Wait a minute, at first you come in and say and now you say So who is getting ripped off by who and by what method. If you want to talk about the monetary policy then say that. You are too hung up on the conspiracy theory to formulate a single solid statement.
let me put it as simple as it can be.. If u own monetary/financial assets, fiat currency, bonds, even stocks, and a net saver, no matter which side of the planet you live(that's the who), if you have money in the bank, you are rip-off by the process. , the fact that we live in global economy under the IMF and central banks ensure this will happen. they do it by print fiat money and diluting your wealth. (the process) . The ones who benefit are net borrowers, mortgage home owners, corporate/consumer debt junkies, the government, banks... That's the "dry" version, but it doesn't take much thinking to realize what a huge scam this is
If an American or an Asian puts money in stocks instead of holding stocks, is he being ripped off? I know Asians save a lot, but "saving" doesn't necessarily mean cash. Saving = Investment in Econ 101, am I wrong? You could be still right if indeed Asians keep all their money in ST treasuries. I just want to understand your point clearer. Thanks! If it helps anyone, I have 5 degrees from MIT, one of which is economics, but I am still very confused by the discussion.
Actually I think vegasoul is right but I hardly agree with him that its a rip off for those "poor asians". It's the govt's and banks who are stuck holding the bag, and even that is hedged by the fact that they invest heavily in american markets (a big reason for the 80s bear was cuz of japanese investors me htnks) but from wat i gather, the gist of vegasouls argument is:: 2000: china factory works ass off to make cheap toys to be sold in america, cost is 10 dollars, so china company gets 10 dollars. At current exchange rate, say 10 to 1, they pay their employees like .1 chinese rmbs. thats peanuts, like 1 cent, but cost of living is low so they are happy. the company (really, the bank) is forced to hold the dollars however. so the bank now has 10 dollars, and since china pratically imports nothing from us cept hi tech stuff, the bank just sits on its dollars, and it cant sell cuz of the chiense policy to maintain a fixed excahnge. 2005: china realizes it has to increase the value of their currecny (and by default devalue our dollar): now its 5 dollars to 1 chinese buck. the bank which once had 10 dollars sitting in their vault now is only worth 5 bucks. they get screwed. but yah i hardly think its THAT bad first of all those chinese factory workers have JOBS that some american factory worker no longer has and they arent peasent farmers and trust me, having been there, (and being abc), those 'poor asians' do not have any qualms about working in factories for 'peanuts'. we are seeing the same thing with india, they have schools teaching them AMERICAN tax law, they are hungry for our jobs, i dont htnk they go ' ha ha some american corporation is exploiting me ' while we piss away some of our best jobs. second of all, the foreign banks do not sit on their dollars, they invest them in american equity and debt markets, foreigners own a sizable share of our stock market!! and bonds and other interest bearing stuff. thus while dollar goes south, at least their investments go up to compensate. prolly not enough, but globalizatoin is just subsidized wage arbitrage (some other ETer used that phrase and ive since adopted it ever since hehe) anywayz so watever, they are happy with all these exports.
Also, China is due to be the most powerful nation in the world by GDP in the next 20 years. I am apprehensive that this is happening, but it is true. Foreigners have no restrictions to own American companies, but the reverse is not true for Chinese companies. So who is exploiting who? I think the relationship is mutually beneficial. As with any relationship, one can focus only on the negatives such as the loss of manufacturing jobs in the USA, or only positives such as cheaper goods and increased foriegn investments. The fact that free choice is employed means that on the balance the relationship is good for both sides.
you are missing the bigger picture. As in ANY capitalist societies, wealth is only concentrate at the top. and as a emerging market economy, the asian countries are the same. The point is the asian countries as a ENTITY gets rip off. trade is a exchange of capital and labor, not labor/capital for a piece of green paper. If there was no Current account deficit,then we would having fair trade, because resources are exchanged. but of course..the real world doesn't work that way.. second point is that asian countries hold US dollar and treasury bills as central bank reserve(if was gold b4 1971), IT"S fiat assets. Hong kong, china, japan and taiwan together finance more than half of the US budget defecit. amazing crap, isn't it? and those savings represent the asian labor no matter who's hand it's in.. it's NOT invested in equities contrary to what u believe. you don't see central banks going crazy buying INTC or property on beverly hills. and that is the CATCH, if they start to SPEND their dollar holdings or letting the dollar collapse, The US would become Thailland or Fillipines with its golf courses and whores..
