Taleb: Stimulus Made Ecomony Worse

Discussion in 'Economics' started by pspr, Sep 25, 2010.



  1. Why Is someone from Kansas more entitled to a job then someone in Calcuta?
     
    #11     Sep 26, 2010
  2. From an employer perspective, I make more money & profit, if I implement work in China or India.
     
    #12     Sep 26, 2010
  3. Good question. Maybe because they voted for some politicians who promised to do everything they could to create jobs in kansas. So it's not that they're more entitled, but that they have an expectation, and if that expectation is not fulfilled, they will have a legitimate gripe.

    A more nuanced answer would involve examining the stability of an economy that relies on emerging countries for all its manufacturing, even as it runs an enormous trade deficit.
     
    #13     Sep 26, 2010
  4. A simple answer would say that if you can build a car for $1 abroad, that's better both for the foreign economy and the domestic economy than building it for $1 billion at home. The obvious logical inference is that the same principle holds if the answer is 1k abroad and 10k at home. Opponents of free trade must demonstrate why it doesn't continue to hold up until the point where domestic manufacture is more profitable.

    If Americans don't want a trade deficit and don't want jobs to be outsourced abroad, they should stop buying foreign products and stop buying from companies that outsource. But then they'd have to pay more or get less desirable products for the same price, compared to today.

    Americans want a free lunch - they want to be able to buy foreign goods at cheaper prices, without taking the consequences of that behaviour. Same as they want lower taxes and higher government spending, better healthcare while eating more junk food and doing less exercise, easier credit without banks going bust or their mortgage debt being collected, high investment returns without assets ever going down in price, the ability to vote politicians into office without having to take responsibility when their choices perform poorly, and so on.
     
    #14     Sep 26, 2010
  5. GS19

    GS19

    Mark Brown where are you


    GS
     
    #15     Sep 26, 2010
  6. jem

    jem


    That efficient trade concept I once believed no longer applies in a world in which currencies are manipulated and our manufacturers pay for health care while some abroad do not. --- among other reasons.

    The core point being -- Currency manipulation eliminates the concept that price is an efficient allocator of resources.

    My proof --- no income no doc loans 2nd loans which came about in part because china was looking to park 1.5 trillion without distorting real prices. So wall street found a way to let them invest in a monopoly game.

    Then china and wall street pressured the fed (which wall street owns) an congress to switch out agency debt for us bonds.
     
    #16     Sep 26, 2010
  7. Mav88

    Mav88

    It's not about entitlement. The real question is why does america owe india a living at our expense?
     
    #17     Sep 26, 2010
  8. They are obviously entitled to a job equally. The problem is when the politician you voted for in Kansas, for example, does not do anything when you lose your job and it goes to India.
     
    #18     Sep 26, 2010
  9. Mav88

    Mav88

    being entitled to a job is communism, and when politicians try and make sure everyone has a job the results sre typically miserable.

    The question is free trade, why must we trade with India when we know that they will benefit at our expense?
     
    #19     Sep 26, 2010
  10. jem

    jem

    just posted on another thread...


    "...
    China's worst abuse involves its undervalued currency and its promotion of export-led economic growth. The United States isn't the only victim. China's underpricing of exports and overpricing of imports hurt most trading nations, from Brazil to India. From 2006 to 2010, China's share of world exports jumped from 7 percent to 10 percent.

    One remedy would be for China to revalue its currency, reducing the competitiveness of its exports. American presidents have urged this for years. The Chinese acknowledge that they need stronger domestic spending but seem willing to let the renminbi (RMB) appreciate only if it doesn't really hurt their exports. Thus, the appreciation of about 20 percent permitted from mid-2005 to mid-2008 was largely offset by higher productivity (aka, more efficiency) that lowered costs. China halted even this when the global economy crashed and has only recently permitted the currency to rise. In practice, the RMB has barely budged.

    How much the RMB is undervalued and how many U.S. jobs have been lost are unclear. The Peterson Institute, a research group, says a revaluation of 20 percent would create 300,000 to 700,000 U.S. jobs over two to three years. Economist Robert Scott of the liberal Economic Policy Institute estimates that trade with China has cost 3.5 million jobs. This may be high, because it assumes that imports from China displace U.S. production when many may displace imports from other countries. But all estimates are large, though well short of the recession's total employment decline of 8.4 million.

    If China won't revalue, the alternative is retaliation. This might start a trade war, because China might respond in kind, perhaps buying fewer Boeings and more Airbuses and substituting Brazilian soybeans for American. One proposal by Reps. Tim Ryan, D-Ohio, and Tim Murphy, R-Penn., would classify currency manipulation -- which China clearly practices -- as an export subsidy eligible for "countervailing duties" (tariffs offsetting the subsidy). This makes economic sense but might be ruled illegal by the World Trade Organization. A House committee last week approved this approach; the full House could pass it this week. Ideally, congressional action would convince China to negotiate a significant RMB revaluation.

    Less ideally and more realistically would be a replay of Smoot-Hawley, just when the wobbly world economy doesn't need a fight between its two largest members. Economic nationalism, once unleashed here and there, might prove hard to control. But there's a big difference between then and now. Smoot-Hawley was blatantly protectionist. Dozens of tariffs increased; many countries retaliated. By contrast, American action today would aim at curbing Chinese protectionism.

    The post-World War II trading system was built on the principle of mutual advantage, and that principle -- though often compromised -- has endured. China wants a trading system subordinated to its needs: ample export markets to support the jobs necessary to keep the Communist Party in power; captive sources for oil, foodstuffs and other essential raw materials; and technological superiority. Other countries win or lose depending on how well they serve China's interests.

    The collision is between two concepts of the world order. As the old order's main architect and guardian, the United States faces a dreadful choice: resist Chinese ambitions and risk a trade war in which everyone loses; or do nothing and let China remake the trading system. The first would be dangerous; the second, potentially disastrous.


    Copyright 2010, Washington Post Writers Group""

    http://www.realclearpolitics.com/ar...ina_107310.html
     
    #20     Sep 27, 2010