[Samseau]

I wrote this up in the Trump thread earlier, but I think it deserves it's own thread especially since people keep bringing it up the issue of trade. Financial jargon makes it difficult for people to understand what's going on, but I think it is possible for anyone to understand.

So I will try to break it down as simply as possible.

Third-world countries such as China, India, etc, have a set of laws in place to keep their population enslaved while they work to produce crap for First-world countries. China, for example, has a currency peg set at roughly 6:1. So no matter how much a Chinese worker saves, his dollars of value are always worth six less than American dollars. So if America prints 3 trillion dollars, that means his base currency supply has also necessarily devalued by 18 trillion.

This creates a powerful incentive for First-world companies to setup shop in third-world slave countries since labor costs are practically non-existent. First-worlders enjoy the slavery by sending their dollars to the third-world for these slave goods, but because money is not spent in the First-world, the money isn't circulated back into First-world economies which then slowly go bankrupt.

What First-world governments have chosen to do is print more cash as they run out of it. To do this, they loan bonds to specially chosen banks with extremely low interest rates. The banks as a result have effectively unlimited money. The banks then selectively loan out the cash to whatever special interests and projects they want. The money is slowly circulated out to the workers who are tied to the financial industry: government workers, Wall st. hedge funds, banker lawyers, certain real estate companies (very few compared to pre-2008 in America), tech companies, and other industries with "proven" returns. These First-world companies then pay salaries to First-world workers, who are all classified as working in the "service" industry. These First-World workers then spend their money on cheap goods produced in third-world slave countries, who have currencies pegged at a value vastly below what it would be if the currency were allowed to be floated.

At the bottom of the economic totem pole are Third-worlder's savings which are constantly devalued and rendered into shit, which means they must continue working to pay for a cost of living they can never keep up with.

The end game is that the Chinese man works until he dies because he will never accumulate savings, and most First-world citizens go without real work until he dies because his country men have few high-paying jobs and cannot accumulate capital to start new businesses. The only ones who make it are those who win approval from the ever selective financial "industry," which is nothing more than slave-racketeering.

The only reason this state of affairs occurs is because of collusion between both First-world and Third-world elites; First-world elites know they can use Third-world slave labor to sell dirt cheap goods in First-world markets and hog all the cash and profits for themselves (which is why the income disparity has gotten so bad in First-world countries), while Third-world elites secretly use the immediate profits they gain to buy First-world goods and convert to First-world dollars yet simultaneously paying Third-world citizens with pegged trash money and placing capital controls on the average Third-world citizen so they cannot escape their fate.

For example, in China it is illegal to take money out of the country. This is why bitcoin and gold are so popular in China, because it is a way for the average Chinaman to escape the capital controls and brutal currency peg. By changing his Chinese dollars into bitcoins he can avoid the steady devaluation of his money. This is also the reason why the Chinese elites buy up tons of American property in major cities, because these places are priced in American dollars which are worth 6 times as much as Chinese dollars, via the peg.

Other countries, such as Mexico, do not use capital controls but instead have "parallel economies" where citizens trade with one another in their trash pegged currencies, and have a much more valuable trade involving US dollar hoarding that they can get via remittances from illegal or legal labor sent into the US.

The ultimate situation today is not much different than the old slavery system of the American south. You had the working black slaves (Third-worlders), high unemployment among free Whites (First-worlders), and the rich plantation owners (corporate shareholders). Since slaves are forced to work below a market wage, just like the third-worlders are via their peg, there is no chance for the free men to compete with their labor on an open market because free men would never work for the pitiful wages given to the slaves so they remained unemployed. Meanwhile, the plantation owners grew richer and richer.

Libertarian and classical economists got it wrong on free trade. They did not consider how international markets could be manipulated to turn groups of people into slaves for the sole benefit of an elite few. I don't know many libertarians who support slavery, so usually when I point out the above analysis they quickly change their opinion on how free trade is supposed to operate.

Trump has a very sensible plan regarding free trade. His official policy paper states that total free trade will not occur unless the country America does trade with also applies the same labor laws and currency standards that we do, and lets their currency float. There will be less enslavement of third-worlders in the name of global profits under the Trump administration. Countries, such as China, who refuse to comply will be met with huge tariffs that will force American companies to think long and hard before they start opening up sweatshops in these countries.

