Top 10 Ridiculous Examples of Corporate Greed

[Andylusion]

Second, Keynes economics has been proven false dozens of times. The great depression was preceded by a massive increase in government spending.

No. Not true, look at the chart. What exploded massively was private debt.

Your chart, does not contradict my statement, nor prove your claims. I'm not sure what you think it proves.

We already went over the fact that correlation, does not equal causation. And we already know that the government pushed sub-prime loans, which resulted in higher private debt.

The fact this X happened, and Y happened, doesn't mean X caused Y. And it certainly doesn't prove without private debt, the economy would have crashed.

Maybe , but then you can see the same happen in Japan, Spain and other countries.

Regardless that doesn't change the fact that money is created when debt is issued and that it slowly disapears when it starts to be repaid.
Then think about this formula:

Consumption = income + new debt - debt payments

That little formula is the proof.

That argument, I never contended with. I agree with that. It's all your other claims surround that, that I disagree with.

 

[CultureCitizen]

Companies don't spend billions of dollars in this sort of thing, unless they have to. Most companies would rather avoid automation, if at all possible. But it's generally not possible.

I worked for a company that prior to, hand built all their CPU boards. They had it automated, so the work of 25 people, could be done by 1.

But the alternative was, go out of business. So in effect the capital investment to replace labor, was actually money spent preserving dozens of jobs. If they had not done this, the company would of closed, and EVERYONE would be unemployed.

So even that spending, is spending that benefits the entire country, and the people who worked there.

Yes, this is correct. But looking at the employment charts this happens more frequently every time, and it is not just blue collar jobs, but other jobs also.
In economy this is called creative destruction.
It happens all the time, but what matters most is if the rate of creative destruction can be offset by the economic growth.
Again , this doesnt seem to be happening

 

[Andylusion]

Companies don't spend billions of dollars in this sort of thing, unless they have to. Most companies would rather avoid automation, if at all possible. But it's generally not possible.

I worked for a company that prior to, hand built all their CPU boards. They had it automated, so the work of 25 people, could be done by 1.

But the alternative was, go out of business. So in effect the capital investment to replace labor, was actually money spent preserving dozens of jobs. If they had not done this, the company would of closed, and EVERYONE would be unemployed.

So even that spending, is spending that benefits the entire country, and the people who worked there.

Yes, this is correct. But looking at the employment charts this happens more frequently every time, and it is not just blue collar jobs, but other jobs also.
In economy this is called creative destruction.
It happens all the time, but what matters most is if the rate of creative destruction can be offset by the economic growth.
Again , this doesnt seem to be happening

All true. And?

 

[CultureCitizen]

Second, Keynes economics has been proven false dozens of times. The great depression was preceded by a massive increase in government spending.

No. Not true, look at the chart. What exploded massively was private debt.

Your chart, does not contradict my statement, nor prove your claims. I'm not sure what you think it proves.

We already went over the fact that correlation, does not equal causation. And we already know that the government pushed sub-prime loans, which resulted in higher private debt.

The fact this X happened, and Y happened, doesn't mean X caused Y. And it certainly doesn't prove without private debt, the economy would have crashed.

Maybe , but then you can see the same happen in Japan, Spain and other countries.

Regardless that doesn't change the fact that money is created when debt is issued and that it slowly disapears when it starts to be repaid.
Then think about this formula:

Consumption = income + new debt - debt payments

That little formula is the proof.

That argument, I never contended with. I agree with that. It's all your other claims surround that, that I disagree with.

Take a look at Minsky demonstrations and at the research made by prof Steve Keen.
You might disagree, but his arguments are quite compelling.

Minsky

 

[CultureCitizen]

Companies don't spend billions of dollars in this sort of thing, unless they have to. Most companies would rather avoid automation, if at all possible. But it's generally not possible.

I worked for a company that prior to, hand built all their CPU boards. They had it automated, so the work of 25 people, could be done by 1.

But the alternative was, go out of business. So in effect the capital investment to replace labor, was actually money spent preserving dozens of jobs. If they had not done this, the company would of closed, and EVERYONE would be unemployed.

