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

Tchiowa <tchiowa2@xxxxxxxxxxx> wrote in
news:87a077a1-d095-47f6-bc77-61c1b7bdedf0@xxxxxxxxxxxxxxxxxxxxxxxxxxxx:

On Mar 3, 4:05 am, Nick <nicknom...@xxxxxxxxx> wrote:
Tchiowa <tchio...@xxxxxxxxxxx> wrote
innews:40ec7686-2edb-475e-ac35-7d95b7
c27fce@xxxxxxxxxxxxxxxxxxxxxxxxxxxx:

Think about what you said. If I say I spend $1,000 and Chabby said
that makes a debt that's silly. And you say "yes, but if you only
earned $500 and had to borrow the rest, that is a debt". Yes, but
that is a completely unrelated assumption.

That's an assumption related to your words "It has exactly *ZERO* to
do with debt indebtedness.", suggesting that "income" never has any
influence on indebtness as if the amount one can "spend" isn't
influenced by how much cash one earns and/or has and how much one can
borrow.

The report was about the spending deficit.

The report was about the current account deficit, I think it's better to
stick to that term to avoid confusing.

In and of itself it has
nothing to do with indebtedness.

One could argue that isolated it has nothing to do with indebtness.
However the current account deficit is never isolated from other economic
variables like reserves and capital transfers.

Chabby crossed the words up, proving
he doesn't understand what he reads.

I think Chabby was probably shooting too fast from the hip, anyway what
he does or doesn't understand is unrelated to my remarks about "my
assumption".


Simply put income, spending *AND* saving do influence your
cash/credit position.

I capitalized *AND* in your sentence to make the point clear that none
of those three have anything to do with debt.

You might want to note that I actually wrote cash/credit position.

It is only a
combination, and a SPECIFIC combination that influence debt.

The words above contradict your words ""It has exactly *ZERO* to do with
debt indebtedness." suggesting that "income" never has any......
Capice??
Anyway it's not about a SPECIFIC combination but the numbers in a
straigtforward combination (Reserves+Income-Spending=Balance (of reserves
either negative or positive, when negative there's indebtness).

Without
those factors, the other are meaningless when talking about debt.

That's just your strawman, those other factors (Income, Reserves) always
play a role with respect to a cash/credit position.
Too much spending relative to Income and Reserves will lead to
indebtness.


Seems you haven't thought enough on what I said.
A prime example of a country running CAD's for some time and where
these CAD's had a lot to do with indebtness has been Thailand,
remember 1997? Thailand got in quite some financial trouble because
of these CAD's.

No, Thailand got in trouble because it tried to manipulate it's own
currency.

As if the fact that they where running CAD's for years had nothing to do
with Thailand "manipulating" it's own currency!!
BTW quite a few Thais seem to think it were others that were doing the
"manipulating".
Anyway the example of Thailand shows that if a country is experiencing
CAD's over a long time that doesn't necessarily signify that such a
country has a strong domestic economy and high wages as you alleged.


And it got into debt by having lax banking regulations.

Lax banking regulations don't lead to high debt per se nor to CAD's.


And one has exactly nothing to
do with the other. If, in the example, I earned $1,500 then not
only isn't it a debt, I have a surplus.

If speaking about the Current Account, you would have a Current
Account Surplus, simple isn't it?

Where did you get that?

What part of "If speaking about the Current Account" didn't you
understand???!!!

What I earned has nothing to do with it. If I
spent $1,000 and earned $1,500, but $1,000 of those earnings where
domestic and only $500 were foreign but all of my spending was foreign
then I would be running a current account deficit while also not going
into debt.

Why come with stupid examples that don't relate to the Current Account,
when the Current Account was discussed!!
Am I now to understand that those examples you gave earlier were not
simplifications of international trade? Why did you give such examples
than if they're not supposed to be related to the Current Account (and
Capital Account)?!?!

The fact that if you have a surplus there's a surplus, doesn't negate
that if you have a deficit there's a deficit.

Deficit <> debt.

Defict/surplus on the current account.

To conclude as you seem to do that if you're spending less than you
earn you won't run a deficit and if you spent more than you earn you
won't run a deficit either is just ludicrious.

The current account has nothing to do with what you earn (or spend,
for that matter). It has to do with what you earn or spend outside the
country.


Is there something you didn't understand when I added these words
"+ Net Invest Income (Income Receipts less Income Payments)+ Net
Unilateral Transfers (The balance of gifts given and gifts received)."
to your words "The Current Account Deficit is the difference between
imported goods and services and exported goods and services." ???!!!

You are the one that came with simplified examples, are you now saying
those weren't related to international trade!!
For me the context of your examples has always been international trade
to suggest that my words above weren't related to international trade
is plain stupid if not outright vile.
Seems to me you're just playing your stupid games misrepresenting what
I've written.

If you have a good domestic economy then the CAD is pretty
much irrelevant.

Which is something different than that a CAD signifies good domestic
economy and high wages wich you wrote earlier.
Which doesn't exclude that high and continiuos CAD's could lead to a
"souring" of a good domestic economy.


