Here, Here!!! I thought I stepped into a match of people speaking of things I had never heard of. Turns out just one of the participants was improperly equipped and was making absolutely no sense whatsoever. Glad that’s resolved.
DD5,
“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.”
I didn’t say that it would be fine in that case. Straw man. What matters is that there is that debt that cannot be repaid. If you, DD5, a member of the private sector, not the govt, borrowed from your American next door neighbor Esuric 50 billion dollars a month that you could not pay because you had no job or money or skills, you would be in trouble. It just so happens we owe it to the Chinese.
"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. "
You seem to be saying in your posts that if you owe a million dollars to Esuric that you cannot repay, then everything is fine, because although you are a million in the red, he is a million in the black, so that the two numbers cancel each other out and everything is fine. SMH.
I ceratinly could do that aggregate you mention, Daves and Lisas, but it would probably not shed any light on what is going to happen. However aggregating into Americans and Chinese tells us something. The CHINESE look at it that way. "Those Americans owe us mountains of money and will never pay back. Let’s stop sending them stuff." Even if we do it your way and say that decisions are made on a case by case basis [who knows how those inscrutable Chinese think], the bottom line will be that all the Chinese will stop giving free stuff to all the Americans. Unlike a David and Lisa aggregate, this aggregate has meaning, because we get our stuff from the aggregate called the Chinese, and the people who will have to face empty shelves will be exactly those members of the aggreagte called Americans.
Dave, can you prove that you are personally liable for the US debt?
WRT sourcing, I’m not the smartest guy in these discussions, but I am clearly not the laziest. I’m not really interested in holding hands, or coddling people. Progress is made when people engage in scholarship and research on their own. Repeating what they have heard, or demanding to be educated by the people they have already staked out an adversarial position with is theatre.
I’m sorry people don’t know how to use Google. I’m sorry people don’t take a contrarian view to their own interests, just so they can understand more than one perspective. I am truly sorry Peter Schiff fans aren’t aware of counter-arguments to his positions. I’d hope a thinker would be intrigued by these things. I hope by pointing out that more than one perspective exists, we end up with more people with more nuanced views.
@Everyone, please don’t personalize posts. If you do, I will delete them. And if you continue to do it, I will ban you. So let’s avoid all that nastiness and keep the debate clean. Granted, some of us may not like one another, but this isn’t the format to express that.
This sort of needling and cheerleading is counter productive.
Are you claiming to speak on behalf of all the Chinese people in the world, or just all the Chinese people in China? Or just all the Chinese people holding US dollars?
And whichever group it is that you and Peter are talking about, has even one expressed these sentiments to you directly?
Who are the Chinese? Who are “the Americans”?
I’m sorry. Again you have to explain to me. Why Is Sam not able to pay back Lin or Wang any more of a problem then Sam not able to pay back Dave or Joe? Dave or Joe won’t “stop sending them stuff”?
Not according to you.
Dave: " However aggregating into Americans and Chinese tells us something"
LS, I apologize for the barb. It was written before our amicable end to the debate
To LS,
I edited that post after, and it hopefully addresses some of your q’s .
By the Chinese I mean the guys selling us the stuff that fill the shelves here, to whom we give $50 billion dollars in IOUs every month. The Americans are the set of all people living in the USA who buy Chinese consumer goods and pay with IOUs.
They have not expressed these sentiments to me. It is Peter’s prediction of what they will do. His reasoning is this: If your fellow office worker borrowed 50 billion dollars a month from you, every month, and showed no sign of intention or ability to ever pay anything back, would you eventually get sick of it and stop lending him?
To NidStyles,
Thanks for the support.
Dave, I am very familiar with Peter’s rationale. He usually implies people are acting irrationally, or that the Chinese need to “wake up”. The problem with this, is that he assumes he knows more about their values than they do. And in some cases, there could be a little truth to that, say someone who does something that is self-defeating, like stepping on a rake, or so forth.
He never stops to think about it from the perspective of the people he is criticizing.
DD5,
I agree with you that it could be Joe or Dave also. The reality is that its Wang.