So even that spending, is spending that benefits the entire country, and the people who worked there.

Yes, this is correct. But looking at the employment charts this happens more frequently every time, and it is not just blue collar jobs, but other jobs also.
In economy this is called creative destruction.
It happens all the time, but what matters most is if the rate of creative destruction can be offset by the economic growth.
Again , this doesnt seem to be happening

All true. And?

Let's assume no inflation:

Year one : GDP = 100
Income = 50 ( an arbitrary number)

Year two : GDP = 105
Income still 50

Production increased.
Scenario 1 : Positive trade balance --> No problem
Scenario 2 : Negative trade balance --> We have a problem
a) There is an over production. You can reduce prices, but at the expense of reducing gains. Which in turn will reduce employment ( additional to creative destruction).
b) Households increased their debt , keeping up with the consumption level. No problem at short term , but a problem if debt grows too much.

 

[Andylusion]

Companies don't spend billions of dollars in this sort of thing, unless they have to. Most companies would rather avoid automation, if at all possible. But it's generally not possible.

I worked for a company that prior to, hand built all their CPU boards. They had it automated, so the work of 25 people, could be done by 1.

But the alternative was, go out of business. So in effect the capital investment to replace labor, was actually money spent preserving dozens of jobs. If they had not done this, the company would of closed, and EVERYONE would be unemployed.

So even that spending, is spending that benefits the entire country, and the people who worked there.

Yes, this is correct. But looking at the employment charts this happens more frequently every time, and it is not just blue collar jobs, but other jobs also.
In economy this is called creative destruction.
It happens all the time, but what matters most is if the rate of creative destruction can be offset by the economic growth.
Again , this doesnt seem to be happening

All true. And?

Let's assume no inflation:

Year one : GDP = 100
Income = 50 ( an arbitrary number)

Year two : GDP = 105
Income still 50

Production increased.
Scenario 1 : Positive trade balance --> No problem
Scenario 2 : Negative trade balance --> We have a problem
a) There is an over production. You can reduce prices, but at the expense of reducing gains. Which in turn will reduce employment ( additional to creative destruction).
b) Households increased their debt , keeping up with the consumption level. No problem at short term , but a problem if debt grows too much.

In the days of mercantilism, having a trade deficit meant that the other country was selling stuff to you, for currency which they converted into gold. As they sold more stuff, collected more dollars, converted into more gold, the other countries would slowly lose their gold reserves causing major economic problems.

Fiat Currency, eliminated this issue. When a Chinaman sells a TV for $200, what can he do with this money? Nothing. He can't spend it, because no business in China takes US dollars. He can't pay his workers, because they won't except US dollars. He can't pay his suppliers, or invest, or purchase anything with it. Not in his home country.

Primary place that excepts US dollars is.... the US. There are a few alternatives, but none worth noting. You can buy oil with US dollars, perhaps some blood diamonds from Africa, but beyond that, there isn't anything you can do with US dollars, but buy US goods, or invest in the US.

Even if they buy oil.... what can those oil people do with US dollars? Nothing, but buy US goods.

So ultimately speaking, all dollars sent out of the US, at some point must return back to the US. The so-called 'trade deficit' is completely irrelevant.

But if all money must return back to the US, and it must..... then why is there a trade deficit? Because there is one thing not counted in the trade deficit numbers. Purchase of US bond and T-bills.

And this is where the implication of your post, contradicts all your prior posts. If you want to eliminate most of the trade deficit, there is a simple way to do it. Stop borrowing. If you simply refuse to borrow money, what are companies around the world going to do? They'll be forced into investing and buying. There is no other choice for them.

But you claim deficit spending is good. Well you can't have both. If you want deficit spending, then people who sell us stuff from abroad are going to buy debt, which is going to create a trade deficit.

Beyond that, like Friedman was famous for saying, the trade deficit isn't a big deal. If anything a trade deficit is an indication of a successful growing economy.

Without getting into the gritty details, just using fundamental logic, the entire reason that you are importing more goods... is because you can afford to. If the economy sucks, and you have no money, you can't afford to buy imported goods.

