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Author Topic: Question #1 (of a few)  (Read 24880 times)

JasonPSorens

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Re:Question #1 (of a few)
« Reply #45 on: August 18, 2002, 06:39:07 pm »


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What do you mean by "siphoning of capital"?  Money is not capital. /// What do you mean by "at the expense of"?


Yes, and no. I am not using it in the traditional sense of being related to a specific business entity - but viewing an entire economy as a business - which it is.


No, it is emphatically not a business.  A business can be managed; an economy cannot.  A better analogy for an economy is an ecological system.

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I should have clarified myself in my first response.  An economy's value is based the total of it's hard (tangible) and liquid (monetary) assets. Money is liquid capital.


Nope, monetary assets have nothing to do with an "economy's value" (by which I presume you mean the total wealth in a national society).  We could burn half of all currency tomorrow and it would not affect wealth one whit.  Prices will simply adjust immediately.  The fact that cash flows out of America and into other countries is neither intrinsically bad nor good.

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In a closed economy it does not matter where money is spent - it stays within and remains useful to it. In an open economy (such as ours) capital (money) can be stripped out and shifted to another.  When Nike takes money from our economy and shifts it elsewhere - we loose. They are not building our economy - not creating any real infrastructure here - it is shifted to the third world country - at our loss.  


Some fundamental misunderstandings here.  Different parts of the economy serve different functions.  Nike is providing goods to people living in America (and other places).  Let's take the example of a town: say, Boise, Idaho.  Let's say Boise grows and sells potatoes to Orlando, Florida, while Orlando, Florida grows and sells oranges to Boise.  You're saying that by locating in Orlando, orange growers are "hurting" Boise, taking "capital" from it.  But that's not the case.  Oranges grow better in Florida than in Idaho.  It is to the advantage of both Boiseans and Orlandoans to have the orange industry located in Orlando.  Similarly, it is to the advantage of Americans to have shoe manufacturers located in, say, Thailand.  Shoes produced in Thailand will have a much lower price for the same quality relative to shoes produced in the U.S.

If mercantilism (the name of the system you are supporting) is good for countries, it should be good for towns, neighborhoods, and even individuals.  So I should hoard up cash while never buying anything from anyone else, because once I buy something from anyone else, I'm lowering my wealth (according to your theory) because I'm losing cash.  But real wealth does not consist in cash; it consists in things you can use.  American is wealthier because it is able to trade the goods that Americans produce to foreign countries in exchange for the goods that those foreign countries produce.  Cash is just a medium of exchange; it has no value apart from what it can buy.  Free trade is good because it increases the range of stuff we can buy: it increases wealth.
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That's good, because we don't want big firms failing every day.  But firms maximize profit.  If they take a hit in court, they will resolve the problem that led to the hit.  You don't have to put firms out of business in order to get them to act honestly.


If you really believe this - study the history of Ford and a little explosive car they made called the Pinto...


The Pinto ceased production after a couple of years!  This would seem to prove my point...
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nomad

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Re:Question #1 (of a few)
« Reply #46 on: August 18, 2002, 11:04:21 pm »

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No, it is emphatically not a business.  A business can be managed; an economy cannot.  A better analogy for an economy is an ecological system.


You've been reading the book, "Bionomics: The Economy as an Ecosystem" haven't you... lol

Sorry, I have to disagree and we'll probably have to leave it at that - our economy is a business and it IS managed - that's what the Fed was created to do.

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Nope, monetary assets have nothing to do with an "economy's value" (by which I presume you mean the total wealth in a national society).


If monetary assets have nothing to do with the total wealth in a society - then try getting rid of any money you have and see if your net worth is the same before and after. I bet it changes.

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We could burn half of all currency tomorrow and it would not affect wealth one whit.  Prices will simply adjust immediately.

Yes, the value of the remaining currency will increase to absorb the decrease in volume of currency - the medium (money) is still existant. This has nothing to do with the shifting of money from one economy to another.

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The fact that cash flows out of America and into other countries is neither intrinsically bad nor good.


A dollar in realistic terms represents human "life hours" - nothing more, nothing less. When you shift cash out of the US you are exporting those "life hours" - That is, intrinsically bad.

