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

To: RealMuLan who wrote (50494)	5/25/2004 9:41:27 PM
From: energyplay	Read Replies (1) \| Respond to of 74559

Are US balance of payments deficits real ? >>This may be the most importatn post I could make this year. Remember in 1997 Asia currency crisis the US Dollar was "too high" especially for debts in USD ? ****************** The balance of payments numbers aren't exactly correct. 1. If you add up all the worlds balance of payments numbers, the world is a defict with itself. Numbers hsould be close to zero, and they are not. 2. There is a very large incentive for multinations to change transfer pricing so imports to the US are at higher prices and exports at lower prices. This can move profits to lower tax areas, like Ireland, HK, etc. The US is a high corporate tax area, if you make large profits. Since about 30% of world trade is transfer pricing between affiliated corporate entities, it is likely at least 5 - 15 % of the US trade defict is phony. There is also an incentive for the captive companies in Ireland, HK, etc. to lend money to the US operations, since the depreciation is worth more in the US. There's also R&D tax credits in the US. This results in money comming into the US. Note that it doesn't matter where the companies real ownership is - tax laws tend to push this distortion. In many cases, there is US stock holder ownership, and the cash in Ireland ultimately has some degree US ownership. The question gets asked, " How long will foreign holders keep buying or leneding to the US ? " The answer for many of them is " as long as they want to reduce US taxes." One example - Honda builds cars in Ohio from parts supplied by the US, Japan, and elsewhere. How should the engines be priced ? How should Honda parts from Ireland (tax holiday country) be priced ? Note that when the US trade defict gets down to about 2 or less % of total US GDP, the US Dollar starts moving up. There currently is a real trade deficit that the US is running, but the size is inflated by bad or useless numbers, just like employment, productivity, consumer price index, etc. This means the a Euro at more than $1.25 USD may start really hurting Europe. It also means that Japan and China's buying of US Treasuries isn't as dumb as it first seems. (Surprise !) Many other implications...

To: RealMuLan who wrote (50494)	5/26/2004 2:25:51 AM
From: Maurice Winn	Read Replies (1) \| Respond to of 74559

Good grief Yiwu, what is the world coming to? I think I agree with all of that post. <The reasons that the US can get away with printing for free for what others have to work to get:...etc... > There is more, but what you wrote was pretty good. Weird, but odd things happen in the world. Maybe you now think it's a bad idea to start a war with Taiwan. Surely that would be expecting too much sense in one day. Okay, on re-reading, there were a few glitches, but nothing too serious, just your usual biases such as "pursued or forced to keep more than 90% .." Mqurice PS: I also agree that it was better to have Ray Duray than not have him. It was an honor to be vituperatively insulted by him. He also included a lot of good information and some good reasoning. I hope the loss isn't permanent. Two agreements with you in one day!! Good grief, I'd better have a lie down = I must have a fever.