Re: US on the rocks. Rank Order - Current account balance

On Feb 28, 7:10 pm, goodsoldierschweik <goodsoldierschw...@xxxxxxxxx>
wrote:
On Feb 28, 6:34 pm, Tchiowa <tchio...@xxxxxxxxxxx> wrote:

No. That does not follow.

2 problems with your logic.

1) If the countries that collected the money held the money that would
be true. But in fact the countries (like China) are returning most of
the money in the form of investments. So the money comes back.

2) The domestic money supply can be increased if wealth is created.
Again, a powerful domestic economy solves that.

You are rationalizing.

First, we are talking about current accounts. There is no guarantee
that a country with a positive current account must/will invest in a
country that has a negative current account, thus your first statement
is simply pie in the sky.

No, there is no guarantee. But in fact that is what is happening. It's
not pie in the sky. It's today's reality.

Secondly, when you state that China is "investing" in the U.S. what is
actually happening is that they are buying bits and pieces of the U.S.
and thus accelerating the speed with which money flows out. i.e., if a
foreign country buys, say, 10% of Company 'X" it simply means that 10%
of company X's profits flow to the foreign company rather then into
the local economy; in addition to the positive balance of payments it
enjoys from their export/import trade.

So? That doesn't create debt. Money flows. That's a *GOOD* thing. A
*VERY* good thing.

Secondly, if, as you state, the U.S. enjoys such a strong "powerful
domestic economy" why is the U.S. continually borrowing on the
international market by issuing government bonds?

???? If snakes are reptiles then why do peaches grow on trees???? How
could you make a more unconnected assumption?

The US is borrowing to support public debt. The government spends more
than it takes in. That has exactly *NOTHING* to do with the domestic
economy.

Further, it is difficult to look at the fairly rapid depreciation of
the US dollar and accept the premise that the US economy is a
"powerful domestic economy. Frankly I would tend to believe that the
U.S. economy better described as "sick" at the moment..

The US economy is in a slow down. No doubt about it. But what that
means is that it is not as strong an economy as it was last year. All
part of the normal business cycle.

But if I have a million dollars and I normally increase my income by
10% a year then next year I have $1,100,000. Right. Now if I slow down
and only increase by 1% that means that the following year I have
$1,101,100.

Now if you have $50,000 then I am wealthier than you. I'll be
wealthier than you next year. I'll be wealthier than you the following
year even though I only increased by 1%.

That's how you should look at the US when you're talking about the
domestic economy.

The US has (far and away) the largest domestic economy in the world.
It grows at an average of over 3% a year and has for decades (some
years it's more, some years it's less, the business cycle lives on).
Over the past half century not only is it the largest domestic economy
it is also the fastest growing. A potent combination.

If the US didn't have a powerful domestic economy it couldn't purchase
all those Chinese toys (lead paint and all).
.

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