What I’m saying is this. If we look at individuals, we may be missing something. If Bill Gates pays for everything with copies of Windows, and we consider him only, we might reach the conclusion that all the producers are happy because they are getting final payment in something they want. Only if we look at the set of all people taking home their stuff that live in the USA [which we call “Americans”], and see that adding up the numbers shows us that the Chinese [see post to LS to see who they are] see they are giving their stuff away for free [=accepting IOUs in payment that will never be honored], do we grasp that there is a problem. In other words, it is only by aggregating into the buyers and the sellers and studying what they are doing in total, do we realize that there is a debt accumalating here that can never be repaid [again, by aggregating the set of people who owe money and seeing what thier total productive capacity adds up to].
DD5, are you agreeing with my conclusion but questioning how I reached it? Or saying that I am more right than I think, because the problem exists, but it would have existed even if the reality had less Wangs and more Joes?
This is your problem. You’re just adding up numbers and reaching false and rather absurd conclusions based on very misleading aggregates.
The American consumer is not getting anything for free. On the contrary, he’s paying a heavy price for all the savings that are channeled into the financing of government debt. You (and Schiff) make it sound as if the money returns back to the consumer when Lin buys a government IOU, as if the end net result is Joe buys from Lin by paying with an IOU (which he won’t pay back). This is obviously not the case.
Now, only because you are thinking in “groups” (by your own admission) you are able to reach such false conclusions. The government getting the money from Lin is not Joe buying from Lin at Walmart. Joe got absolutely nothing for free! It is too bad that you have abandoned methodological individualism in order to support every little thing that Schiff says.
DD5, we seem to be talking past each other, so I am going to stop replying. In any case I would only be repeating what I have written several times in different ways, trying to get the ideas across.
Honestly my “cheerleading” was for making sense not a personal stride. There had been a person that was posting contradictory evidence in their post’s. This was what I was referring to. In the light of the discussion that was being made, there was a trend for some of the posts that were clearly Austrian School in nature, but came up with conclusions that did not fit with the rest of the text, IE they didn’t conclude what they should have in the Austrian sense.To add, my post of contention had not been responded to, when it pointed out the fallacy of the line of debate before to continued onto an entire page of obscurity.
As for this debate. The payment to the Chinese is in the form of T-bond’s. These are Money Instruments, and they do have a shelf life. Most of the ones that were sold to the Chinese are held by Bank’s, and they have a 20 year maturity. That mean’s in 20 year’s if not sooner depending on the the exchange rates, the Chinese will come asking for their return when it benefit’s them. We will not be able to pay for them, as we have no real asset’s as a nation. I know I will not be willing to pay for the Nation’s debt myself. I do not have $800 Billion laying around, do any of you?
This is what separates the business man like Mr. Schiff and the Theoretical Economist. Businessmen tend to live in reality, and try to make an Economical Theory work. Mr. Schiff is known as he is the most successful person at this point in time that follows the Austrian School. Is he the best person to listen to 100% of the time, no certainly not. Then again there are other’s that follow the same suit. Mike Maloney comes to mind as well.
I will directly quote Bob Murphy from this lecture because you either (a) did not listen to the whole thing (about 3 minutes dealing with the myth that trade deficits are “bad”), or (b) you’re just a liar:
Now Dr. Murphy limited his example to just securities. But in many situations, the Japanese investor actually gets tangible goods immediately. He either buys a piece of real-estate, or he invests directly in America (FDI) with the dollars he’s received from the American trade deficit. Your confused response was typical: you claimed that those funds don’t go to investment opportunities but rather go towards consumption. Now it’s certainly conceivable that an American businessman would issue stock, and rather than buying capital goods, he blows it all on consumer goods. But why are we assuming that this is the rule, that this is what typically happens? It’s so absurd.
I’m not really responding to you. You’re hopeless. I’m merely refuting your nonsense so that others, who are actually here to learn, don’t get confused and make the same fundamental mistakes that you’re making. There is no such of thing as a favorable balance of trade. There is nothing inherently beneficial about a current account surplus. America is not doomed because it has a current account deficit. If America is doomed it’s because of its central banking system and our international monetary system (but if this is the case, which it is of course, than most nations are doomed).
You don’t know what it means to be a Keynesian, and that “muddled mish mash” you’re referring to is called economics (basic economic doctrine).
