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Awesomelyglorious
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17 Feb 2009, 10:43 am

Dussel wrote:
And why the products do not sell worldwide? At the end it is the marked how decides. To produce something which is only on the marked in the own country is not a good indicator for an economy.
Well, multiple reasons, for one many trade policies are not kind to foreign products. Another issue is that the US currently has a negative trade balance, trade balance usually being partially attributed to macroeconomic policy, given that ultimately goods trade for goods. In any case, I would counter-argue that one of the better indicators for an economy is still GDP, because if people are giving you goods in exchange for money, that means they have faith in the value of that money in exchange for goods.

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as said above I do not trust the US-data fully, because they rely on US-markets, not on the world market, where real prices are defined.

There is nothing wrong with the US data. US markets allow for foreign competition, so there is no reason to think that these markets are better or worse than any other market. Not only that, but the economy is sustaining itself, which is basically a pretty-good measure of it's sustainability, as people would not trust an economy that was believed to be on the verge of collapse. You could have secret knowledge or something, but I do not think you are an economics expert but rather a layman.



Awesomelyglorious
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17 Feb 2009, 10:47 am

Fuzzy wrote:
Dussel wrote:
To produce something which is only on the marked in the own country is not a good indicator for an economy.


He has a good point that relying solely on an internal market isnt very safe or healthy for an economy.

The thing is that nobody solely relies upon an internal market given international trade. Secondly, there is no reason to assume, a priori, that internal markets are very significantly worse than external markets, as internal markets are prone to internal problems, while external markets are prone to external problems. Finally, I don't think that the internalness of a market has ever been considered a good measure of economic efficiency, or macroeconomic stability, but rather I think this is just Dussel's intuition, and there is no reason to think it is supremely valid given that he does not seem to follow the logic that is normally accepted in the field of economics.



Fuzzy
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17 Feb 2009, 11:17 am

Awesomelyglorious wrote:
Fuzzy wrote:
Dussel wrote:
To produce something which is only on the marked in the own country is not a good indicator for an economy.


He has a good point that relying solely on an internal market isnt very safe or healthy for an economy.

The thing is that nobody solely relies upon an internal market given international trade. Secondly, there is no reason to assume, a priori, that internal markets are very significantly worse than external markets, as internal markets are prone to internal problems, while external markets are prone to external problems. Finally, I don't think that the internalness of a market has ever been considered a good measure of economic efficiency, or macroeconomic stability, but rather I think this is just Dussel's intuition, and there is no reason to think it is supremely valid given that he does not seem to follow the logic that is normally accepted in the field of economics.


I see your point.

However, I think we can agree that trade within North America can be likened to internal trade(vis a vis the free trade agreement), and I have some very good examples which highlight the dangers of relying on one specific market.

Specifically America virtually shut down the Canadian Beef industry when we had problems with BSE. Even after the problems were resolved and the USDA allowed Canadian beef back in, forces in the American Cattle industry contrived to keep Canadian beef out. Now that is neither here nor there, but the over all effect was worsened because we allowed our market to be dominated by sales to the US. We had not the flexibility nor market arrangements to make sales elsewhere.

Now that could very well happen internally too. Perhaps a corn blight, or some such thing could happen, leaving a severe shortage. You dont just order something in bulk that comes from over seas. it takes months to arrange and ship.

I guess if I had to put it in simplest terms it would be thus:

If you had 100 eggs to sell each day, would you rather sell 90 to the same farmer every day, or sell 10 to ten separate people? In this case, having lots of baskets for your eggs makes the best sense.


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Dussel
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22 Feb 2009, 3:26 am

Awesomelyglorious wrote:
You could have secret knowledge or something, but I do not think you are an economics expert but rather a layman.


You don't need secret figures - any country how has over decades a significant trade deficit has a weak economy. It is not healthy to have deficit at all, but especially not over decades and not in the region of 4% of GDP (BTW@ This is true for the UK too).