And that exactly mirrors what we see in trade history. In the 1980s, as the economy improved, the trade deficit grew.
When the recession hit around 1990, the trade deficit fell.
As the economy grow in the mid to late 1990s, the trade deficit grew.
When the recession hit 2002, the trade deficit fell.
In the mid 2000s as the economy grew, the trade deficit grew.
When the massive recession hit, the trade deficit fell like a rock.

Over and over throughout the trade deficit history, the deficit runs parallel to economic growth, rising wages and prosperity. Trade deficit declines, run parallel to economic recession, decline and falling wages.

The trade deficit is merely a sign that we are affluent.

Lastly, the idea that somehow people will be better off without a trade deficit, isn't even logical. Name one employer, anywhere on the face of the Earth, that has given out a pay raise because of a change in the balance of trade? It never happens. Ever. No employer has ever said "oh look the balance of trade is getting better.... pay hike for everyone!".

Now aside from the absurdity, the point is, people are paid what the labor is worth. That value doesn't change with trade deficits.

Moreover, I would argue that any attempt to "fix" trade deficits would necessarily make everyone worse off. If you were to ban the import of cars for example... what would happen? Supply is reduced, and demand remains the same. Result prices go up.

Now would wages go up? No. Not at all. My company that I work for is not going to pay me a higher wage, because the cost of automobiles goes up. I promise you.

So wages stay the same, but prices go up. Am I better off, or worse off? Worse off. By trying to eliminate the the trade deficit, you are going to make everyone worse off.

Worse, what if all those countries, place similar bans on exports from the US? What if all the customers around the world, that buy the products my company sells, stop buying because of retaliation trade barriers? Now I'm out of a job. So prices go up, and I'm unemployed.

Welcome to what led into the great depression. The key economic policy that was passed going into the great depression, was protectionism.

 

[Andylusion]

Second, Keynes economics has been proven false dozens of times. The great depression was preceded by a massive increase in government spending.

No. Not true, look at the chart. What exploded massively was private debt.

Your chart, does not contradict my statement, nor prove your claims. I'm not sure what you think it proves.

We already went over the fact that correlation, does not equal causation. And we already know that the government pushed sub-prime loans, which resulted in higher private debt.

The fact this X happened, and Y happened, doesn't mean X caused Y. And it certainly doesn't prove without private debt, the economy would have crashed.

Maybe , but then you can see the same happen in Japan, Spain and other countries.

Regardless that doesn't change the fact that money is created when debt is issued and that it slowly disapears when it starts to be repaid.
Then think about this formula:

Consumption = income + new debt - debt payments

That little formula is the proof.

That argument, I never contended with. I agree with that. It's all your other claims surround that, that I disagree with.

Take a look at Minsky demonstrations and at the research made by prof Steve Keen.
You might disagree, but his arguments are quite compelling.

Minsky

I'm inherently skeptical of all 'modeling' of economics. Not that I won't look at what he has. I have no problem looking at it, and perhaps I will if I have more time.

Whenever people start making their conclusions based on computer models, you shouldn't be compelled by this. You should be skeptical. Why?

Name one model that accurately predicted anything. Remember this computer model used by the Obama administration?

Using the most sophisticated computer models, by the leading Keynes economists of our day.

All wrong. Not just a little wrong, or even mostly wrong, but completely 100% utterly wrong.

You can get a model, to produce any result you want. You can tweak one assumption, add one data point, and change a model to say anything you want.

Now there is nothing wrong with playing with models, but to base your conclusions on them.... Show me one that has worked first. Then we'll talk.

 

[CultureCitizen]

In the days of mercantilism, having a trade deficit meant that the other country was selling stuff to you, for currency which they converted into gold. As they sold more stuff, collected more dollars, converted into more gold, the other countries would slowly lose their gold reserves causing major economic problems.

Fiat Currency, eliminated this issue. When a Chinaman sells a TV for $200, what can he do with this money? Nothing. He can't spend it, because no business in China takes US dollars. He can't pay his workers, because they won't except US dollars. He can't pay his suppliers, or invest, or purchase anything with it. Not in his home country.

