One of the issues on the agenda at the Strategic Economic Dialogue between the US and China is action against copyright theft - see the CNN article from last week for a discussion of the problem.
But China is not only acquiring the custom and capital (even the factories) of the West: she is also very keen to catch up on know-how. The arguments at the moment may be about pirated music and videos, but I wonder whether industrial patents and designs may become a bone of contention in the future. I can't think it is safe for the West to watch its physical production processes migrate abroad, consoling itself with the thought of licensing the use of its inventions.
All original material is copyright of its author. Fair use permitted. Contact via comment. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.
Wednesday, May 23, 2007
US-China "Strategic Economic Dialogue" resumes
We're waiting to hear much from the Western side on the talks, but see here for a Chinese-angled general background to the series. However, this one from China View is more frank about the differences between the two sides.
Pakistan's Daily Times gives useful detail on the economic issues: US manufacturers are calling for further appreciation of the Yuan against the dollar, but "an international think tank, Oxford Economics, estimated that even a 25 percent revaluation of the yuan against the US dollar would decrease the total deficit by only 20 billion dollars after two years."
For the American side, it must be like an uncomfortable meeting with your bank manager.
Pakistan's Daily Times gives useful detail on the economic issues: US manufacturers are calling for further appreciation of the Yuan against the dollar, but "an international think tank, Oxford Economics, estimated that even a 25 percent revaluation of the yuan against the US dollar would decrease the total deficit by only 20 billion dollars after two years."
For the American side, it must be like an uncomfortable meeting with your bank manager.
Tuesday, May 22, 2007
'Nam for investors
Hard on the heels of revelations about Marc Faber's investment in Vietnam, here's a story about how Vietnam (and the Philippines) is attracting interest. A South Korean shopping centre in Ho Chi Minh City - who would have expected that in 1975?
Nostalgia apart, let's look at the economic implication. The article notes this development as "yet another sign of the region’s increasingly affluent middle class showing a growing preference for made-in-Asia products". One can only hope that the East creates enough demand, fast enough, to take over when America's wallet finally fails.
Nostalgia apart, let's look at the economic implication. The article notes this development as "yet another sign of the region’s increasingly affluent middle class showing a growing preference for made-in-Asia products". One can only hope that the East creates enough demand, fast enough, to take over when America's wallet finally fails.
The plain truth about investment
Dan Denning in The Daily Reckoning Australia says today:
"Studies show being in the right asset class accounts for over 90% of your total return in any given investment.
--This happens to be why we are still bullish on Aussie resource stocks despite the China melt-up. Resource stocks are the right asset class to be in right now, and probably for the next 15 years. There will be dips and potholes. But if the asset class is right (and resource stocks made a 200-year low in 2000, so they are still very cheap in historic terms), then the investment maths is really simple."
That's it, unless you're a gunslinger investor and fancy your chances against people who stare at computer screens all day, all week. The world's governments can print all the money they like, but they can't print the resources that turn into things money buys. This is where most bears are bulls.
"Studies show being in the right asset class accounts for over 90% of your total return in any given investment.
--This happens to be why we are still bullish on Aussie resource stocks despite the China melt-up. Resource stocks are the right asset class to be in right now, and probably for the next 15 years. There will be dips and potholes. But if the asset class is right (and resource stocks made a 200-year low in 2000, so they are still very cheap in historic terms), then the investment maths is really simple."
That's it, unless you're a gunslinger investor and fancy your chances against people who stare at computer screens all day, all week. The world's governments can print all the money they like, but they can't print the resources that turn into things money buys. This is where most bears are bulls.
Dollar to rise against the Euro; gold against BOTH
Goldseek.com today gives an extract from Steve Saville's 6 May article in "Speculative Investor", explaining why he thinks the US$ will rise against the Euro - he thinks the latter should depreciate relatively by 20%.
Again, read more closely - Saville says he expects both currencies to drop against gold, it's just that the Euro has further to fall.
Again, read more closely - Saville says he expects both currencies to drop against gold, it's just that the Euro has further to fall.
More on Marc Faber's investments
Bloomberg quotes Marc Faber as saying that US stocks are more reasonably priced than other markets after the recent fall in the dollar's value. When you read on, you find he means they're less outrageously priced, but still overvalued.
So where does he think your money should be?