Third-world countries can still respond to tariffs by further devaluing their currency to keep labor costs low, however. It remains to be seen if tariffs will just make third-world countries beat down their workers even harder with further poverty and even worse slave conditions, or if the slaves revolt, or if they finally let their currencies float. In any of these circumstances, it will be good for First-world countries like America.

[Samseau]

I will update this thread later with charts and graphs to illustrate everything I've talked about above.

[Centurion]

Few questions.

1) How are the first world "elites" profiting from this.

2) What's stopping first world non elites taking advantage of the free labor?

3) Why do you support labor laws?

[NASA Test Pilot]

If country B (China) has their currency pegged to country A (U.S.), when country A creates currency in terms of selling bonds (there is a process between the U.S. Treasury (UST) and the U.S. Federal Reserve Bank (Fed) whereby the UST creates a bond and gives it the Fed, who counts the bond as a credit and prints (literally and digitally) currency as a debit. The currency (physically and digitally) is given to the UST as payment and is marked as a credit on their balance sheet.) at a Treasury auction, participants (including other countries) like country B may buy some of country A´s bonds and then turn around and create/sell their own (country B) bonds for others to buy (countries or individuals). When the currencies are pegged, that means for each bond (currency issue) that country A creates, country B will create the same to maintain the peg. If the amount of goods and service in country B are not increased, then inflation will be created in country B, while country A reaps the benefits of the goods traded to them by country B. Country A gets a discounted lunch and those using the loaned money first in country A get closer to a free lunch.

First world non-elites do take advantage of the cheap(er) labor. If you are a citizen country A (U.S.) for example, all of those goods that you buy at Wal-mart or wherever that are made in country B (China) and are imported in exchange for the currency (or bonds on a large scale) of country A, you are getting the goods because your country is exchanging its paper for tangible goods. When country B no longer desires the bonds from country A, those people in country A will need to work harder and/or longer to buy the same goods. The people of country A will need to work harder and/or longer as a country in the sense that they must produce something that the other country (country B in our case here) desires. If country B does not want what country A has to offer, then country A must either do without the goods, try to get the goods from another country that is willing trade with country A, or produce the goods domestically. However, if there is a currency peg by country B, then it is in their interest to keep the peg until they have zero bonds from country A and decide to de-peg and then ask for something else. Oil for dollars is a large example on a world-wide scale. This simplified trade.

Free trade and capitalism are built on sound money and mutually enforced contract laws. Trade is enhanced when the parties trust one another and there are standard weights and measures of value and equitable means of resolving disputes.

[BortimusPrime]

It's also interesting how the system is maintained. Figure in both the first and third worlds it's the non-elites who are relatively worse off. Third-worlders don't get the true value of their labor, and First-worlders are denied middle-class jobs due to a lack of demand for productive labor in the first world.

The only way to maintain it is to ensure that in the third world there is a constant supply of rural peasants living at subsistence levels. The Chinese factory worker is kept in line with the threat of being sent back to the country to wallow in shit, since he's easily replaceable.

Then in the first world you can only maintain the system through a welfare state. You can see this in the US all over the place: ghetto communities paid off via welfare, food stamps, and section 8 housing, laid-off factory workers living off bullshit disability claims for lumbago, and underemployed service industry workers having their wages artificially boosted via liberal minimum wage laws that price burger-flipping at $15/hr.

I was arguing with a friend of mine last night about the idea of a basic minimum income, that on a macroeconomic scale it can only exist under either a slave economy or one sufficiently technologically advanced to which artificial intelligence can perform all unskilled labor tasks. Right now we've got the slave economy.

[Centurion]

Thanks, that made sense.

The things I want to say are that Communist Party(China) and other miscellaneous third world elites probably don't give a fuck about their people. They're going to be slaves no matter what unless/until they revolt. In a way, I have to say it isn't our problem. In human rights it is- but we have to be very careful- I'm very skeptical of any American/Israeli/neocon military missions to introduce freedom/democracy to shitholes.

If we take slavery of these people as a given, then we are much better off taking advantage of their cheap labor.

I think by labor laws Samseau was referring to mandatory time off/holidays, womens leave, minimum wages, equal rights/anti discrimination etc. I was asking why would you support government regulations like those.

In other news- I'm fully on the Trump train, despite a few quibbles. Samseau, you must be happy.

