Americans are pathetic!!

[Joe DeFuria]

I have a 13yr old daughter & a 10yr old son & I'm very concerned about their future in a country that puts police budgets & prison building (even roads, for christ sake) above education! Our children are our future, not some GD 8-lane highway to Yosemite!

IF you are concerned about education, then work to take it OUT OF GOVERNMENT HANDS.

DemoCoder has it pretty spot on.

I'm on the east cost and I hear the talk shows here explaining how FUBARED California is. (NY is not too far behind.) Isn't there actullay a grass-roots movement to RECALL Gov. Davis as governor? Less than a year after his re election?

I do find it hard to feel too sorry for the CA residents in this case...because they RE-ELECTED that buffoon.

To re-emphasize DC's most important point:

* Gov. Davis, during the time of the economic boom increased spending faster than tax revenues were increasing.. Do you understand the severity of that? Tax revenues were SKYROCKETING due to the boom, and Californina OUT SPENT it!

Wht do you expect to happen when the bubble bursts? The only solution is to CUT BACK SPENDING. You can't take in MORE money in taxes when the people don't have the money to give you!

The next time you get laid off from a job, and are forced to look at lower paying jobs because economic times are tough...try going to the new prospective employer and "demanding" that he pay you more money, "just because my current household budget requires that I have $X per month".

It doesn't work that way.

 

[Natoma]

L233:

I'm merely skimming this thread, so at the moment I don't feel like getting into it completely. But I saw a point you were trying to make in response to Fred.

I think what you're trying to say is that the US receives roughly $2 Billion daily in foreign funds. If the US did not have that daily influx of foreign capital, the dollar would collapse, along with our economy. The cost of acquiring capital in this country would explode if we did not have this daily influx of foreign capital. It would become far too difficult to do business here. There is no way we could survive without foreign investment at this point, due to the ballooning trade deficit as well as the national debt. Most people think they're one and the same, but they're not.

The trade deficit is roughly tens of billions of dollars, not in our favor, a month. Meaning that we import tens of billions of dollars more in products and services than we export. The national debt is in the trillions of dollars. We are completely interdependent in the world system. Self-Sufficient we are not. Not by any stretch of the imagination.

 

[Joe DeFuria]

Self-Sufficient we are not. Not by any stretch of the imagination.

No one is "self-sufficient" by your definition. We are all interdpendent on the "world economy."

Is that because we are forced to be that way, or because we choose to be that way. That's the question.

I readily accept the premise that if if "cut ourselves off" from the rest of the world, there would be some drastic changes, and many of them for the worse.

However, I also believe that we could be self-suffficient, and at a much higher standard of living than any other individual nation if they were to cut themselves off from the rest of the world.

 

[Natoma]

Self-Sufficient we are not. Not by any stretch of the imagination.

No one is "self-sufficient" by your definition. We are all interdpendent on the "world economy."

Is that because we are forced to be that way, or because we choose to be that way. That's the question.

I readily accept the premise that if if "cut ourselves off" from the rest of the world, there would be some drastic changes, and many of them for the worse.

However, I also believe that we could be self-suffficient, and at a much higher standard of living than any other individual nation if they were to cut themselves off from the rest of the world.

I agree wholeheartedly. But then, as the architect stated, would we be willing to accept certain levels of survival to achieve that level of self-sufficiency? Most likely no.

p.s.: Now that I think about it, I'd think that Russia would be the most self-sufficient country over the long haul. They possess every national resource in some sufficient quantity over the vast expanse of their country. Be it oil, coal, natural gas, timber, gold, diamonds, silver, etc etc etc. So now that I think about it, they'd probably be the most overall self-sufficient nation in the world.

 

[RussSchultz]

Don't confuse russia with the old soviet union. Russia is a small part and lacks most of the resources that the old soviet union had control over.

 

[L233]

No one is "self-sufficient" by your definition. We are all interdpendent on the "world economy."

