Quote of the Day: Free Trade

Bill King reminds us that decades ago Milton Friedman chided those that worry about the US trade deficit by asserting the US gets real products while all that foreigners garner for their efforts is dubious paper…Eventually foreigner will get it and adjust. That process might have already commenced.

The folks at GATA retort: Free and fair trade: They give us Poisoned food and toys, we give them  fraudulent securities . . .  Everybody wins!

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UPDATE: August 29, 2007, 10:09am

I see the NYT covered a related issue:

Calls Grow for Foreigners to Have a Say on U.S. Market Rules
HEATHER TIMMONS and KATRIN BENNHOLD
NYT, August 29, 2007
http://www.nytimes.com/2007/08/29/business/worldbusiness/29regulate.html

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What's been said:

Discussions found on the web:
  1. Marcus Aurelius commented on Aug 29

    In a global economy, there is no place for the American middle class. Be careful what you ask for, you just might get it.

    Is it too late to bring communism back to the developing countries?

  2. REW commented on Aug 29

    Even better, we could stop all trade with China and stick to the poisoned food produced in the U.S (peanut butter, ground beef, etc).

  3. techy2468 commented on Aug 29

    good one REW….i am a bit tired of the rhetoric against the chinese….

    as though everything produced in other parts of the world is just pristine.

    this issue/topic needs more analysis than simple two lines of media promoted catch words.

  4. KP commented on Aug 29

    Making crap was first and foremost an American invention. Ever heard of the concept of “Engineered Failure”. The foreigners just haven’t quite gotten the art of polishing a turd down to a science just yet, give them time.

  5. Greg0658 commented on Aug 29

    Yes, take it easy on the new employees.

    US Corps. push for ‘always low prices’ so when a truckload of paint with a great price comes their way, ya just gotta go for it.

    There is a learning curve. You know that.

  6. karen commented on Aug 29

    Two more funds in trouble:

    1. Cheyne Capital Mangement (London)

    “LONDON (Reuters) – A structured investment vehicle (SIV) managed by British hedge fund Cheyne Capital Management said on Wednesday it was seeking to restructure after being forced to start selling assets to pay down debt. The Cheyne Finance vehicle, which analysts say amounts to about $6.6 billion, is the latest in a string of funds to have come unstuck due to a strategy of borrowing short-term money and then investing in longer-term securities in the asset-backed bond market.”

    2. Basis Yield Alpha Fund:

    “The Cayman Islands-registered fund, run by the Australian firm Basis Capital, listed more than $100 million of assets and more than $100 million of liabilities in its filing with the U.S. bankruptcy court in Manhattan. The fund firm managed nearly $1 billion earlier this year.”

  7. karen commented on Aug 29

    Carlyle Group affiliate says it can ride out credit turbulence
    Marketwatch – August 29, 2007 10:50 AM ET

    “Executives at Carlyle Capital Corp., a Dutch firm affiliated with private-equity giant Carlyle Group, said Wednesday that its mortgage portfolio is strictly top investment grade and that it has the financial strength to ride out the current credit crunch without selling off any of the portfolio.”

    Isn’t this the same line BSC started out with?

  8. alexd commented on Aug 29

    Lets see, I buy something from you that has material, labor, and knowledge content. I give you American dollars (or anything with the same characteristics) that have been decreasing in value and I am printing as many of them as I can. Why am I selling you the goods?
    If what I am selling is unwanted anywhere else and I can quickly trade those dollars for something better (there is a sucker born every minute- P.T.Barnum) then the currency does what currency is made to do, that is act as a store of value. If I cannot trade those dollars quickly, then hopefully the goods I traded are loosing value at an even faster rate. If I used to trade dollars because the dollar was relatively stable but now is falling fast then I am first going to get rid of my dollars as fast as practical (which will lower the value of the dollar) and I will turnover any dollars received ASAP and if that is not a good option I will demand payment for any goods I might produce in something I believe is a better vehicle for the transmission of value.

