Quote: (01-29-2019 11:26 AM)rockoman Wrote:
Quote: (01-29-2019 11:02 AM)EndsExpect Wrote:
Quote: (01-29-2019 05:21 AM)rockoman Wrote:
So, why has America had a trade deficit every single year since 1975?
If, for the last 44 years I have only been able to cover 80% of my expenses with my own work and I have to issue IOUs to my neighbours for the rest, then I need them more than they need me.
I used to ask this same question all the time when I was younger. However, now I realize that if China makes 300 billion selling to the US... then Chinese Elites take that money and then spend $400 billion on buying US assets. That includes stock, real estate, yachts... pretty much everything.
Yes, turning debt into equity - getting rid of dollars. Very rational I would say.
In my original 'neighbours analogy' this equates to the neighbours who hold my IOUs using them to buy my furniture, my tools and my garden, which then no longer belong to me and which will not be inherited by my children.
Eventually if taken to its logical conclusion I- and my children - will work for the 'neighbours'.
I'm going on a limb here, are you a gold bug?
Let's break these points down, because I can tell you've been consuming doom porn media for a long time.
Quote: (01-29-2019 05:21 AM)rockoman Wrote:
So, why has America had a trade deficit every single year since 1975?
If, for the last 44 years I have only been able to cover 80% of my expenses with my own work and I have to issue IOUs to my neighbours for the rest, then I need them more than they need me.
The trade deficit is a means towards creating an interdependence upon America's financial empire and encourage adoption of the dollar as a reserve currency.
The end goals are:
1. US asset inflation.
2. T-Bills as a means of pushing USD out into the world economy for balance of payments.
3. Discourage nations from attacking America or its allies.
4. Encourage co-operation through manufacturing and conspicuous consumption.
The truth of the matter is, after the 60s, America's economic output was so great and powerful that the world would not have fully recovered if America maintained its factory output. No one consumes as much as America does. America could have taken a small haircut and closed it borders to all trade and be fine while the rest of the world would have languished in economic malaise.
This would have lead to a world economy similar to when the great powers were all kicking each other pre WW1.
So, to discourage that from happening again, this leads us to the next point: encouraging world wide dependence on the dollar and America's financial system.
Let's look at a graph of who holds the most T-Bills in 2018:
So no, your kids aren't going to be working as servants to some squinty eyed midgets.
China holds only 5.6% of T-Bills. Not a remarkable number at all. In fact, the majority of T-bills are hilariously owned by US pensioners and social security.
Another graph from 2018 to prove that point,
If you want your kids to not be slaves to rich people, I'd suggest you not buy consumables like furniture, tools, and other such stuff like in your example and instead focus your efforts on buying assets instead. The Americas who lost out because of globalization were shortsighted and thought they could continually keep trading their labor for wealth forever. The majority of the Chinese aren't this stupid hence their insistence on gobbling up tons of properties in empty ghost cities (albeit another problem for a different discussion).
Anywho, that 5.6% constitutes $1.18 trillion and that income feeds much needed USD reserves into China if the Chinese wish to be able to purchase exports.
If China were to attack America or one of its allies. , 5.6% of that debt would disappear. As in "poof" and no it wouldn't affect America's credit rating either because what China did was an act of war.
Quote: (01-29-2019 11:26 AM)rockoman Wrote:
Yes, turning debt into equity - getting rid of dollars. Very rational I would say.
In my original 'neighbours analogy' this equates to the neighbours who hold my IOUs using them to buy my furniture, my tools and my garden, which then no longer belong to me and which will not be inherited by my children.
Eventually if taken to its logical conclusion I- and my children - will work for the 'neighbours'.
I'm going to assume you mean foreign ownership of companies, property, and IP. This one is easy, what happened to the Japanese and German foreign owned businesses and property during WW2?
It was seized and in many cases it was never given back.
Secondly, you discount legal system xenophobia. Dealing with an American court as a foreigner is a nightmare and most people correctly wish to avoid it. Courts will rule in the favor of the home court and push a home field advantage. Look at the Huawei case. Similarly, look at what happens in China when an American company tries to sue for IP theft.
Also, and let's tackle an unmentioned point. America is the world's greatest consumer, built a giant system to ensure other countries buy into this system to feed our conspicuous consumption, and those other countries built factories to sustain that want.
What happens when America stops buying? You'll probably say, "they'll go find another customer."
Ok, good luck with that. In the meantime, what are you going to pay your idling workforce? What about the capital costs to keep that factory clean and up to date?
In China, the government pays industries to keep them open to avoid civil unrest. How long will that keep up? They're called zombie industries for a reason.
Your thinking is too linear. Yes, i'd say that your thesis would be correct if absolutely nothing changed course for the next 25 years. But when has that ever happened?
It hasn't.
My own opinion? Look at the Taiwan and China issue as the flashpoint for the next world war. Taiwan is our century's Poland and will be China's downfall.
Oh and precious metals will never be the foundation of the world economy ever again. He who has the most guns, makes the rules. And at the moment, that's America.