The all or nothing argument. Noone said that gold would usher in a utopian era of everlasting peace and stability. But it would certainly remove one rather valuable tool of theft and control. At least we won't have bankers stealing from us via inflation. Nor will they be able to control the business cycle to flush out assets from weak to strong hands. Those in power will ALWAYS find ways to attempt to control and profit from their subjects. At least we can remove one of their most powerful tools. This is warfare between bankers and everyone else and you're simply repeating the propaganda they've fed you. Unless you really believe bankers have your best interest at heart? Just like the specialist is there to keep a fair and orderly market and make sure you get a good price?
bankers a necessary evil or not, thats another discussion... nothing wrong with shorting the (paper) currency and going long other asset types / currencies if you believe the hype / relative value and expected returns are favorable at this particular juncture / the fiat currencies are going to collapse... but regarding the viability and real life benefits of asset-backed currencies or even worse, gold as a currency, keep dreaming!
Deficits are a measure of flow, flow away from one place and into another place. The conometrics continue apace. If anything falls apart it is the original sources and that is an internal issue that may be something that could be faced by those who are participating. The places where capital arrives are continually buttressed by their "boot strapping" efforts and they, in turn, can hand off more and more opportunities to others to serve their burgeoning economies. There are very few "callables" in econometric modelling. The place to look, and I have, is the "substitution" effect which nets down the positive other three effects. What could take the place of this huge supply of outgoing captial from the US and Euro? US and Euro selfsufficiency would be one thing. Liasez faire by US gov't. Not likely. A parallel strategy that is being used for 2006 elections is gay marriage as a national ratification modus. In 2004 it delivered 12 states by running public voting on new state regs in 12 borderline states to tip the balance. What government (federal) mandates could stem the deficite tide in a way parallel to the gay marriage ruse? The topic is stemming the internatal national consequences pending for allowing the trade deficit to continue. We see the ahswer appearing as the days pass. Congress has renegged on those who are nearest to those in developing nations. The poor need to be bootstrapped by federal national legislation. So far the strategy was to let the richest hepl the poorest by giving them capital to help out. Now the pendulum is swinging to help the poorest. the states are taking on the table and state by state a federal initiative is being put on the table for Congress to deal with next term. Raising minimum wages. New members of Congress will be elected by poor people to get the minimum wage changed. This Democratic initiative is facing squarely the conservative Republican agenda of making gay marriage illegal nationally. The US is going to vote by electing representatives for improving the quality of life for our poor instead of not allowing Gay marriage on a national basis. I think the rich (gay bashing conservatives) have been outflanked by the working class people whose interests had not gotten on the table. The new wave of investigations that follow will shut down the deficits more than any other means. A whole new and full range of policy adjustments will also follow. I deep enough hole has been dug in the US for its citizenry; soon we will begin to fill up the hole with capital that is circulating within the US. I have worked at EOP for both R and D administrations; please do not take my views as biased, they just relate to the quality of things that is possible.
Actually, I'm sorry, but you are getting it wrong. A currency such as gold is inherently deflationary. Why? Because it gives value to the currency that can't be easily adjusted without adjusting everyone else's gold backed currencies as well. And, except for what you can mine out of the ground, there is a fixed supply. So, what happens is that prices tend to stay fixed, except for when advances in technology and productivity yield falling prices, which are deflationary. With me so far? Interest then paid on your money becomes real, and borrowing money is not something you do without a very good reason. Go read William Bryant's famous "cross of gold" speech - that is what it was talking about: the farmers who had borrowed money being unable to pay it back due to a deflationary system caused by the gold backed dollar at the time. So, if you are a banker, and you control the gold, and there is consistent price stability or deflation, you in fact will grow richer. Bankers should recognize this instantly and would love a gold standard to return. On the other hand, the government does not like a gold standard, because it makes it more difficult for the government to fund itself without going to the bankers, who might want special perks and whatnot for funds which annoy the politicians to no end. Imagine - having a banker tell you what you can and cannot do with your money - the outrage! Well, that's more or less what happened here in the US from 1850-1920. Seems to have been warfare between the bankers and the government, and the bankers lost. Bankers have their money stolen by inflation, so they need to charge a higher spread. They steal your money by deflation, and become richer just by sitting on the stuff. And noone has your best interest at heart more than yourself.
Question: if inflation is not caused by bankers (as you say, "they are having their money stolen from inflation"), then what is the source of inflation? And what is your definition of inflation? I would suggest the definitions: - Inflation is a rise in prices caused by an increase in the money supply - Deflation is a decline in prices caused by a decrease in the money supply If you disagree with those definitions then: - How are you measuring the price level changes? CPI or other arbitrary basket? Pre-Clinton CPI or current? Core rate? Something else? - How are you distinguishing between a price rise due to a supply/demand imbalance vs. an emotional reaction to houses vs. productivity changes vs. monetary supply? Or does the source of "inflation" (your definition) not matter? So what is the source of inflation (increase in monetary supply)? And who benefits?
your seriously confused mate... borrowers like (wage) inflation... makes it easier to repay the loans... bankers are lenders by definition... as for inflation itself, your missing an important parameter, the velocity of money... google it if your interested, but beware, from what u post, sharp learning curve ahead...