"Faber recommended investing in "depressed assets,'' citing the Middle East market and the Detroit property market. He also said farmland in Argentina and Brazil is a good value and property in New Zealand and Australia may be a sound investment because of their proximity to China. [...] he has large positions in real estate and equities in Vietnam."
So where does he think your money should be?
"Faber recommended investing in "depressed assets,'' citing the Middle East market and the Detroit property market. He also said farmland in Argentina and Brazil is a good value and property in New Zealand and Australia may be a sound investment because of their proximity to China. [...] he has large positions in real estate and equities in Vietnam."
The plain truth about investment
Dan Denning in The Daily Reckoning Australia says today:
"Studies show being in the right asset class accounts for over 90% of your total return in any given investment.
--This happens to be why we are still bullish on Aussie resource stocks despite the China melt-up. Resource stocks are the right asset class to be in right now, and probably for the next 15 years. There will be dips and potholes. But if the asset class is right (and resource stocks made a 200-year low in 2000, so they are still very cheap in historic terms), then the investment maths is really simple."
That's it, unless you're a gunslinger investor and fancy your chances against people who stare at computer screens all day, all week. The world's governments can print all the money they like, but they can't print the resources that turn into things money buys. This is where most bears are bulls.
All original material is copyright of its author. Fair use permitted. Contact via comment. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.
"Studies show being in the right asset class accounts for over 90% of your total return in any given investment.
--This happens to be why we are still bullish on Aussie resource stocks despite the China melt-up. Resource stocks are the right asset class to be in right now, and probably for the next 15 years. There will be dips and potholes. But if the asset class is right (and resource stocks made a 200-year low in 2000, so they are still very cheap in historic terms), then the investment maths is really simple."
That's it, unless you're a gunslinger investor and fancy your chances against people who stare at computer screens all day, all week. The world's governments can print all the money they like, but they can't print the resources that turn into things money buys. This is where most bears are bulls.
All original material is copyright of its author. Fair use permitted. Contact via comment. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.
Dollar to rise against the Euro; gold against BOTH
Goldseek.com today gives an extract from Steve Saville's 6 May article in "Speculative Investor", explaining why he thinks the US$ will rise against the Euro - he thinks the latter should depreciate relatively by 20%.
Again, read more closely - Saville says he expects both currencies to drop against gold, it's just that the Euro has further to fall.
All original material is copyright of its author. Fair use permitted. Contact via comment. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.
Again, read more closely - Saville says he expects both currencies to drop against gold, it's just that the Euro has further to fall.
All original material is copyright of its author. Fair use permitted. Contact via comment. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.
Conspiracy to support the dollar
This exchange of letters in the Market Oracle has very significant implications. It's a discussion of the huge international "carry trade", which means borrowing in one country at low rates of interest, to invest in another country.
In this case, it is loans from Japan to invest in US Treasury bonds. The columnist, Professor Antal E. Fekete, says that Japan will keep its interest rate low, because otherwise the yen would rise, hitting Japanese exports. On the other side, the US Treasury will maintain or even increase interest rates on its bonds, to prevent the dollar from collapsing, despite America's economic weakness. China has no wish to destabilise the dollar, and as the Professor points out, some of China's enormous gains from the US come from its holding of Treasury bonds. So there are powerful vested interests sustaining the status quo.
This is a cool-headed contrary view to that of the most pessimistic bears, who feel in almost a moral sense that the present state of affairs ought to end in tears. It is the very awfulness of the potential consequences of a sudden, radical change of balance in the world economy that motivates the main players to keep the polite fiction of normality going.
So the Professor is a "bond bull": yes, the dollar may gradually decline; no, it will not suddenly dive. That's his position.
In this case, it is loans from Japan to invest in US Treasury bonds. The columnist, Professor Antal E. Fekete, says that Japan will keep its interest rate low, because otherwise the yen would rise, hitting Japanese exports. On the other side, the US Treasury will maintain or even increase interest rates on its bonds, to prevent the dollar from collapsing, despite America's economic weakness. China has no wish to destabilise the dollar, and as the Professor points out, some of China's enormous gains from the US come from its holding of Treasury bonds. So there are powerful vested interests sustaining the status quo.
This is a cool-headed contrary view to that of the most pessimistic bears, who feel in almost a moral sense that the present state of affairs ought to end in tears. It is the very awfulness of the potential consequences of a sudden, radical change of balance in the world economy that motivates the main players to keep the polite fiction of normality going.