I think you miss the point here. When I say "self-sufficient" I do not mean that a country can produce everything it could possibly need all by itself. It means that it can produce enough to satisfy it's needs and trade the excess production for what they need. In that case, a country does not have a trade deficit and is therefor "self-sufficient". The USA on the other hand needs more than it produces. Germany needs less than it produces. France needs less, Japan needs less. The term "self-sufficient" means balanced trade, that simple. Goods are exchangeable, as long as the value of goods produced is about the same as the value of goods consumed, you are self-suffient, even if you have to trade $5b in F-16 Fighter Jets against $5b in wheat to feed you population.

We aren't really talking about the end of all trade. We are talking about the end of capital influx which is not returned by the export of goods or capital.

However, I also believe that we could be self-suffficient, and at a much higher standard of living than any other individual nation if they were to cut themselves off from the rest of the world.

The USA has a huge population, a wealth of natural resources and a huge land mass. Plus, it has a stable (even if flawed) political and juridical system and a sound infrastructure. There is no doubt that the US can be self-suffient - hell, it was until the 1970s.

To put it bluntly: yes, the US could sustain itself at a very high level. Just like most developed nations can. But that high level would be lower than what you have today. About 450b $ p.a. lower, to be exact.

 

[L233]

Don't you have that backwards? A trade deficit means the US sends hard currency out for goods in return. I don't see how the world is subsidizing the US government. If anything, its the other way around.

edit: spelling

No, actually not. First of all, the trade deficit tells us that the US consumes more than it produces, and I am talking about production (either tangible goods or "productive" IP) not printing dollar bills or issuing bonds.

Money flows into the US (investments etc.) because investments can actually be very profitable in a deficitiary economy until the system collapses. On a smaller scale we saw that during the dot-com boom, where invested money multiplied in an economical sector which didn't even come close to making profits. Every at least somewhat common sense person should have seen that there was something wrong back when an ISP like AOL could buy Time Warner and Yahoo, a miserable dump consisting of a few hundred employees logging internet links and which financed itself with banner ads, was at one time "worth" more a huge industrial conglomerate like Daimler Benz with several hundred thousands employees all over the world, assets worth dozens billions and successful activities in automotive, aerospace, defense and whatnot industry branches. Or look at Enron, a company which didn't actually do anything other than buying and selling electricity, a worthless service, without producing anything of tangible or intellectual worth - an intermediary service so totally unneccessary that it was a joke, even if they hadn't cooked their books.

The financial markets aren't exactly reasonable. Short term ROI is more important than long term investment and if short term ROI can be achieved in a deficitary market, then that's where the money goes to.

The real question here is: with what exactly does the US pay? That's something that we could discuss with no end but it probably boils down to this: the US pays with paper. That will work fine until the paper is returned in exchange for tangible goods - which the US cannot provide.

 

[L233]

p.s.: Now that I think about it, I'd think that Russia would be the most self-sufficient country over the long haul.

Russia is self-sufficent. They had a positive trade balance of ~60b USD last year.

Again, self-sufficiency isn't about having everything you can possibly needs within your own borders. As long as there is any form of international trade, every country with a positive trade balance is self-sufficient and every country with a negative trade balance is not. It's that simple, really.

 

[Joe DeFuria]

That will work fine until the paper is returned in exchange for tangible goods - which the US cannot provide.

Does not currently provide, or cannot provide?

 

[indio]

Some of the comments on this board I find pretty shocking. For starters the the Federal and State governments are running budget deficets not becuase of illegal immigrants but because they increased raided the public coffers during the internet "boom" . Unfortunatley projected tax revenue increases were tied to the also incredible increase in personal income tax reciepts , however this increase can be attributed to the stock market bubble that burst. That's why governents are running ungodily record breaking debts is because they were receiving ungodly record breaking tax revenues and actually thought it would continue indefinately.

