Re: The Trade Deficit, another view



On Tue, 11 Oct 2005, Phil Scott wrote:


"Straydog" <asd@xxxxxxxxx> wrote in message
news:Pine.NEB.4.63.0510111517520.6276@xxxxxxxxxxxxxxxxxxx



Stray dog, this is  NOT  'Flim flam' from 'Hummel'... that
takes some brains at least.


Hummel is simply a moron, who thinks that an economy is just a
big confidence game and is willing to lie about reality... and
has no faintest clue about the underlying demographics and
goods production drivers..   nor the effects of govt bloat
sucking up the net domestic product only to turn it to crap
and toilet paper running out the 8" or larger sewer lines in
most state and federal buildings.


Well, thanks for the "heads up" on Hummel. Very recently I've started to spend a lot of time reading about banking (under that rock you will find a lot of answers, maybe not all, but a lot) and economics (under that rock, I've had a lot of doubts about what the experts know or don't know) because I am finding myself progressively less and less satisfied by the overall simplistic crap that comes out in the media. The other crap I don't care for is that special language, spoken by economists, called economisese which includes a special word usage (like legalese) coupled with a tendency to --what I call-- 'abstractise' subject mater ('abstractise' as in 'make it sound mathematical' so as to intimidate the one reading or listening to the 'economist').

One thing that cracked me up not long ago was an article in the WSJ where they had two economists give answers to the exact same interview questions. From my reading of their answers, neither one made any sense anywhere AND the stories each gave, regardless of the sense they made, were totally different.

I hope you get my drift. I think I got yours.

Straydog

===== no change to below, included for reference and context ===== 

Phil Scott



On Tue, 11 Oct 2005, William F Hummel wrote:

                        "Sharecropper's Society" Revisited
                                 by Thomas E Nugent
                                     August 16, 2005

Are we selling out to foreigners, as the Washington Post
suggests?


Foreigners already own a large fraction of the real estate in
a lot of our
major cities.

Recently, one of the directors of the Washington Post,
Warren Buffett,
said that the U.S. was on its way to becoming a
"sharecropper's
society." The statement characterizes the Washington Post's
latest
economic theory on international trade. In a recent
editorial entitled
"A Sharecropper's Society?" the Post bemoans America's
sacrifice of
future standards of living for current consumption by
selling out to
foreigners:

   "Every year Americans sell or mortgage a slice of their
productive
assets to foreigners with the result that income from those
assets
must flow abroad in the future."


When foreigners own real estate here, they also get rents.
And, capital
gains when RE goes up. Its a cash cow for them.

Does the Post's economic position make any sense? 

YES,

Let's investigate. 

When Americans sell a piece of their productive assets, they
receive
an agreed upon payment in return. This is a voluntary
transaction at
the "market" price, which means the buyer and seller are
both
satisfied with the price. This price should reflect the
present value
of all expected future cash flows of the productive asset
that is
sold.


Not counting inflation, tax changes, depreciation, etc. Its
not that
simple.

The seller also has the cash resources that can be used to
purchase foreign productive assets, 

You mean cars? They are not fungible.

build U.S.-based productive
assets, or simply be saved. 

Deposit where the interest rates are high but the currency
won't be
devalued. Also, its not that simple.

If a loan funded a buyer's purchase, the loan also "creates"
an
equivalent deposit. The transaction means that the loan
itself creates
the funds that buy the productive assets. The funds do not
come from
some mythical "pool of savings," as described in the
"loanable funds"
rhetoric freely tossed around by the media and others who
should know
better.


Here is where you are playing big-time bait and switch.

 It's a zero-sum game, in the sense that loan/deposit
expansion
does not create any net financial assets. 

Loose talk on definitions. Loan/deposit does create money. Its
in the
books.

However, the economic 
activity created by the purchase of goods and services and
related
loan creation increases output and income so that the
economy grows
accordingly.


Money creation, by  the loan/deposit expansio0n does expand
the economy.
this is in the books, too.

More, the Post's idea that income "flows" abroad is not what
happens.
Let's go back to the April 10, 1984, edition of the Wall
Street
Journal. Leif Olsen, the chairman of Citibank's economic
policy
committee, made the following important distinction in a
letter to the
editors:

   "If you hear 'import,' what immediately comes to mind?
You'll
probably say 'cars.'  Now, if you hear 'capital flow,' what
do you
think?  Money coming in, right?  Wrong.  Money doesn't come
in from
abroad like cars. It's already here."


Physically, its not even here. It's black ink on paper, or
white symbols
on computer screens.

In other words, money doesn't flow offshore. 

Power to use that money does flow offshore. You are getting
into bull***
territory now.

Rather, domestic claims 
change hands. Many economic commentators miss the fact that
when the
U.S. went off the gold standard in 1971, there was no longer
any
guarantee behind the U.S. dollar - it became a fiat
currency.