What I am saying is that it is indeed capitalism that places the highest values on productive assets of any kind... In my younger days it was quite humorous talking to an oil analyst to whom I posed the question...at what price multiple would you value Exxon stock....and furthermore how much money have you personally made trading this stock....Of course the analyst had no idea...and had never put his own money in the stock.... And thats right ...a stagnant asset...good or bad...is one which has taken away the idea of prospective growth ...which in turn commands a discount in value to an identical more productive asset... Money velocity is money at work....the higher the velocity...the higher the potential capitalistic value.. This value can only be accomplished in a capitalistic system... What I meant earlier by the latest Saudi and Indian fiascoes were the extraordinary downward pricing volatility in their bolsas which scares away money...Their bolsas need to fold into the new world bourse that is currently being formed which could offer a better overall selection of choices world wide.... What I am hopeful of ...in simpler terms would be a case like the following... Assume Chavezs followers were told by Chavez...look I made a mistake by not capitalizing our Venezuelan assets in the new world bourse created by the merging of the worlds stock exchanges...The capitalized value would quadruple our current assets which would allow for us to inject our economy with 4 times the capital as before....Socialism and Nationalization just will not produce this....However social capitalism can produce this...More for all of us... With the worlds bourses consolidating...and the rapid expansion of the internet...anyone with a bank account could participate in the capitalization of the worlds best assets....and in particular that countries local familiar assets.... To really reach the pinnacle...governments need to adopt a consumption only tax....and remove all obstacles from creating maximum values... Can it happen....It already is happening.... Hey look...does your country want more money or less money ??? And no...volatility will not go away...but the highest monetary values of working assets can be attained.... What I am saying is that if the highest valuations are allowed...then you have the best chance for higher level positive economics which can alleviate downward valuations. Governments have to help by taking out all the legal hindrances....
Sorry a little late to this forum. A trade deficit is neither good or bad, just a symptom of our World as it is. The US, not only dwarfs all other econs, but is also a consumption society. Much more so than Asia or Europe, or even S America which is similar. Additionally, even China is one tenth our size with econ might. Although they grow fast, it will be 20 years before they catch up, assuming no civil war in the mean time (800 million poor, pissed off peasants). We will always run a trade deficit. Well, in my lifetime anyway (I'm a Yank in my mid 40's). I have degrees from 3 schools, but actually think that means little. Academics is self perpetuating. They feed off outdated theories because they have to. Jay
No, no, no. Grob, I agree with some of your energy comments, but you are soo wrong here. If it wasn't for Yanks consuming like mad, would China have an economy, would India? There always has been, and always will be Global inefficiencies by definition. It is not fair, but it is reality. Jay Deficits are like filling an ice tray with filtered water. The water is good and it gets to every cube freezing location ultimately by over coming the barriers no matter how high they may be. tHE GLOBE BECOMES FILLED CAPITALIZATION WISE. Africa is in contrast to the Asian island nation states. Deficits replace the function of the World Bank , etc as well. Deficits represent the capital for funding the development of the globe in a fast track manner that would not have been achievable otherwise. The stock held corporation will emerge as the structural unit and the electronic world that is preceding it will be the global "policy making" and standard of efficiency. This will fit into the developing definition of a LONG TAIL orientation of businesses now that such efficiencies are attaining utility. Read about long tail as the books are published. The fact that this on going process is "unkown" (see the ET commentary here), not planned for in any way, not part of current national and international policies and not supported by hardened theories is quite the usual for modern society. Check the 1985 Nobel prize as a collateral example of these four items Worldwide, individual and family wealth (tangible and intangible) will be built through this deficit mechanism. By the numbers, you can see several of the econometric factors (4 major categories as usual) surfacing as isolated icebergs. As time passes these will become mountains on techtonic plates of economic continents that will resemble population centers of the globe. Deficits and electronics afford decentralization too. The two driving divisions are molecular (autos, T shirts)) and non molecular (out sourcing services) products and services. 1. Cottage industry becoming incorporated 2. Containerized freight and ports (foreign management is best) 3. machine tools and tooling for manufacturing (chip industry) 4. Declining power requirements 5. matrials design (nano tech) (replacing oil with renewable bio mass) 6. education and skills acquisition (engineering world center has shifted to Asia by a factor of 2 already) 7. stock exchanges. 8. financial centers 9. technological replacement (renewable) of extracted resourses 10. recycling. There are downsides as well. Globalization has caused irreversable planetary damage that society will have to adapt to. 1. health quality limitations. 2. new global port system. 3. agricultural relocation. 4. weather protections. Perhaps, adding this dimension will be helpful to those participating in the thread. Probably not since is cancels out most of the commentary. I just jotted these notes down; the people I circulate with are different than most people get to connect with. Most of this stuff here is about 30 to 40 years old. [/B][/QUOTE]
Jay, basically you're saying our deficit is funding the development of other economies. I don't think anyone is disagreeing with that. In fact, most are having a problem with exactly that. In a theoretical world, where time and distance and individual desires are blended together into a collectivist lump, I agree an individual country's deficit is neither good nor bad. However, the short term disruptions to life in the US will be significant. And as a general rule, the disruptions will tend to be good for those in developing countries and bad for those in the US. And, yes, of course there will certainly be people in the US who adapt and take advantage of the situation. However, I am of the opinion that MOST will NOT adapt and that the culture of socialism and the overall inertia of our society's institutions will create a huge drag on those that do adapt. We would need one hell of a wake up call to reverse the trends of wealth redistribution, subsidies, bail-outs, and protectionism in DC. The masses that don't want to adapt will demand them. Basically: I'd rather be 20 years old in Asia than 20 in the US.