In defense of Peter Schiff

Miscellaneous General
61

As I’ve stated, Peter Schiff operates on neat little sound bites that are packaged to sell his services. Sometimes those “neat” little sound bites aren’t so “neat.” He’s not a true representative of Austrian economics, nor does he make any claim to be so.

Some of his positions are conforming with Republican party ideology, and he has had political ambitions. Perhaps he still does.

To me he’s essentially a Republican businessman who calls upon Austrian economics and libertarian thought when it’s convienent for him. Unfortunately for him, those who call the shots in the Republican party just didn’t think he was Republican enough for them. And in that sense you might as well replace Republican with Mercantilist. It was Schiff’s radical libertarian leanings that drove them off.

Both dominant political parties in the U.S., Democrat and Republican, tend to reach out to libertarians and free-thinking individuals when they are out of power. By this I mean they accept their votes, and in some places they might even accept a candidate or two. Once in power, however, each of these political parties will begin to persecute those they seemed so willing to accept. This year libertarians were called neo-Nazis by Democrats, whereas under GWB they were allies in a common cause. I’m sure once the Republicans take power they will revert to calling libertarians traitors and malcontents.

You would think that a political party would be flexible enough to realize the changes in the tides. Whether the two major political parties will admit it, the 2010 election was a refutiation of Keyensian socialism and a push towards free market capitalism. At least that’s what the voters thought.

The reality is that Republicans will not move toward free market capitalism and Austrian economics no matter how much they referred to these ideas during the campaign. You’d think that the most logical Republican candidate to put forward for the 2012 presidential election would be Ron Paul, especially if you truly believe what you’ve sold the American public. But they will not support Ron Paul.

They, those who actually influence the Republican party, will push for a vanilla candidate that sticks to their mercantilist ways. Right now I’d say that Mitt Romney is their front-runner. They could also go with Patraeus or Jeb Bush. They don’t want Sarah Palin because the folks in control of the Republican party aren’t really conservative and she’s a loose canon, not the stable mercantilist candidate they like. Ron Paul scares the hell out of them because he actually has a brain and the will to use it.

The only time in recent memory where the non-politically elite candidate for the Republican party won the nomination was Ronald Reagan. George H.W. Bush was their guy, but Reagan captured the attention of the plebes to win the nomination, and the JFK Democrats to win the general election. Jimmy Carter’s complete ineptness provide the opportunity for Reagan. I’m not saying that Reagan was a radical, but to those in power in the Republican party he wasn’t the guy they wanted. I think in time both Reagan and the power elite found common ground, and the party has tried to recreate Reagan’s blue print for success. That means drawing conservatives and libertarians into the fold, but not to the point where they determine any meaningful policy.

I think in time this gambit will back-fire. Could be happening now, but I’m skeptical. What you are more likely to see is the continued bastardization of Austrian economics and libertarian thought by a political class that wants to obtain and maintain power. The Mises Institute and other like-minded organizations and people have a lot of work to do before we see a breaking point. The present challenge will be to see that this recent rise in popularity continues on into further education and eventually action. But then even with a complete understanding and acceptance of these ideas by the American public I don’t think the change will come through elections.

Only Peter Schiff knows his own motivation. Is he embracing certain positions for political purposes or does he actually believe in them? Is he conforming to the way things are in hopes that ideas become the way things will be? A 100% pure anything is extremely rare. A 100% pure libertarian in a world that disdains libertarianism or free-thinking is perhaps the rarest of all. I think what some are worried about is whether Peter Schiff is a defender of Austrian economics and libertarian thought or a tool of the political elite to attract the masses with no real hope for actual change. I think there is healthy skepticism in questioning anyone who’d attempt to use the political process for change.

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However much you wish to argue against the man, you are missing a very large portion of Mr. Schiff’s history. His writing’s alone are soundly concreted in Austrian School. His take of it is purely economical, and he lean’s to the Conservative side on his method’s. Conservative as in making the safe bet, rather than the risky reward.