And, why did the US go off the gold standard? Everyone in the
world was
taking their "money" in gold and not paper.

As such, 
there was no gold being moved around in the basement of the
Federal
Reserve Bank of New York to settle liabilities to
foreigners.


There ain't that much left, anyway.

Foreign 
holdings of U.S. assets, namely Treasury bills, must be
redeemed some
day but can only be redeemed for U.S. dollars and spent or
"saved" as
U.S.-dollar financial assets. Foreigners can trade U.S.
government
liabilities, but in the end, the "buck" stops here.


Another string of flim-flam.

To some extent, we are "mortgaging" our future, but the
transaction
whereby we consume their resources now and they consume our
resources
later is a game that is stacked against foreigners since our
policies
are the ones that set future domestic prices, export taxes,
and
restrictions. In other words, we can decide to reduce the
future
purchasing power of foreigners via the multitude of legal
policy
options at hand.


And, they have no recourse?

Equal trade, whereby we consume foreign labor (a.k.a.,
creating jobs
abroad) by buying their goods in exchange for U.S. financial
assets
that allow foreigners to buy our goods


"our goods" = hard real estate, mostly.

in the future, can provide the 
flexibility for each trading partner to time purchases of
goods and
services. For example, Japan has been accumulating net U.S.
financial
assets for decades and not net spending.


Maybe they are smart.

For all practical purposes 
the Japanese are satisfied with the U.S. consuming their
physical
resources in exchange for their accumulation of U.S.
financial assets
indefinitely. And, as previously noted, we have perfectly
legal policy
options to unilaterally minimize the value of their holdings
of U.S.
financial assets should we so decide.


I'm stil waiting to see this happen.

What are the Post's editors attempting to do? Are they
implying that
selling now is bad and that not selling is good? As I
mentioned, the
total transaction - buying now with I.O.U.'s given to
sellers for
their future buying - works entirely to our advantage. What
is
important is that the transaction takes place: Domestic
credit creates
the loans and deposits (there is no such thing as "imported
capital"),
we get the goods and services, foreign investors are paid
for their
output with the newly created deposits, and non-resident
savings are
created for possible future spending.


Another line of BS.

The U.S. population benefits, without a sharecropper among
us.


A day will come when the debt will fall on people's heads.

- Thomas E. Nugent is executive vice president and chief
investment
officer of PlanMember Advisors, Inc. and principal of
Victoria Capital
Management, Inc.


He is full of ***.

Here is the book to be read:

Recently I posted about a book that I thought might be
interesting to read:

"The Creature from Jekyll Island: A Second Look at the Federal
Reserve" by G. Edward Griffin ( ISBN 0912986182 ) Second
edition
(fifth printing), 608 pp. I think there is a 3rd edition, now.

What attracted more of my interest was the blurb on the back:

"Where does money come from? Where does it go? Who makes it?
The
money magicians' secrets are unveiled. We get a close look at
their
mirrors, their pulleys, cogs, and wheels that create the grand
illusion called money. A dry and boring subject? Just wait!
You'll
be hooked in five minutes.... This book is about the most
blatant
scam of all history... the cause of wars, boom-bust cycles,
inflation, depression, prosperity."

Yep, I was hooked.  From the table of contents:

"What is the Federal Reserve System? The answer may surprise
you.
It is not federal and there are no reserves. Furthermore, the
Federal Reserve Banks are not even banks."

And the author explained all this in the book.

To give you an idea of what was involved, here is a quote from
page
8:

"...riding in the car at the end of the train, were seven men
who
represented an estimated one-fourth of the total wealth of the
entire world." I copied that correctly, one-fourth of the
total
wealth of the entire world. They were: Nelson Aldrich, Abraham
P
Andrew (Secy US Treasury, Frank A. Vanderlip (prez of the most
powerful bank at the time), Henry P. Davison (J. P. Morgan),
Charles D. Norton (J.P. Morgan), Benjamin Strong(J.P.Morgan),
and
Paul Warburg (representing the Rothshild dynasty). Jekyll
Island is
a real place and the meeting of these guys was kept secret for
years and even denied to have taken place. The meeting was to
create a banking cartel that did not look like a cartel or a
bank
but was to allow private interests to make money (in more ways
than
one) and shift any and all risk to the taxpayer.

I will say that after reading the book I was truly blown away
(more
way below). Anyone reading this post can go to amazon.com and
click
on books, advanced search, then put in the ISBN and look at
that
page, or, copy and paste the URL below (watch out for CRs
since the
line is wrapped).