Primary place that excepts US dollars is.... the US. There are a few alternatives, but none worth noting. You can buy oil with US dollars, perhaps some blood diamonds from Africa, but beyond that, there isn't anything you can do with US dollars, but buy US goods, or invest in the US.

Even if they buy oil.... what can those oil people do with US dollars? Nothing, but buy US goods.

I don't think that is precise. I mean without debt that would be almost correct...
Picture this: I am a powerfull tycoon with literally billions of dollars. What can I do ?

1) I can lend it ( e.g. I can buy US government bonds)
2) I can buy assets, well..., anywhere, because the dollar is the reserve currency ( and China has been hoarding gold and silver quietly since 2008).
3) I can buy my competitors in the US ( a disquieting notion given the ties between politicians and donnors ) .
4) I can buy real estate anywhere ( London seems a favorite destination which has created a property bubble there too).

Once again , it seems like a nice textbook theory, but the fact that the US has had an increasingly large trade deficit with China doesn't check with it.

 

[CultureCitizen]

No. Not true, look at the chart. What exploded massively was private debt.

Your chart, does not contradict my statement, nor prove your claims. I'm not sure what you think it proves.

We already went over the fact that correlation, does not equal causation. And we already know that the government pushed sub-prime loans, which resulted in higher private debt.

The fact this X happened, and Y happened, doesn't mean X caused Y. And it certainly doesn't prove without private debt, the economy would have crashed.

Maybe , but then you can see the same happen in Japan, Spain and other countries.

Regardless that doesn't change the fact that money is created when debt is issued and that it slowly disapears when it starts to be repaid.
Then think about this formula:

Consumption = income + new debt - debt payments

That little formula is the proof.

That argument, I never contended with. I agree with that. It's all your other claims surround that, that I disagree with.

Take a look at Minsky demonstrations and at the research made by prof Steve Keen.
You might disagree, but his arguments are quite compelling.

Minsky

I'm inherently skeptical of all 'modeling' of economics. Not that I won't look at what he has. I have no problem looking at it, and perhaps I will if I have more time.

Whenever people start making their conclusions based on computer models, you shouldn't be compelled by this. You should be skeptical. Why?

Name one model that accurately predicted anything. Remember this computer model used by the Obama administration?

Using the most sophisticated computer models, by the leading Keynes economists of our day.

All wrong. Not just a little wrong, or even mostly wrong, but completely 100% utterly wrong.

You can get a model, to produce any result you want. You can tweak one assumption, add one data point, and change a model to say anything you want.

Now there is nothing wrong with playing with models, but to base your conclusions on them.... Show me one that has worked first. Then we'll talk.

Well , all we've been discussing are models: the classical or neo classical model of economy to be more precise.

Keen is only expanding the theory created long ago by Fisher

Debt deflation - Wikipedia, the free encyclopedia

 

[CultureCitizen]

Lastly, the idea that somehow people will be better off without a trade deficit, isn't even logical. Name one employer, anywhere on the face of the Earth, that has given out a pay raise because of a change in the balance of trade? It never happens. Ever. No employer has ever said "oh look the balance of trade is getting better.... pay hike for everyone!".

Now aside from the absurdity, the point is, people are paid what the labor is worth. That value doesn't change with trade deficits.

Moreover, I would argue that any attempt to "fix" trade deficits would necessarily make everyone worse off. If you were to ban the import of cars for example... what would happen? Supply is reduced, and demand remains the same. Result prices go up.

Now would wages go up? No. Not at all. My company that I work for is not going to pay me a higher wage, because the cost of automobiles goes up. I promise you.

So wages stay the same, but prices go up. Am I better off, or worse off? Worse off. By trying to eliminate the the trade deficit, you are going to make everyone worse off.

Worse, what if all those countries, place similar bans on exports from the US? What if all the customers around the world, that buy the products my company sells, stop buying because of retaliation trade barriers? Now I'm out of a job. So prices go up, and I'm unemployed.

Welcome to what led into the great depression. The key economic policy that was passed going into the great depression, was protectionism.

Ah , but then again we come full circle: the only way to cover a trade deficit is through debt, debt which you said was unnecesary and harmfull... and I agree: a high level of debt will create a crisis eventually.