I’m not sure how you can refer to the man as a core Neo-Conservative, when he actually has worked for Ron Paul in the past. Even to this day Ron Paul has been heard stating that he would appoint him as the SOT if he wins the Presidency. Mr. Schiff may be motivated by profit, but seeing as how this is a forum based on an economic philosophy, I would dare say we all are. Otherwise why are would you be here to talk about the most logical system of achieving it?

The best way to determine if a person truly is a Socialist type personality, which Neo-Con’s have shown to be, just ask them if they are willing to work for bare sustenance, and give everything to someone else. All of these sub-division ideas that some of the people have put out are based on inherently false logic. Prof. Mises himself stated that, “Interventionism leads to Socialism”.

Anyone that supports Interventionism, is in fact supporting Socialism. There is no middle ground on this argument. Those that say there is are confusing the issue and compromising their principles. If any human is ever to truly live in a free society with Individual choice, then there can be no scent, flash, or even speck of Authoritarian ideas in their mind.

If we go even further into understanding the true depth of what Prof. Mises was onto, we have to exam the subject matter itself.

Forgive the use of Wikipedia, it’s simply easy to access for reference ATM:

As you can see the economy refers to everything that drives life in a region or state. The US being the exception as it’s a collection of Independent states. That mean’s inherently to Intervene in the economy is to Intervene in life itself. With that conclusion, it’s obvious that any Intervention in life of any means, is a step toward’s Socialism.

That’s why there’s so many Anarchist’s that support Austrian School, obviously.

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Absolutely laughable. The biggest human rights violater in the world is the US military and it isn’t even close.

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KC Farmer.

  1. About sound bites. I think four books, several hour long speeches, two hours of radio every night, and dozens of articles are not exactly sound bites. So to say he is all about sound bites is a bit odd.

  2. You realize Peter was criticizing the Bush administration with the exact same criticisms that he has of Obama [for of course they are doing the same things].

Also, his many books and articles [some of which are archived on lewrockwell.com] and TV appearences start from when Bush was Pres, and continue when Obama came in, and so to this day.

Can you find any change in his message in all those years, as would be expected from someone who starts off as a harsh critic of Republicans and then decides to run for office as a Republican? [Waits for you to find something, anything…] I didn’t think so. So that it is hard to dismiss him as someone who is saying what he thinks will get him elected.

Let us not forget that while running for Senator he came out against Social Security, which any beginning politician knows you never ever do.

  1. Reading the “economic” criticisms of Peter Schiff posted here, I see that they say he is not a “trained economist”. As if [some of] the posters here have any training besides passing through the standard Keynesian brainwashing and then reading a book or two by Hayek [and judging by their posts, without understanding]. What “training” can anyone say he has had here, besides reading books? Someone who works with their hands, be it a carpenter, or a surgeon, certainly can say he has training if he practices. Someone who has to solve problems for a living, such as an engineer, a scientist, a mathemetican, even a psychologist, can get training by practicing solving problems. But what “training” do economists get? The only thing I can think of, using the other disciplines as guides for what training is, is if someone here has here run a business, a country, a state budget, something like that. Then maybe he can say he has on the job “training” as an economist. Maybe people here practiced solving differential equations, or writing term papers, and they think that makes them “trained” economists.

  2. Certainly they expose their economic ignorance in their postings. For all the big words and arrogant atitudes, they are clueless. Let us remember, for a country and an individual, despite what the Keynesian brainwashers will tell you, the same economic principles apply. So that when they cheerlead for the wonders and glories of debt, the more the better, then they of course should be maxing out their credit cards, taking out mortgages they can never repay, squeezing whatever loans they can out of their friends.

If they are, we shall not hear from them anymore very soon, as their computers will be taken away from them to pay for their debts. If they aren’t, then there is hope, because deep down they have an underlying layer of sound instinct that they have not succeeded in speechifying into silence. Thus it may one day surface and save them from their current curious way of thinking.

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jmorris,

Where does Peter say going into debt to consume is as great as Esuric would have us beleive?

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Smiling Dave wrote:

  1. About sound bites. I think four books, several hour long speeches, two hours of radio every night, and dozens of articles are not exactly sound bites. So to say he is all about sound bites is a bit odd.

Did I say “he is all about sound bites” or did I say…

K.C. Farmer wrote:

As I’ve stated, Peter Schiff operates on neat little sound bites that are packaged to sell his services.