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Let's take the example of a town: say, Boise, Idaho.  Let's say Boise grows and sells potatoes to Orlando, Florida, while Orlando, Florida grows and sells oranges to Boise.  You're saying that by locating in Orlando, orange growers are "hurting" Boise, taking "capital" from it.  But that's not the case.  Oranges grow better in Florida than in Idaho.  It is to the advantage of both Boiseans and Orlandoans to have the orange industry located in Orlando.  Similarly, it is to the advantage of Americans to have shoe manufacturers located in, say, Thailand.  Shoes produced in Thailand will have a much lower price for the same quality relative to shoes produced in the U.S


You are trying to compare apples and oranges (no pun really intended). The Boise/Orlando scenario is a shift of money within an economy - the other is a shift of money out of an economy. The first is good, the second is bad.

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The Pinto ceased production after a couple of years!  This would seem to prove my point...


You don't know the history of the Pinto then - I'll write that up tomorrow night. (don't have time right now)

JD
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nomad

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Re:Question #1 (of a few)
« Reply #47 on: August 18, 2002, 11:17:11 pm »

SnowDog,

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How? When Nike sells shoes, they take US Dollars in Exchange, (or an intermediary does). Those dollars are only valuable in the US, so they ultimately come back to us, though not necessarily directly. Those dollars exist as claims on the wealth that is produced in the US. Ideally, they would burn the dollars, and then we would have the shoes, and get to keep our wealth. However, they'll probably buy something from us, causing an increase in our exports, and a decrease in goods available for purchase here.


No, those dollars are valuable in any economy in the world.

It would be nice if they burned them - and no, they usually don't buy something back from us - that is why we have the massive trade deficits that we do.

One of two things usually happen:

1. The dollar is exchanged for another currency which strips the dollar of its value and places it into the other currency - the dollar is then dumped back on our economy causing inflation.

2. The first half of #1 happens and then the host nation hordes the dollar for the value placed on it to give stability to their currency - only to be dumped back into our economy at a later time - again causing inflation.


Neither of those scenarios are good for our economy.

JD
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Let us hear the conclusion of the whole matter. Fear God, and keep His commandments. For this is the whole duty of man. For God shall bring every work into judgment, with every secret thing, whether it is good, or whether evil. (Ecclesiastes 12:13-14)

nomad

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Re:Question #1 (of a few)
« Reply #48 on: August 18, 2002, 11:18:46 pm »

Eddie-

I'll have to wait 'till tomorrow to dig into that one.. lol

JD
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Let us hear the conclusion of the whole matter. Fear God, and keep His commandments. For this is the whole duty of man. For God shall bring every work into judgment, with every secret thing, whether it is good, or whether evil. (Ecclesiastes 12:13-14)

JasonPSorens

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Re:Question #1 (of a few)
« Reply #49 on: August 19, 2002, 09:58:33 am »


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No, it is emphatically not a business.  A business can be managed; an economy cannot.  A better analogy for an economy is an ecological system.


You've been reading the book, "Bionomics: The Economy as an Ecosystem" haven't you... lol


No, haven't even heard of it!

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Sorry, I have to disagree and we'll probably have to leave it at that - our economy is a business and it IS managed - that's what the Fed was created to do.


The Fed was originally designed to maintain the stability of the banking sector: in fact, it seriously undermined its stability in the 1920s and 1930s.  Nowadays, the role of the Fed is to keep inflation low, which it has done a more or less decent job of.

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If monetary assets have nothing to do with the total wealth in a society - then try getting rid of any money you have and see if your net worth is the same before and after. I bet it changes.


A fallacious analogy to an economy.  If I lose all my money and no one else loses any, then prices do not decline to match my loss of currency.  Whereas if currency flows out of the U.S., Americans don't lose because prices are simply higher than they otherwise would be if that currency were still in the U.S.  According to your theory, we should just print billion-dollar bills and hand them out to everyone, and suddenly everyone would be fabulously wealthy!

