The balance of trade bothers me because it has to be financed just like the federal budget deficit, and it's a lot bigger. If we balanced the federal budget tomorrow (which we should) and still kept the trade deficit (and it's probably going to grow, at least in the short run), we'd still end up owing the Chinese. And they could crater the dollar any time they determined that it would be worth the losses they would sustain to do so.

There are three other reasons why I think the trade deficit is more troubling than the federal budget deficit:
1. We COULD always balance the federal budget deficit by the simple expedient of not spending more than we took in. There'd be lots of complaining, be we can control that one unilaterally. We can't control the trade deficit unilaterally. Any action we take can be countered by other countries.
2. The federal budget deficit could be financed by Americans. The foreign trade deficit implicitly has to be financed by foreigners.
3. Your comment that we've come to expect it. We've actually come to expect both. But we did have a period where the budget was not in deficit mode, the economy did well and people thought that was great--so great that they are still complaining about current budget deficits.

There isn't enough gold in the world to "back" any significant economy.

As for foreign ownership of A-B, I agree regarding market proximity. But are the new markets to be developed in the future going to be in the US or in an area easily served from the US, or are they going to be in markets ot easily served from the US. The new owners won't have the same prejudice to favor the US as A-B might have.

Multiply that times many companies in many industries, and you have the makings of a problem.

Hambone10 Wrote:There isn't enough gold in the world to "back" any significant economy.

speculation....It could be fractionally possible...as our dollar once was.

Owl 69/70/75 Wrote:The balance of trade bothers me because it has to be financed just like the federal budget deficit, and it's a lot bigger. If we balanced the federal budget tomorrow (which we should) and still kept the trade deficit (and it's probably going to grow, at least in the short run), we'd still end up owing the Chinese. And they could crater the dollar any time they determined that it would be worth the losses they would sustain to do so.

There are three other reasons why I think the trade deficit is more troubling than the federal budget deficit:
1. We COULD always balance the federal budget deficit by the simple expedient of not spending more than we took in. There'd be lots of complaining, be we can control that one unilaterally. We can't control the trade deficit unilaterally. Any action we take can be countered by other countries.
2. The federal budget deficit could be financed by Americans. The foreign trade deficit implicitly has to be financed by foreigners.
3. Your comment that we've come to expect it. We've actually come to expect both. But we did have a period where the budget was not in deficit mode, the economy did well and people thought that was great--so great that they are still complaining about current budget deficits.

I may have said we've come to expect it, but I don't remember the context and don't want to look... or you may be talking to someone else... but...

the global demand for high quality debt and the shrinking supply of US treasury debt ran our rates to virtually zero and allowed our companies to finance everything with debt rather than equity... which is a BIG part of our current problem. If we simply halted the GROWTH of the deficit, Social Security will finance 100% (and more) of our debt at some point in the future.

China could crush the dollar, but they'd be losing a primary export partner. Sure, there are situations where that might be worth it to them, but its pretty hard to imagine.

It would actually encourage US domestic investment and create domestic jobs. ALl of the outsourced jobs would come home, and factories would have to double shifts.

The ONLY reason countries care about currency differentials is because they need what another country has. Right now, we need (primarily) foriegn oil and foriegn wage structures. They need our demand. If the dollar collapses, their wage structures are less advantageous. If we also reduce or eliminate our dependency on foriegn oil (I say it that way, because I am in favor of replacing foriegn oil with foriegn ethanol as a quick response and launching point) then we don't really care HOW weak the dollar is, as we will be earning AND paying in dollars (isolationism?), we will stop buying THEIR goods, and THEY may start to buy OUR goods at some point.

The problem comes when we have no alternatives to rising prices as we do now in oil. If China stops selling us cheap goods, then there are a dozen other countries that could replace them. Just as they have replaced Mexico for a number of imported items.

Owl 69/70/75 Wrote:As for foreign ownership of A-B, I agree regarding market proximity. But are the new markets to be developed in the future going to be in the US or in an area easily served from the US, or are they going to be in markets ot easily served from the US. The new owners won't have the same prejudice to favor the US as A-B might have.

Multiply that times many companies in many industries, and you have the makings of a problem.

So, US ownership of foriegn companies is okay (or physical US expansion into foriegn markets)... but Foriegn ownership of US companies (or physical expansion into domestic markets) is not??

While I agree somewhat, that seems to be part of our problem in many countries.

Fo Shizzl Wrote:

Hambone10 Wrote:There isn't enough gold in the world to "back" any significant economy.

speculation....It could be fractionally possible...as our dollar once was.

Yes, you could say that you can exchange your 500 in Rubles for 5 Rubles worth of gold... but what is the point?

You've limited your downside to some fraction of your currency, but the markets will devalue your currency anyway... and the devaluation will likely encourage foriegn investment LONG before you reach that fraction... unless you think the country is going away, in which case the government will sell "your" gold anyway and we'll be trading in chickens.

The gold standard was replaced when the ability to transfer goods, services and money from one currency to another became instantaneous.

Hambone10 Wrote:

Owl 69/70/75 Wrote:As for foreign ownership of A-B, I agree regarding market proximity. But are the new markets to be developed in the future going to be in the US or in an area easily served from the US, or are they going to be in markets ot easily served from the US. The new owners won't have the same prejudice to favor the US as A-B might have.