As far as overpaid lazy union workers , I take serious deferrence to that statement. I'm sure some union workers are lazy and overpaid. the fact is though your life depends daily on these same union workers. When you get in an elevator or drive your car over a bridge . Most union jobs are very dangerous unless they are clerical or a food service job. For the company I work for which has 40,000 employees worldwide had 98 work related DEATHS and probably countless injuries. We have constant (and I mean constant!) safety training. We have a wall of "death" updated weekly so we don't become lax and get mauled or maimed. We should get paid alot for putting are lifes on the line unfortuneately others good paid more and never produce anything
The moral of the story is stereotypes suck and are a completely useless component of human nature that has never brought any good on our species. probably ever.

 

[RussSchultz]

L233:

From your statement, it appears the US makes nothing but smoke and mirrors.

But, beyond that, as I said: we're "subsidizing" the world. That money from the trade deficit does not come from some guy printing up dollar bills. The value comes from somewhere. You claim it comes from foreign investment. I think it comes from elsewhere. For example, most semiconductor companies do not sell product that touches US territories until its in its final form(to avoid inport tarrifs and shipping costs). NVIDIA and ATI ship the product directly from the package house or warehouse in east Asia to the AIB manufacturer in east Asia, who ships finished product to be purchased in the US. In this case, there is an amount of money that is generated by a US company without it selling a good or service from the US, but there is a recorded amount of money being exchanged for incoming goods)

Unless, of course, you're suggesting that some day everybody will wake up and say "Hey! US currency isn't worth anything!"

 

[L233]

That will work fine until the paper is returned in exchange for tangible goods - which the US cannot provide.

Does not currently provide, or cannot provide?

Hm, let's say "cannot currently" provide. The productive base just isn't there anymore. Can't sell what you can't produce. That does not mean that the US cannot return to from being deficitary to being productive after a transitional period but unless the change is not made actively and guided, it will be a hard crash and quite painful. It's easier to de-industrialize a country than to re-industrialize it.

I am not saying that the US is fucked or anything. That would be quite hillarious. But I am confident that in a few decades you can kiss the high standard of living you enjoy today good bye and the lack of a decent social security net might lead to severe social problems since the poor and middle class would be affected more severly than high income groups. Unless of course, the US somehow manages to uphold the current system of wealth flow from America's productive satellites to the USA. And in order to do that, the USA must remain significant as a super power. That's why I suspect that the USA will turn even more agressive in international politics. The USA must make itself "needed" or at least make itself appear to be - see my first posting on this threat.

The problem is not that the US has a trade deficit. The problem is that the trade deficit became an integral part of the US financial/economic system and is NOT just a temporal phenomenon. During the last two decades, from a global, big-picture point of view, the US economy turned parasitic and it will eventually have to return to a symbiotic existence with the rest of the world. IMHO the question is not IF but rather WHEN and HOW.

 

[DemoCoder]

L233 is just reiterating the fallacious dollar conspiracy that I debunked earlier. If he picked up an economics textbook, instead of reading stupid essays in the media, he wouldn't have even bothered to post.

The trade deficit is an artifact of the abnormally high dollar, which bleeds wealth away and jobs from the US into Europe. It is not Europe that is financing America, it is America that has been financing Europe, including European manufacturing jobs.

The high dollar makes US exports expensive, and EU exports cheap, which means Americans buy cheap foreign goods, but sell expensive American goods. This alters the balance of trade so that savings flow out of the US. Simultaneously, the strong dollar has kept inflation low, and made the US attractive for foreign capital.

If the Europeans weren't gaining anything from the trade (selling their manufactured goods cheap, loaning the money right back to the US) they would not be exporting to us in the first place.) The fact is, the postulated mechanism is false. US payments immediately get converted into Euro to pay workers who are making the goods, which then spend the money in European markets.


