.com/watch?v=OTSQozWP-rM

--------

PeakTrader said...

Juandos, the U.S. government is able to squander enormous wealth, because of the massive wealth created by the U.S. market economy, including the wealth generated from international trade.

Also, the U.S. government has proven to be adept at trapping the American people into inferior economic policies, while continuing to disregard the will of the American people, to prevent more economic traps, and attacking the people (by words and actions) who create the wealth the government destroys.

Americans are becoming slaves to the U.S. government.