So I don’t quite understand this response to what I said.
“But those bubbles will be industry specific. If your interest rate does not reflect savings then you will have a bubble. You can’t loan what you don’t have.” - Me
“What does a negative current account tell you besides a trade imbalance? ” - Him
Is this just referring to national debt?
And now this response from him.
“You know nothing about production as you keep talking about savings being vital in capital accumulation, yet constantly forget to mention diminishing returns in regards to the marginal product of capital.”
What’s the relevance?
I don’t get it either. It’s like this guy just likes to use big terms to try to show intellectual superiority because he knows that I haven’t really taken a formal economics course.
The current account is one of the components of the balance of payments. There really isn’t anything I could tell you about it that you won’t find on wikipedia. A large current account deficit might be a sign that the given country has severe trade deficits and/or the country receives massive amounts of foreign aid and/or a lot of the assets in the country are owned by foreign residents who earn their rent/interest. The US has a large current account deficit because foreigners invest in the US (thereby draining interest income) and then the US runs large trade deficits. Peter Schiff basically says that it’s as if the Asians were letting us borrow their money to buy their products. This obviously isn’t a stable situation.
EDIT: He might be trying to hint that he believes that the US housing bubble was caused by Asian savings.
He’s trying to sound authoritative.