The result of a collapsed dollar would be a boon to the US export economy and a nightmare to Germany and Japanese. It would spell an end to expensive American goods and the gravy train ride of Americans paying Europeans to manufacture stuff because of an artifact of the international currency markets. It would mean an increase in our national savings rate, and an end to the sell off of American real estate and other financial assets (e.g. foreign investment)


There is nothing the EU can manufacture that the US can't. Whether something gets imported or bought locally is based on price, not on non-capability.

 

[Gollum]

Well, since many of these "countries" (Nation States, especially on the continent) were created on the map in the last century, or had their border's redrawn several times since then, I feel justified. Anyway before the US civil war, US states were much more independent entities, so if we want to ignore geographic history, let's throw that in to.

Fact is, someone from the UK that sits a handful of miles across the water from France counts his travel there as travel to a foreign country. Well, if true, then people in in Chicago, Seattle, and new england that travel routinely across the Canadian border, and can get some Canadian TV stations are "world travelers"

Fact is, someone from London who spends a long weekend in Paris once will hardly call himself a "world traveler", but yes, at least he's been outside of his own little corner of the world once. The same can be said for an American that travels to Mexico, he's no globetrotter either but he is definitely more qualified to consider himself one than someone traveling from Nevada to Arizona.

This has nothing to do with ignoring geographic history either, mostly because geographic history (if you refer to national borders) often has little to do with cultural heritage, which is what really defines the different cultures on this planet. Europe has had a horrible first half of the 20th century and even before that national borders have been redrawn after wars too often. But while borders and flags may have changed several times over the centuries in several regions, the regional culture and peculiarities have remained mostly intact for centuries (except when mass deportation of a culturaly dominant majority took place, a sad part of history). 800 years ago there was a Spain and there was England, the political system, borders and maybe even the names may have changed, but essentially its still the same culture and people.

I would say that there is larger difference between UK and Italy, or Spain and Norway than there is between the UK, France, and Germany. The differences between those three are like the differences between California, Texas, and New York, modulo language (and in southern california, a huge fraction of people are bilingual anyway). You have differences in political culture (just like California == very left wing, Texas = right wing), and differences in local food (just like NY vs TX) but there are way more similaries than differences, especially in the France/German/Belgium area.

There's a lot of truth in that, several european regions can be considered very culturally similar even across national borders, that doesn't mean that it can be extended over thoe whole of Europe though. A couple of examples would be Germany/Austria/Switzerland, France/Benelux countries, Scandinavia, England/Scottland/Ireland or Spain/Portugal. I'd be willing to accept your East Coast vs. West Coast or California vs. Texas examples if you compare them to those regions (e.g. Tirol vs. Saxony, Scottland vs. England), but Europe as a whole? No way José...

Yes, that's because of the artificial borders that were drawn. But your "states" or provinces, are like our counties. Look, California is the world's fifth largest economy, ahead of France, BTW. You want to compare Bavaria to California? Or Swiss cantons?

If any borders are drawn artificially its those of the US states, notice the strtaight lines, 90° corners and stuff? That's because for large parts of the US map a couple guys sat in front of a map and said "I wanna have that part, I'll give you this one instead". In contrast borders in most european countries are mostly the result of hundreds of years of development, war and struggle, they are definitely way more "naturally grown over time" than "artificially drawn"!

I don't want to compare California to a Swiss cantons, no. But Bavaria? Certainly! Bavaria FYI would rank as the world's 15th biggest economy on its own. Maybe not as impressive as California, but ahead of countries like Taiwan, the Netherlands or Russia. Germany's biggest federal state outranks even India and Korea. I don't really see what this has to do with anything but hey, I can play the number game too!

