GM

[8cd03gro]

Originally Posted by liquidsmoke

Money

Fantastic post.

[fielderLS3]

Originally Posted by a_Username

Protectionism, IIRC, is protection from "unfair trade." Putting up tariffs and the like is (an attempt to) protecting yourself from these mythical threats. Also, if it is common sense, then you won't have any trouble refuting it. Or will you?

The list of things I gave that China is doing are not "mythical threats." They are all things China is actually doing. How can you possibly expect to have a healthy economy without the enforcement of copyright and patent law? Why produce anything if you have no ability to keep the fruit of your labor?

Originally Posted by a_Username

Again, the Japanese have paid for their manipulation, hence the Lost Decade. Their citizens standard of livings is being reduced, while their manipulation is actually helping us more so than them.

Again, how can having our goods counterfeited, and our intellectual property rights stolen possibly be beneficial to us? The last time I checked, when someone steals something from you, you are the one who loses.

Originally Posted by a_Username

Why are you assuming the only two countries in the world that trade with each other is China and the United States? Assuming this "trade deficit" is bad, which it isn't, this still overlooks the fact that we have a "trade surplus" with other countries.

The US has a huge net trade deficit with the world.

Originally Posted by a_Username

So, a dollar is only useful for buying American goods or buying corporate bonds and other types of private securities. In all cases, the dollar is returning to the United States.

And for every dollar that comes back in that manner, we owe a dollar plus compounding interest. When the dollars come back as debt, it is a negative, not a positive. Sure, it feels good for a while, but this is in no way sustainable. Eventually, the creditor has to be paid. When that day comes, it is not going to be pretty. This is not how economies grow, this is how nations lose their sovereignty. We all saw what happened when houses became worth less than the mortgage. What do you think is going to happen when our debts exceed our GDP?

[truth411]

Originally Posted by DGthe3

Would that be the up-comming 35 mpg CAFE regulation? Because Bush signed that one in 2007 and I think the even stricter 62 mpg in 2025 has been shot down as being impractical.


It doesn't look like many have suggested those sorts of things, or implied them. Mainly the ones that wanted businesses to be more competitive wanted lower wages for workers and less regulation, in effect making America more like Mexico to keep US jobs from going to Mexico. I see some rather obvious problems with that logic, but you probably see it more clearly than I, right Mr Economist.

But to address what you mentioned ... you're saying that its better for global companies to have their home market be 100% free and open, meanwhile their international competitors enjoy a home field advantage (due to the various methods you mentioned)? Sounds like its great for making everyone else competitive, but not so much for the domestic companies. What I personally endorse are mirroring the trade practices of other nations, at least whats practical. If they want free trade, good for them. But if they try and protect their market so they can sell to you without you selling to them ... that doesn't sit well with me.

THANK YOU!!!

[truth411]

I'm no expert here on this topic but in my experiance A_Username guys who sound like you are blinded by there ideology and ignore the reality of the situation. they throw around the word "protectionism" on just about anything. Even when its not "protectionism".

[8cd03gro]

Everyone has an imaginary international econ degree.

[20Camaro11]

some graduated with their BS in world economies (Bull sh*&).
some graduated with their MS in world economies (more sh*&)
Then there is the PHD..Piled Higher and Deeper.....


This thread was somewhat entertaining....only if we could get some of you into the IMF and into DC to fix all the problems that plague the US.

There are so many reasons why Domestic companies invest overseas....nailing it down to one or two main reasons is naive. This is a global economy and will remain that way.

[a_Username]

Originally Posted by fielderLS3

The list of things I gave that China is doing are not "mythical threats." They are all things China is actually doing. How can you possibly expect to have a healthy economy without the enforcement of copyright and patent law? Why produce anything if you have no ability to keep the fruit of your labor?

Again, how can having our goods counterfeited, and our intellectual property rights stolen possibly be beneficial to us? The last time I checked, when someone steals something from you, you are the one who loses.