So the Professor is a "bond bull": yes, the dollar may gradually decline; no, it will not suddenly dive. That's his position.
China's bubble - or long-term boom?
Bill Bonner's take on China's stake in US finance house Blackstone is bearish. He cites the OECD, saying low interest rates, thanks to China and Japan, have encouraged buy-outs like this.
Bonner has a jaundiced view of the fees and wheeler-dealing of market-makers, and believes that a flood of Chinese investors' money is raising share prices generally.
Today's Australasian Investment Review, quoted in ACN Newswire, dissents from the bubble view, giving these reasons:
• Firstly, much of the rebound in Chinese shares since 2005 reflects a recovery from a four-year bear market, during which individual Chinese investors lost confidence in shares and allocated most of their assets to bank deposits.
• Secondly, profit growth for listed Chinese companies over the last year has been a very strong 78%.
• Thirdly, while the price earnings ratio for Chinese A shares of around 40 times is high by our standards it is only just above its 10 year average of 36 times and is well below its previous high of 60 times.The PE on Chinese shares is also way below the peak levels reached during previous share market bubbles, eg, the Japanese Nikkei index peaked on a PE of 70 times in 1989 and the tech heavy Nasdaq reached a PE of 160 in 2000.
• Finally, Chinese investors still have a very low proportion of their financial wealth invested in shares, around 25% compared to over 50% in Australia and 40% in the rest of Asia. Bank deposits on 3% or so interest account for 65% of financial wealth.So the long term potential for a higher allocation to shares is high.
The author of this piece admits things need to cool down and the recent raising of interest rates should help. But, he says, China's financial and economic fundamentals are sound.
The arguments are cogent and reassure us about the longer term; but I imagine it's possible that if naive investors in China suffer a setback, they may over-react and become bearish for some time to come. If so, and bearing in mind Chinese light industry's vulnerability to exchange rates, a bold investor might buy medium/large-cap Chinese stocks. Not immediately, perhaps - I seem to recall that historically, a major stock slide takes around 30 months to hit bottom.
Bonner has a jaundiced view of the fees and wheeler-dealing of market-makers, and believes that a flood of Chinese investors' money is raising share prices generally.
Today's Australasian Investment Review, quoted in ACN Newswire, dissents from the bubble view, giving these reasons:
• Firstly, much of the rebound in Chinese shares since 2005 reflects a recovery from a four-year bear market, during which individual Chinese investors lost confidence in shares and allocated most of their assets to bank deposits.
• Secondly, profit growth for listed Chinese companies over the last year has been a very strong 78%.
• Thirdly, while the price earnings ratio for Chinese A shares of around 40 times is high by our standards it is only just above its 10 year average of 36 times and is well below its previous high of 60 times.The PE on Chinese shares is also way below the peak levels reached during previous share market bubbles, eg, the Japanese Nikkei index peaked on a PE of 70 times in 1989 and the tech heavy Nasdaq reached a PE of 160 in 2000.
• Finally, Chinese investors still have a very low proportion of their financial wealth invested in shares, around 25% compared to over 50% in Australia and 40% in the rest of Asia. Bank deposits on 3% or so interest account for 65% of financial wealth.So the long term potential for a higher allocation to shares is high.
The author of this piece admits things need to cool down and the recent raising of interest rates should help. But, he says, China's financial and economic fundamentals are sound.
The arguments are cogent and reassure us about the longer term; but I imagine it's possible that if naive investors in China suffer a setback, they may over-react and become bearish for some time to come. If so, and bearing in mind Chinese light industry's vulnerability to exchange rates, a bold investor might buy medium/large-cap Chinese stocks. Not immediately, perhaps - I seem to recall that historically, a major stock slide takes around 30 months to hit bottom.
Monday, May 21, 2007
More food for British bears - M4 up
Reuters reports M4 in the UK for the last quarter rose above 13% annualised. Where are all the blogs and websites that should be lamenting our improvidence? Why are Americans so much better at flaying their government for its financial mismanagement?
Panzner reviews Bookstaber on derivatives
Michael Panzner's view on the dangers of derivatives is confirmed in a new book by Richard Bookstaber, a senior insider in that world. "A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation " is available from Amazon here, where you will also find a review and further information about the author.
Panzner's Financial Armageddon site reviews it (under 18 May) here, quoting and commenting on a previous Wall Street Journal piece. He calls the whole system "Ponzi finance" and Bookstaber himself is calling for a reduction in the complexity of these financial instruments. See also my review of Panzner's Financial Armageddon, which considers these and other risks to America's economy.