[Space Cowboy]

Economically uninitiated reporting in. People talk about the a currency like the Chinese RMB being undervalued, but when they began to float the currency (albeit a managed float), the yuan's value quickly depreciate. Was it truly overvalued, CCP trickery, or am I off the mark here?

[porscheguy]

(03-04-2016 11:12 PM)Samseau Wrote:  

Libertarian and classical economists got it wrong on free trade. They did not consider how international markets could be manipulated to turn groups of people into slaves for the sole benefit of an elite few. I don't know many libertarians who support slavery, so usually when I point out the above analysis they quickly change their opinion on how free trade is supposed to operate.

Most so called libertarians are IRL Mary Sues who suffer from a crippling condition I call Unique Snowflake Syndrome.

(03-04-2016 11:12 PM)Samseau Wrote:  

Trump has a very sensible plan regarding free trade. His official policy paper states that total free trade will not occur unless the country America does trade with also applies the same labor laws and currency standards that we do, and lets their currency float. There will be less enslavement of third-worlders in the name of global profits under the Trump administration. Countries, such as China, who refuse to comply will be met with huge tariffs that will force American companies to think long and hard before they start opening up sweatshops in these countries.

The first thing that must be done, is stop calling it free trade. The concept of free trade is trade without regulation and restrictions. Trump's plan imposes regulations and restrictions and therefore it can't truly be free trade if such conditions exist. Trump's plan should be called what it is: FAIR trade. BTW, fair trade is what any rational person(s) should strive for. This may seem like an issue of semantics, but it really isn't.

(03-04-2016 11:12 PM)Samseau Wrote:  

Third-world countries can still respond to tariffs by further devaluing their currency to keep labor costs low, however. It remains to be seen if tariffs will just make third-world countries beat down their workers even harder with further poverty and even worse slave conditions, or if the slaves revolt, or if they finally let their currencies float. In any of these circumstances, it will be good for First-world countries like America.

The problem you'll face with tariffs is the libertarian/big business bullshit thinking that tariffs are evil because they're another form of taxation.

One other point is that we shouldn't really differentiate between first world elites and third world elites. Do you remember the end of Animal Farm? The pigs were living in the house, standing upright, wearing clothes, and having a dinner party with the humans. The pigs were the third world elites, and the humans were the first world elites. The animals outside who were freezing their asses off, hungry, and looking in the window weren't really able to any of them apart.

[Centurion]

(03-06-2016 05:03 AM)porscheguy Wrote:  

Most so called libertarians are IRL Mary Sues who suffer from a crippling condition I call Unique Snowflake Syndrome.

Makes sense. It's quite standard for most people to. Unless I'm missing something...

(03-06-2016 05:03 AM)porscheguy Wrote:  

The first thing that must be done, is stop calling it free trade. The concept of free trade is trade without regulation and restrictions. Trump's plan imposes regulations and restrictions and therefore it can't truly be free trade if such conditions exist. Trump's plan should be called what it is: FAIR trade. BTW, fair trade is what any rational person(s) should strive for. This may seem like an issue of semantics, but it really isn't.

Why would you rationally prefer "fair" trade over free trade?

(03-06-2016 05:03 AM)porscheguy Wrote:  

The problem you'll face with tariffs is the libertarian/big business bullshit thinking that tariffs are evil because they're another form of taxation.

How is taxation not evil? Also, what about the big businesses who are in favor of the stuff you like, mainly for selfish reasons?

[All or Nothing]

(03-06-2016 12:56 AM)Centurion Wrote:  

The things I want to say are that Communist Party(China) and other miscellaneous third world elites probably don't give a fuck about their people. They're going to be slaves no matter what unless/until they revolt.

Are the elites in the US any better?

Also, from an uninformed outsiders perspective, China appears to have a highly centralized government with direct power over everything that happens within the country. What it looks like to me is that the leadership is trying to allow people to have more economic freedom while simultaneously silencing political dissent to make things work more smoothly.

In addition to this, many in China have risen to become wealthy and the overall quality of life has risen astronomically for many of the Chinese people over the last 30-40 years.

They aren't slaves and the currency manipulation thing is overblown. People can manipulate money all they want. Human productivity is human productivity. Period. Long term, the market will correct itself.