It’s not odd at all. Schiff can speak for hours and write volumes of books and it can still boil down to a couple of sound bites. There’s nothing wrong with that. But he is by no means a Ludwig von Mises or a Murray Rothbard, nor does he or anyone here expect him to be. Schiff hasn’t provided his own economic treatise. Schiff has been influenced by Austrian economics introduced through his father. That is all.

Smiling Dave wrote:

  1. You realize Peter was criticizing the Bush administration with the exact same criticisms that he has of Obama [for of course they are doing the same things].

A lot of Republicans criticized George W. Bush.

Smiling Dave wrote:

Also, his many books and articles [some of which are archived on lewrockwell.com] and TV appearences start from when Bush was Pres, and continue when Obama came in, and so to this day.

Irrelevant.

Smiling Dave wrote:

Can you find any change in his message in all those years, as would be expected from someone who starts off as a harsh critic of Republicans and then decides to run for office as a Republican? [Waits for you to find something, anything…] I didn’t think so. So that it is hard to dismiss him as someone who is saying what he thinks will get him elected.

It’s not a matter of Peter Schiff changing as much as Peter Schiff revealing who he is. Peter Schiff hasn’t been around enough to really change, has he?

If there is a claim that Peter Schiff is 100% libertarian, then they better look again. Check out Peter Schiff’s senate campaign site for what he views as the issues and his position on each.

Schiff appears to support Austrian economic positions, and probably more so than most of the Republicans in the Senate, but he is still a Republican.

Smiling Dave wrote:

Let us not forget that while running for Senator he came out against Social Security, which any beginning politician knows you never ever do.

He also terminated his high-powered campaign consultants early on. They said he was too untraditional to win. Schiff opted for a lean, grassroots campaign that many say was too disorganized to be effective versus a Republican Party backed campaign with big money. He performed like an inexperienced politician. Also, the primary difference between Peter Schiff and Ron Paul is that Ron Paul knows when to keep his mouth shut; and it doesn’t hurt coming from Texas. Schiff had a three candidate primary race against a strongly backed Republican “insider” candidate. I think, given the circumstances, he did quite well for someone who screwed up his campaign so badly. Of course, it’s extremely difficult to hold to principle when your a political candidate, especially in a state-wide election in a state like CT.

Smiling Dave ranted:

  1. Reading the “economic” criticisms of Peter Schiff posted here, I see that they say he is not a “trained economist”. As if [some of] the posters here have any training besides passing through the standard Keynesian brainwashing and then reading a book or two by Hayek without understanding. What “training” can anyone say he has had here, besides reading books? Someone who works with their hands, be it a carpenter, or a surgeon, certainly can say he has training if he practices. Someone who has to solve problems for a living, such as an engineer, a scientist, a mathemetican, even a psychologist, can get training by practicing solving problems. But what “training” do economists get? The only thing I can think of, using the other disciplines as guides for what training is, is if someone here has here run a business, a country, a state budget, something like that. Then maybe he can say he has on the job “training” as an economist. Maybe people here practiced solving differential equations, or writing term papers, and they think that makes them “trained” economists.

  2. Certainly they expose their economic ignorance in their postings. For all the big words and arrogant atitudes, they are clueless. Let us remember, for a country and an individual, despite what the Keynesian brainwashers will tell you, the same economic principles apply. So that when they cheerlead for the wonders and glories of debt, the more the better, then they of course should be maxing out their credit cards, taking out mortgages they can never repay, squeezing whatever loans they can out of their friends.

If they are, we shall not hear from them anymore very soon, as their computers will be taken away from them to pay for their debts. If they aren’t, then there is hope for their benighted minds, because deep down they have an underlying layer of sanity that they have not succeeded in speechifying into silence. Thus it may one day surface and save them from their current darkness.

Was that directed at me?

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I must have misunderstood Esuric, if he implied that going into debt in order to consume, is a good thing.

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I don’t believe Esuric implied that. As I stated before, however, Schiff seems to argue that the US trade deficit is being promoted not by increased production of US exports, but by increased production of US government debt. Maybe I’m wrong, though – if so, please let me know.