You think there are no significant cultural and political differences inside (to you apparently small and insignificant) countries like Germany? Please do think again. Lets take Bavaria as an example, its both culturally and politically very different from the rest of Germany. People are very catholic and conservative, they consider Bavaria almost as a nation of its own. Part of my family comes from Hesse, neighbouring state to Bavaria in the north, people there are less conservative, more socialistic and mostly protestant. To many Bavarians traveling to Hesse is like traveling to a foreign country. Their dialect is hardly understandable by someone who just talks plain german and you hear things like "why should I learn proper german, I live in Bavaria so I'll talk bavarian" often even these days. But you can't even say that for all of Bavaria: Franconia is a part of Bavaria, but you can istantly tell the difference from a more southern Bavarian. Not only by dialect but also by attitude and lifestyle. This is what you should be comparing your counties to, while Bavaria as a whole is definitely very much like one of your states (best compared to Texas probably).

No, it supports the notion that Europeans know about other European countries, and count that as "world knowledge", but the average EU member is as profoundly ignorant of Asia and Africa (except for perhaps the French who still have colonial interest there) Let's see someone from the Belgian countryside place Peru or Shenzhen on a map.

I'd be more impressed of knowledge of EU citizens *outside* continental Europe, but I think you will find it lacking.

The difference is, most Europeans will not only be able to show you several other European countries, but also at least some of these: the US, Canada, China, Japan, Australia, South Afrika, India, Russia; while many Americans will unfortunately have trouble pointing out more than one or two of those. The average European might not be able to point you to Nepal or Ecuador, but at least they have a better idea of what a globe looks like and where certain countries should be located than most Americans.

All just a recent addition. So what? I can travel to most EU countries openly without a visa as well. Meanwhile, for the past century, Americans have had total freedom of movement in the US for 200+ years, hell, before 9/11, flying dosmetic airlines was almost as efficient as getting on a train, with very little checkpoints. Euro still isn't there yet. I didn't get Euros when I was in the UK, I made sure I had pounds.

Wow, free travel inside your own country? What an accomplishment! Never heard of that concept before, truly brilliant.
I was just saying that in the past decades european nations have been growing much more together (much like the US did 2-3 hundred years ago), and by now most borders are open. By open I don't mean not requiring visas either, more like border posts being empty or transformed into snack booths. Excuse me for not being able to go back in time and telling people to stop fighting each other and start working together sooner, but apparently they just weren't ready for it.

As for the Euro, oh its here! That's why I specifically said continental Europe. What do I care what our lovable brothers from the rainy island (no offence, I hail from Ireland myself so I like the climate! ) pay with, most of continental Europe has been using the Euro for over 18 months now and I personally love it (except that I have trouble telling the 10 and 20 cent coins apart in a hurry).

Only if the language is different. You can get English channels on German TV. Do you think someone in Vancouver watching TV in Montreal is completely different?

ONLY the language is different? Uhm... okay, whatever you smoked it must've been good. Or maybe I just don't get what you meant to say. First of all I was just picking up your example, then I am not really sure what TV really has to do with anything. TV progams are certainly different in many more ways than just language between European countries, the audience has pretty significantly different tastes. French TV shows look and feel very different than german ones, which in turn are very differnt from italian ones, and they all cover different topics. If you want to get more general, then most TV channels all over the world are pretty much similar (commercials, soap operas, commercials, talk shows, commercials, cop shows, commercials and more commercials)...

I'm not claiming either side is superior. I'm merely claiming that a historical difference in the way borders were drawn and government was administered left Americans mixed together and Europeans separated, both by small distances. The US at one point had large French, Spanish, and English possessions. If the colonies had not revolted, and the US had not bought or annexed those possessions, today, the US landmass would be divided into atleast a French, Spanish, and English speaking part, probably evolving into separate states, like Canada, loyal to difference overseas governments/cultures.

In such a "what-if" scenario, the US would have been more like continent Europe, where a Spanish speaking California would have to watch a French speaking midwesterner or English speaking New Yorker on TV. But those artificial borders were never drawn, and Americans moved about so throughly, that major linguistic and cultural differences have been ironed out over 200 years. Now, a Californian can't count New York as "world knowledge", but had the "what if" scenario happened, he would.