Awesomelyglorious
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22 Feb 2009, 3:38 am

Dussel wrote:
You don't need secret figures - any country how has over decades a significant trade deficit has a weak economy. It is not healthy to have deficit at all, but especially not over decades and not in the region of 4% of GDP (BTW@ This is true for the UK too).

Dussel, a significant trade deficit over the ages really reflects a poor macroeconomic policy, for trade deficit is set by international monetary exchange rates, and has very little to do with the actual ability of the economy. As for the health of deficit, the deficit itself does not matter so much as the macroeconomic policy leading to the deficit, and the maintenance of that deficit. As after all, the deficit does not have to do with the fundamentals of the economy, because money is the international intermediary through which deficits are supposed to be held in check.



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22 Feb 2009, 4:56 am

Awesomelyglorious wrote:
Dussel, a significant trade deficit over the ages really reflects a poor macroeconomic policy, for trade deficit is set by international monetary exchange rates, and has very little to do with the actual ability of the economy. As for the health of deficit, the deficit itself does not matter so much as the macroeconomic policy leading to the deficit, and the maintenance of that deficit. As after all, the deficit does not have to do with the fundamentals of the economy, because money is the international intermediary through which deficits are supposed to be held in check.


How do explain that countries with a notoriously overvalued currency like Switzerland or Germany had the most time huge trade surpluses, whilst other countries, like France or Italy, which devalued their currency frequently (when in 1958 France introduced the New Francs the exchange rate was roughly FFr 1.00 = 1.00 DM - when the € was introduced the exchange rate was ~FFr 3.30 = 1.00 DM) maintained their deficit.

If a country is really dominant in the high technology sector the exchange rate or other factors do not really matter, because those companies can ask always for the price they think fits. If deliver gods which other countries/companies can produce too, than you must adjust your prices.



Awesomelyglorious
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22 Feb 2009, 6:39 am

Dussel wrote:
How do explain that countries with a notoriously overvalued currency like Switzerland or Germany had the most time huge trade surpluses, whilst other countries, like France or Italy, which devalued their currency frequently (when in 1958 France introduced the New Francs the exchange rate was roughly FFr 1.00 = 1.00 DM - when the € was introduced the exchange rate was ~FFr 3.30 = 1.00 DM) maintained their deficit.

If a country is really dominant in the high technology sector the exchange rate or other factors do not really matter, because those companies can ask always for the price they think fits. If deliver gods which other countries/companies can produce too, than you must adjust your prices.

How do I explain it? How do I define "overvalued"? The issue of why "overvalued" currency is not shifted down by profitable arbitrage is significant.

Dussel, goods are basically traded for goods, and money is the medium. Thus money always matters, because you can't buy with what you do not have. Thus, the balance of trade will naturally tend to balance, and should move towards being neutral, so long as monetary distortion is not occurring.



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22 Feb 2009, 7:15 am

Awesomelyglorious wrote:
How do I explain it? How do I define "overvalued"? The issue of why "overvalued" currency is not shifted down by profitable arbitrage is significant.

Dussel, goods are basically traded for goods, and money is the medium. Thus money always matters, because you can't buy with what you do not have. Thus, the balance of trade will naturally tend to balance, and should move towards being neutral, so long as monetary distortion is not occurring.


This brings me again to the point: "Goods". Let say a good like standard construction steel, sulphuric acid or standard optical systems are exchangeable. You can buy those almost anywhere in the world, because a lot of countries are able to produce those.

Successful industrial countries do not produce such goods any longer, but have a range of companies, sometimes quite small ones but also "big" names, which are highly specialist in a particular area in which they have a defacto monopole for the top range. Such companies do not care about exchange rates or prices: They demand and get what they want. If you are not working in this specific area, you may often even never heard their names.

To maintain such a structure you need well trained and educated workers and engineers, perhaps not the Nobel-price winners, with a solid theoretical education.