[porscheguy]

[quote] (03-06-2016 12:56 AM)Centurion Wrote:  

In a way, I have to say it isn't our problem. In human rights it is- but we have to be very careful- I'm very skeptical of any American/Israeli/neocon military missions to introduce freedom/democracy to shitholes. It is our problem as the elites push harder and harder for a "global economy". Slave labor in China has wiped out a tremendous amount of first world labor. If one of my neighbors loses his job this week it's no big deal to me. If 10 of them lose their jobs, then there's a good chance that something bad is in store for me.
[quote='Centurion' pid='1240894' dateline='1457243796']
If we take slavery of these people as a given, then we are much better off taking advantage of their cheap labor.[/quote]
You need to have significant resources upfront in order to take advantage of their slave labor.
[quote] (03-06-2016 12:56 AM)Centurion Wrote:  

I think by labor laws Samseau was referring to mandatory time off/holidays, womens leave, minimum wages, equal rights/anti discrimination etc. I was asking why would you support government regulations like those.[/quote]
Is that a serious question? I like labor laws because I don't want to end up like a Chinese slave. I like labor laws because before my grandfather died, he told me what it was like to grow up as a sharecropper in the post-reconstruction south. He had to quit school when he was 12 so he could work in the cotton field. I like labor laws because my other grandfather quit school at 11 because kids made fun of him for not having shoes to wear.

[Centurion]

(03-06-2016 05:38 AM)All or Nothing Wrote:  

Are the elites in the US any better?

From what I know about China in terms of how much freedom you have- yeah of course it's a hundred times better than say, North Korea.

But you know how many conspiracy theorists/constitutionalists/liberty lovers etc are complaining about government overreach and the American government maybe going too far and "someday they will enact their secret plans"? Most likely the worst case scenario(that still seems realistic) is the US government would do things 20% as bad as the Chinese are already doing... silencing political dissidents, not having freedom of speech, state run media/propaganda, organ harvesting/murder of groups the government doesn't like(Falun Gong)... the Tienanmen square massacre etc.

I don't believe the Western(Jewish?) elites are necessarily better. They just have to act a shitton better because Westerners are more civilised and on some level actually believe in freedom.

[Centurion]

(03-06-2016 05:43 AM)porscheguy Wrote:  

It is our problem as the elites push harder and harder for a "global economy". Slave labor in China has wiped out a tremendous amount of first world labor. If one of my neighbors loses his job this week it's no big deal to me. If 10 of them lose their jobs, then there's a good chance that something bad is in store for me.

The workers lose less than the companies gain. Get on the entrepreneurship or investment bandwagon. You can't expect to do the same thing all the time in a world that's always changing. The ceiling for how well you can do is ever increasing(without necessarily working harder either). Obviously, a lot of the gain would be due to slave labor. But the slaves would probably suffer anyway, so why feel guilty.

(03-06-2016 05:43 AM)porscheguy Wrote:  

You need to have significant resources upfront in order to take advantage of their slave labor.

You only need a moderate amount of resources to be an investor/shareholder. Index funds reduce the risk.

(03-06-2016 05:43 AM)porscheguy Wrote:  

Is that a serious question? I like labor laws because I don't want to end up like a Chinese slave. I like labor laws because before my grandfather died, he told me what it was like to grow up as a sharecropper in the post-reconstruction south. He had to quit school when he was 12 so he could work in the cotton field. I like labor laws because my other grandfather quit school at 11 because kids made fun of him for not having shoes to wear.

The burden of proof is on you to prove a link. I'm 95% confident there isn't one. Only that modern Western society is much richer than both Chinese society and your grandfather's society. There's a much stronger link between labor laws and inefficiency(ie less wealth/increased poverty). Not to mention how immoral labor laws are(if I want to hire/be hired in a certain way, why should the state be able to butt in).

[porscheguy]

(03-06-2016 05:24 AM)Centurion Wrote:  

Why would you rationally prefer "fair" trade over free trade?

Because for several decades my country has been on the long term losing end of so called free trade deals. Because in a fair trade deal, you don't get to dump your worthless consumer junk in my backyard unless I get to dump mine in yours.

(03-06-2016 05:03 AM)porscheguy Wrote:  

The problem you'll face with tariffs is the libertarian/big business bullshit thinking that tariffs are evil because they're another form of taxation.