Here, take a look at Joe Stiglitz presentation, and let me know what you think.

Joe Stiglitz's Presentation On Why The Entire Global Economic System Is Doomed To Fail

 

[Andylusion]

In the days of mercantilism, having a trade deficit meant that the other country was selling stuff to you, for currency which they converted into gold. As they sold more stuff, collected more dollars, converted into more gold, the other countries would slowly lose their gold reserves causing major economic problems.

Fiat Currency, eliminated this issue. When a Chinaman sells a TV for $200, what can he do with this money? Nothing. He can't spend it, because no business in China takes US dollars. He can't pay his workers, because they won't except US dollars. He can't pay his suppliers, or invest, or purchase anything with it. Not in his home country.

Primary place that excepts US dollars is.... the US. There are a few alternatives, but none worth noting. You can buy oil with US dollars, perhaps some blood diamonds from Africa, but beyond that, there isn't anything you can do with US dollars, but buy US goods, or invest in the US.

Even if they buy oil.... what can those oil people do with US dollars? Nothing, but buy US goods.

I don't think that is precise. I mean without debt that would be almost correct...
Picture this: I am a powerfull tycoon with literally billions of dollars. What can I do ?

1) I can lend it ( e.g. I can buy US government bonds)
2) I can buy assets, well..., anywhere, because the dollar is the reserve currency ( and China has been hoarding gold and silver quietly since 2008).
3) I can buy my competitors in the US ( a disquieting notion given the ties between politicians and donnors ) .
4) I can buy real estate anywhere ( London seems a favorite destination which has created a property bubble there too).

Once again , it seems like a nice textbook theory, but the fact that the US has had an increasingly large trade deficit with China doesn't check with it.

I don't have any problem with buying competitors. This is generally a good thing. Most competitors don't sell unless they are already in danger of going out of business. It's extremely rare that a business owner is making billions, and then sells out.

It's when the company is already in difficult, that they sell out to competitors, and generally the other option is to go out of business completely.

Besides that, the only reason I would want to buy a competitor, is if I wanted to invest in the other country. The more people that invest in the US, the better it is for all of us.

Take Chrysler.
http://www.detroitnews.com/story/bu...07/26/fca-sterling-heights-assembly/87564134/

Fiat has invested $1.5 billion into Chrysler plants here in the US. This is a good thing, not a bad thing.

All countries hoard gold and silver. We do. Everyone does. But again, if I am in China, and I sell you a TV set, and I use the US dollars to buy gold.... how does that benefit me? I can't pay my people in gold, nor can I pay my suppliers or bills with gold, I can't even pay my taxes in gold.

However, even if someone does buy gold, all you have done is shifted the problem. Say I'm the gold seller. What am I going to do with US dollars? Ultimately the US dollars, must come back to the US. If they buy gold, the people they bought the gold from, still have to use those US dollars for something, and ultimately it comes back to the US.

They can buy real-estate, sure. Again, this isn't a bad thing. More people buying real estate is why values rise in general. Obviously if fewer people want to buy your home, the value of your home is going to fall.

That said, while it is true that foreign investors are buying property in London, it's not true that those investors are the cause of the price bubble.

The economist did several articles on the price bubble in London.
http://www.economist.com/news/brita...e-regulation-throttling-capital-grip-tightens

More than 1/5 of the total land in London, is off limits to developers. Green-space laws, land control laws, open-space laws, have dramatically restricted the creation of homes and office space, in a massive city, where demand for such space and living areas is incredibility high.

Basic economic, supply and demand.... supply is restricted, while demand increases... and you get higher prices.

You have confused the cause with the effect. Foreign investment in London real-estate, is an effect. Not the cause. As the price shoots up and up, people invest, including foreigners.

Lastly, again lending it to government by purchasing bonds.... is because you have supported government borrowing money. Stop the government from borrowing money, and foreigners won't be able to buy bonds with the money they get selling us stuff.

 

[Andylusion]

Your chart, does not contradict my statement, nor prove your claims. I'm not sure what you think it proves.