So the differences are thoroughly explainable merely by the situation that Europeans find themselves in, that their neighboring "states" have not mixed with them as thoroughly over 200 years, and they still regard them as "foreign", and they get counted as "knowledge of other peoples and cultures and geography"

I see what you're getting at, I still don't agree however. Maybe a few centuries from now Europe will be similar to what the US is now. I doubt it though, the US history is too unique from any other part of the world to be repeated, there are no "new worlds" anymore (maybe in space but that means getting all science fictiony and stuff). Anyway, if that were to happen I might accept your reasoing. But until the European cultures have merged and mixed as the ones forming the US have I don't think its valid ground for your asumptions. You seem to base too much of your perception on geographical scale rather than cultural heritage. Geographically France and Germany are close, yes, and they even share their common history, but each country has countless other historical, social, cutural and political characteristics unique to itself, and far more so than any US state.

These are what make the difference. Or do you really want to convince me that Illinois has such a dramatically different history and culture from Michigan, that learning one of them over the other could be called "knowledge of other peoples and cultures and geography"? Its not even close to being on the same level of complexity that differentiates european cultures...

But I would hazard to guess that if you picked a guy out of a Irish pub at random and asked him about a truly foreign culture, something fundamentally difference, he wouldn't have a clue.

He will be able to show you the US on a map however, while some random guy in a US bar won't neccessarily be able to show you Ireland. Wanna bet?

One of the reasons I prefer traveling to Asia is that it is so difference than the EU or US. Frankly, for all the Eurosnobbery that goes on, I simply do not find Europeans all that difference from Americans. They might like to view themselves as culturally superior, I find them the same.

Agreed, Europeans and Americans are very similar in many ways. That's why I'm also a bit irritated at our recent bitching amongst each other. There's a reason that "the West" as opposed to "the East" usually means both Europe and the US. I too love traveling to Asia, love the people and culture there because its so different. Been to Hong Kong (twice), Singapore, Indonesia, Thailand and the Philippines (twice) so far. Maybe not as often as you were there in the region, but I bet I'm younger so I can still catch up...

BTW, have you sen Hero yet? Damn, that one should have won the international Oscar, I'm almost a shamed that a german movie got it instead...

 

[L233]

L233:

From your statement, it appears the US makes nothing but smoke and mirrors.

But, beyond that, as I said: we're "subsidizing" the world. That money from the trade deficit does not come from some guy printing up dollar bills. The value comes from somewhere. You claim it comes from foreign investment. I think it comes from elsewhere. For example, most semiconductor companies do not sell product that touches US territories until its in its final form(to avoid inport tarrifs and shipping costs). NVIDIA and ATI ship the product directly from the package house or warehouse in east Asia to the AIB manufacturer in east Asia, who ships finished product to be purchased in the US. In this case, there is an amount of money that is generated by a US company without it selling a good or service from the US, but there is a recorded amount of money being exchanged for incoming goods)

Unless, of course, you're suggesting that some day everybody will wake up and say "Hey! US currency isn't worth anything!"

Russ, you don't really understand what I am trying to say. First of all, I never said the US was "nothing but smoke and mirrors". About 20% of the USA's 10000b USD GDP is industrial and agricultural. But discussion GDP is tricky, especially since we do not know the exact composition especially when it comes the the 80% "services" share. I has to be determined which part of the "services" constitute a tradeable commodity (like "productive IP" or even stuff like movies). The guy who bundles the asparagus at WAL-MART does not produce anything of value.

Your example is seriously flawed. Actually, you got it backwards. But let's take one step at a time.

I am making up numbers now and will simplify radically.