How is taxation not evil? Also, what about the big businesses who are in favor of the stuff you like, mainly for selfish reasons?
[/quote]I don't view taxation as evil. I view it as indifferent. In the case of import tariffs as a protection against Chinese dumping, I see it as a positive thing. Yes, those tariffs will ultimately be passed on to the US consumer, but they will also:
1. Reduce the number of dollars the US sends to China.
2. Encourage China to stop dumping and even float their currency.
3. Encourage manufacturing to relocate back to the US.

[porscheguy]

(03-06-2016 05:54 AM)Centurion Wrote:  

The workers lose less than the companies gain. Get on the entrepreneurship or investment bandwagon. You can't expect to do the same thing all the time in a world that's always changing. The ceiling for how well you can do is ever increasing(without necessarily working harder either). Obviously, a lot of the gain would be due to slave labor. But the slaves would probably suffer anyway, so why feel guilty.

That's a matter of perspective. To the guy who loses his house, he's lost everything. To the billion dollar company that made 1 million off his loss, they haven't gained all that much.

(03-06-2016 05:54 AM)Centurion Wrote:  

You only need a moderate amount of resources to be an investor/shareholder. Index funds reduce the risk.

Putting $10K into the stock market doesn't make you some kind of influential international baller. You're just along for the ride and clinging to the rear bumper by your fingernails.

(03-06-2016 05:54 AM)Centurion Wrote:  

The burden of proof is on you to prove a link. I'm 95% confident there isn't one. Only that modern Western society is much richer than both Chinese society and your grandfather's society. There's a much stronger link between labor laws and inefficiency(ie less wealth/increased poverty). Not to mention how immoral labor laws are(if I want to hire/be hired in a certain way, why should the state be able to butt in).

I don't have to prove a fucking thing to anyone son. But I can say that I'm 95% confident that you're from a first world nation and that you've never known a life outside the protections of labor laws. You view labor laws as immoral, but you have no issues with the practice of modern slavery. I'm speechless.

[NASA Test Pilot]

Space Cowboy asks a relevant question. When we rephrase the question as the Yuan being undervalued (overvalued) vs. what (U.S. Dollar, Euro, Japanese Yen, British Pound, gold); we get an interesting picture. Most of China´s debt is internal (they owe it to themselves) and not to external creditors nations; whereas in the west a large portion of the debt is owed to other external nations. The Yuan currency devaluation had a lot to do with the introduction of the latest Yuan offshore swap facilities. There were gaps between the swap facilities (on and off shore) to the new offshore facilities as well as a lack of hedging.

To have trade without a commonly desired medium of exchange (honest money as an example) will in the long run be neither free nor fair. If one country says it wants to trade its oil (goods/services) and it wants XXX (not U.S. Dollars), but another country attempts to prevent (through various means) this yet another type of manipulation. The exchange in a manipulated system that does not have a commonly desired medium of exchange has an element of fraud built. Tariffs are a way to protect when one party (country) does not believe the trade (or trading) is equitable.

One of the key questions becomes how is human productivity stifled or encouraged by a manipulated (currency) system or a monetary system for that matter?

[Blaster]

(03-05-2016 12:08 AM)Centurion Wrote:  

Few questions.

I can take a crack at 2 of the 3:

Quote:

1) How are the first world "elites" profiting from this.

Simple. Offshoring labor reduces production costs, while demand remains constant, which means price remains high, which means profits go up.

Profits to go stockholders, not wage-earners. While some workers at some companies own stock, and plenty of people have 401ks that include stock investments, typically this is insignificant compared to the stock owned by the elite.

Quote:

2) What's stopping first world non elites taking advantage of the free labor?

In some cases they can(odesk, elance-- I have also heard of people buying shipping containers full of shit from China), but there are some major reasons why it's difficult

1. Do not own the means of production. The factories, processes and other trade secrets are controlled by the elite.

2. Lack of startup capital. For a large corporation with a billion dollars in revenue, a few trans-pacific flights to meet with the right people and arrange the deals is a drop in the bucket. For a normal person that's going to be a major expense and a major risk.

3. Access and corruption. Elites have much better access to foreign politicians and leaders who will work with them to arrange the necessary access to foreign companies and workers.

[Blaster]

(03-06-2016 05:54 AM)Centurion Wrote:  

(03-06-2016 05:43 AM)porscheguy Wrote:  

It is our problem as the elites push harder and harder for a "global economy". Slave labor in China has wiped out a tremendous amount of first world labor. If one of my neighbors loses his job this week it's no big deal to me. If 10 of them lose their jobs, then there's a good chance that something bad is in store for me.