    I am sorry to say that our government seems to have been involved in a financial shell game. Also a bit of smoke and mirrors. Holding politics above financial reality, we have done exactly what the mortgage lenders have done. We have borrowed to pay for the war and tax cuts. The mantra of growth will cure all does not work well if you are sending more of your treasure abroad than you are taking in. It is sustainable for a while then the chickens come home to roost. Supposedly Henry Ford wanted to see the rise of the middle class because they were a market for his cars. We seem to be seeing a decrease of both the middle class and the quality of their lives. The same can be said for their ability to purchase. Even worse, due to outsourcing and the importation of many goods from abroad (and most of those goods do not increase our productivity, then we have a further drain on our wealth and a decrease in wages for the middle class and so it goes. We seem to have gone from being a productive society to being a debt society. It just gets that much juicier if you dell misrepresented debt.

    For the most part the wealthy seem to be the primary beneficiaries for the above scenario as aggrandized wealth is shorn of a percentage of profits that goes to stockholders and CEO’s who are paid a king’s ransom even if they fail. Some people will make the statement that we should look at the number of stockholders; therefore it must benefit many Americans. At this time that is deceptive. If we look at the number of people whom own large amounts of stock we then see that a relatively small number of people control most of the wealth in the USA. Makes me want to go right out and buy an Aston Martin Dealership. Or one that sells Chinese made cars for 6k.

    I think the rest of the world is going to be reluctant to accept our financial shenanigans, and since they are holding our debt they are likely to start keeping us on an ever shorter leash.

    Just makes you want to hold dollars doesn’t it?

  9. alexd commented on Aug 29

    sorry it fell off”

    For the most part the wealthy seem to be the primary beneficiaries for the above scenario as aggrandized wealth is shorn of a percentage of profits that goes to stockholders and CEO’s who are paid a king’s ransom even if they fail. Some people will make the statement that we should look at the number of stockholders; therefore it must benefit many Americans. At this time that is deceptive. If we look at the number of people whom own large amounts of stock we then see that a relatively small number of people control most of the wealth in the USA. Makes me want to go right out and buy an Aston Martin Dealership. Or one that sells Chinese made cars for 6k.

    I think the rest of the world is going to be reluctant to accept our financial shenanigans, and since they are holding our debt they are likely to start keeping us on an ever shorter leash.

    Just makes you want to hold dollars doesn’t it?

  10. techy2468 commented on Aug 29

    so we give dollars to the chinese…they can buy boeing planes if they want (sorry we do not manufacture much anymore, limited choice)

    or they can buy genuine software (of course they get free pirated so why should they care)

    at the same time we are not forcing them to use only dollars for transactions.

    so i dont agree that we are giving them good for nothing dollars…..i would like to add that if not them we will get another developing country to manufacture goods we want to consume.

    so are we benefitting from getting goods for our dollars….yes we are since inflation has been held low just because of that….but at the same time wages has been held low because of all the outsourcing.

    but i think in all these transaction there is someone who makes a net profit….the person with capital…..i guess the rich man.

    but can these go on forever….how long can the chinese keep their currency undervalued by hoarding dollars?? anyone has any insight when they will lose control over their currency??

    india also pegs its currency to the dollar to promote its exports….but in case of india it is not product of infinite supply of cheap unskilled labor….skilled IT workers wages has been increasing so much that inflation has gotten out of control…due to which india had to let its currency appreciate by as much as 10%.
    india also depends on lot of imports hence by appreciating rupee they reduced inflation.

  11. brion commented on Aug 29

    “the US gets real products while all that foreigners garner for their efforts is dubious paper…Eventually foreigner will get it and adjust

    The last washing machine i bought (chinese) broke down within a year-The new dishwasher 16 months is breaking out (inside) in rust.-The 16 mo old stove needs to be lit with a match as the pilots rarely work-i recently returned 2 thomas the tank engines for the lead recall….
    who’s conning whom?

    Anybody else having quality issues?

  12. jkw commented on Aug 29

    It’s all a big game of trying to get rid of your worthless crap. The cycle works as long as nobody notices that they’re getting worthless crap from everybody else.

