Re: What could China do to the American economy if they traded their dollars for Euros?

Zerge wrote:

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,

I am not talking about ONE company I am talking about society as a whole
Zerge. At macroeconomic level the employees are the customers.
Do you realize that the customers do not rain from the sky with unlimited
cash just to buy any trash a corporation produce ?

Strangely enough for you, if you look at the macroeconomic level, the
customers need to have a job in order to pay for goods they buy.
If they don't have a job (or are fired and get a job that pays less) they
will spend their savings, eat their home equity then enter in credit card
debt until they reach the credit limit. Then ...... They stop spending
since nobody give them anymore cash.

Reciting verses from pro corporate propaganda manual won't help to hide the
truth: The customers do not rain from the sky with unlimited funds.

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.

Look at what people post in groups related to career in research or high
tech. Yes, they invest in research. But this jobs are offshore. The US
wages in engineering and research dropped in last 6 years the most. No
manufacturing or research wage dropped as much as in high tech.

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.

At least here we agree, that Wal Street it is nothing but a gambling
machine.

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.

The problem is that all this knowledge research and development is moving
offshore. It is gone forever. The only thing that grow are the stocks while
wages decline. This is just making "investment gambling" less accessible to
common folks. It only increase polarization in economy, and polarization
slows the economy down.


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.

Did you ever bothered to read the the theory you worship ?

http://internationalecon.com/v1.0/ch40/40c020.html
"""
................
This implies that the production technology is assumed to differ across
countries. Labor is costlessly mobile across industries within a country
but is immobile across countries. Full employment of labor is also assumed.
Consumers (the laborers) are assumed to maximize utility subject to an
income constraint.
...............
"""

This is a quite good reading. A full page of model assumption for the
comparative advantage to work. Break one precondition and all the best are
off.

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.

What about learning about it before making such claims :-)

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).

If in your opinion, basic economics is what corporate masters want other to
believe so they can get away with looting, then you are correct.

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.

You buy a $200 CD pack with Windows.

A)
20 goes to India to pay the programmer wage.
60 goes to India to build the new research center.
120 are left as proffit for Microsoft shareholders.

B)
If the research center were in US then:
60 went to US to pay the programmer wage.
60 goes to India to build the new research center.
80 are left as proffit for Microsoft shareholders.

In the first case 120 fuel US economy, while in the second case 200 fueled
US economy. But wait, there is more:
Wall Street are slow money (they change very many speculators hands before
reaching the industry as input) while consumer spending are fast money
(they reach the industry faster).

The speed of created wealth in the society it is directly proportional with
the speed of money flow. That is is a simple theorem I hope you understand
it.

In case A) you got back in US 60% of the money spent as slow money
while in case B) you get 40% as slow money and 60% as fast money.

The A) do harm to US economy compared to B).
I know, it is difficult for many people to grasp that a complex system
it is more than the simple sum of it parts.

Many still believe that if doing something is good for a company, and since
our economy is build of many companies, that thing must be good for the
economy. Well, it is more complicated than that.

And wait, there is still even more: By firing programmers at home (or
cutting their wages) while boosting proffits the gap betwen poor and rich
grow. And the resulting polarization in society DO harm the economy even
more in itself. By itself, a polarized economy have a slower circulation
of money therefore a more sluggish economic output:

http://www.angelfire.com/planet/dragonomics/polarization1.pdf

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.

Bla bla bla.
Once they have money and no other political interests the financial markets
will pop up like a dream. To have a financial market you need money (we
give to them as we speak, billion a day) and brainpower to manage them
(since we move jobs there, they do have it).

The knowhow can be imported very easily from the collapsing US economy with
an equivalent of .... work visa. Just wait to see and get wondered.

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.

Manufacturing can be automatized then produce a lot with less.
Services being labor intensive are more likely to be outsourced.

Oh oh, it doesn't look good! You are slipping into the realm of
conspiracy theories :)

That seems to be the single explanation, since I really don't believe that
there can be people so dumb to still believe that kind of cheap propaganda.

Have you actually SEEN statistics on GDP and GDP/Capita in
manufacturing vs. services industries? I invite you to do that.

Of course, we are destroying out manufacturing base as we speak.
What you see there is no miracle growth in services but a decline in
manufacturing.

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.

All of them are being moved offshore. Look at the groups related to career
on research, development and information technology.

The manufacturing engineers are forced to work where the manufacturing take
place. The implementation engineers work better if they are in the same
location with manufacturing engineers. The design engineers also will work
better if they can get direct interaction with the implementation
engineers.

If you move manufacturing offshore ALL the engineering jobs will follow it.
It won't happen overnight, but in the end the inefficiency will take it toll
and it is going to happen.

And as mater of fact, it happen as we speak.

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.


We are talking about supercomplex systems that NOBODY can understand them
and the biggest brains still debate of many aspects, yet you say: "I
understand perfectly".

It is often told that: "people as much they learn, as much they figure out
how much don't understand". Yet you say: "I understand perfectly".

Sorry !!!

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.

Yes, they still do that. But Wall Street speculations are just selling a
dream. Once China and India wake up the dream is gone. Forever.

So how is it then that the US GDP/Capita is so high, and it keeps
getting higher?

Trillions in national debt. This were money borrowed then spent back into
the economy. Trillions in personal debt on credit cards and personal
loans. This were money borrowed by population in the hope that the economy
will bounce back with better jobs. A Trillion in cached home equity debt.
People literarilly eat their home equity to compensate for lost wages.

In 2 words: Deficit spending.

You need to read more about economics. Having only a little information
is more dangerous than having none at all.

Correct !!!
Especially when: "I KNOW. I'm an economist" :-)


.

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