The workers lose less than the companies gain. Get on the entrepreneurship or investment bandwagon.

This is missing the point that the whole system is rigged to siphon money out of the American economy. You can't jump on an investment bandwagon if you have nothing to invest. There isn't room for everyone on that (highly volatile) bandwagon anyway.

Quote:

You can't expect to do the same thing all the time in a world that's always changing. The ceiling for how well you can do is ever increasing(without necessarily working harder either). Obviously, a lot of the gain would be due to slave labor. But the slaves would probably suffer anyway, so why feel guilty.

This is fine reasoning but the problem is that it actually getting a share of the profits from the cheap labor requires negotiation and leverage.

Quote:

You only need a moderate amount of resources to be an investor/shareholder. Index funds reduce the risk.

You cannot buy a house raise a family by investing your college savings in an index fund.

[Blaster]

(03-06-2016 05:54 AM)Centurion Wrote:  

The burden of proof is on you to prove a link. I'm 95% confident there isn't one. Only that modern Western society is much richer than both Chinese society and your grandfather's society.

The wealth of western society is why it is being targeted by this scam. Business are selling out to foreign countries, giving away trade secrets and western competitive advantage in return for increase profits that primarily benefit a tiny few. And no, you cannot buy your way into index funds to join the crowd.

Quote:

There's a much stronger link between labor laws and inefficiency(ie less wealth/increased poverty).

My turn to call bullshit. You prove a poverty link.

I can agree that labor laws will slow down innovation and may slow down the global economy. Labor protections can also risk increases in corruption and other externalities. Labor laws can't go overboard and aren't some kind of silver bullet. However, labor protections will be better for workers and better for social and economic stability.

Quote:

Not to mention how immoral labor laws are(if I want to hire/be hired in a certain way, why should the state be able to butt in).

The state has an interest in stability and safety of its citizens. The state has an interest in allowing laborers to have [b]non-violent leverage[b] in wage negotiation.

Calling labor laws immoral in one way (freedom to take pay) while ignoring literally any other moral question is just ridiculous.

[Samseau]

Here is the raw data to support the first post of this thread. Since America opened trade with China, here is the total trade balance by numbers (in millions):

http://www.census.gov/foreign-trade/balance/c5700.html

1985: -6.0
1990: -10,431.0
1995: -33,789.5
2000: -83,833.0
2005: -202,278.1
2010: -273,041.6
2015: -365,694.5

Notice, ever since trade began with China, the trade balance grows worse and worse? This is because China manipulates their currency with a peg. No matter what, Chinese dollars are set to be worth 6 times less than American dollars. In fact, this peg may have even been lower prior to 2008. The result is that, over the years, American businesses who move to China have their production costs lowered by a factor of 6 or more, which makes it impossible for American-based businesses to compete at cost. The only way to stay competitive is to move operations overseas and manufacture with slave labor as well. It is a race to the bottom.

Now, let us compare the US trade balance with Hong Kong, which allows its dollar to float. Here is the US-Hong Kong trade balance (in millions):

http://www.census.gov/foreign-trade/balance/c5820.html

1985: -5,610.5
1988: -4,550.2
1989: -3,430.9
1990: -2,804.8
1991: -1,141.3
1992: -716.0
1993: 319.3
1994: 1,745.3
1995: 3,940.2
1996: 4,101.7
1997: 4,829.3
1998: 2,387.2
1999: 2,123.9
2000: 3,133.0
2001: 4,381.4
2002: 3,266.2
2003: 4,669.3
2004: 6,513.5
2005: 7,459.3
2010: 22,274.1
2015: 30,471.5

Notice how the trade with Hong Kong goes up and down. This is what healthy trade in a free market economy looks like. I chose HK because it is one of the freest economies in the world and shows us what normal trade looks like. Although Hong Kong is a net importer of American goods (which makes sense, as they do not have much room for industrial production), the amount that they import to America fluctuates with the normal ebbs and tides of the American economy. As America was rich and our currency valuable, we were buying more from them than they from us, and as we became poor and our currency less valuable they bought more from us than us from them. Despite being right next to China, there is no persistent trade deficit that goes in one direction. This illustrates the power of a currency peg - it creates the artificial appearance on the markets of a country being poorer than they actually are so they can continue to sell exports at a competitive advantage.