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Yes, the value of the remaining currency will increase to absorb the decrease in volume of currency - the medium (money) is still existant. This has nothing to do with the shifting of money from one economy to another.


Of course the medium still exists!  The medium also exists when currency flows from one economy to another.  Why are currency flows among countries bad?  I've yet to see an answer to this question that makes any economic sense.

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A dollar in realistic terms represents human "life hours" - nothing more, nothing less. When you shift cash out of the US you are exporting those "life hours" - That is, intrinsically bad.


A dollar does not represent "life hours"; material goods made by humans do.  You're saying that if we created billions of billion-dollar bills, suddenly there would be many more "life hours" floating around?!

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You are trying to compare apples and oranges (no pun really intended). The Boise/Orlando scenario is a shift of money within an economy - the other is a shift of money out of an economy. The first is good, the second is bad.


There is no distinction!  Cities have their own economies, countries have their own economies, the world has its own economy.  You're saying that arbitrary international boundaries have some relevance on economic realities?  That makes no sense.  What if Boise and Orlando became independent countries?  Then would orange production in Boise and potato production in Orlando, stimulated by protectionist policies, be desirable?!
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JasonPSorens

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Re:Question #1 (of a few)
« Reply #50 on: August 19, 2002, 10:07:00 am »


SnowDog,

One of two things usually happen:

1. The dollar is exchanged for another currency which strips the dollar of its value and places it into the other currency - the dollar is then dumped back on our economy causing inflation.

2. The first half of #1 happens and then the host nation hordes the dollar for the value placed on it to give stability to their currency - only to be dumped back into our economy at a later time - again causing inflation.


Neither of those scenarios are good for our economy.

JD


There are so many things wrong with these statements I don't even know where to begin.  First, exchange of dollars for other currencies does not "strip" the dollar of its value; I don't even know what you mean by this.  The value of the dollar relative to another currency depends on increases and decreases in the supply and demand for dollars and another currency.  For example, if investors lose confidence in the Mexican economy, they pull some investments out of Mexico, decreasing demand for pesos and decreasing the exchange value of the peso.  If the peso undergoes hyperinflation, its supply has increased dramatically, and again, its exchange value decreases.

Second, "dumping" of currencies usually refers to the practice of getting rid of currency holdings, at cut-rate prices, when an economy is seen to be extremely weak, and therefore investors expect the currency to decline significantly in the future.  This has never happened to the dollar.

Third, you're contradicting your own theory that somehow dollars give wealth.  You should want dollars to flow into the country all the time & you should want inflation.  Otherwise, how can you say that dollars' flowing out of the country is bad?
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"Educate your children, educate yourselves, in the love for the freedom of others, for only in this way will your own freedom not be a gratuitous gift from fate. You will be aware of its worth and will have the courage to defend it." --Joaquim Nabuco (1883), Abolitionism

nomad

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Re:Question #1 (of a few)
« Reply #51 on: August 19, 2002, 10:26:42 pm »

Jason -

Well, I just spent 1-1/2hrs in response - went out to get a bowl of ice cream - and while I was digging in the Blue Bunny my wife decided to check her Ebay auctions, destroying what I had written - so, I'll give it another shot tomorrow night.  >:(

JD
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Let us hear the conclusion of the whole matter. Fear God, and keep His commandments. For this is the whole duty of man. For God shall bring every work into judgment, with every secret thing, whether it is good, or whether evil. (Ecclesiastes 12:13-14)

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Re:Question #1 (of a few)
« Reply #52 on: August 20, 2002, 11:06:14 am »

Here is an article on corporations that I thought might be of interest to this topic.  It is called   'How Corporations Came to Rule the World'  http://www.bankindex.com/read.asp?ID=1139
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LaissezFaire

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Re:Question #1 (of a few)
« Reply #53 on: August 20, 2002, 04:28:16 pm »

The fact that corporate CEOs are going to prison while politicians and bureaucrats walk free, pretty much invalidates the whole "corporations run the world" piece of propaganda.

Here is a better analysis on the Big Business/Big Government theme:

Big Business: Number One Enemy of Capitalism
http://freedom.orlingrabbe.com/lfetimes/big_business_enemy.htm



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