We think They sweat
Bill Bonner, back in London...
*** "We think, they sweat," writes colleague Steve
Sjuggerud. Steve doesn't believe that we are "just nasty gluttonous Americans." Instead, he seems to believe that we
earn our way in life, despite the evidence of the trade deficit, by thinking!
We will gladly take the other side of this trade! We've
seen thousands and thousands of Americans... over many,
many years... but rarely have we seen one actually
THINKING!
Americans are people who prefer action. That's why George
W. Bush is president; he doesn't even pretend to think.
It's why people buy stocks for many times what they are worth... why they believe that they can spend money their grandchildren haven't even earned yet... and why, following
a curious attack by mostly Saudi nationals based in
Pakistan or Afghanistan, Americans went to war with Iraq!
We have great respect for Steve's investment savvy... but
no one can be right about everything. As far as we can
tell, Steve thinks the trade deficit has no information content; it is mute. Apparently, it tells him nothing. But to us here at The Daily Reckoning, the trade deficit speaks
louder than actions. It tells us that America is spending
more than it earns... and that every day that this
continues, America grows poorer.
"Andy Kessler offers a more optimistic take on this conventional wisdom in his latest book, Running Money, Steve writes. "Quite frankly, I've never bought the conventional argument about trade deficits being a bad thing. So Andy Kessler's idea is a breath of fresh air."
What is Kessler's breezy insight?
"A problem is not a problem until it's a problem," Steve
tells us.
Hmmm...
A man jumps off a high building. He has no problem,
according to Kessler, as he passes the 25th floor. Still no
problem going by the 14th... or the 10th... the 7th... and
so on. He still has no problem as he goes by the
windowsills of the first floor... or even just before he reaches the dust on the pavement. In fact, up until that nanosecond in which his flesh is compressed against the concrete and his hard head is flattened... he is just fine!
"It's not the fall... that hurts at all... it's that sudden
stop," sings Percy Sledge in "Sudden Stop."
This is thinking? This is the thinking that earns America's
keep?
"We are not a bunch of gluttonous consumers who are
mortgaging away our future by overindulging and running
huge deficits in foreign goods," writes Kessler. "Instead,
the United States turns out high-margin intellectual
property that the rest of the world uses to build finished products. We may run trade deficits, but we have more margin than they do."
What?
Ooh la la... let's say you sell a hit song. High margin,
right? So you sell $1,000,000 worth to foreigners and you
bring back $500,000 in profit.
Great.
The foreigners are not nearly so smart. They don't think.
They sweat... and turn out a million gizmos... which they
sell for $10 each and make only $1 each. Low margin, right?
Who's better off? The foreigners, of course!
The trade deficit tells us that more money is going out
than coming in. The low margin products provide jobs,
profits, new factories, infrastructure and everything else
that raises standards of living. Margins may be higher in
the United States, but so what? The foreigners are selling
more and making more than we are. And they are taking the surplus and buying up U.S. assets.
Is this good?
Is Kessler really thinking... is he offering fresh air or
hot air? |