Also note that since 2008, the amount of goods Hong Kong buys from America has gone up tremendously, as America has seriously devalued it's currency since the housing crisis.

Now, classical economists (aka libertarians) would say, "Hey currency pegs are bad for them, not us, because we get extremely cheap labor!" But the problem with this analysis are several:

1. Workers under currency pegs are slaves who cannot accumulate much savings relative to their efforts.
2. No one except the extremely rich can afford the cheap labor from these slave economies anyways, so average First-world citizens do not directly get to hire and use the slaves.
3. First-worlders go unemployed.

To see this, we just have to look at a country's GDP relative to it's GDP per capita.

China GDP: http://www.tradingeconomics.com/china/gdp



China GDP per capita: http://www.tradingeconomics.com/china/gdp-per-capita



China, in spite of having one of the largest economies in the world, have some of the poorest workers in the world. Their GDP has increased roughly by a factor of 5, yet their workers have seen their GDP per capita increase only roughly by a factor of 2. This is exactly what you'd expect with a currency peg, since the only people who escape the rampant inflation in China are the Communist elites and Industrial elites, who quickly spend their profits in other countries, buying up real estate, gold, or whatever else tangible goods they can get their hands on, while the Chinese worker watches his savings inflate away every year.

Now compare this to USA's numbers. USA GDP: http://www.tradingeconomics.com/united-states/gdp



USA GDP per capita: http://www.tradingeconomics.com/united-s...per-capita



Notice how much more evenly USA's GDP increases with it's per capita? That's because our currency isn't quite as ravaged as other currencies, and so American citizens see their savings increase proportionately with the elites and rich. However, it should be noted that although America is nowhere as bad as China, the USA still has a vast discrepancy between what the rich are making and everyone else.

This is because American corporations are the only ones realistically able to employ the slave labor farms in third-world nations like China as they are the ones who collect profits from selling the slave produced goods. This money is then reinvested back into third-world slave farms, while the American worker only gets to buy the goods, but does not get any jobs to produce the goods. Thus American worker wages remain near-stagnant during this process while the rich get richer. We see this quite clearly when examining the historical data of America's GDP and GDP per capita:





In the same time period it takes for the GDP per capita in America to double, between 20,000 to 40,000 (1967-2000) the total American GDP has increased by a factor of 10. Notice how, since Nixon opened up trade with China in the 1970's, America's GDP has vastly outpaced its GDP per capita. This is because once the first American companies established a competitive advantage with slave labor in third-world nations like China, future American workers will never be able to compete since they did not get their foot on the slave markets first and lack the capital to compete at cost. On top of this, American labor pools are flooded with immigrants, both legal and illegal, compounding the problem.

As a result of these terrible trade deals, money has been flowing out of the US Economy for decades, and nowhere is this more clearly reflected than in our M2 money velocity:



Fewer and fewer dollars are spent each year within the America economy, as they are all sucked up by elites of various countries who scam everyone via slave labor and currency pegging. Money spent on slave goods in places like China never return to America, nor do the jobs taken by slaves labor in places like China. Every single day, the amount of money for American citizens to earn decreases which creates a deflationary spiral that can only be countered with debt and money printing. The ability for citizens to take on more debt has become exhausted since 2008, while the ability to print money is the only thing keeping the American economy from imploding completely. Even this can eventually fail should other countries decide to remove their pegs, but considering how foreign elites move to First-world nations to buy real estate and have zero moral qualms keeping their own citizens enslaved back at home, money printing looks like it can be continued for as long as the third-world slaves have life left in them.

But eventually this runs out as third-world slaves in places like China really aren't reproducing like they used to, and labor in India or Africa isn't even close to the same caliber as East Asians. South America has a somewhat high quality labor force available, but the governments in South America are so corrupt it is just as likely for any US industries to be nationalized as they are to turn a profit. So ultimately, the currency peg scam runs out once the supply of slaves run out.

Therefore, it is obvious to see that current trade deals do not benefit anyone but the elites, while the workers go without. This is why the current group of politicians are so against Trump, because Trump will fight for tariffs against currency pegs. This stops the plundering of slave labor in third-world nations and causes corporate profits to plummet, but First-world workers would get vastly richer. Of course, American corporations do not give a damn about the workers, which is reflected in the rhetoric of the politicians they buy.

[Quintus Curtius]

^^^

Great write up.