What I meant by "mythical threats" is simply they are not actual threats; it's not a threat to trade with anyone. How can I expect it? See the fashion industry; a multibillion dollar industry that thrives without any patent or copyright laws. Of course, "the fruit of your labor" argument is one that is ignored quite often due to the arbitrary selection of which company receives these forms of protection from competition. Does the creator of the first car or t-shirt not deserve a patent for his discovery? Does he/she not deserve the to reap the "fruits of his labor?" "Intellectual property" is not property at all. The only reason why property is assigned to goods is the fact that nearly all goods are scarce and some type of system needs to solve the conflict that would inevitably arise from two people trying to, for example, eat the same orange; property is such a system. Consequently, a good, such as ideas, that is not scarce does not fit the criteria of being property. In other words, ideas are infinitely reproducible, therefore they can not be labeled property.

I would hardly call this theft.

The US has a huge net trade deficit with the world.

China has a trade deficit with most other countries also. This is true of the United States as well, but it ironically does not lead the reduction of economic growth you want it to. In fact, our balance of trade says;

The graph indicates that, as Frédéric Bastiat predicted, the deficit slackened during recessions and grew during periods of expansion. Also of note, many economists calculate trade deficits and/or current account deficits as a percentage of GDP. The US last had a trade surplus in 1975.[42] Every year there has been a major reduction in economic growth, it is followed by a reduction in the US trade deficit.[37]

And for every dollar that comes back in that manner, we owe a dollar plus compounding interest. When the dollars come back as debt, it is a negative, not a positive. Sure, it feels good for a while, but this is in no way sustainable.

The issue you talk about here is uncontrolled credit expansion and fixed exchange rates that are currently under the control of not the market but government. Of course it's not sustainable; yet, you can thank your federal reserve and the ones who believe government can efficiently allocate resources.

Eventually, the creditor has to be paid. When that day comes, it is not going to be pretty. This is not how economies grow, this is how nations lose their sovereignty. We all saw what happened when houses became worth less than the mortgage. What do you think is going to happen when our debts exceed our GDP?

I'm sorry, but this viewpoint is not one that fits with your previous assertions. If you're hoping that our nation having a trade deficit is why China is needed to buy government bonds, then I'm sorry to disappoint you.

Originally Posted by Antony Mueller

The U.S. trade deficit is an American problem. It is the result of insufficient savings at home and a widening budget deficit. With the pool of available external savings shrinking, the United States will be confronted with the task of generating sufficient savings at home. This requires a reduction of private consumption and will put a hard pressure on governmental expenditures.

I have a good feeling what will happen when our debts exceed our GDP; it is likely our government will default on their debts. This can be avoided, but it's going to take drastic cuts in spending if you do not want to raise taxes.

[a_Username]

Originally Posted by truth411

I'm no expert here on this topic but in my experiance A_Username guys who sound like you are blinded by there ideology and ignore the reality of the situation. they throw around the word "protectionism" on just about anything. Even when its not "protectionism".

In my experience, people who shout about ideologies are usually looking for a cop-out to avoid arguing with someone. Then again, most people don't even realize everyone has their own ideology, thus I do not know why you even act as if you have no biases. Finally, if you're so confident about your interpretation of reality then by all means try and prove me wrong.

[a_Username]

Just for the record, I am majoring in economics. Of course, you don't need a degree in anything to be correct; Aristotle didn't have a degree in logic, yet I'm assuming you will all believe every word that he said.

[Number 3]

Originally Posted by a_Username

What I meant by "mythical threats" is simply they are not actual threats; it's not a threat to trade with anyone. How can I expect it? See the fashion industry; a multibillion dollar industry that thrives without any patent or copyright laws. Of course, "the fruit of your labor" argument is one that is ignored quite often due to the arbitrary selection of which company receives these forms of protection from competition. Does the creator of the first car or t-shirt not deserve a patent for his discovery? Does he/she not deserve the to reap the "fruits of his labor?" "Intellectual property" is not property at all. The only reason why property is assigned to goods is the fact that nearly all goods are scarce and some type of system needs to solve the conflict that would inevitably arise from two people trying to, for example, eat the same orange; property is such a system. Consequently, a good, such as ideas, that is not scarce does not fit the criteria of being property. In other words, ideas are infinitely reproducible, therefore they can not be labeled property.

I would hardly call this theft.

For the most part, your posts are based on your education or are well thought out even if we don't agree.

However, per your last post on being an Econ Major, your ideas on Intellectual Property are wayyyy out of your norm.