We already went over the fact that correlation, does not equal causation. And we already know that the government pushed sub-prime loans, which resulted in higher private debt.

The fact this X happened, and Y happened, doesn't mean X caused Y. And it certainly doesn't prove without private debt, the economy would have crashed.

Maybe , but then you can see the same happen in Japan, Spain and other countries.

Regardless that doesn't change the fact that money is created when debt is issued and that it slowly disapears when it starts to be repaid.
Then think about this formula:

Consumption = income + new debt - debt payments

That little formula is the proof.

That argument, I never contended with. I agree with that. It's all your other claims surround that, that I disagree with.

Take a look at Minsky demonstrations and at the research made by prof Steve Keen.
You might disagree, but his arguments are quite compelling.

Minsky

I'm inherently skeptical of all 'modeling' of economics. Not that I won't look at what he has. I have no problem looking at it, and perhaps I will if I have more time.

Whenever people start making their conclusions based on computer models, you shouldn't be compelled by this. You should be skeptical. Why?

Name one model that accurately predicted anything. Remember this computer model used by the Obama administration?

Using the most sophisticated computer models, by the leading Keynes economists of our day.

All wrong. Not just a little wrong, or even mostly wrong, but completely 100% utterly wrong.

You can get a model, to produce any result you want. You can tweak one assumption, add one data point, and change a model to say anything you want.

Now there is nothing wrong with playing with models, but to base your conclusions on them.... Show me one that has worked first. Then we'll talk.

Well , all we've been discussing are models: the classical or neo classical model of economy to be more precise.

Keen is only expanding the theory created long ago by Fisher

Debt deflation - Wikipedia, the free encyclopedia

Yes I am aware of this. I still think both are wrong on this matter. The fact that debt generally increases during boom times, and shrinks during recessions, is reversing the cause and effect. The idea that paying off debt, causes recession, is ridiculous. It's the recession that causes people to pay off debt. Banks don't lend randomly (unless guaranteed by GSEs), and when there is a recession, there are naturally fewer credit worthy borrowers.

 

[CultureCitizen]

However, even if someone does buy gold, all you have done is shifted the problem. Say I'm the gold seller. What am I going to do with US dollars? Ultimately the US dollars, must come back to the US. If they buy gold, the people they bought the gold from, still have to use those US dollars for something, and ultimately it comes back to the US.

Ok , let me tie the two problems: Assume I am a bank.
I sell gold, I get dollars
Then I borrow to a private company in the U.S. which imports Chinese goods
The dollars are now in the US economy again, but they aren't producing growth, They are actually causing a leak, since companies have to pay interests on the loan.
The financial sector expands, but the problem is the financial sector doesn't produce anything. You may assume it produces something based on its customers, but as I said before, that is a dangerous assumption ( it is surprising that some banks are rated AAA when most of their customers are rated as A and BBB).

 

[Andylusion]

Lastly, the idea that somehow people will be better off without a trade deficit, isn't even logical. Name one employer, anywhere on the face of the Earth, that has given out a pay raise because of a change in the balance of trade? It never happens. Ever. No employer has ever said "oh look the balance of trade is getting better.... pay hike for everyone!".

Now aside from the absurdity, the point is, people are paid what the labor is worth. That value doesn't change with trade deficits.

Moreover, I would argue that any attempt to "fix" trade deficits would necessarily make everyone worse off. If you were to ban the import of cars for example... what would happen? Supply is reduced, and demand remains the same. Result prices go up.

Now would wages go up? No. Not at all. My company that I work for is not going to pay me a higher wage, because the cost of automobiles goes up. I promise you.

So wages stay the same, but prices go up. Am I better off, or worse off? Worse off. By trying to eliminate the the trade deficit, you are going to make everyone worse off.

Worse, what if all those countries, place similar bans on exports from the US? What if all the customers around the world, that buy the products my company sells, stop buying because of retaliation trade barriers? Now I'm out of a job. So prices go up, and I'm unemployed.

Welcome to what led into the great depression. The key economic policy that was passed going into the great depression, was protectionism.