Not only this, but when foreign companies want to sell to China, they make the companies move there, and they make them bring their best state-of-the art technology. And guess what? That technology is leaked, stolen, or filtered out into Chinese hands.

They are ripping us off blind and have been for decades.

But no one ever really points the finger at those responsible. It's the Congress, Presidents (all of them for the past 40 years), the Supreme Court, and the leaders here who allowed this to happen.

[Soma]

(03-08-2016 05:27 PM)Samseau Wrote:  

Now, let us compare the US trade balance with Hong Kong, which allows its dollar to float. Here is the US-Hong Kong trade balance (in millions):

The Hong Kong Dollar has been pegged to the US Dollar since 1972, with the last major revision to the peg in 1983 at HK$7.8=US$1.

[nomadbrah]

100% accurate and succint description. I want to vouch for this to forum members who are not well versed in economics. You can share this with friends and online and be sure of it's accuracy.

I want to add that Western workers also get screwed due to declining pension returns and lack of investment opportunities. With government bonds at close to 0% where are you going to put your retirement portofilio except extremely overvalued stocks. These companies then use their overvalued stock prices to achieve very cheap financing which they use for stock buybacks, in essence making themselves into economic giants who don't even answer to stockholders.

As this happens, senior management begins to enrich themselves like communist party apparatnicks, the money they earned funnelled into real estate portfolios where rents increase for the tenants.

The scam is off monumental scale. The cheap money printed by the Fed on the backs of collateral of the American trust and productivity - because that is the exact definition - gets loaned out cheaply to the parasite economy of banking and real estate, which then exchanges the worthless fiat for very real value real estate.

It's a robbery of epic proportions.

[Samseau]

(03-08-2016 05:47 PM)Soma Wrote:  

(03-08-2016 05:27 PM)Samseau Wrote:  

Now, let us compare the US trade balance with Hong Kong, which allows its dollar to float. Here is the US-Hong Kong trade balance (in millions):

The Hong Kong Dollar has been pegged to the US Dollar since 1972, with the last major revision to the peg in 1983 at HK$7.8=US$1.

Damn, I cannot believe I missed that. Great job on owning me here. I am mistaken, but I am shocked that with such a high peg we still have a high positive trade against Hong Kong. My bad for not double-checking.

That said, the theory presented is still sound, but there must be particulars which affect Hong Kong in such a dramatic way even with such a huge peg.

I knew I should have included the example of Australia instead... here are Australia's numbers. And yes, the Aussie floats!

http://www.census.gov/foreign-trade/balance/c6021.html

1985: 2,604.1
1986: 2,923.4
1987: 2,489.3
1988: 3,431.5
1989: 4,458.4
1990: 4,091.1
1991: 4,415.8
1992: 5,188.3
1993: 4,979.4
1994: 6,578.5
1995: 7,466.1
1996: 8,139.5
1997: 7,460.6
1998: 6,530.5
1999: 6,538.2
2000: 6,044.4
2001: 4,452.7
2002: 6,606.1
2003: 6,673.9
2004: 6,412.4
2005: 8,246.3
2006: 9,341.7
2007: 10,563.2
2008: 11,629.8
2009: 11,587.8
2010: 13,221.7
2011: 17,383.3
2012: 21,594.6
2013: 16,849.9
2014: 15,909.9
2015: 14,175.6

Australia can easily replace my Hong Kong example because it is close to China, has a skilled workforce, floats its currency, and we can easily see how the balance of trade has a natural ebb and flow between America that isn't as lopsided as it is with China or most other third-world currency manipulators.

[Blaster]

Quote:

China, in spite of having one of the largest economies in the world, have some of the poorest workers in the world. Their GDP has increased roughly by a factor of 5, yet their workers have seen their GDP per capita increase only roughly by a factor of 2. This is exactly what you'd expect with a currency peg, since the only people who escape the rampant inflation in China are the Communist elites and Industrial elites, who quickly spend their profits in other countries, buying up real estate, gold, or whatever else tangible goods they can get their hands on, while the Chinese worker watches his savings inflate away every year.

Just to clarify something here... the fact that your particular source calculates "GDP per capita" in inflation-adjusted terms is the only reason for the discrepancy. Normally, GDP per capita is strictly a function of GDP and population. If population is growing, there's no way GDP and GDP/capita will grow at the same rate.