Taleb: Stimulus Made Ecomony Worse

Quote from intradaybill:

They are obviously entitled to a job equally. The problem is when the politician you voted for in Kansas, for example, does not do anything when you lose your job and it goes to India.
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What should he do?

Prosperity has always shifted from nation to nation and continent to continent.

At one point in time Italy was the capital of the world, then it moved to Spain, or to Amsterdam or to the UK, who lost their position of reserve currency to the US etc etc etc.

Visit Egypt today and try to grasp the notion they were once the absolute centre of the world for centuries...

I'm not saying nothing can be done to counter loss of wealth, industry or atractiveness to investors but I do believe a considerable part of it can not be captured in laws or policies.
 
Quote from Ghost of Cutten:

A simple answer would say that if you can build a car for $1 abroad, that's better both for the foreign economy and the domestic economy than building it for $1 billion at home. The obvious logical inference is that the same principle holds if the answer is 1k abroad and 10k at home. Opponents of free trade must demonstrate why it doesn't continue to hold up until the point where domestic manufacture is more profitable.

If Americans don't want a trade deficit and don't want jobs to be outsourced abroad, they should stop buying foreign products and stop buying from companies that outsource. But then they'd have to pay more or get less desirable products for the same price, compared to today.

Americans want a free lunch - they want to be able to buy foreign goods at cheaper prices, without taking the consequences of that behaviour. Same as they want lower taxes and higher government spending, better healthcare while eating more junk food and doing less exercise, easier credit without banks going bust or their mortgage debt being collected, high investment returns without assets ever going down in price, the ability to vote politicians into office without having to take responsibility when their choices perform poorly, and so on.
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well said
 
Quote from Ghost of Cutten:

A simple answer would say that if you can build a car for $1 abroad, that's better both for the foreign economy and the domestic economy than building it for $1 billion at home. The obvious logical inference is that the same principle holds if the answer is 1k abroad and 10k at home. Opponents of free trade must demonstrate why it doesn't continue to hold up until the point where domestic manufacture is more profitable.
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You have no idea what you're talking about. Ricardo's theory of comparative advantage is terribly flawed because in reality, low-cost producers dominate the full spectrum of industrial production, including high-tech manufacturing - computers, aerospace, and autos. Exactly what China is doing now.

The quaint academic notion that free trade benefits both low-cost and high-cost production centers based on their respective disparities in technology is complete horseshit.

US Fortune 100 bring our technology over to China, teach them how to use it, build the factories to make it, and we're done. Our goose is cooked.

Airbus is opening plants in China to build commercial aircraft for their market. Boeing has plans to do the same. Where do you think those jobs are coming from? Our EXPORT MARKET. Ford is building plants in South America to export cars to the US. The Big 3 make and assemble most their vehicles in Mexico for export to the American market!

There is no "comparative advantage" here, bud. This is a wholesale export of American technology and jobs, gifted to 3rd world shitholes, only to resell it back to us on credit. In doing so, national incomes are destroyed and with it, our export market. Those backward nations of 30 years ago now make everything we can because we taught them. Seriously. You think that's a brilliant "strategy"?
 
Quote from jem:

just posted on another thread...


"...
China's worst abuse involves its undervalued currency and its promotion of export-led economic growth. The United States isn't the only victim. China's underpricing of exports and overpricing of imports hurt most trading nations, from Brazil to India. From 2006 to 2010, China's share of world exports jumped from 7 percent to 10 percent.

One remedy would be for China to revalue its currency, reducing the competitiveness of its exports. American presidents have urged this for years. The Chinese acknowledge that they need stronger domestic spending but seem willing to let the renminbi (RMB) appreciate only if it doesn't really hurt their exports. Thus, the appreciation of about 20 percent permitted from mid-2005 to mid-2008 was largely offset by higher productivity (aka, more efficiency) that lowered costs. China halted even this when the global economy crashed and has only recently permitted the currency to rise. In practice, the RMB has barely budged.

How much the RMB is undervalued and how many U.S. jobs have been lost are unclear. The Peterson Institute, a research group, says a revaluation of 20 percent would create 300,000 to 700,000 U.S. jobs over two to three years. Economist Robert Scott of the liberal Economic Policy Institute estimates that trade with China has cost 3.5 million jobs. This may be high, because it assumes that imports from China displace U.S. production when many may displace imports from other countries. But all estimates are large, though well short of the recession's total employment decline of 8.4 million.

If China won't revalue, the alternative is retaliation. This might start a trade war, because China might respond in kind, perhaps buying fewer Boeings and more Airbuses and substituting Brazilian soybeans for American. One proposal by Reps. Tim Ryan, D-Ohio, and Tim Murphy, R-Penn., would classify currency manipulation -- which China clearly practices -- as an export subsidy eligible for "countervailing duties" (tariffs offsetting the subsidy). This makes economic sense but might be ruled illegal by the World Trade Organization. A House committee last week approved this approach; the full House could pass it this week. Ideally, congressional action would convince China to negotiate a significant RMB revaluation.

Less ideally and more realistically would be a replay of Smoot-Hawley, just when the wobbly world economy doesn't need a fight between its two largest members. Economic nationalism, once unleashed here and there, might prove hard to control. But there's a big difference between then and now. Smoot-Hawley was blatantly protectionist. Dozens of tariffs increased; many countries retaliated. By contrast, American action today would aim at curbing Chinese protectionism.