Ah , but then again we come full circle: the only way to cover a trade deficit is through debt, debt which you said was unnecesary and harmfull... and I agree: a high level of debt will create a crisis eventually.

Here, take a look at Joe Stiglitz presentation, and let me know what you think.

Joe Stiglitz's Presentation On Why The Entire Global Economic System Is Doomed To Fail

I would disagree with Joe, and your claim.

There is absolutely no logical reason to assume that a trade deficit must be covered with debt. None.

First off, Joe is actually wrong. If you add up all global exports, and add up all global imports, there is 1% more exports than imports.

There are a number of reasons for this. Smuggled stuff. Undeclared imports. Even changes in value over time. The value leaving the port, might be higher or lower than the value entering the port. In 1 to 2 months, a change in currency values can make the values different.

Additionally, it's impossible to value all the items coming in and going out. For example, the Honda plant here in Ohio, imports products from Canada. These shipments travel via truck, rather than train, for a specific reason. Taxes are not levied on loads under a certain value. I found this out when I was training to be a truck driver. By limited the value of the loads coming from Canada, they avoided the taxes, and of course these imports are not counted.

So there are dozens of reasons that imports and exports don't match.

Nevertheless, to claim a trade deficit must be covered by debt, is not logical. If I'm in China, and I sell you a TV, and you buy the TV, and you give me $200 (that you didn't borrow), and I give you the TV.... where is this debt? There is no debt.

Trade deficits, do not create debt. Borrowing money creates debt.

If you don't borrow.... it doesn't matter what the trade deficit is, there will be no debt.

If you borrow, it doesn't matter what the trade deficit is, there will be debt.

The two things are not linked in any way.

 

[CultureCitizen]

They can buy real-estate, sure. Again, this isn't a bad thing. More people buying real estate is why values rise in general. Obviously if fewer people want to buy your home, the value of your home is going to fall.

That said, while it is true that foreign investors are buying property in London, it's not true that those investors are the cause of the price bubble.

And this is the problem: this creates asset bubbles. And even if it doesn't cause one, what makes a contry grow is increasing the amount of capital goods. Real Estate doesn't actually make a country more productive unless it is at the most basic level ( e.g. going from a hut to a proper house, but this is mostly because it improves the population's health).

 

[Andylusion]

However, even if someone does buy gold, all you have done is shifted the problem. Say I'm the gold seller. What am I going to do with US dollars? Ultimately the US dollars, must come back to the US. If they buy gold, the people they bought the gold from, still have to use those US dollars for something, and ultimately it comes back to the US.

Ok , let me tie the two problems: Assume I am a bank.
I sell gold, I get dollars
Then I borrow to a private company in the U.S. which imports Chinese goods
The dollars are now in the US economy again, but they aren't producing growth, They are actually causing a leak, since companies have to pay interests on the loan.
The financial sector expands, but the problem is the financial sector doesn't produce anything. You may assume it produces something based on its customers, but as I said before, that is a dangerous assumption ( it is surprising that some banks are rated AAA when most of their customers are rated as A and BBB).

Stop borrowing money. Now what is the bank going to do with the money? If no one borrowed money from the bank, (and you are the one that claims debt is required for growth), then your entire argument falls apart.

Stop borrowing money.

Equally, according to you, debt is useful for growth. So the bank loans out the money to a private US corporation. By your own claims, they are producing growth. The private company uses the money to grow, expand, make new products, open another store, and so on.

And again, there is no "leak". Say the bank loans the money, and the private company is paying interest to the banks. So now like you say, the money is paying interest on the loan. But still, what can the bank do with the money? They can only spend, save and invest in the US with US dollars. At some point, the money comes back to the US. It must. It's not possible for it to just fly away and never return. Fiat currency, has no value other than what you can buy with it, and buy something you must at some point.

Lastly, it is not entirely surprising that a bank can be rated AAA, while it's customers are not. This isn't a big deal. If I'm a bank, I could have $100 Million in investments, while most of my customers are not nearly as credit worthy.

 

[Andylusion]

They can buy real-estate, sure. Again, this isn't a bad thing. More people buying real estate is why values rise in general. Obviously if fewer people want to buy your home, the value of your home is going to fall.