Once more remember Thailand?!

Once more, remember the US for the past couple of decades? CAD
deficits and growth, both in absolute and percentage terms, greater
than any other country over that period of time.

I've never claimed the USA was "sinking", what I have claimed is that
some countries that do run large CAD's for a long time do "sink".
This in response to you claiming that a a large CAD signifies a strong
domestic economy and high wages
Actually New Zealand and Austalia are also countries that have been
running CDA's for decades without "sinking".


Same spending. The amount of
spending has nothing to do with debt.

If you want to use the terms "spending" and "income", you should
realize that both "spending" (basically imports) and "income"
(basically exports)

What on earth are you talking about????? Exports and imports are a
very small part of the US spending or income.

I'm talking about the Current Account, as I did all along so I expected
you're talk of "spending" and "income" to be related to international
trade, capice??!! You're not able to read the complete sentence:
"If you want to use the terms "spending" and "income", you should
realize that both "spending" (basically imports) and "income"
(basically exports) contribute to the Current Account."!!!

contribute to the Current Account. Looking at a  Capital Account can
explain how a CDA is financed.
Basically it can be financed by borrowing or equity investments,
theoretically a CDA could be entirely financed by foreign equity
investments.

Domestic sales. Capital growth? Wealth creation? The engines of the US
economy that have been driving it since its inception????

Does that negate what I'm saying about the Current and Capital
Account?!?!?

<snipped the example that falsely assumes that all income is foreign>

When speaking about a Current Account all you measure IS foreign income.
Here's a definition so you might finally (?) realize what a Current
Account "deals" with:
The net flow of current transactions, including goods, services, and
interest payments, between countries.


Could you spend unlimited without ever running in a debt given
limited reserves and limted income?

Who said anything about limited income?

You're snipping my example and than ask some question out of context, how
nice:)


Actually prices of American product have been dropping for quite
sometime relatively speaking as a result of the decline of the value
of the US $
 
on the international markets, to conclude as you seem to do that
American products pre-dominantly are loosing ground because of high
prices doesn't sound right to me.

Actually American exports to other than China have been growing as the
currency drops.

So what does that say about American products pre-dominantly loosing
ground because of high prices?:)


The dollar has not dropped relative to China and it is primarly China
that is the source of the CAD.

I haven't got the numbers but I doubt the $ hasn't dropped at all
relative to China's currency these last years. I recall there has been a
rise of the RMB against the US $ in 2007.


So your conclusion fails because you didn't look at the specifics of
the market.

You keep on bullshitting, I spoke of international markets.
Also as if these words were only related to China:
"And in order to do that it must import a lot (which requires a
powerful domestic economy) and export less (which means the goods are
less attractive, usually because of price, which is often caused by
high wages). In the case of the US, this is exactly the primary cause."

BTW do you want to make me believe that America produces a lot of
labour- intensive products or that America has a very
labour-intensive economy?:)

No. We no longer depend on manufacturing. Our economy has matured
above that stage.

So why talk about high wages than as a reason for high prices, doesn't
make sense does it?!?!


IMO a Current Account Deficit should theoratically lead to
downward pressure on domestic high wages, but since so much is
bought on credit

Why credit?

Savings have been dropping for years, so I think it's save to assume
that more is bought on credit.

Savings in bank savings accounts have been dropping for years. Savings
through investments in Real Estate, stocks, and other sources have
risen dramatically.

So if more is invested in stocks for instance and "Savings in bank
savings accounts have been dropping for years", doesn't it make sense
than that more is bought on credit?
Do you ever think about what you write?
BTW I don't think most people would call investments in real estate or
stocks savings, investments is the proper term.


Compared to the US it has *almost* no domestic economy. It's high
annual GDP increases stem from exports.

The same thing applies to Europe. Take away exports and look solely
at the EU domestic economy and you see that Europe has been in
recession roughly half the time in the past decade or so.

Exports are part the economy,

But they are not part of the *DOMESTIC* economy, which is what we were
talking about, is it not?

"We" were talking about a recession!!!

a recession can be defined as "A temporary
decline or setback in economic activity or prosperity.", it's stupid
to "take away" exports and than declare recession. I don't think that
anybody in his right mind would declare China and India to have been
in "actual" recession these last years.

China and India have had noticeable domestic economy growth rates
lately, but nothing like the 10% overall growth.

So, were China and India in recession these last years?!?!

Some countries might have escaped recession because of strong
exports, but that doesn't mean that these countries actually have
been in a recession. At best they might have been in recession if one
would "take away" exports.

That's the point. Europe has been avoiding recession on the back of
the strong US economy that buys its goods and allows slow economic
growth.


So Europeans are to blame because they're avoiding recession, those
bloody Europeans:)


Europe's domestic economy is stagnant.


Seems I wasn't far off when I wrote:
"It seems to me you like to declare recession in Europe as eagerly as
some people like to declare it in the USA, just based on some aversion
against Europe respectively America."

Yes, we Europeans are all going bankrupt, happy now?


Nick
.