Nvidia designs a chip.
Nvidia pays $5 to TSMC to have the thing produced.
Then Nvidia sells the chip for $10 to MSI
who produce the board and sell it for $15 in the US

How will the US trade balance change?
Step 1: -5$ payment to TSMC
Step 2: +10$ revenues from MSI to Nvidia
Step 3: -15$ from Joe Yankee to MSI
----
Total: -10$

That does NOT mean Nvidia loses money, they get $5 out of it. It means that of the $15 Joe Yankee spends on the board, $10 flows into foreign economies to pay for chip production and board production. So when you look at the video board, the US did consume more foreign goods/services than it produced itself. What Nvidia did was designing the Chip and marketing it and it got $5 out of it. That is the value the US economy provided in that trade. TSMC produced $5, MSI produced $5.


You say the money from the trade deficit does not come from a guy printing dollar bills (or issuing bonds or somehow motivating investors to dump money into a deficitary economy for the sake of short term RIO etc). Well, then tell me: where does it come from?

 

[Gollum]

The trade deficit is an artifact of the abnormally high dollar, which bleeds wealth away and jobs from the US into Europe. It is not Europe that is financing America, it is America that has been financing Europe, including European manufacturing jobs.

I don't want to get pulled into this whole economics debate, but will comment this one time. The key word is "has been". That might have been true for the post-war timeframe, but today a significant amount of european money is invested IN the US, not so much the other way around. German companies e.g. have about 3 times more money invested in the US than the other way around (don't remember the exact numbers unfortunatelly). And I think this will be similar for other countries as well. So I don't know how accurate your statement actually is anymore...

 

[indio]

well from what I can recall that during the largest expansion in US history we had a strong dollar. According to the reasoning here thats not possible. We are going back to BS supply-side economics. Get it through your thick skulls IT DOES NOT WORK!! never has never will. I hate to break it to you but the US doesn't produce very much and what is does is on a small scale. We are a service or value-added based economy. Most businesses are just middlemen. Computers for example . almost none of the parts are fabricated here the designing planing distribution is the only thing that Gateways or Dells do . All they do is put up the capitol to by shit loads of components and rebrand them to make it a "dell" pc however Dell made no tangable item in the process. You can look at industry after industry. The US is a bunch of middlemen.
If the above is true it is more in our best interest to have a strong dollar because we can by MORE product to resell. We do not make very many products natively, we are we are just exporting reconfigured foreign products! We need low prices on the wholeside to maximize profits on the retail side This can only be had with a strong dollar.

 

[DemoCoder]

I don't want to get pulled into this whole economics debate, but will comment this one time. The key word is "has been". That might have been true for the post-war timeframe, but today a significant amount of european money is invested IN the US, not so much the other way around. German companies e.g. have about 3 times more money invested in the US than the other way around (don't remember the exact numbers unfortunatelly). And I think this will be similar for other countries as well. So I don't know how accurate your statement actually is anymore...

The strong dollar is a subsidy for foreign exports. This means you sold goods that you wouldn't have otherwise sold. For an economy like Germany, where over a third of the economy is exports, this is very important. (US is not an export based economy, Japan and Hong Kong are extreme examples) US dollar is as good as a gold bar. These dollars which come from US consumers (previously financed out of national savings, now financed by foreign investment) pay for other goods and services that Germany gets from other countries, plus is directly convertable into profits for German companies.

Those companies must then decide what to do with that profit. They can either spend it on expansion, or invest it. If they choose to invest it, they will invest it where it can get the highest rate of return at a given risk. Ergo, American financial markets. This money raised in financial markets then goes to finance business investment, which ultimately ends up paying American companies to produce goods and services. However, the profits from this go back to Germany, which now owns part of the company's assets.

Thus, the trade deficit is only one part of the equation. The real figure is the current account. Since Germans aren't exchanging an equal amount of goods for American goods, the difference is made up by exchanging assets: real estate, capital ownership, etc. The germans are not getting short changed in this process, America is selling off its wealth to finance the deficit, and Germans are getting cheap real estate and other property.