Panzner's Financial Armageddon site reviews it (under 18 May) here, quoting and commenting on a previous Wall Street Journal piece. He calls the whole system "Ponzi finance" and Bookstaber himself is calling for a reduction in the complexity of these financial instruments. See also my review of Panzner's Financial Armageddon, which considers these and other risks to America's economy.
China puts Blackstone in its shopping basket
And the day before the next round of US-China trade talks starts, the IHT reports on the purchase of a $3 billion minority stake in private equity firm Blackstone Group. Nice timing.
Peter Schiff interview with MarketWatch
I'm not quite sure how to rate bears - stars don't give the right flavour. Honeypots? Claws? Anyhow, if Michael Panzner merits five of them, Peter Schiff is only a three or four, since he recommends a tailored suit/e of high-yielding, conservative, non-US value stocks as well as gold and mining shares.
For an introduction to his excellent book, "Crash Proof", see this. Click here for audio of Mr Schiff's interview last month on MarketWatch.com, and here for MW's covering note.
For an introduction to his excellent book, "Crash Proof", see this. Click here for audio of Mr Schiff's interview last month on MarketWatch.com, and here for MW's covering note.
China goes shopping for the world's resources
China is taking in $20 billion a month of foreign capital, according to this 9 March article from the International Herald Tribune. It has set up an agency to decide how to invest its (now) $1.2 trillion in foreign currency reserves.
There are many implications, some contradictory. Diversification could mean less demand for US Treasury bonds, and if China lends less to America, interest rates could rise in the USA. On the other hand, increasing its holding of other currencies will make it less disruptive for China to let the dollar drop against the yuan.
A stronger yuan will affect some Chinese businesses that trade with America, as previously noted. In a thread discussing America's trade deficit on China Daily, "tradervic" from Chicago says: "Mexico thought it had the cheapest labor market, welcoming all the American companies they could get. Then China showed up with their workforce, and those same American companies left Mexico, leaving the Mexicans running into America looking for jobs. It will be interesting to see what happens when the American companies start pulling out of more factories out China for Vietnam, Bangledesh, and other countries. It is like I told my cousins-in-law in China what happened to my cousins-in-law in Mexico and my immediate family in Detroit: Do not get too used to the jobs - they will not last forever."
I have previously suggested that China may be willing to accept these consequences, to some extent, as part of a strategic economic plan. Just as the Chinese in light industry should not take their jobs for granted, the US cannot rely forever on its bargaining power as one of China's biggest customers.
A Bloomberg article today explains how China is trying to manage the currency appreciation so as to limit the damage in employment terms. It also has a stockmarket bubble on its hands. Did China ever expect that wealth and success could be such a problem?
Now it can also start buying the world's assets. The IHT article quotes Jing Ulrich of J.P. Morgan: "They're not going to be looking for financial assets, but energy assets and natural resources, minerals — things China desperately needs." So bears who look to buy commodities as a hedge against US inflation, may be doubly motivated when they see a big player enter the same market.
All original material is copyright of its author. Fair use permitted. Contact via comment. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.
There are many implications, some contradictory. Diversification could mean less demand for US Treasury bonds, and if China lends less to America, interest rates could rise in the USA. On the other hand, increasing its holding of other currencies will make it less disruptive for China to let the dollar drop against the yuan.
A stronger yuan will affect some Chinese businesses that trade with America, as previously noted. In a thread discussing America's trade deficit on China Daily, "tradervic" from Chicago says: "Mexico thought it had the cheapest labor market, welcoming all the American companies they could get. Then China showed up with their workforce, and those same American companies left Mexico, leaving the Mexicans running into America looking for jobs. It will be interesting to see what happens when the American companies start pulling out of more factories out China for Vietnam, Bangledesh, and other countries. It is like I told my cousins-in-law in China what happened to my cousins-in-law in Mexico and my immediate family in Detroit: Do not get too used to the jobs - they will not last forever."
I have previously suggested that China may be willing to accept these consequences, to some extent, as part of a strategic economic plan. Just as the Chinese in light industry should not take their jobs for granted, the US cannot rely forever on its bargaining power as one of China's biggest customers.
A Bloomberg article today explains how China is trying to manage the currency appreciation so as to limit the damage in employment terms. It also has a stockmarket bubble on its hands. Did China ever expect that wealth and success could be such a problem?