That said, while it is true that foreign investors are buying property in London, it's not true that those investors are the cause of the price bubble.

And this is the problem: this creates asset bubbles. And even if it doesn't cause one, what makes a contry grow is increasing the amount of capital goods. Real Estate doesn't actually make a country more productive unless it is at the most basic level ( e.g. going from a hut to a proper house, but this is mostly because it improves the population's health).

Well typically investors do create growth. Typically it's a very good thing to have more investors.

Think about it.... how do construction companies figure out where they intend to build? Where prices are good. You don't see major construction firms, investing in Alaskan Tundra. Obviously because the value of the buildings they produce wouldn't be worth anything. No demand.

In a normal free functioning system, as investors bought property, and the values started to rise, this would create an incentive for construction firms to build in these locations. Resulting in an increased supply, which would counter the effects of increased demand.

Supply increases along with increased demand, and the result is a stable price growth. This is why you don't see price bubbles in Texas. Houston has no zoning laws at all. If someone wants to build more homes, they just do it. I don't think anyone can claim that Houston has no investors, foreign or domestic, and yet they don't have price bubbles.

But this hasn't happened in London. Why? Because the natural incentive to build more construction in London has been restricted by open-space laws, green-space laws, 'smart growth' policies, and so on.

Again, you restrict supply in the face of increasing demand.... you are going to get a price bubble with, or without foreign investors.

 

[Wyatt earp]

Another thing we could do is make damn sure that the big corporations can't buy out all the little competition. Competition is good and we need to enforce our anti-trust laws big time.

Raise up the Minimum wage and that's exactly what's going to happen, the little guys can't complete

 

[CultureCitizen]

Nevertheless, to claim a trade deficit must be covered by debt, is not logical. If I'm in China, and I sell you a TV, and you buy the TV, and you give me $200 (that you didn't borrow), and I give you the TV.... where is this debt? There is no debt.

Lol!! No , that's not how it works!!
From the US point of view it seems logical because it is the reserve currency.

Take a step back :
First :
total production = local demand + exports. (10 + 1)
total consumption = local demand + imports (10 + 2)

This is a simplification because you could actually have stock build up, which leads to other problems, so for this example I'll disregard it. In the above example you produced 11, but you consumed 12. This can't be right. The only way to offset the difference is through credit.

 

[CultureCitizen]

They can buy real-estate, sure. Again, this isn't a bad thing. More people buying real estate is why values rise in general. Obviously if fewer people want to buy your home, the value of your home is going to fall.

That said, while it is true that foreign investors are buying property in London, it's not true that those investors are the cause of the price bubble.

And this is the problem: this creates asset bubbles. And even if it doesn't cause one, what makes a contry grow is increasing the amount of capital goods. Real Estate doesn't actually make a country more productive unless it is at the most basic level ( e.g. going from a hut to a proper house, but this is mostly because it improves the population's health).

Well typically investors do create growth. Typically it's a very good thing to have more investors.

Think about it.... how do construction companies figure out where they intend to build? Where prices are good. You don't see major construction firms, investing in Alaskan Tundra. Obviously because the value of the buildings they produce wouldn't be worth anything. No demand.

In a normal free functioning system, as investors bought property, and the values started to rise, this would create an incentive for construction firms to build in these locations. Resulting in an increased supply, which would counter the effects of increased demand.

Supply increases along with increased demand, and the result is a stable price growth. This is why you don't see price bubbles in Texas. Houston has no zoning laws at all. If someone wants to build more homes, they just do it. I don't think anyone can claim that Houston has no investors, foreign or domestic, and yet they don't have price bubbles.

But this hasn't happened in London. Why? Because the natural incentive to build more construction in London has been restricted by open-space laws, green-space laws, 'smart growth' policies, and so on.

Again, you restrict supply in the face of increasing demand.... you are going to get a price bubble with, or without foreign investors.

That increases the assets of a country but not the capital goods or its productivity.
Take a radical example : assume all that money went into a company like SpaceX.
Who is better off?
The country who constructed 200 high rises? Or the country that constructed a reusable rocket?