As to your last point, i know its not heavily invested in equities, but some of it is, i mean the japaense were buying up real estate all over the country during the 80s bubble with all the moeny they were getting from their industries. at any rate thats not besides the point, theres a reason why china and japan are desperate to maintain a strong dollar, and its not for our benefit.. and wat u mention is really the crux with wats wrong with our funny econmy, we produce NOTHING, i mean really, our entire economy is based around money floating around doing nothing but multiplying and making someone rich. (well thats an exaggeration of course but newayz). honestly, if asian countries started to spend their dollars buying AMERICAN goods then i see nothing wrong with that watsoever, like u mention, and if they start to devalue the dollar, then i dont think that will devestate the american economy, sure inflation will suck but i thnk we've enjoyed low prices for so long. lets face it, most of 'inflation' is tied in rising real estate and associated expenses, not really in consumer goods, and if u look at the rising technological value of higher end goods like cars and comptuers.. and as far as asian countries getting ripped off, please, if anyone it is our country as a whole that is getting the shitty deal in this exchange. the rich in our country are getting a bonaza but honest ppl who actually want to find work and arent legacies can only find service jobs. sure prices are cheaper in the short term but in the long run we piss away our industries like we did with manufacturing, cars, electronics, now informatoin technology, soon to be engineering, in a few years there goes biotechnology, and we'll piss away nanotech if that ever becomes big. and once we do, we wont even be stealing away PHDs from taiwan and germany anymore. asian countries get 'shafted' now sure, but in the long run they benefit as capital investments are made in their infrastrucuture courtesy of american consumer spending dollars. u know japan didnt invent the electronics industry overnite!! that was american shortsightedness that gave them that industry entirely! china knows they are getting jack for their factories as they pump out all our cheap products for 'toilet american dollars' that they sit on, but its capital thats still being used to build up al ltheir industries. microsoft invests in a school to teach chinese ppl info tech. ibm outsources work to india computer monkeys. we get a short term benefit now, but in the long run u can bet ur ass that its them who are gonna be laughing at us as we come craashing down. if nething, asia is exploiting us imo.
all this economic issue the World(not only america) you mentioned is a result of the fiat monetary system we have. you don't seem to understand. It's not the real economy(production,jobs,technology,consumers) that is causing economic problems, but the monetary economy that is fundatmentally flawed. Without money, the real (as opposed to just toilet US paper) economy can't exist and its inherent flaws (central bank can print money) is at the crux of the problem I am not entirely saying the US is at fault, in a market economy, asians can't be rip-off UNLESS they allow it to happen. How? by using a fixed/dirty exchange rate. I don't say european are rip-off (they have a trade surplue to the US too) because well..look at the euro!! but the Yen,Yuan, the HK, the ringgat, baht, are all engage in competivtive devaluation, exporting for sake the sake of export economy. Allowing themselve to be exploited in the name of competitiveness. 80% of the asian aren't getting rip off(as in your explanation) because they don't own 80% of the wealth, but the rich and fat 20% of the population get take to the cleaners. Depending where you stand, left or right, it could be a huge scam, rip off or it can be justice and equaility for all..It's a huge welfare program on a global scale.. As a believer in the capitalist system and a capitalist( trader), the whole situation disgusts me..