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It’s easy to forget that every exchange of present goods for future goods is always an exchange between two parties. One party, by definition, is always going into debt in order to consume. That is what it means to trade a future good for a present good. So how can it be a bad thing to go into debt in order to consume?

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I don’t know why you people continuously reassert this. It’s factually incorrect. For the 5th time, the U.S. manufacturing base reached an all-time high in 2007, and we still have the most powerful manufacturing base in the entire world (even in the face of labor unions, regulations, high taxes, etc).

This is also factually incorrect on multiple levels. I don’t know what you mean when you say derivatives aren’t “real products.” What constitutes a “real product?” Derivatives are merely financial contracts that attempt to manage risk (swaps, futures, options, etc). The American securities market is the second most powerful market in the world, right behind the FOREX market.

Derivatives do not, in fact cannot, cause inflation. If anything, the wide-scale employment of derivatives may be an effect of inflation, a symptom.

It comes from BLS and Federal Reserve Statistics:

Again, we see that total manufacturing output peaked in 2007. When people talk about the “demise of the American manufacturing base,” they’re really referring to the fact that manufacturing employment rates have been falling since the 90s. But this is not a coincidence; it’s the result of massive productivity gains due to technological innovation and capital accumulation. This is freeing up labor for other, more warranted economic activities, and it’s why America has both the strongest manufacturing base in the world, and the most robust service sector. If we eliminated every sector with the exception of manufacturing, we would still have the second highest GDP in the world, right behind Japan (and that’s if we eliminated every other sector in the economy!).

The alleged demise of American manufacturing is simply a myth. All of this ignores the fact that China is plagued with massive malinvestemnts across the board. They have literally built ghost cities and empty super malls. All of this shows up on their GDP, but this is not warranted production, and it’s certainly not real wealth; in fact, it’s the destruction of wealth, and the squandering of scarce resources. Also, China just announced that it will install price controls in order to “control its inflation.” And finally, the Chinese savings rate, that Peter frequently praises, is nothing but forced savings. Chinese citizens are forced to save because they cannot afford the products that they produce (due to currency manipulation).

There is nothing structurally sound about the Chinese economy. People made the same claims about the Soviet Union, which also had enormously high GDP growth rates (it produced a lot of steel), but which was the most structurally unsound economy in the world.

Again, you (and Peter Schiff) are simply factually incorrect.

This has to do with government debt and irresponsible fiscal policy. No one disagrees with this, and this is not Schiff’s insight. If government debt rises to unsustainable levels, then the demand for government securities will fall, and interest rates will rise (making the debt unmanageable).

First, I’ve literally heard him say that China has a freer economy than the U.S. dozens of times. Next, China also has a central bank and torrential amount of banking regulations. The CCP directly and explicitly controls their central bank.

What makes you think you know so much more than me? Why don’t you actually respond to my arguments and the facts that I’ve provided. Listening to Peter Schiff on youtube does not make you an expert in international economics, and monetary/capital theory. Peter Schiff is simply an investor; that’s all. George Soros is a billionaire investor who, at the same time, is completely dominated by socialist confusion and mysticism. His success in the financial market does not make socialism theoretically tenable.

Again, I don’t doubt that the American economy is structurally unsound and is plagued with torrential imbalances and malinvestment. I also agree with Peter that this has affected international capital flows and trade balances in adverse ways (because perpetual currency manipulation attempts to create illusory comparative advantages). But again, Peter is simply wrong when he says that the Chinese economy is structurally sound, and his arguments are frequently incoherent, and/or ignore relevant variables.

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That the government diverts savings from potential productive activity to unproductive government spending by promising to continue to rob every one of its subjects until they either drop dead or run out of bullets (whichever comes first), is a totally different argument from “trade deficits are bad”, “we don’t produce anything”, etc…

Government securities and its fiscal policy is a very bad thing. That’s right! But why blame the trade deficit? What does it matter if it is your savings or it is a Chinese’ savings that are financing government debt? And when I save here in the US, I am also making consumers goods cheaper then they otherwise would be since I am not bidding them up. So I am now also “subsidizing the American consumer” ( A common one by Shciff).

Yes, even self-proclaimed Austrians fall for the same old fallacies. What’s the big deal?

