Is this the Swooshing Sound?

[Guest Lester Weevils]

We pay for imported goods with dollars. They send us a shipment of products, and we give them dollars. How great would it be if that was the end of it? We get all this useful stuff and all they get is useless pieces of paper in return. We could just print more dollars and receive infinite goods. But that's not how it works.

You can't do a whole lot with dollars if you live in Asia. Something happens to those dollars...they don't get buried over there. Those dollars are used to buy American goods (increasing our exports) or they are used to purchase investments in America (growing our economy). They all eventually make their way back to our economy.

Hi Overtaker

Yes in theory. If the money is coming back, then how come the balance of trade is so bad? Really, if you know it is all coming back and it will all work out-- Am not trying to make you mad and I don't pretend to know much.

But please give details rather than theory. I know the theory but haven't seen the money coming back. I would rather be proved wrong than right on this issue, so please show me details how the books are balancing?

====

A great deal of the money comes back as gov debt when china buys our gov bonds. Then the gov immediately spews the borrowed money into the economy with deficit spending. Then all the USA recipients of the deficit spending go to walmart and buy chinese goods. Then that new-borrowed money makes ANOTHER round trip to china, so our gov can borrow the same money one more time!

Eventually china will quit selling us stuff "for nearly free" when we are so deep in hock that it becomes obvious we can't ever pay em back. I'm baffled why they still sell us stuff, as our insolvency has been rather obvious for quite awhile.

The situation is reminiscent of the Manhattan Indians selling the most valuable real estate in the world for trinkets and beads.

Compound interest is very powerful. It is a shame our gov and businesses have got themselves on the wrong side of compound interest. How dumb can they get?

Edited January 29, 2012 by Lester Weevils

[Guest ThePunisher]

It didn't hurt that Nixon started diplomatic relations with the Chineese. With the dumb ole USA paying for all the manufacturing and technology cost for the Chineese to produce our products and inventions, then China has the ability to make these same high technology products. And of course it also helped China when traitor Bill Clinton gave them some of our top military secrets so that they now are near our military strength, and have already surpassed us as an economic power.

Edited January 29, 2012 by ThePunisher

[Guest lostpass]

Hi Overtaker

Yes in theory. If the money is coming back, then how come the balance of trade is so bad? Really, if you know it is all coming back and it will all work out-- Am not trying to make you mad and I don't pretend to know much.

But please give details rather than theory. I know the theory but haven't seen the money coming back. I would rather be proved wrong than right on this issue, so please show me details how the books are balancing?

====

A great deal of the money comes back as gov debt when china buys our gov bonds. Then the gov immediately spews the borrowed money into the economy with deficit spending. Then all the USA recipients of the deficit spending go to walmart and buy chinese goods. Then that new-borrowed money makes ANOTHER round trip to china, so our gov can borrow the same money one more time!

Eventually china will quit selling us stuff "for nearly free" when we are so deep in hock that it becomes obvious we can't ever pay em back. I'm baffled why they still sell us stuff, as our insolvency has been rather obvious for quite awhile.

The situation is reminiscent of the Manhattan Indians selling the most valuable real estate in the world for trinkets and beads.

Compound interest is very powerful. It is a shame our gov and businesses have got themselves on the wrong side of compound interest. How dumb can they get?

It's a little more complicated, or easier (depending on your perspective) than the picture you paint Lester. Most of our trade deficit comes from oil, not from chinese manufactured stuff. And most of the oil comes from canada. Which is good, maple syrup flavored oil and all.

The trade imbalance is a little skewed, especially with China. You buy an iPad and it says "made in China by suicidal Foxconn workers" but the actuality is that the parts come from all over. It gets put together in China and ets counted as an import but the money goes to Apple. A US (nominally) corp.

If you are interested a better analysis can be found here.

But even that doesn't tell the whole story. Everyone is familiar with the idea that the reason that America doesn't produce anything is that labor is too expensive. And, even if it is affordable, American workers don't care. This is utter BS. It was fed to us by the automakers. They said they couldn't compete with the Japanese because Americans got paid too much. They lied, what they meant to say was "we don't want to compete". I can say that with authority because they make Japanese cars in the US and the quality is still fine. The workers get a nice wage and so forth. So what the car makers should have been saying is that we aren't interested in competing, our management is lazy.

There is some question about the profitability of an Apple plant (I'm familiar with Apple) in the US. If US workers were assembling iPads could Apple sell them for only 499? The answer is an unqualified yes. It isn't the labor that drives high tech product to China, it is the convenience. Since China has recently come into the capitalist age the country has be able to focus areas for manufacturing. Need a new gasket? That factory is next door. That dock connector isn't quite right? Two doors down. It's Detroit in the fifties. A golden age that won't last forever.

[seez52]

Maybe we could get Ross Perot to team up and be Ron Paul's running mate! Man would that be an old geezer ticket. And old geezers don't take s**t from anyone. They would flat get some things straightened out-- that's what I'm talking about!!

[BigK]

My dad worked for GE in M'boro for 35 years before he retired. The factory workers were making good money and building good products. He said one day they announced they were packing up and moving to Mexico. NAFTA made this possible, but voting in the union around the same time, and driving up costs didn't help either.

Regardless, my dad said 'How can you blame them?' If it costs more to stay in business here than it does to move all that stuff to Mexico and start over, why would they stay? His rationale was how can you justify paying an American $30/hr to run a press when you can pay a Mexican $5/hr to do the same thing?

I agree to some degree, but I've also noticed that GE used to be a top-knotch manufacturer, now their appliances are no better than the Chinese crap at Walmart.

[Guest Lester Weevils]

If you are interested a better analysis can be found here.

Thanks lostpass. Interesting article.

Will think about it and perhaps respond further later on.

They seem to tally the cost of truckers and sales clerks as "usa value added" to import products. Which is fine, but DUH!!! Until the distribution model evolves to something else, such things are a "value added" regardless of where the product was made, or how cheaply it was produced?

If china could give us product for free and the only consumer costs for the items include domestic design, marketing, distribution, sales, and profit, would it give a realistic view of the situation to calculate that such products are 100 percent USA value added? Maybe so. Dunno. As any programmer knows, 2 + 2 can sometimes equal 3.999999.

China is not the only offshore partner. I don't mean to pick on China or any other nation for what are most likely our own problems of our own making.

Will think about it and maybe the analysis should be reassuring. A pessimistic paraphrase of the analysis--

Yes the patient has chronic bleeding for years now. It is true that the bleeding has doubled in the last year. Admittedly many of his regenerative systems have either shut down or are severely compromised.

However, on the bright side, the bleeding has only reached five percent so far. The patient's cardiopulmonary and digestive systems are bigger than ever, and they appear to be getting more efficient.

So it is probably nothing to worry about.