Multiply that times many companies in many industries, and you have the makings of a problem.

So, US ownership of foriegn companies is okay (or physical US expansion into foriegn markets)... but Foriegn ownership of US companies (or physical expansion into domestic markets) is not??

While I agree somewhat, that seems to be part of our problem in many countries.

If you view this as a battle for worldwide economic supremacy, as for example Ross Perot did in 1992, then that's a reasonable position. My problem is a bit more forward-looking. Right now our tax laws actually give foreign companies advantages over domestic ones, at least as parent corporations. If that continues, we can expect to see more of this. I actually read one article postulating that the US could become the next banana republic, with foreign ownership of virtually everything.

I'm not sure I understand your initial point. Actually what you are saying is what I was thinking YOU meant.

I agree that our taxation policy discourages foriegn investment. No argument.,.. never said you weren't right...

MY only comment was that the devaluation of the dollar that encourages foriegn investment is not necessarily a horrible thing as it serves to support our currency. Obviously, changing our tax policy would do the same thing, but it would similarly discourage OUR ownership of foriegn companies (by encouraging domestic investment). Level the playing field by all means... I'm only talking about currency differentials... and the markets will generally do that.

It hurts our currency relative to a country when we export jobs. If we hurt our currency enough, those jobs will return, and/or we will import jobs. Right now, we're exporting jobs and importing cheap labor (who send the money back home... which is akin to exporting 2/3rds of a job).

it's a double whammy against us.

Its a falling currency or a falling standard of living... or a slow leak of both... but it is impossible to maintain our standard of living AND maintain a strong dollar in a world where the average person earns roughly 1/10th of what the average American does.

I think we're more saying the same thing different ways than really disagreeing, and I think you kind of nailed my concern in the last post. We're facing a declining dollar AND a declining standard of living. It's sort of like we are living with tax and other economic policies that are hurting our competitiveness, and counting on the dollar to fall enough to make up the difference. I'd rather fix the economy to the point where we can have a strong dollar and an improving standard of living.

yes... I don't think that is in the cards right now... I think we outpaced the rest of the world for the past few decades and with the advent of the internet, our world has shrunk precipitously... besides... I think we waste much more money on regulation, handouts and CYA activities than the rest of the world....

If we change the tax policy on corporate ownership, AND get rid of pointless tarriffs (like the 57 cent tax on imported ethanol) while investing in domestic production and alternatives, then we can create local jobs that are somewhat immune from situations like oil (is there anything else in the world that we are so tied up by??) AND somewhat immune from the falling dollar. Our standard of living can remain stable while those in developing countries can rise...

Hambone10 Wrote:

Owl 69/70/75 Wrote:As for foreign ownership of A-B, I agree regarding market proximity. But are the new markets to be developed in the future going to be in the US or in an area easily served from the US, or are they going to be in markets ot easily served from the US. The new owners won't have the same prejudice to favor the US as A-B might have.

Multiply that times many companies in many industries, and you have the makings of a problem.

So, US ownership of foriegn companies is okay (or physical US expansion into foriegn markets)... but Foriegn ownership of US companies (or physical expansion into domestic markets) is not??

While I agree somewhat, that seems to be part of our problem in many countries.

Fo Shizzl Wrote:

Hambone10 Wrote:There isn't enough gold in the world to "back" any significant economy.

speculation....It could be fractionally possible...as our dollar once was.

Yes, you could say that you can exchange your 500 in Rubles for 5 Rubles worth of gold... but what is the point?

You've limited your downside to some fraction of your currency, but the markets will devalue your currency anyway... and the devaluation will likely encourage foriegn investment LONG before you reach that fraction... unless you think the country is going away, in which case the government will sell "your" gold anyway and we'll be trading in chickens.

The gold standard was replaced when the ability to transfer goods, services and money from one currency to another became instantaneous.

And our currency today is preferable to a hard backed one?...I think not. We have flooded the world with FRNs and have "devalued" them by just printing more whenever we wish. At least a fractional system puts some limit on the money supply. The sky is the limit today...as is the resulting inflation.

Valuing our currency at a small fraction of its current value is pointless.

All the gold in the world is probably worth 3 or 4 trillion dollars. World GDP is something like 50 trillion dollars each year...

They're taking our word for our money anyway... giving them $1 while we borrow $1,000 is kinda silly.

Hambone10 Wrote:Valuing our currency at a small fraction of its current value is pointless.

All the gold in the world is probably worth 3 or 4 trillion dollars. World GDP is something like 50 trillion dollars each year...

They're taking our word for our money anyway... giving them $1 while we borrow $1,000 is kinda silly.

What happens when they stop taking our word for our money?

Hambone10 Wrote:All the gold in the world is probably worth 3 or 4 trillion dollars.

Holy testicle tuesdays. Please go review supply and demand.

georgia_tech_swagger Wrote:

Hambone10 Wrote:All the gold in the world is probably worth 3 or 4 trillion dollars.

Holy testicle tuesdays. Please go review supply and demand.

HELL NO...Its easier to print useless fiat currency and tax(by inflation) not only you and I but our children with this sillliness.

Its all going to come to a tipping point....Put you head between you legs and kiss your assess goodbye!