I think this discussion won't be complete without a analysis by the mastreo ..Mr greenspan at his BEST here, explcitly and unambigously AGREEING with my fundatmental contention. Instead of giving a link, I will just post it here so everybody can think about it for a moment.. Gold and Economic Freedom by Alan Greenspan ------------------------------------------------------------------------------- GOLD AND ECONOMIC FREEDOM An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense-perhaps more clearly and subtly than many consistent defenders of laissez-faire -- that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other. In order to understand the source of their antagonism, it is necessary first to understand the specific role of gold in a free society. Money is the common denominator of all economic transactions. It is that commodity which serves as a medium of exchange, is universally acceptable to all participants in an exchange economy as payment for their goods or services, and can, therefore, be used as a standard of market value and as a store of value, i.e., as a means of saving. The existence of such a commodity is a precondition of a division of labor economy. If men did not have some commodity of objective value which was generally acceptable as money, they would have to resort to primitive barter or be forced to live on self-sufficient farms and forgo the inestimable advantages of specialization. If men had no means to store value, i.e., to save, neither long-range planning nor exchange would be possible. What medium of exchange will be acceptable to all participants in an economy is not determined arbitrarily. First, the medium of exchange should be durable. In a primitive society of meager wealth, wheat might be sufficiently durable to serve as a medium, since all exchanges would occur only during and immediately after the harvest, leaving no value-surplus to store. But where store-of-value considerations are important, as they are in richer, more civilized societies, the medium of exchange must be a durable commodity, usually a metal. A metal is generally chosen because it is homogeneous and divisible: every unit is the same as every other and it can be blended or formed in any quantity. Precious jewels, for example, are neither homogeneous nor divisible. More important, the commodity chosen as a medium must be a luxury. Human desires for luxuries are unlimited and, therefore, luxury goods are always in demand and will always be acceptable. Wheat is a luxury in underfed civilizations, but not in a prosperous society. Cigarettes ordinarily would not serve as money, but they did in post-World War II Europe where they were considered a luxury. The term "luxury good" implies scarcity and high unit value. Having a high unit value, such a good is easily portable; for instance, an ounce of gold is worth a half-ton of pig iron. In the early stages of a developing money economy, several media of exchange might be used, since a wide variety of commodities would fulfill the foregoing conditions. However, one of the commodities will gradually displace all others, by being more widely acceptable. Preferences on what to hold as a store of value, will shift to the most widely acceptable commodity, which, in turn, will make it still more acceptable. The shift is progressive until that commodity becomes the sole medium of exchange. The use of a single medium is highly advantageous for the same reasons that a money economy is superior to a barter economy: it makes exchanges possible on an incalculably wider scale. Whether the single medium is gold, silver, seashells, cattle, or tobacco is optional, depending on the context and development of a given economy. In fact, all have been employed, at various times, as media of exchange. Even in the present century, two major commodities, gold and silver, have been used as international media of exchange, with gold becoming the predominant one. Gold, having both artistic and functional uses and being relatively scarce, has significant advantages over all other media of exchange. Since the beginning of World War I, it has been virtually the sole international standard of exchange. If all goods and services were to be paid for in gold, large payments would be difficult to execute and this would tend to limit the extent of a society's divisions of labor and specialization. Thus a logical extension of the creation of a medium of exchange is the development of a banking system and credit instruments (bank notes and deposits) which act as a substitute for, but are convertible into, gold. A free banking system based on gold is able to extend credit and thus to create bank notes (currency) and deposits, according to the production requirements of the economy. Individual owners of gold are induced, by payments of interest, to deposit their gold in a bank (against which they can draw checks). But since it is rarely the case that all depositors want to withdraw all their gold at the same time, the banker need keep only a fraction of his total deposits in gold as reserves. This enables the banker to loan out more than the amount of his gold deposits (which means that he holds claims to gold rather than gold as security of his deposits). But the amount of loans which he can afford to make is not arbitrary: he has to gauge it in relation to his reserves and to the status of his investments. When banks loan money to finance productive and profitable endeavors, the loans are paid off rapidly and bank credit continues to be generally available. But when the business ventures financed by bank credit are less profitable and slow to pay off, bankers soon find that their loans outstanding are excessive relative to their gold reserves, and they begin to curtail new lending, usually by charging higher interest rates. This tends to restrict the financing of new ventures and requires the existing borrowers to improve their profitability before they can obtain credit for further expansion. Thus, under the gold standard, a free banking system stands as the protector of an economy's stability and balanced growth. When gold is accepted as the medium of exchange by most or all nations, an unhampered free international gold standard serves to foster a world-wide division of labor and the broadest international trade. Even though the units of exchange (the dollar, the pound, the franc, etc.) differ from country to country, when all are defined in terms of gold the economies of the different countries act as one -- so long as there are no restraints on trade or on the movement of capital. Credit, interest rates, and prices tend to follow similar patterns in all countries. For example, if banks in one country extend credit too liberally, interest