DSGE
VIP Member
- Dec 24, 2011
- 1,062
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Of course it does. Think about it. If 1 man in China own exxon-mobile and he sells just enough gas in the US to pay for his workers then ships the rest back to China and gives it out for free. That means the US is getting less then what it is producing, as a result of our past trade deficit.
What are you talking about? That doesn't make any sense. Are you imagining that owning exxon-mobil means that there's just this stock of oil that you suddenly get to do whatever you want with?
Also, are you imagining that if an American owns exxon-mobil they'll just take oil and give it out for free to Americans? You haven't actually demonstrated how there's any difference between US ownership and foreign ownership.
The more US businesses they own, the more free stuff China is getting. Theoretically it is even possible that China could own every business in the world, and every single Chinese person could get everything they wanted for free, while we work to provide it for them.
That's idiotic. How much stuff are you getting for free from corporations owned by Americans?
First off, yes you can do whatever you want with the business if you own it. Doesn't matter if it a small painting business and you give away free paint to your neighbors or a multi-billion dollar oil company.
Second,y ou are missing the entire point. It was just an example to illustrate the point. The point is they own these businesses for a reason. They are not buying US businesses to make US$ to buy more US businesses ad infinum. They are buying them for the purpose of extracting goods from the US economy, perpetually. A chinese man making $10m off a business he owns in the US doesn't want the cash. But he might want a jet made in the US.
And yes I do get stuff free from corporations in that sense. I own stocks, every year I get checks from those companies with which I buy stuff with.
It basically comes down to this. From a wealth perspective, it is better to invest your money then to buy goods that devalue, because it makes you more money in the long run. As a whole they are investing, while we are buying the goods. They are getting wealthier, while we are not.
Well it depends. In the case that we're deciding to consume more than we produce today and we borrow internationally to fund that consumption, yeah they get wealthier. But we also get to consume now, which is what we want. It's not the place of you or I to tell people that they should be saving more or their preferences should be different. Individuals can pursue their own interests.
In the case where we're borrowing internationally or obtaining foreign direct investment to fund investment, it's making everybody richer in the long run. When a factory buys a new machine which can increase productivity, the factory is getting something out of it. It can make more stuff in the long run. But it needs to borrow money in the short run to finance that. If we couldn't borrow internationally to fund investment, we wouldn't be able to buy the things that make us more productive. But of course they're not going to lend you money for free.
So either way, it's not a bad thing.