4 ms·

I've never bought arguments like that. To me, this is just neo-mercantilism. I don't see why it makes a difference if the person who buys our product is in Sea

by Darmani 17y ago

I've never bought arguments like that. To me, this is just neo-mercantilism. I don't see why it makes a difference if the person who buys our product is in Seattle or Vancouver. If we're producing the most value we can at the least cost (not in the naive sticker-price sense), it doesn't matter who or what is the least cost labor. Drawing borders around countries and treating them as fundamental units of trade is just 19th-century nationalism in disguise.

DougWebb 17y ago
It's a local-market vs extended-market issue. Money is the medium of trade; it has to circulate or trade stops. If you have a local market, the people producing products, and getting paid to produce the products, are also buying the products and/or buying other local services from people who can then afford to buy the products. The same money can circulate many times within the local market to keep the economy moving, and support the production of valuable things. In an extended market, you've got a separation between the people creating the products and the people buying them. Money has to travel between these groups in order for trade to exist. If there is a balance of trade between the groups, the money circulates evenly and both groups benefit; it's like the local market, but bigger. If trade is not balanced, the money winds up on one side and the products on the other. Eventually, the flow of money stops because one side runs out. For the people running out of money, must do one of the following: (1) Start producing additional goods/services that can be sold to the other side, in order to increase the flow of money back and restore a balance of trade. (2) Reduce the amount of goods/services being bought from the other side in order to reduce the flow of money out, also restoring a balance of trade (at a lower level than #1). (3) Purchase the goods/services on credit rather than with cash, in hopes of having the cash later to pay off the debt. (4) Inflate the money supply by producing more money, and hope that the other side doesn't increase prices to reflect the lower value of your money. In the US/China trade, the US has been buying lots of Chinese goods, but the Chinese haven't been buying much US goods. Instead, the Chinese have been collecting US money (in the form of both actual currency and bonds.) Trade has been out of balance, with the US on the side running out of money. We'd like to do #1, by selling more into the Chinese marketplace, but the Chinese government has been very slow to open its markets to outside companies. We can't do #2 for a number of reasons; we've lost our capacity to produce many of the good we buy, we can't produce similar goods at competitive prices, and for political reasons we can't raise tariffs on Chinese imports to bring their prices in-line with domestically produced goods. So, we've been stuck with #3 and #4: going into debt and inflating our money supply. These options can only work for so long before the other party stops accepting credit and inflated currency. The US has pretty much reached that point with China now, so we're going to have to go back to #1 or #2.

by Darmani 17y ago

DougWebb 17y ago

It's a local-market vs extended-market issue. Money is the medium of trade; it has to circulate or trade stops. If you have a local market, the people producing products, and getting paid to produce the products, are also buying the products and/or buying other local services from people who can then afford to buy the products. The same money can circulate many times within the local market to keep the economy moving, and support the production of valuable things. In an extended market, you've got a separation between the people creating the products and the people buying them. Money has to travel between these groups in order for trade to exist. If there is a balance of trade between the groups, the money circulates evenly and both groups benefit; it's like the local market, but bigger. If trade is not balanced, the money winds up on one side and the products on the other. Eventually, the flow of money stops because one side runs out. For the people running out of money, must do one of the following: (1) Start producing additional goods/services that can be sold to the other side, in order to increase the flow of money back and restore a balance of trade. (2) Reduce the amount of goods/services being bought from the other side in order to reduce the flow of money out, also restoring a balance of trade (at a lower level than #1). (3) Purchase the goods/services on credit rather than with cash, in hopes of having the cash later to pay off the debt. (4) Inflate the money supply by producing more money, and hope that the other side doesn't increase prices to reflect the lower value of your money. In the US/China trade, the US has been buying lots of Chinese goods, but the Chinese haven't been buying much US goods. Instead, the Chinese have been collecting US money (in the form of both actual currency and bonds.) Trade has been out of balance, with the US on the side running out of money. We'd like to do #1, by selling more into the Chinese marketplace, but the Chinese government has been very slow to open its markets to outside companies. We can't do #2 for a number of reasons; we've lost our capacity to produce many of the good we buy, we can't produce similar goods at competitive prices, and for political reasons we can't raise tariffs on Chinese imports to bring their prices in-line with domestically produced goods. So, we've been stuck with #3 and #4: going into debt and inflating our money supply. These options can only work for so long before the other party stops accepting credit and inflated currency. The US has pretty much reached that point with China now, so we're going to have to go back to #1 or #2.