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Trade deficits are just a different way of looking at dept.

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“What does it matter if it is your savings or it is a Chinese’ savings that are financing government debt?”

It doesn’t. But I think we agree that govt debt is aproblem.

Peter argues that, in addition, there is another problem. Every month we buy $50 billion dollars more in products from other countries than they buy from us. Where do we have the money to pay for those extra 50 billion in products? It can be in only one of two ways. Either we give them dollar bills, or they tell us “You can owe us the 50 billion, and pay us some modest interest”.

In the case where we give them dollar bills, what is happening to a large extent is that they lend it right back to us, usually to the govt, which we know is a problem. We will have to pay it back one day.

In the case where they “You can owe us the money”, once again they are lending it to us and we will have to pay it back. And note that they lent it to us, not to do all the fantasy world stuff Esuric mentioned [=grease the wheels of business], but by definition of a trade deficit, they lent it to us to take home a Chinese TV set to watch, or to buy some other Chinese consumer good. Sure, in the 19th century the money we borrowed from abroad was used for the stuff Esuric mentioned, and that made us a wealthy nation. But Esuric is 150 years behind the times. Now the money we borrow is used to buy TV sets.

Bottom line, that trade deficit yields one result: we have more consumer goods in our homes, and the Chinese have our IOUs. We will have to repay that money with interest. And we are broke. We cannot pay them back, ever. That is the root problem we have.

So what will happen when they ask for their money, or when interest rates rise to the extent that we cannot even pay them the interest on time?

Peter says two things will happen. The govt will pay off its debt by printing money, creating high inflation or hyperinflation. The private sector will not be able to pay. So the Chinese will tell us, no tickee no washee. You get no more of our TV sets, or anything else, till you pay us back in full. And since we had to get 50 billion dollars a month of stuff from them, that means by definition that we were not making that stuff. We had to buy it from them. So that every month, when the Chinese close the faucets, we will go to Walmart’s to buy things, and see that the shelves are empty.

BTW, one question Esuric has evaded is “If we are so productive, why do we need to buy 50 billion dollars a month of Chinese stuff that we cannot afford?”

74

This will be my last response. Smiling dave continuously ignores my arguments and merely reasserts the same fallacious over and over again. But it’s good to see that he has dropped the “America doesn’t produce anything” myth.

I’ve explained how current account deficits are counter-balanced by capital account surpluses (and the reserve account), which, again, merely means that foreigners are using their dollars, which they’ve received from international trade, to invest in the U.S. It’s true that much of this takes the form of consumer credits, and American’s are definitely consuming capital (over-consumption), but this is the result of inflationism and mercantilist policies which destroy savings (artificially low return on savings), incentivize capital consumption, and yield international structural imbalances. In other words, for the nth time, there’s nothing inherently wrong with a current account deficit; the problem arises only when introduce another variable, namely government interventionism (foreign government’s are inflating in order to capture the U.S. consumer and to boost their exports, which, according to you, constitutes the wealth of nations).

We buy foreign products because they’re high quality and relatively cheap (cheaper than they should be, but that’s another matter altogether); those products that we do not export are consumed domestically. States have current account deficits and surpluses amongst themselves, and that says nothing about the strength of their economy, and this is true in the international sphere as well.

How do you explain our three trillion dollar manufacturing base? It doesn’t solely go towards consumption (and there’s nothing inherently wrong with consumption either).

What do you mean when you say “they have our IOU’s,” and that “we’ll never be able to pay them back?” You continuously conflate the government with individuals and firms. We have to distinguish between government debt and private debt; between government expenditures and private investment and capital accumulation. The American Economy is the most powerful economy in the world but our government is broke.

Your argument implicitly consists of both mercantilist fallacies (a “favorable balance of trade”) and fallacies often made by various money cranks, namely that exponential debt can never be repaid, and that debt is inherently destructive. You have to abandon your holistic approach when it comes to international trade.

Bonds mature; firms that cannot pay back their debt will lose access to their capitals which will then be reallocated towards other, more capable producers. Bond holders will lose. If a firm cannot pay competitive dividend yields, then their stock valuations will fall, and they will lose access to financing. Only the government prints money when it cannot pay debt; private individuals and firms go bankrupt.