    The Chinese make cheap products. These are bought by the American middle class, who are paying for it by borrowing from the American upper class (with no realistic means of repaying the debt ever). The upper class is getting their money from the profits their companies get by outsourcing the production of cheap crap to the Chinese. Sometimes the Chinese cut the upper class out and loan money directly to the middle class.

    The loans that are going to be defaulted on are being funded by the money that would have been paid to the people borrowing the money if their jobs hadn’t been outsourced. So the net effect of outsourcing is that the overall economy is much less efficient. The now unemployed get to borrow what would have been their wages. Since they can’t realistically pay the debt off, they are effectively still being paid. But now they don’t have to work. Meanwhile, a small amount of the pay is going to people in China, who can now afford to eat (saying an economy is inefficient is equivalent to saying more people are getting money than is strictly necessary).

    It is all shell games. It can continue indefinitely, but it will hurt everyone when it stops. The recent liquidity problems suggest that the bankers are beginning to realize that their paper assets are worthless.

  13. techy2468 commented on Aug 29

    brion sorry, my appliances are working fine with no issues (most purchases from sears).

  14. Blissex commented on Aug 29

    «The Chinese make cheap products. These are bought by the American middle class, who are paying for it by borrowing from the American upper class (with no realistic means of repaying the debt ever). The upper class is getting their money from the profits their companies get by outsourcing the production of cheap crap to the Chinese. [ … ]
    It is all shell games. It can continue indefinitely, but it will hurt everyone when it stops. The recent liquidity problems suggest that the bankers are beginning to realize that their paper assets are worthless.»

    This game is called “inflation”, because it can only work given an expanding money supply. The winners are those that have increased the amount of non-paper assets they own (real estate, businesses, …), which means that the winners are the USA and Chinese upper classes. The Chinese lower classes also win a bit as they get to eat better as you say. But their aggregate gain is lower than the aggregate loss to the US lower classes.

    Then inflation happens and those who hold real assets make a killing, and those who hold paper assets lose them as you say.

  15. David commented on Aug 29

    Right now, and for a couple months, the broad market will rise, but is a big head-fake. Be Careful! This will be an incredible head fake. When the numbers come in (Sept-Oct-Nov) jobs, housing, finance, and spending, etc, the market will only be up 2% for the year. Jim Kramer(CNBC), and his capo friends be exposed.

    “ships are but boards, sailors but men; there be land-rats and water-rats, land-thieves and water-thieves,–I mean pirates,–and then there is the peril of waters, winds, and rocks.” – William Shakespeare

    Good Luck and Happy Trading.

  16. brion commented on Aug 30

    i see Techy….will you trade appliances with me?

    i DID see decent appliances at Sears… They have the “Elite” Series, (i.e. $1000 washer)
    which strikes me as adequate workmanship at an exorbitant price.
    I’m old enough to remember when made in Japan was a perjorative but I have never seen such shoddy plastic shit in my life, as i have in this 21st century.

  17. wunsacon commented on Aug 30

    Perot was right about the Giant Sucking Sound and the wisdom of requiring trading partners to begin raising their safety, health, and environmental standards as part of any tariff reduction plan. (The boom-bust of the internet and Y2k software rewrite overwhelmed the GSS. But, once that went away, you could really hear it….well, I did.)

    When Kyoto was signed, the earliest year folks expected China’s CO2 emissions would equal ours is 2012. (That’s why, to the constant complaint of right-wingers, China and India were excluded from the initial climate accord that was Kyoto.) Has that expectation changed? Yes, now they’re expected to surpass our emissions in…2007.

    Trade is great. But, did it have to be done with *such* damage to our air and water supplies? Industrial safety? Wild fish populations? Yantze dolphins?

    I’m sure we’ll turn things around though. To quote Senator McCain on The Daily Show misquoting Chairman Mao, “it’s always darkest before it’s pitch black”. Or something like that.

  18. SPECTRE of Deflation commented on Aug 30

    3 month LIBOR up another 4 ticks to 5.58% this morning. It’s all contained. LOL!

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