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22 Feb 2009, 8:59 am

The USA has exported a large percentage of its industrial capacity because the businesses are all in hot pursuit of cheap labor and although that has benefited the low cost labor sources it has robbed the American workers of their due rise in wages from improved technological efficiency. The rather peculiar concept that a market can be maintained with minimum or less input from wages, since the source of market wealth is wages, has depleted the capability of consumers in the USA to buy. The false wealth assumed by the bubble in the real estate sector has vanished and also the fairy gold in the credit card business has gone up in smoke. So there is no money to maintain consumer purchasing. The adamant drive of US businesses to deprive the workers of income has destroyed the market for goods manufactured outside the USA since there was no wage input to permit the workers to purchase. For some crazy reason businesses have not managed to conceive that workers are also consumers and the extra earnings from saving labor costs have not been fed back into consumers to keep the economic cycle moving. Beyond that many very large corporations have paid little or no income taxes and most of the budget excesses from adventures in Iraq and Afghanistan have been supported by the Chinese and other foreign lenders. The attraction of US treasury bonds is rapidly losing prospective buyers and when that finally reaches a threshold the US economy will fall into a very deep hole. Obama is making very feeble efforts to stop this and the Republicans are doing their best to halt even that. There is very big trouble ahead for the USA and the rest of the world and nothing substantial is being done to stop it.



Awesomelyglorious
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22 Feb 2009, 4:39 pm

Dussel wrote:
This brings me again to the point: "Goods". Let say a good like standard construction steel, sulphuric acid or standard optical systems are exchangeable. You can buy those almost anywhere in the world, because a lot of countries are able to produce those.

Successful industrial countries do not produce such goods any longer, but have a range of companies, sometimes quite small ones but also "big" names, which are highly specialist in a particular area in which they have a defacto monopole for the top range. Such companies do not care about exchange rates or prices: They demand and get what they want. If you are not working in this specific area, you may often even never heard their names.

Such companies will care about exchange rates or prices simply because perfect inelasticity usually does not exist. As well, niche markets are often defined by the fact that they cannot have multiple entrants, which will prevent any one niche market from dominating an economic situation.



Awesomelyglorious
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22 Feb 2009, 4:47 pm

Sand wrote:
The USA has exported a large percentage of its industrial capacity because the businesses are all in hot pursuit of cheap labor and although that has benefited the low cost labor sources it has robbed the American workers of their due rise in wages from improved technological efficiency. The rather peculiar concept that a market can be maintained with minimum or less input from wages, since the source of market wealth is wages, has depleted the capability of consumers in the USA to buy. The false wealth assumed by the bubble in the real estate sector has vanished and also the fairy gold in the credit card business has gone up in smoke. So there is no money to maintain consumer purchasing. The adamant drive of US businesses to deprive the workers of income has destroyed the market for goods manufactured outside the USA since there was no wage input to permit the workers to purchase. For some crazy reason businesses have not managed to conceive that workers are also consumers and the extra earnings from saving labor costs have not been fed back into consumers to keep the economic cycle moving. Beyond that many very large corporations have paid little or no income taxes and most of the budget excesses from adventures in Iraq and Afghanistan have been supported by the Chinese and other foreign lenders. The attraction of US treasury bonds is rapidly losing prospective buyers and when that finally reaches a threshold the US economy will fall into a very deep hole. Obama is making very feeble efforts to stop this and the Republicans are doing their best to halt even that. There is very big trouble ahead for the USA and the rest of the world and nothing substantial is being done to stop it.

Actually international trade is part of the same problem as technological advance. The assumption that technology will universally raise wages ignores labor-capital substitution that improved technology can allow for, and actually technological improvements are often considered a very significant part of the rise in inequality.
http://gregmankiw.blogspot.com/2006/07/ ... ugman.html

Umm.... the market works like this Y = C + I + G + NX

Even assuming that increased inequality decreases consumption(C), there is no reason to think this bad because that would increase investment(I) (marginal propensity to consume = 1 - marginal propensity to invest, and vice versa and you just posit that different income levels have different propensities), and investment increases economic growth. Thus, there is not much reason to suspect too much negative from inequality.

Because of that, I do not see much reason to suspect your analysis is true.