Now it can also start buying the world's assets. The IHT article quotes Jing Ulrich of J.P. Morgan: "They're not going to be looking for financial assets, but energy assets and natural resources, minerals — things China desperately needs." So bears who look to buy commodities as a hedge against US inflation, may be doubly motivated when they see a big player enter the same market.
All original material is copyright of its author. Fair use permitted. Contact via comment. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.
China goes shopping for the world's resources
China is taking in $20 billion a month of foreign capital, according to this 9 March article from the International Herald Tribune. It has set up an agency to decide how to invest its (now) $1.2 trillion in foreign currency reserves.
There are many implications, some contradictory. Diversification could mean less demand for US Treasury bonds, and if China lends less to America, interest rates could rise in the USA. On the other hand, increasing its holding of other currencies will make it less disruptive for China to let the dollar drop against the yuan.
A stronger yuan will affect some Chinese businesses that trade with America, as previously noted. In a thread discussing America's trade deficit on China Daily, "tradervic" from Chicago says: "Mexico thought it had the cheapest labor market, welcoming all the American companies they could get. Then China showed up with their workforce, and those same American companies left Mexico, leaving the Mexicans running into America looking for jobs. It will be interesting to see what happens when the American companies start pulling out of more factories out China for Vietnam, Bangledesh, and other countries. It is like I told my cousins-in-law in China what happened to my cousins-in-law in Mexico and my immediate family in Detroit: Do not get too used to the jobs - they will not last forever."
I have previously suggested that China may be willing to accept these consequences, to some extent, as part of a strategic economic plan. Just as the Chinese in light industry should not take their jobs for granted, the US cannot rely forever on its bargaining power as one of China's biggest customers.
A Bloomberg article today explains how China is trying to manage the currency appreciation so as to limit the damage in employment terms. It also has a stockmarket bubble on its hands. Did China ever expect that wealth and success could be such a problem?
Now it can also start buying the world's assets. The IHT article quotes Jing Ulrich of J.P. Morgan: "They're not going to be looking for financial assets, but energy assets and natural resources, minerals — things China desperately needs." So bears who look to buy commodities as a hedge against US inflation, may be doubly motivated when they see a big player enter the same market.
There are many implications, some contradictory. Diversification could mean less demand for US Treasury bonds, and if China lends less to America, interest rates could rise in the USA. On the other hand, increasing its holding of other currencies will make it less disruptive for China to let the dollar drop against the yuan.
A stronger yuan will affect some Chinese businesses that trade with America, as previously noted. In a thread discussing America's trade deficit on China Daily, "tradervic" from Chicago says: "Mexico thought it had the cheapest labor market, welcoming all the American companies they could get. Then China showed up with their workforce, and those same American companies left Mexico, leaving the Mexicans running into America looking for jobs. It will be interesting to see what happens when the American companies start pulling out of more factories out China for Vietnam, Bangledesh, and other countries. It is like I told my cousins-in-law in China what happened to my cousins-in-law in Mexico and my immediate family in Detroit: Do not get too used to the jobs - they will not last forever."
I have previously suggested that China may be willing to accept these consequences, to some extent, as part of a strategic economic plan. Just as the Chinese in light industry should not take their jobs for granted, the US cannot rely forever on its bargaining power as one of China's biggest customers.
A Bloomberg article today explains how China is trying to manage the currency appreciation so as to limit the damage in employment terms. It also has a stockmarket bubble on its hands. Did China ever expect that wealth and success could be such a problem?
Now it can also start buying the world's assets. The IHT article quotes Jing Ulrich of J.P. Morgan: "They're not going to be looking for financial assets, but energy assets and natural resources, minerals — things China desperately needs." So bears who look to buy commodities as a hedge against US inflation, may be doubly motivated when they see a big player enter the same market.
Sunday, May 20, 2007
Protectionism dressed up as concern for worker's rights, the environment
The Detroit Free Press reports on new terms of trade set by America which require that Panama and Peru "...maintain and enforce five basic international labor standards: freedom of association for workers, the right to collective bargaining, and eliminating forced labor, child labor and discrimination in employment." They must also "adhere to environmental protection standards in their manufacturing."
Next in line for this treatment is Korea - but will such terms apply to China? Don't expect too much, Motown: remember Vice Premier Wu Yi's warning two days ago - "Attempts to politicize trade issues should be resisted." Wait till China's car industry really gets going.