It’s frustrating because you continuously conflate very different things in order to make your fallacious point. Yes, government debt is bad (causes the crowding-out effect, and requires monetary easing), and yes, arbitrary capital flight and consumption caused by inflationism and currency manipulation is bad, but there’s nothing inherently wrong with current account deficits and private debt. The problem is that you’re incapable of holding the ceteris paribus condition (isolating the relevant variables) and reaching a sound conclusion. You also don’t understand how the economy works (we can easily do what China does and continuously devalue our currency in order to make our exports relatively attractive on international markets. But this would help manufacturing at the expense of all other industries, and it would cripple our consumers; they would lose access to goods that they previously had available to them, and they would face high rates of inflation).

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  1. You accuse me of things I am not doing, such as not distinguishing between the govt and the private sector. I dealt with each one seperately.

  2. You indeed tried to “explain” that trade deficits are balanced by current acct surpluses, but you failed, as explained in earlier posts.

  3. Note that you once again evaded the question I said you were consistently evading.

  4. We may have a 3 trillion dollar manufacturing base, built up in the past when we knew what we were doing, but we still buy 50 billion dollars worth of goods every month from other countries. Obviously, we are not producing enough to meet our incredible consumption habits.

That question is like asking “I make ten thousand dollars a month? How can you say I am poor?”. when you are spending $20,000 dollars a month.

  1. You straw manned me when you misunderstood my saying we can never pay our debt back. Not because of debt being exponential, but because we are broke. And are getting deeper in the hole every month.

To put it in language anyone can understand, if you have no job and no money and no skills, and borrow more and more on your credit card, how can you ever pay your debt? You can’t. Nothing to do with exponentials, but with your limited productive capacity, which is not enough to pay for what you are buying.

  1. Another straw man is that I have mercantilist fallacies. No, no mercantilism in my writings. I will educate you about mercantilism later in this post.

  2. Another straw man is your attributing to me that exports constitute the wealth of nations. What? I never said that.

  3. You say my mercantilist fallacy is “a favorable balance of trade”. Which means that you don’t understand what mercantilism is. OK, I will explain it to you.

Wikipedia explains that the mercantilistic concept of a favorable balance of trade was trading in such a manner that your country gets more and more gold in its treasure chest. This was to be accomplished by exporting more than you import.

I am saying something else completely. Nothing to do with getting more gold, [or more paper money], into our coffers. I’m talking about something everyone with a head on his shoulders does in running his household. And of course, one of the lessons AE teaches us is that the principles that apply to an individual’s economic state apply as well to a nation’s. [Maybe Hayek or whoever you read didn’t mention this, or even disagrees, but a search on this site will educate you about this].

Every individual engages in importing and producing and exporting. He imports into his economy when he goes to the store and buys something. He produces when he goes to his place of work and earns money. [It would be nice if people worked and got paid in goods, but they get paid in money. No matter, the principle is the same.] He exports when he takes his money and gives it to the store.

Now, if he earns X dollars a month, and buys X plus 50 billion dollars worth of consumer goods every month, he is deep trouble. [I hope we agree on this. I hope you won’t tell me he is great shape because he has a current account surplus of 50 billion dollars.]

This simple fact, that you should not buy 50 billion dollars a month more than you can pay for, is not to be conflated with a mercantilist philosophy that would say you should try to have as much gold in your wallet as you can at all times. I hope this is clear.

  1. You say I make the mistake of money cranks, who think debt is inherently destructive. Straw man strikes again. I explicitly and repeatedly made the distinction between debt incurred to produce, and debt incurred to consume, especially when you have no way of earning enough money to repay your debt.

Now you may say that even debt to consume that can never be repaid is just fine. Who cares if you never pay it back? China is not a credit card company or a Mafia usurer, who have some way of making you pay back. They can go whistle for the money they were foolish enough to lend us, right? Wrong. I explained the problems with that in my earlier posts.

  1. Your last paragraph once again straw mans me from beginning to end. Of course China is being stupid devaluing their currency. Did I ever say otherwise? But don’t forget, they have the factories and the productive capacity, enough to flood the world with their coveted goods, and we don’t.