If for example the lowest cost highest quality producer always wins, unless outside influences change the playing field, then the U.S. can never win. We will never (at least in our lifetimes) be the lowest cost producer and it is exceedingly difficult to differentiate your product on quality. What does differentiate your product is the application of technology and the application of style. Both of these are "intellectual property". So if a low cost producer, and we know Americans LOVE low cost producers or we wouldn't have Walmart, can simply copy my technology or copy my styling then the low cost supplier will always win. If I can not make money from manufacturing my product, and I can't make money from inventing my product, then creating ideas simply becomes a hobby. And hobbies don't pay very well. So we have given up our manufacturing base and everyone is ok with that.

And by your comments I think you are ok then with the knock of handbags, golf clubs, watches etc. that you can buy CHEAP in China? "pssssst, I have the keys to the factory. I can get you that watch for $100. All I have to do is turn on the machines for a few extra minutes" Riiiiiiiiight. Movies, music, art are all intellectual capital. If you write a book, can someone simply copy it and publish it at a lower cost? If your band records a song, should someone be able to copy it and produce it at a lower cost?

Now we have to give up our intellectual capital as well? Or did I miss your point?

[fielderLS3]

Originally Posted by a_Username

You yourself argued that correlation is not causation in a previous thread. I think that can be applied here. I can just as easily argue that the massive deficits during the boom where not the cause of, but a result of the boom, and vice-versa during the recessions.

Originally Posted by a_Username

I'm sorry, but this viewpoint is not one that fits with your previous assertions. If you're hoping that our nation having a trade deficit is why China is needed to buy government bonds, then I'm sorry to disappoint you.

I am not saying that the trade deficit with China makes it necessary for the US to sell bonds to China (I'll be the first to admit that government spending is what is making that necessary). But while it is not "necessary," it certainly does make it possible.

This is not so much an economics argument, it is a national security argument. Even if buying all of our goods from China (or elsewhere) benefited both sides economically, it is still not wise to outsource so much production capacity to a very ambitious economic and political rival. Losing our self-sufficiency and becoming dependent on other countries for the products we need puts us in a very vulnerable position. Dependency is the last step before reaching bondage.

Originally Posted by a_Username

What I meant by "mythical threats" is simply they are not actual threats; it's not a threat to trade with anyone. How can I expect it? See the fashion industry; a multibillion dollar industry that thrives without any patent or copyright laws. Of course, "the fruit of your labor" argument is one that is ignored quite often due to the arbitrary selection of which company receives these forms of protection from competition. Does the creator of the first car or t-shirt not deserve a patent for his discovery? Does he/she not deserve the to reap the "fruits of his labor?" "Intellectual property" is not property at all. The only reason why property is assigned to goods is the fact that nearly all goods are scarce and some type of system needs to solve the conflict that would inevitably arise from two people trying to, for example, eat the same orange; property is such a system. Consequently, a good, such as ideas, that is not scarce does not fit the criteria of being property. In other words, ideas are infinitely reproducible, therefore they can not be labeled property.

I would hardly call this theft.

I will concede that you have made some very good points, and that given your educational background, you likely know more about economics than I do, but this last statement just boggles my mind, and I'm not exactly sure how to respond to it other than to suggest that when Karl Marx said the last capitalist would sell to rope by which he hung, he may have been talking about you.

Since as you say you are in college, and you like to think in abstract theories, let me raise you another purely hypothetical situation. I'm assuming that you will have to write a senior thesis before getting your diploma. Lets say two days before you turn it in, a fellow senior undergrad in your department hacks into your computer, changes the name, prints it off, and hands it in as their own before you turn it in. Based on your previous quote, I guess that is acceptable. After all, that thesis is just an "idea," and there is no such thing as intellectual property. Sure, you wrote it, but it wasn't yours. It belongs to whoever can get their hands on it (Guess you'll have to write a different one, good luck).

This is exactly what China is doing to our software and other companies. Piracy IS theft!

[a_Username]

Originally Posted by fielderLS3

You yourself argued that correlation is not causation in a previous thread. I think that can be applied here. I can just as easily argue that the massive deficits during the boom where not the cause of, but a result of the boom, and vice-versa during the recessions.

You're correct that I did say this, but the difference here is that I can explain the theory to why my correlation is actually causation. I'll try to condense an economic growth theory as best as I can, and I will probably end up oversimplifying it. Either way.. here it goes.

Economic growth always begin with capital and savings. It is savings, or an individual's choice to defer present consumption for higher future consumption, that allows an entrepreneur to accumulate capital, which is a good that is used in the production process to create consumable goods. This accumulation of capital leads to future growth precisely because the more capital you have the more goods and services, i.e. the real economy, you can produce. The fact is that the United States is one of the (if not the) most capital rich countries (country) on the planet. It becomes obvious to why the United States has seen so much growth; it is a very capital-intensive country. A "wordy" piece on international trade and the division of labor,

An export-oriented strategy permits countries to use the international market to exchange their own, relatively labour-intensive commodities for capital-intensive goods. They are thus able to take advantage of the division of labour and specialisation. This ability contrasts sharply with import-substitution policies under which labour-abundant developing countries produce the entire spectrum of manufacturing goods and experience high and rising capital/labour ratios.

This technical explanation simply shows how a labor-intensive country, such as India or China, can trade with a capital-intensive country, the United States, by taking advantage of the division of labor.

Now that we have a very simplified version of growth, you can now deduce the effects of a trade deficit. He explains it better than I:

Originally Posted by Charles L. Hooper

Let's directly address the much-maligned trade deficit. If I buy a made-in-Japan car from Toyota, what happens? Simple. I get a nice car and a Japanese company gets some dollars that it then pays to its suppliers, employees, and shareholders (the last of whom include me). What can these people do with the dollars that they don't spend on American goods? Only five things: buy U.S. assets, including stocks, bonds, and land; engage in direct investment in the United States by building plants, etc.; buy U.S. services; exchange the dollars on the currency market; or keep them.

By purchasing U.S. assets or services, the purchasers make individual Americans and American companies richer. After all, in any exchange, both sides gain or else they wouldn't engage in the exchange. Direct investment in plant and equipment increases the productivity and, therefore, the wages of American workers. If these foreigners keep their dollars, then we get valuable cars and they get cheap pieces of paper that our government can print for pennies on the dollar. If they exchange their dollars on international currency exchanges, then the person or entity they exchange with has the same invest/buy products/buy services/exchange/keep decision to make.

In the worst case, our dollars come back to buy American goods, services, or assets. In the best case, our dollars don't come back and we get useful goods virtually for free. A trade deficit reflects the best case, while a trade surplus reflects the worst—but still good—case.

This would result in Basait's predictions being correct.

If you can, then I say go for it. I'd be interested to hear this argument.

I am not saying that the trade deficit with China makes it necessary for the US to sell bonds to China (I'll be the first to admit that government spending is what is making that necessary). But while it is not "necessary," it certainly does make it possible.

It absolutely makes it necessary. The only reason why government is looking for foreign buyers of bonds is because this route allows government to increase its expenditure without putting to heavy a burden on the taxpayer. The only other way to fund their spending would be taxing, and which we know that taxing has a negative effect on economic growth. That is, it leads to the "crowding out" effect.

This is not so much an economics argument, it is a national security argument. Even if buying all of our goods from China (or elsewhere) benefited both sides economically, it is still not wise to outsource so much production capacity to a very ambitious economic and political rival. Losing our self-sufficiency and becoming dependent on other countries for the products we need puts us in a very vulnerable position. Dependency is the last step before reaching bondage.

The national security argument is way too overused and just as lacking then as it is now. Ignoring this, you still have nothing to worry about, considering we will always have a manufacturing industry; remember that trade is based primarily on comparative rather than absolute advantage. That is, no one will ever have an absolute advantage on labor, therefore no one will ever be able to have the whole manufacturing industry, which is both labor-intensive and capital-intensive, to themselves.

Originally Posted by Charles L. Hooper

Consider that if the U.S. manufacturing sector were a separate economy, it would fit nicely between France and the United Kingdom as the world's sixth-largest economy, enjoying an annual output of $2.155 trillion6—hardly reason for hand-wringing.

I will concede that you have made some very good points, and that given your educational background, you likely know more about economics than I do, but this last statement just boggles my mind, and I'm not exactly sure how to respond to it other than to suggest that when Karl Marx said the last capitalist would sell to rope by which he hung, he may have been talking about you.