rates in that country will tend to fall, inducing depositors to shift their gold to higher-interest paying banks in other countries. This will immediately cause a shortage of bank reserves in the "easy money" country, inducing tighter credit standards and a return to competitively higher interest rates again. A fully free banking system and fully consistent gold standard have not as yet been achieved. But prior to World War I, the banking system in the United States (and in most of the world) was based on gold and even though governments intervened occasionally, banking was more free than controlled. Periodically, as a result of overly rapid credit expansion, banks became loaned up to the limit of their gold reserves, interest rates rose sharply, new credit was cut off, and the economy went into a sharp, but short-lived recession. (Compared with the depressions of 1920 and 1932, the pre-World War I business declines were mild indeed.) It was limited gold reserves that stopped the unbalanced expansions of business activity, before they could develop into the post-World Was I type of disaster. The readjustment periods were short and the economies quickly reestablished a sound basis to resume expansion. But the process of cure was misdiagnosed as the disease: if shortage of bank reserves was causing a business decline-argued economic interventionists -- why not find a way of supplying increased reserves to the banks so they never need be short! If banks can continue to loan money indefinitely -- it was claimed -- there need never be any slumps in business. And so the Federal Reserve System was organized in 1913. It consisted
When business in the United States underwent a mild contraction in 1927, the Federal Reserve created more paper reserves in the hope of forestalling any possible bank reserve shortage. More disastrous, however, was the Federal Reserve's attempt to assist Great Britain who had been losing gold to us because the Bank of England refused to allow interest rates to rise when market forces dictated (it was politically unpalatable). The reasoning of the authorities involved was as follows: if the Federal Reserve pumped excessive paper reserves into American banks, interest rates in the United States would fall to a level comparable with those in Great Britain; this would act to stop Britain's gold loss and avoid the political embarrassment of having to raise interest rates. The "Fed" succeeded; it stopped the gold loss, but it nearly destroyed the economies of the world in the process. The excess credit which the Fed pumped into the economy spilled over into the stock market -- triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in braking the boom. But it was too late: by 1929 the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence. As a result, the American economy collapsed. Great Britain fared even worse, and rather than absorb the full consequences of her previous folly, she abandoned the gold standard completely in 1931, tearing asunder what remained of the fabric of confidence and inducing a world-wide series of bank failures. The world economies plunged into the Great Depression of the 1930's. With a logic reminiscent of a generation earlier, statists argued that the gold standard was largely to blame for the credit debacle which led to the Great Depression. If the gold standard had not existed, they argued, Britain's abandonment of gold payments in 1931 would not have caused the failure of banks all over the world. (The irony was that since 1913, we had been, not on a gold standard, but on what may be termed "a mixed gold standard"; yet it is gold that took the blame.) But the opposition to the gold standard in any form -- from a growing number of welfare-state advocates -- was prompted by a much subtler insight: the realization that the gold standard is incompatible with chronic deficit spending (the hallmark of the welfare state). Stripped of its academic jargon, the welfare state is nothing more than a mechanism by which governments confiscate the wealth of the productive members of a society to support a wide variety of welfare schemes. A substantial part of the confiscation is effected by taxation. But the welfare statists were quick to recognize that if they wished to retain political power, the amount of taxation had to be limited and they had to resort to programs of massive deficit spending, i.e., they had to borrow money, by issuing government bonds, to finance welfare expenditures on a large scale. Under a gold standard, the amount of credit that an economy can support is determined by the economy's tangible assets, since every credit instrument is ultimately a claim on some tangible asset. But government bonds are not backed by tangible wealth, only by the government's promise to pay out of future tax revenues, and cannot easily be absorbed by the financial markets. A large volume of new government bonds can be sold to the public only at progressively higher interest rates. Thus, government deficit spending under a gold standard is severely limited. The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit. They have created paper reserves in the form of government bonds which -- through a complex series of steps -- the banks accept in place of tangible assets and treat as if they were an actual deposit, i.e., as the equivalent of what was formerly a deposit of gold. The holder of a government bond or of a bank deposit created by paper reserves believes that he has a valid claim on a real asset. But the fact is that there are now more claims outstanding than real assets. The law of supply and demand is not to be conned. As the supply of money (of claims) increases relative to the supply of tangible assets in the economy, prices must eventually rise. Thus the earnings saved by the productive members of the society lose value in terms of goods. When the economy's books are finally balanced, one finds that this loss in value represents the goods purchased by the government for welfare or other purposes with the money proceeds of the government bonds financed by bank credit expansion. In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands of twelve regional Federal Reserve banks nominally owned by private bankers, but in fact government sponsored, controlled, and supported. Credit extended by these banks is in practice (though not legally) backed by the taxing power of the federal government. Technically, we remained on the gold standard; individuals were still free to own gold, and gold continued to be used as bank reserves. But now, in addition to gold, credit extended by the Federal Reserve banks ("paper reserves") could serve as legal tender to pay depositors.as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard.