Re: What could China do to the American economy if they traded their dollars for Euros?
- From: "Zerge" <zerge@xxxxxxxxxxx>
- Date: 22 Oct 2006 14:05:26 -0700
Nospam wrote:
Zerge wrote:
No, the US need not do that. The US would simply buy its stuff from
OTHER third world countries who would be more than happy to step in for
China.
Buy with what ? With thin air ? Exporting jobs don't bring any revenue.
When you export a manufacturing job out of the country, you make the
company more productive; it can make MORE with LESS. This brings extra
income into the company, income used to do more research, launch new
brands, expand geographical coverage, etc. All these activities give
jobs to engineers, marketers, retailers, logisticians, etc.
Everybody is fixated in manufacturing jobs and have no clear picture
about the value that SERVICE jobs bring.
China keep us alive (economically) because they buy our non intervention.
Who else will be idiot enough to buy bonds into an economy that does not
produce almost anything anymore?
The US provides a fundamental service to the world: it produces US
dollars, and it provides the biggest casino (aka "financial market") in
the world where to play with those dollars: Wall Street.
The US also produces the largest number of patents, and of the 100 top
brands in the world, 60 are American.
The US produces PLENTY of economic wealth. Don't think that the country
who can assemble little pieces of plastic and metal is the one in
charge. The one in charge is the one who generates the knowledge, and
the one who has the financial markets. On other words, the US.
Who want to be a self reliant economy? Self reliant economies are poor;
being self reliant violates the economic principle of comparative
advantage.
Comparative advantage works how long the country having the advantage on
both products DO HAVE FULL EMPLOYMENT. As mater of fact the full employment
it is assumed right in the beginning of the theory of comparative advantage.
No it is not. I don't know where you got that. Comparative advantage is
the FUNDAMENTAL principle on which ALL economics is based, and I'm not
talking theoretically, I mean in the REAL world. On the other hand,
full employment does not happen in any country. Ergo, comparative
advantage and non-full employment coexist.
In the real life it will never work properly, because of the less than full
employment. That is, the comparative advantage will drain resources from
the country with the biggest cost until the country with an absolute
advantage will reach full employment. In meantime, the other country (in
our case US) is going to collapse. Think.
I'm sorry my friend but you do not seem to have a grasp on basic
economics. (This is not an insult, it's an observation).
Heck. You won't even find textile workers in US today.
Good! Why do you want to specialize in low productivity industries that
pay employees low wages? The US is doing great economically because it
specializes in things like engineering, marketing, financial services,
etc.
Not anymore. It is gone.
Starting with last year, US it is a bigger importer of high technology than
it exports. Companies invest in research and development in India and
China. Even China overpassed US as the biggest exporter of technology,
last year too.
Again, you are not understanding how it works. I'll give you an
example. If say Microsoft puts a research center in India and hires
Indian engineers to design cutting edge software, that research is not
"owned" by India; it's "owned" by the US, because Microsoft is an
American corporation, whose stock trades in Wall Street.
We still have an edge in financial services but once China gets it economy
up and running, that will be gone to.
No it won't. China is a third world, state-controlled, politically
unstable economy with practically non-existent financial markets, with
a wobbly banking system. Financial markets function based on the
concept of critical mass; the more buyers and sellers, the more buyers
and sellers. There's no way in HELL China will ever build strong
financial markets.
Maketing ? This is ridiculous.
You see? You don't understand how it works. The number #1 brand in the
world is Coca Cola. But what IS Coca Cola? Nothing buy MARKETING! Coca
Cola Corporation does NOTHING BUT MARKETING, and it licences the actual
production of the liquid to other companies across the world. Nike is
nothing but marketing. Adidas is nothing but marketing. Sony is
nothing but marketing AND engineering. Who gets to assemble the little
pieces of metal and plastic is quite irrelevant. They do it in China
now because it's cheap. If it stops being cheap, hey, they'll shift
production to Malaysia, or Phillipines, or Mexico, or whatever.
Whoever owns the BRAND, rules.
I'm sorry my friend, but you, as most people in this planet of ours,
have a fixation on manufacturing. That's because it's easy to perceive
the value of a manufactured object, but it is not easy to perceive the
value that SERVICES bring.
You refuse to think in purpose or what ?
Production can be automatized, that creates more bang for the buck.
Services, on the other side are more labor intensive.
Exactly. Production is about putting pieces together; it brings little
value. Services is about THINKING on HOW to put the little pieces
together, how to sell them, how to transport them, how to protect them
from counterfieters, etc etc.
If US is not competitive anymore due to pricy of workforce into a less work
intensive field (manufacturing) you believe that they will compete into a
more labor intensive field (services) ?
You are reaching a wrong conclusion. There are different types of
"labor". Manufacturing, which is manual labor, brings less value than
services, which is "brain" labor.
Man, what are you thinking ? All this "service based economy of the future"
it is the biggest lie of the last years. This it is a lie special intended
for weak minded to alleviate the worry about the total destruction of US
economy by neoconservatives.
Oh oh, it doesn't look good! You are slipping into the realm of
conspiracy theories :)
Have you actually SEEN statistics on GDP and GDP/Capita in
manufacturing vs. services industries? I invite you to do that.
An example. The laptop I'm using right now
cost me $3000 USD, so I can easily perceive THAT value, because I
dished out the money. Therefore I would tend to think that the value
was generated by the manufacturing of the laptop. This is only partly
true; a very large percentage of the value is brought by the service
part of the product: the engineering, marketing, logistics, retail
distribution, customer support, lawyers to protect patents, etc. etc.
All of them being moved offshore as we speak. Why ? because the services are
more labor intensive than manufacturing.
No they are not. They are not comparable. You cannot compare the
man-hours of assembling chips and plasic casings of a laptop with the
man-hours of the engineers who designed the chips, and the man-hours of
the marketers who thought up the marketing campaigns, and the man-hours
of the logisticians who designed the supply chain network.
When you call to ask how to reboot
your laptop, the service job is in Bangalore. The service based economy it
is the biggest lie of our times, and you believe it.
Let me tell you something in no uncertain terms: I do not "believe" it
to be. I KNOW it is. I KNOW. I'm an economist, I understand perfectly
well the dynamics behind it, and I have studied the statistics, at a
macroeconomic and microeconomic level.
Not "belief", but KNOWLEGDE.
Without all those services, this laptop might cost twice as much.
Nope. It will cost less but will be almost useless.
Therefore services allow a more PRODUCTIVE creation and distribution of
manufactured goods.
May. But being more labor intensive than production there are more
incentives to move them offshore.
All first world countries are predominantly services economies; any
county that depends or agriculture and mining is at the bottom of the
third world list,
And yet, today US it is mainly relying in agriculture exports.
No. Agriculture exports are certainly big, but mainly because the US
government choses to subsidize farmers. Every time I buy here in Mexico
vegetables from the US, which are cheaper, I'm benefiting from YOUR tax
dollars which subsidized some farmer. Ever think of that?
The US economic strength comes from its HUGE financial market that can
turn thousands upon thousands of tiny startups into public companies
trading in Wall Street, and those companies get to use the liquidity
generated from all the Wall Street investments done by China and all
the other countries.
We lost the advantage in technology and services.
We import products from China and services from India.
We export jobs and keep the dollar artificially high by huge debt.
So how is it then that the US GDP/Capita is so high, and it keeps
getting higher?
Economics is a hard subject, and very counterintuitive.
Yes, and belief in obsolete mythology and corporate propaganda make it
impossible to grasp.
You need to read more about economics. Having only a little information
is more dangerous than having none at all.
.
- Follow-Ups:
- References:
- What could China do to the American economy if they traded their dollars for Euros?
- From: Robert Miller
- Re: What could China do to the American economy if they traded their dollars for Euros?
- From: Zerge
- Re: What could China do to the American economy if they traded their dollars for Euros?
- From: Nospam
- Re: What could China do to the American economy if they traded their dollars for Euros?
- From: Zerge
- Re: What could China do to the American economy if they traded their dollars for Euros?
- From: Nospam
- Re: What could China do to the American economy if they traded their dollars for Euros?
- From: Zerge
- Re: What could China do to the American economy if they traded their dollars for Euros?
- From: Nospam
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