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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: ild who wrote (274197)1/17/2004 9:55:25 AM
From: Perspective  Read Replies (1) of 436258
 
<after all, a voluntary exchange between US consumers of Chinese goods and Chinese producers of same MUST be beneficial to both - otherwise they wouldn't agree to such an exchange. >

Tell EJ that there's a big hole in that theory. Transient distortions in exchange rates cause the buildup of hidden, long-time-constant problems that aren't beneficial to both. The productive capacity being transferred to China takes a long time to move back to the US, even though the exchange rates might equalize very quickly. That part of the system has a very long memory and could (will) haunt us for a long time when rates swing to (and past) proper equilibrium for the dollar.

Fact is, one of the biggest blind spots in pure capitalism is its inability to see beyond the next three months.

BC
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