The post-World War II trading system was built on the principle of mutual advantage, and that principle -- though often compromised -- has endured. China wants a trading system subordinated to its needs: ample export markets to support the jobs necessary to keep the Communist Party in power; captive sources for oil, foodstuffs and other essential raw materials; and technological superiority. Other countries win or lose depending on how well they serve China's interests.

The collision is between two concepts of the world order. As the old order's main architect and guardian, the United States faces a dreadful choice: resist Chinese ambitions and risk a trade war in which everyone loses; or do nothing and let China remake the trading system. The first would be dangerous; the second, potentially disastrous.


Copyright 2010, Washington Post Writers Group""

http://www.realclearpolitics.com/ar...ina_107310.html
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What I need to know is this:

What makes China different from the USSR, Nazi Germany or present day Germany, which is pound for pound probably the most efficient export machine on the planet, Japan before or after WWII also, or the Arabs?
The USSR no longer exists.
No one thinks the Arabs are taking over, although for a moment in the Seventies that was the great fear.
No one anymore thinks Japan is taking over.
Regardless of how well Germany does as an export machine, no one fears that Germany will take over and rule the world.

So, what makes China different from the rest of these pretenders to the throne? They have the problem that their one-child policy has given them a horrible demographic, compounded by the Chinese preference (probably a universal preference, really) for male children, so that they face a future of a massive elderly population supported by an overly male population extremely vulnerable to any sort of leader who can make an active minority of them oppose the present regime and channel their excess, um, energy towards that goal.
China is no more a threat, long term, than any of the other pretenders were. You can always gain superiority for a moment by means of organizing the entire society around a single goal, something dictatorships are very good at.
The long term kills them every time, though.
 
Quote from trefoil:

What I need to know is this:

What makes China different from the USSR, Nazi Germany or present day Germany, which is pound for pound probably the most efficient export machine on the planet, Japan before or after WWII also, or the Arabs?
The USSR no longer exists.
No one thinks the Arabs are taking over, although for a moment in the Seventies that was the great fear.
No one anymore thinks Japan is taking over.
Regardless of how well Germany does as an export machine, no one fears that Germany will take over and rule the world.

So, what makes China different from the rest of these pretenders to the throne? They have the problem that their one-child policy has given them a horrible demographic, compounded by the Chinese preference (probably a universal preference, really) for male children, so that they face a future of a massive elderly population supported by an overly male population extremely vulnerable to any sort of leader who can make an active minority of them oppose the present regime and channel their excess, um, energy towards that goal.
China is no more a threat, long term, than any of the other pretenders were. You can always gain superiority for a moment by means of organizing the entire society around a single goal, something dictatorships are very good at.
The long term kills them every time, though.
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You're joking, right?

USSR was a centrally planned economy.

Nazi Germany destroyed itself through war.

Present-day Germany is an economic juggernaut only limited by it's population. You think if Germany had 1.2 Billion people you'd be singing the same tune?

Japan, again, same story. Not enough people.

Present day China has everything the previous four don't. A free-market economy, a non-interventionist foreign policy, and a gigantic population.

China needs to mass educate, implement massive legal reform, juice it up with some consumer financing, and they'll eclipse America in 20 years. They have the technology to make everything. We gave it them. Now, all they must do is define the risks and protect the rewards of entrepreneurship, give everyone a fair shake in the courts, and it's done. They win. We lose.
 
Remind me, please: I need to know the last time a dictatorship rewarded entrepreneurship.
Remembering, by definition, all property belongs to the state by default.
 
Quote from trefoil:

Remind me, please: I need to know the last time a dictatorship rewarded entrepreneurship.
Remembering, by definition, all property belongs to the state by default.
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Is something wrong with your eyes? You can't see what's happening in-front of you???

The Communist Party of China gave tacit protection to private property rights... 30 YEARS AGO!!!!

Wake up, buddy. This is 2010. Nobody in their right mind would invest trillions in China if it weren't so. Yet here we are. Where are the sweeping CPC expropriations we'd expect if that were true?! Never happened.

China is on a crash-course with Superpower-hood. They know that's achieved economically. And it's bedrock is a free market economy and private property rights. They are not going to fuck with that.
 
Rillie?
You keep right on believing that. Sergey Brin and Hemlock would disagree with you on that, but that's OK. You're obviously the expert on all things Chinese and how they treat their entrepreneurial class and property and all that.
 
Quote from Ghost of Cutten:

A simple answer would say that if you can build a car for $1 abroad, that's better both for the foreign economy and the domestic economy than building it for $1 billion at home. The obvious logical inference is that the same principle holds if the answer is 1k abroad and 10k at home. Opponents of free trade must demonstrate why it doesn't continue to hold up until the point where domestic manufacture is more profitable.

If Americans don't want a trade deficit and don't want jobs to be outsourced abroad, they should stop buying foreign products and stop buying from companies that outsource. But then they'd have to pay more or get less desirable products for the same price, compared to today.

Americans want a free lunch - they want to be able to buy foreign goods at cheaper prices, without taking the consequences of that behaviour. Same as they want lower taxes and higher government spending, better healthcare while eating more junk food and doing less exercise, easier credit without banks going bust or their mortgage debt being collected, high investment returns without assets ever going down in price, the ability to vote politicians into office without having to take responsibility when their choices perform poorly, and so on.
More...

Agreee 100%, Its like we want better schools and safer neighborhoods but we don't want to pay the taxes that will make it possible. You have to give a little to get a little.
 
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