It’s not a myth? So America doesn’t produce anything, and yet, it has the largest manufacturing base in the entire world. Much larger than any other nation, and it peaked right before the crisis. Got ya.
One person’s debt is another person’s asset. I don’t disagree with the fact that Americans have a lot of debt. I disagree with your assertion that every single individual and firm are inherently bankrupt, and I especially disagree with the notion that trade deficits cause systemic bankruptcy. Also, importing doesn’t mean that we consume more than we produce. The fact that we import doesn’t mean that our consumption rate exceeds 100%. You seem to think this because you continuously say, “if we produced so much, we wouldn’t need to import.” This, of course, laughable.
Sometimes people are obstinate, or they miss a post. Address the post, not the poster where possible please.
Do you owe the value of the T-Bonds? What are the assets of a nation? Step back one more iteration, what is a nation?
Perhaps you have not heard of Marc Faber or Jim Rogers. Mr. Schiff is one of many investors who draw on Austrian ideas. But his investment experience and opinions have absolutely no bearing on economic science. The truth is not dependent on application. This isn’t marxism.
To make your claim, as someone I believe may have before, that Schiff is more knowledgable about economics, because somehow he performs more economic action than you or I, let alone a Mises or a Rothbard, is silly on its face my friend.
That quote from Bob is about borrowing to produce, not borrowing to consume.
Oh ok, well then I will nice and point out the fallacy of your argument in every post then. I’ll start with this paragraph.
First you denounce my post, then you renounce it in a far more intricate form with some exuberance. You basically stated that the problem is not the Deficit, but the Central Bank, and our International Monetary System. The Central Bank doesn’t control trading to China. The Treasury does. They also control the deficit levels by trading T-bond’s for currency.
My entire argument was based on this wholesale giving away of T-bond’s to China and the EU. This is public knowledge. The point that you made was that the Central Bank and the International Monetary System would bring us down. Where is this International Monetary System you are referring to? We only do such trade in T-Bond’s and market sales. The Federal Government only trades with T-Bond’s. Like I stated previously we have to eventually pay them back. Where is it that think they will get the Currency to pay them with? What do you think is going to happen when they start coming for their currency?
Can you see the point? Do you understand the flaw in your logic yet?
Someone is about to be hoisted on his own petard.
Dr Murphy is crazy about Peter Schiff.
Unlike some posters here, he knows quality when he sees it, and agrees with 99% of what Peter says.
Unlike certain people here, he asserts that Peter “very well read in Austrian economics”, and that "Schiff is remarkably well-versed in Austrian theory for someone who is not a professional economist…"
Unlike a few here, he also recognizes the existence of “creditor nations” and “debtor nations”, and adds that becoming a debtor nation under today’s circs is a recipe for disaster. Feast your eyes, guys:
Although Schiff is remarkably well-versed in Austrian theory for someone who is not a professional economist, I do have a few quibbles with his presentation on the trade deficit. However, as Schiff himself remarked after reading my critique, my objections are akin to medieval scholars debating how many angels could dance on the point of a needle. The important thing is that the US transformation from the largest creditor to the largest debtor nation is the result of our fiat money system, and is not at all a sign of economic strength.
Unlike certain people here, he accepts Peter’s views on China being economically freer: *"*Schiff’s conclusion is that “in ‘communist China’ entrepreneurs have more freedom than they do in America. It is far easier to go into business there than here.” Oddly enough, he does not raise any of the objections to such a statement that some people posted here.
Unlike the sceptics here, Dr Murphy says that Peter’s prediction that "Our days as the dominant economic power are numbered. The dollar is going to collapse, and Americans are going to experience stagflation on an unprecedented scale in the form of recession and hyperinflation." is a “knockout”.
He also admits Peter was right, and he was wrong. Follow the example of Dr Murphy, and man up, guys.
Your friendly KneeBreaker Inc. (a monopolistic co-op, PDA, “protector”, racketeer) borrowed a lot in your name, bought goodies, and gave them to you to gobble up (“Geez, this co-op is so great!”). When the loan re-payment comes due, and the co-op is unable to pay, they’ll probably turn to you first for a “contribution”. You may not be broke – your knees, though, that’s a different story…
Hence, the slight difference between KneeBreaker Inc. and all dudes named Dave, as groups.
Z.