I was never a fan of Marx. Weber, IMO, made a mockery out of him when it came to sociology, and the Austrians refuted what little Marx talked about economics very quickly.

Since as you say you are in college, and you like to think in abstract theories, let me raise you another purely hypothetical situation. I'm assuming that you will have to write a senior thesis before getting your diploma. Lets say two days before you turn it in, a fellow senior undergrad in your department hacks into your computer, changes the name, prints it off, and hands it in as their own before you turn it in. Based on your previous quote, I guess that is acceptable. After all, that thesis is just an "idea," and there is no such thing as intellectual property. Sure, you wrote it, but it wasn't yours. It belongs to whoever can get their hands on it (Guess you'll have to write a different one, good luck).

Actually, his "hacking" in my computer would be a crime, but I wouldn't sweat too much about the paper. Plus, I don't know if that paper wouldn't be used as evidence for said crime either. Either way, I could simply turn it while he does the same, and I would be able to explain the thesis without reading the paper unlike the other student. So, who do you think they would believe to who's idea it was? Obviously me.

This is exactly what China is doing to our software and other companies. Piracy IS theft!

So, you would be totally upset if someone copied your car and left yours alone? Either way, you still did not address the scarcity problem.

[a_Username]

Originally Posted by Number 3

If for example the lowest cost highest quality producer always wins, unless outside influences change the playing field, then the U.S. can never win. We will never (at least in our lifetimes) be the lowest cost producer and it is exceedingly difficult to differentiate your product on quality. What does differentiate your product is the application of technology and the application of style. Both of these are "intellectual property". So if a low cost producer, and we know Americans LOVE low cost producers or we wouldn't have Walmart, can simply copy my technology or copy my styling then the low cost supplier will always win. If I can not make money from manufacturing my product, and I can't make money from inventing my product, then creating ideas simply becomes a hobby. And hobbies don't pay very well. So we have given up our manufacturing base and everyone is ok with that.

And by your comments I think you are ok then with the knock of handbags, golf clubs, watches etc. that you can buy CHEAP in China? "pssssst, I have the keys to the factory. I can get you that watch for $100. All I have to do is turn on the machines for a few extra minutes" Riiiiiiiiight. Movies, music, art are all intellectual capital. If you write a book, can someone simply copy it and publish it at a lower cost? If your band records a song, should someone be able to copy it and produce it at a lower cost?

Now we have to give up our intellectual capital as well? Or did I miss your point?

Well, it is not always the "lowest cost, highest quality producer" that wins. That problem here lies with the underlying theory you are using for cost. I seems you're relying on the defunct cost theory of value. Really, cost is subjective, as denoted by the economists of the marginal revolution and the Austrian school. Here is an example of the problems with the Cost theory of value. Therefore, you will see that "cost" is not the algebraic sum of all the factors of production plus a little left over for profit, but it is determined by the subjective preferences of consumers.

In regards to the U.S. "never being able to win," I must ask why you are so pessimistic? Regardless, it is not the market's fault for the increasingly anti-business environment being pursued by our government. Also, who said you would be unable to make money? Shakespeare and other composers/musicians done very well for themselves despite living in a world relatively without patents or copyright. Presently, the Grateful Dead has embraced letting people download their music for free, take pictures/videos of their concerts, etc. and is now one of the most successful touring bands of all time. That isn't to say their multi-platinum records is something to sneeze at either. Of course, there are countless other examples of individuals making money without the anti-competitive shield of IP. Again, it would be near impossible for the United States to give up its manufacturing industry; trade is based primarily on comparative and not absolute advantage. Furthermore, you're assuming that every competitor will be able to efficiently organize his company to replicate the same production methods as your own. This is no easy task, which is why a lot of small business fail. Even assuming their abilities to be an efficient entrepreneur is true, you still have not addressed the scarcity argument that economics aims to answer.

The fact is that if anything, IP is only a monopoly on an idea. It only prevents others from competing with the copyright/patent owner. IP is not an incentive but a penalty.

[DGthe3]

Originally Posted by a_Username

Just for the record, I am majoring in economics. Of course, you don't need a degree in anything to be correct; Aristotle didn't have a degree in logic, yet I'm assuming you will all believe every word that he said.

I wouldn't ... since I know that matter is made up of atoms not the elements of earth, fire, water, air & ether.