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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: LLCF who wrote (15822)	2/28/2002 12:14:55 PM
From: elmatador	Respond to of 74559

It is looking like some giants are in fact paper tigers!

To: LLCF who wrote (15822)	2/28/2002 2:20:16 PM
From: Maurice Winn	Read Replies (3) \| Respond to of 74559

<<To worry about a trade deficit with Japan is ridiculous. A $ goes from Uncle Al, to Japan to Saudi Arabia to China to QUALCOMM > The point is... it DOESNT> Well, many do and in the end, all of them will be spent, because that's the only thing anyone can do with a dollar other than lend it to somebody else who wants to use it for a while and they pay interest. Japanese have got a lot of dollars which they haven't spent, but they lend them to somebody, which means those dollars have in fact gone somewhere else. Now, who has got debt? Well, crikey, the USA has got a lot of debt [Global Crossing and a lot of credit card holders for example]. So the dollars have in fact gone in the happy circle of life. Worrying about a trade deficit is ridiculous. It just means the one holding the money has worked to produce goods and services and has received a bunch of IOUs which means the buyers have promised to do something useful one day. Personally, I'd be a bit circumspect about accepting too many of those promises because Americans might decide it's too much trouble to get a real job instead of just hiring Uncle Al to print another few billion dollars. To avoid the hard work of repaying the debt, they could dilute the holders of those dollars by printing a LOT more dollars, which is a time-honoured means to avoid repaying IOUs. That would make those dollars like a hot potato - holders would start swapping them for something else, anything else! Gold for example. But so far, the game is good and the demand for dollars is strong as more and more of the 6 billion people find a serious currency is better than Zimbabwean-style barbarianism. Uncle Al is the greatest human the planet has ever seen, keeping the financial system for 6 billion people alive and well. We know he's good and we trust him more than the local shamans. In Al We Trust. There is one God and Al is his name. Al and Allah - one earns interest, one forbids it. I know which most people prefer and which makes sense financially. That's why the Japanese have collected a LOT of Uncle Al's money. It works! They could have swapped those dollars for gold, Pommy Pounds, Euros, New Zealand [which would have been a good buy back in 1990 when the Imperial Palace had the same value as New Zealand] or the Dow or Footsie. But they seemed happy enough to keep a stack of dollars and earn interest. Trade deficits are fun to calculate and keep the trade negotiators in a tax-payer funded job. It would be more sensible to ignore the trade deficits, fire the trade negotiators and if some country wants to restrict imports, that's mainly their problem. If the USA doesn't want cheap steel, USA citizens can put a tariff or quota or restriction on imports - which is funny because the USA is a major whiner about trade restrictions by other countries and here they are whining about steel imports. They also whined about cheap, high quality, New Zealand sheep and stopped imports. The USA could become like Albania, North Korea and China of 30 years ago - shut out the rest of the world. That would be very disruptive to everyone, because the USA is such a big part of the global economy. But it's an option some people seriously consider. If they do that, the USA would implode in a major depression to make the 1930s look like a training run. The rest of the world would take a step down too, but not as far because we live at a lower level. The USA should be wary of disrupting the world's economic flows at a critical juncture such as the post Y2K bubble collapse and debt resolution. Life's a giggle, Mqurice