===================

http://www.amazon.com/exec/obidos/tg/detail/-/0912986182/qid=1112
407833/sr=1-1/ref=sr_1_1/103-3623641-9906207?v=glance&s=books

=========================
Amazon says that:

Customers who bought this book also bought

     * The Case Against the Fed by Murray N. Rothbard
     * Secrets of the Temple: How the Federal Reserve Runs
the
           Country by William Greider
     * What Has Government Done to Our Money by Murray N.
Rothbard
     * The Shadows of Power: The Council on Foreign Relations
and
           the American Decline by James Perloff
     * Tragedy & Hope: A History of the World in Our Time by
Carroll
           Quigley
====================
So, readers are not just casual and superficial.

And, Greider's book (see above) is another very amazing book
(I
didn't read it, but I read book reviews and the blurb) where
the
author did all the research in a very thick book that showed
how
the Federal Reserve actually caused the 1987 stock market
crash
(and I know people that lost a lot of money in this crash).
Griffin's book talks about all of these.

On a separate piece of paper, I listed all the pages of very
amazing paragraphs from probably 50 pages or more. I mean
really
amazing. It is totally beyond me to quote these for your
benefit.
Yes, wars were caused and promoted and had their financing
arranged
by cliques and families of the rich or people who controlled
money!
Its even a bigger deal than the book(s) on the Krupp family
and
Germany. Conspiracy? Yes, England dragging the USA into the
war
with the sinking of the Lusitania. It was all a setup.

The author is not a crackpot. The book has a large number of
references to the serious historical and banking literature. I
actually looked up a few, including one book on the sinking of
the
Lusitania and a lot of the details surrounding the
investigation.
The guy in charge of the investigation refused to take a fee
for
the job (it was a coverup) and, later in years, said it was
all a
"damned dirty business."

Also, right there on Amazon there are 82 reviews of the book.
Yes, 82
reviews of Griffin's book. All that I read were better and
more detailed
than the one I'm writing here. I had the distinct impression
that the
authors of these reviews knew a lot more about the subject
than I did.

Conspiracies? The book describes many and cites references. I
looked up just one:
==========
at:
http://www.bookfinder.com/search/?ac=sl&st=sl&qi=qv28kE4AkI1IPykZ
gYipqLoydJA_1971096349_2:29:80
"Tragedy and Hope..." by Caroll Quigley
you should find the text below:

ISBN: 094500110X
Publisher: GSG & Associates, 1975.; Reprint. 1,348 pages. "The
powers of financial capitalism had a far-reaching (plan),
nothing
less than to create a world system of financial control in
private
hands able to dominate the political system of each country
and the
economy of the world as a whole" - Carroll Quigley. Brand new
hardback. Satisfaction guaranteed by professional seller. All
books
plastic-wrapped for shipment.
==================
The name "Carroll" is misspelled as "Caroll" in some places.

The author's agenda seems politically conservative and he is
definitely on the warpath to have the Federal Reserve system
abolished. Entities such as the World Bank, according to the
author, are conduits for the flow of money from the USA to
developing countries as part of "carrots" and "pitchforks" to
alter
their political ways (including trade treaties, interal human
rights, etc.). I think that elimination of the Federal Reserve
will
not happen (and at least not in my lifetime) and I'm not sure
its
a good idea because it will surely cause major problems all
over
the world. As far as the world bank and influencing
international
political systems involving the flow of money and the author's
notion that we should get out of the UN and get the UN out of
the
USA, I'm not so sure about that, either. I'd like to hear from
the
oposing side before giving my judgement. However, as a lesson
in
how money works and as a lesson in how private financial
interests
of very small numbers of very powerful and rich people (or
people
in control of very large amounts of money), it is an excellent
book.  The author is in favor of returning to a form of money
that
is either made of precious metals or at least backed by
precious
metals. His case and arguments are compelling but I won't take
a
stand on the issue without thinking about the issue a lot
more.
But, as a forewarning of  future "storms" of our economy and
the
world's economy, its pretty clear to me that -- yes -- there
will
be economic collapses and depressions again in the future and
a lot
of people will be hurt and hurt badly.

The Federal Reserve is the US system of a central bank of a
government. The Bank of England is a similar central bank.
Most of
the modern countries have their own central banks and, from
the
book, apparently operate in very similar ways: they manipulate
currencies, arrange funding of wars, and the population at
large
doesn't have the faintest idea what is going on.

Griffin also explains how the Federal Reserve was _causally_
involved in
the great depression of '29. The crash was engineered by the
Fed and even
before the crash, rich people were warned consideralby in
advance to get
out of the stock market. And, they did. And, how! The
depression that
followed the crash was not anticipated and not meant to take
place
(thanks to Murphy's Law and "The best plans of mice and men
oft go awry")
but it happened and lots of innocent people got hurt bad.

I know I have dissed economists all over the place in recent
years
but I have more respect for the "moneychanger" business and
the
world of money, banks, and business in general. That is where
there
is power and control, and as far as I'm concerned, the stuff
in Griffin's
book is important and significant. I had the feeling, after
reading this book, that all of this "New World Order" has,
under the
surface, still more machinations from the rich and powerful.



^Z



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