If germans were truly giving away their exports and not getting paid with anything concrete, they would not be trading. The fact is, when German capitalists put their money here, they end up with tangible gains in the end, and Americans end up less wealthy.

So like I said, the situation is that Americans are funneling their wealth and assets to overseas owners, not the otherway around.

 

[DemoCoder]

well from what I can recall that during the largest expansion in US history we had a strong dollar.

The US is not an export economy, less than 10% of the GDP is exports. The value of the dollar determines how cheap foreign goods are, which means, your DVD player is cheaper. The 90s expansion was a massive dumping of wealth from baby boomer savings into the financial markets which financed a large amount of job growth in stupid companies producing goods and services that no one wanted to buy.

According to the reasoning here thats not possible. We are going back to BS supply-side economics. Get it through your thick skulls IT DOES NOT WORK!! never has never will.

Well moron, it's not supply side economics. It's Macroeconomics, e.g. ECON 102. #2 the strong dollar policy is a demand side dosmetic US policy for foreign goods and a supply side policy for foreign companies. Stimulates demand yes, but not for American goods.

I hate to break it to you but the US doesn't produce very much and what is does is on a small scale

Yeah, $1.5 trillion is pretty small. 15 million jobs is pretty small. US manufacturing, while shrinking, is still 15-18% of the economy. Manufacturing is shrinking in most Western economies, as they all shift to services. (Think Japan is mostly manufacturing? only 31% is, 68% is services)

We are a service or value-added based economy. Most businesses are just middlemen. Computers for example . almost none of the parts are fabricated here the designing planing distribution is the only thing that Gateways or Dells do .

Boy, you sure have an odd view of manufacturing. Every good, save raw components mined out of the earth, is a value-add. Do you think Ericsson and Nokia produce the Tantalum that is used for their cell phones? Think they produce most of the semiconductor components? Think BMW produces most of the materials that goes into their cars?

And what does ATI, Nvidia, Intel, et al, produce? I suppose the fact that they are mostly IP (minus Intel's fabs) discounts them right? If the manufacturing uses only brainpower and not muscles and sweat it don't count?

All they do is put up the capitol to by shit loads of components and rebrand them to make it a "dell" pc however Dell made no tangable item in the process.

They assembled the PC, built to order. Next time you pick up one of your European "manufactured" electronics, why not peer inside and see how many components were produced in Asia and how much of the raw materials came from Africa. But you don't care if the majority of components in a Phillips DVD player are OEMed right? Because you can imagine assembling a PC but can't imagine assembling a DVD player, what Dell does seems less valuable. Fact is, Selectron and Flextronics does exactly what Dell does, for everything else. And mostly everyone else does the same.

Today's products are simply too complicated for one entity to be the most efficient at producing.

 

[Fred]

I kinda/sorta agree with L233. Yes, the US does send a great deal of monetary investment into places like Europe, so in the first approximation of the trade deficit, they finance them rather than the other way around.

However, thats not necessarily a bad thing. For a couple economic reasons. First of all, it increases the rates of circulation of 'dollars', and stabilizes certain things like inflation. Secondly, the goods and services that are imported are readily convertable into GDP profit, indeed its hard to say whether we are actually gaining or losing profitability. Thirdly, it promotes open markets, and the dropping of trade barriers.

Consider the Marshall plan. We spent fortunes on reconstructing Europe and Japan, yet look at the payoff for America in the long run, even though we ran and continue to run trade deficits with those countries.

Throughout history, the advent of certain trade routes opening has always led to positive increases in economic activity for both sides, and yes thats why the US is so interested in promoting the 'global economy', its a win-win situation.

The only downside of opening trade windows is the employment sector, which does not necessarily follow the same curve. Indeed, it can be disastrous for certain socialist countries that have very rigid job infrastructure and lacks job mobility. Contrast say Germany and France's rate of unemployment with America. You can argue about the welfare state all you want, but I'll argue much of it has to do with the lowering of import/export taxes.