Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Kailash who wrote (48503)	12/31/2005 12:05:50 AM
From: ild	Read Replies (1) \| Respond to of 110194

Thanx for the links. <<<We do run a trade surplus with some countries -- Holland, for some odd reason>>> It caught my eye as well. I think it's porno films and stuff. We are the biggest producer and Holland is the distribution point in Europe. Happy New Year to you too.

To: Kailash who wrote (48503)	1/1/2006 8:04:56 PM
From: GraceZ	Read Replies (1) \| Respond to of 110194

And they are not growing -- our trade surplus with the Netherlands has remained around this level for the past 15 years. The overall deficit, on the other hand, is still growing. At some point, we won't be able to borrow the money to pay for it. The mercantilists of the 17th century thought that the only way for a country to get wealthier was to favor exports over imports resulting in gold flowing to the country with a favorable trade balance. It's a flawed theory. The way countries get wealthier is to add to their productive capital which in turn increases the GDP. They can do this internally, in total isolation of other countries or they can do it faster using international trade to maximize return on their capital. They can get richer all the while carrying on a trade deficit and accumulating debts for decades as long as they continue to add to their productive stock. You'd think this was an easy thing to measure, the capital stock of a country, but anyone who has ever run an enterprise or tried to value a company knows that it isn't easy to nail a figure on productive assets. Do you simply count up the money spent on capital investments? You could but it wouldn't be an accurate picture of what it was worth. Some assets would be essentially worthless and others put together would be worth far more than the sum of their parts. Do you use the book value? Most likely the book value is not accurate either. I can tell you from experience that many assets continue printing money long after they are off the depreciation schedule and others become obsolete before you make it halfway through. Capital can turn to scrape overnight and seemingly worthless capital can become your best asset when some sort of technological leap transforms it's function. Capital in one location may be priceless and in another location ...worthless. The best way to see if a country or a company is building up the value of its productive capital is to watch the income line. In the last ten years (between 1994-2004), the US has roughly doubled GDP per capita. We've also built up roughly $1.4 trillion in external debt (2004 figures). But this figure has to be put up against the asset side to see if it has had the effect of making us poorer. How much capital does it take to generate a GDP of 11-12 trillion US dollars in this interest rate environment? The payments on this external debt amount to around 54 billion or less than .5% off the GDP growth yearly. Would we grow faster without this external debt? Probably, but that would lead to an even higher gap in incomes between us and the more populous less developed world and an even larger difference in labor cost. If we are to continue to get richer, we need them to get a lot richer. As long as the former Communist countries continue to give up their collectivist past this is bound to happen.