Also, oh builder of straw men, I did not suggest we devalue our currency to increase our exports.

I dunno, Esuric, are you living in the Twilight Zone, and getting posts out there not identical to those I actually write?

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Where? You explicitly said that “we’re broke.” Who’s broke? I’m not broke.

I have thoroughly answered all of your questions.

Where is this explained? Please point me to this so-called refutation of basic economic principles. Are you really this unforgivably dense? A current account deficit does not mean that we’re exchanging one good for two foreign goods. It means that we’re exchanging one good, plus a bond, or a stock, or a piece of real-estate, or we allow a foreign investor to open up a business here in the U.S. (which he otherwise would not have been able to do because he wouldn’t have access to enough dollars if it wasn’t for our current account deficit) in exchange for two foreign goods. How is this a problem? We’re getting their goods plus investment, and there getting our goods plus assets.

You’re saying that some of this (our capital account surplus) is debt. I’m saying, “so what?” What’s inherently wrong with debt?

Also, a current account deficit does not mean that we’re consuming more than we’re producing. That’s called capital consumption and it can occur, in fact does occur, in nations that have current account deficits or current account surpluses (in fact, all nations are probably engaging in some degree of capital consumption right now). A current account deficit means that American consumption of foreign products is greater than foreign consumption of American products (the capital account alleviates the disparity that you’re so worried about). That’s all.

What the hell are you talking about?

AND?

Why can’t we pay off debt? I understand why the government can’t pay back it’s debt: it’s bankrupt. But why can’t a businessman pay off his debt? Why do you assume that every single individual and firm are bankrupt/unprofitable? Are you saying that every nation with a current account deficit is bankrupt?

No, I’m saying that you’re mindlessly repeating the same baseless assertion over and over again.

We have a larger productive capacity, and China, for a very long time, wasn’t even the world’s largest exporter; Germany, the sick man of Europe, was.

Just answer this one question before I walk away from this tiresome conversation: Is a current account surplus inherently desirable?

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Is a current account surplus inherently desirable?

The answer to this question is either yes/no (the inherently part necessarily makes it a yes/no question)

Also, here’s a lecture from Bob Murphy dealing with this very issue. It’s titled, “Five Most Common Myths about International Trade.” Go ahead and educate yourself: http://mises.org/media/1874 (myth #2)

There, I’ve done some of your homework for you. I’ve never seen someone, with such a feeble understanding of economics, especially Austrian economics, be this arrogant. You’re a parody of Austrian economics. You idiots watch a few videos on youtube and think you’ve mastered economics. And yet, you simply cannot understand the fact that the U.S. exports 1.046 trillion dollars a year, and imports 1.604 trillion dollars a year, and that this 558 billion dollar difference takes the form of foreign investment into the United States (I don’t why you continuously bring up consumer debt), yielding a mutually beneficial exchange. How unfortunate.

But at least you wont go around repeating the “America doesn’t produce anything” myth anymore.

A never-ending wave of unsubstantiated assertions.

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Esuric, honestly I would prefer you to use Independent data. I’m not likely to trust data given by the same organization that benefit’s from the misinterpretation, nor the same organization that promotes the usage of such a flawed figure as GDP.

So at this point in time I simply can not trust a single thing you say on this matter.

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This should have ended right here.

But then you contradict yourself and insist:

The Chinese have our IOUs? OUR? As oppose to if we had our own IOUs? Then we would owe it to ourselves and all would be fine I guess, even though, the result would be the same.

You said it doesn’t matter who holds the IOU’s, but then you say that it does. Those two statements are logically in contradiction.

That the government is sinking is a problem only to the extent that it is determined to take everyone with it. But this isn’t a problem of trade deficit.

The balance between Americans and the Chinese is just an aggregate statistic. You can do such aggregate statistics between all the people named Dave and all the people named Lisa.

Now, you could argue that in this world of nationalistic stupidity, such a trade deficit can lead to really dumb government policies. I will agree with that. It can even lead to war. But this is a completely different problem. It’s not an economic problem, but a political/stupidity problem, which results precisely from the fact that people continue to cling to mercantilistic fallacies.