Meanwhile, let's see what transpires in next week's resumption of the Strategic Economic Dialogue talks between the US and China, for which Wu Yi's Wall Street Journal essay on May 18 is an advance keynote-setter. Since she'll also be representing the Chinese side there, I don't expect much to be decided in America's favour.
Next in line for this treatment is Korea - but will such terms apply to China? Don't expect too much, Motown: remember Vice Premier Wu Yi's warning two days ago - "Attempts to politicize trade issues should be resisted." Wait till China's car industry really gets going.
Meanwhile, let's see what transpires in next week's resumption of the Strategic Economic Dialogue talks between the US and China, for which Wu Yi's Wall Street Journal essay on May 18 is an advance keynote-setter. Since she'll also be representing the Chinese side there, I don't expect much to be decided in America's favour.
Quick fix or cold turkey?
Alan Greenspan seems to think relaxing rules on immigration will help America. I think this is short-sighted.If it's about keeping down wage costs, remember that low-paid workers also claim on a range of social benefits, and the people they are undercutting even more so. The last thing a country needs is a hereditary class of long-term unemployed.
If it's about skill shortages, highly-skilled foreign workers are getting harder to find: as emerging economies develop, they want the same people. My brother in America notes that over the years, his university has attracted fewer foreign mathematicians for this reason.
The quick-fix approach is not a lasting solution. Like the UK, America needs to improve education and vocational training. If times get tough and foreign workers go home, the USA's dependence on them could result in economic "cold turkey".
India rises fast
Chuck Butler at the Daily Reckoning is bullish on India - and Europe.
"The second fastest economic growth in the world resides in India. Interest rates are at good levels, and their relative attractiveness as a country is high, and therefore investors are willing to invest in India."
"The second fastest economic growth in the world resides in India. Interest rates are at good levels, and their relative attractiveness as a country is high, and therefore investors are willing to invest in India."
Unemployment - Permanent
Here's a stark view on unemployment from Jim Willie CB, "The Golden Jackass" (I've bold-typed key phrases):
"LABOR ABSOLUTE DISADVANTAGE
"Much hubbub has been made of "comparative advantage" and how the United States benefits from round after round of creative destruction. The hollow message has that in free trade, both sides win, and where a job is lost, new jobs are created. Few if any advantages can be identified in the present framework, whereby lost jobs seem to be replaced mainly by debts inside the USA. Economists badly misinterpret the labor market here in the USA. They incorrectly label the delay in domestic job creation as "short-run friction," when the entire business cycle clearly has been altered, perhaps permanently broken. David Ricardo's doctrines, outlined in 1817, are misunderstood. The US has an absolute disadvantage on labor costs, across the board, which affects manufacturing, service, and more. His principles are discussed in today's light in the May issue, and shown why wealth is lost in the USA and gained abroad.
"As the work of John Maynard Keynes has been misapplied on federal stimulus, so now the work of David Ricardo is being misinterpreted on exported labor. Expect the entire topic of job export and its misconstrued benefits to become a raging explosive issue."
British readers might ask, how is it different in the UK? And where is the sleuth of British bears, growling their warnings?
All original material is copyright of its author. Fair use permitted. Contact via comment. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.
"LABOR ABSOLUTE DISADVANTAGE
"Much hubbub has been made of "comparative advantage" and how the United States benefits from round after round of creative destruction. The hollow message has that in free trade, both sides win, and where a job is lost, new jobs are created. Few if any advantages can be identified in the present framework, whereby lost jobs seem to be replaced mainly by debts inside the USA. Economists badly misinterpret the labor market here in the USA. They incorrectly label the delay in domestic job creation as "short-run friction," when the entire business cycle clearly has been altered, perhaps permanently broken. David Ricardo's doctrines, outlined in 1817, are misunderstood. The US has an absolute disadvantage on labor costs, across the board, which affects manufacturing, service, and more. His principles are discussed in today's light in the May issue, and shown why wealth is lost in the USA and gained abroad.
"As the work of John Maynard Keynes has been misapplied on federal stimulus, so now the work of David Ricardo is being misinterpreted on exported labor. Expect the entire topic of job export and its misconstrued benefits to become a raging explosive issue."
British readers might ask, how is it different in the UK? And where is the sleuth of British bears, growling their warnings?
All original material is copyright of its author. Fair use permitted. Contact via comment. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.
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