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To: Z Analyzer who wrote (5642)	2/18/1999 9:00:00 AM
From: Lee	Respond to of 9256

Z, Balanced trade... I suppose it depends on how you define balance. After this many years I think its clear a big stick will not get Japan, China, or whomever to buy our goods. Somehow, they will just have to learn on their own that if they open up to freer trade their economy will benefit. Therefore, we must either buy less of their goods in order to balance the goods account, or expand the accounts we are looking at until we find something that offsets. Or expand the time frame we are looking at. If this was the Asian thread I might go off into some interconnectedness holositic discussion and maybe even bring in the theory of constraints, but... By the way, I now own some HTCH. Cheers, Lee

To: Z Analyzer who wrote (5642)	2/18/1999 10:43:00 AM
From: Lee	Respond to of 9256

Z. Shoot, I could have had HTCH at less than $37.5, instead I paid more. Silly me. Regards, Lee

To: Z Analyzer who wrote (5642)	2/20/1999 12:44:00 AM
From: Frodo Baxter	Read Replies (1) \| Respond to of 9256

You know, I can do without the slurs about ivory towers and comparisons to Krugman, if you don't mind. I have tried to answer your questions fully and with intellectual honesty. Yet you keep harping upon hypothetical scenarios of your own imagination that have no basis in reality, and yet you challenge me to disprove them. And then you tell me I have failed. >"Whoa Nellie" is Right! If you overall ran deficits with everyone, pretty soon Burger King, MacDonalds and everyone else would cut you off and you'd be begging on the streets. Well, let's see. The trade deficit last year was $250 billion. Service surplus was $80 billion. Net, a whopping 2% of GDP. In your world, the USA would run out of money or something. In the real world, GDP has grown by $420 billion, M3 by $610 billion. Without a devaluation. Without inflation. Come to think of it, I do run deficits with everyone. They accept my money just fine. Even my credit cards. Because you know what? I have a job. >Talk about straw men. Why does everyone fail to see that the desire for BALANCED trade is not the same as the absolute corrupted protectionism you have immediately turned it into. Perhaps because every time someone expresses some high-falutin' desire for balanced trade, whatever that is, all we end up with is import duties on hot-rolled steel. >1) such as worldwide unskilled or manufacturing wage equalization (a non-trivial social issue). Here I asked only what yor own economic theory says will happen? And I've already answered. Inasmuch as the US has probably the most liberal trade policies, you would expect to see a dramatic lowering of wages for equivalent work if what you posit is true. Of course, that doesn't happen. Either the productivity is ramped up so that the domestic industry becomes competitive even at higher wages (this is the main reason the auto industry is so resurgent) or the industry dies (textiles, hard drive manufacturing). Good riddance, I say. Who the hell wants to be working in a sweatshop when they could be designing web pages or installing fiber into my house or day trading Internet stocks. In any case, wages don't go down. >2) gross trade imbalances such as we run with China and Japan which are indicative of anything but free trade We get cheap goods. They get Treasury bonds. >3)the issue of what happens to a country running chronic deficits (try to avoid even thinking about free trade in answering this since it distracts you from the basic question), If the country is a superpower and its currency is a reserve currency, nothing. If not, it depends on the perception of the investment outlook of that country. If this outlook is bright and sunny, the investment inflow will continue. If not, investments will leave, the currency will decrease in value, making the country more globally competitive, and the deficit becomes a surplus. Does the belief that capitalism is self-adjusting make me some sort of orthodox ideologue? >4) The issue so starkly demonstrated in the past year by other countries of vulnerability to massive short tern "investment" to fund chronic deficits. This is a ridiculous comparison. All these countries suffered because of an idea that is fundamentally inconsistent with free trade, currency pegs. A currency peg is like a small dam. It prevents a few small floods, but makes the big flood much worse. In any case, rather than small currency adjustments, the adjustments are devastating and dramatic. Even so, they play out the same way. South Korea is now running a trade surplus, and its sovereign cost of capital is back to where it used to be. The point of free trade has never been benefits or harm to producers. It's all about benefits to consumers. Lowering the price of goods for consumers allows them more capital to save and invest, which are the real drivers of national productivity and prosperity. This is particularly true of consumers at the lower end of the wage scale, where an incremental dollar saved here and there can have profound effects on standard of living. (this is why the Japanese, while relatively rich in dollar terms, actually have a much lower standard of living) btw, since we're all so hung up on intellectual hypocrisy, what do you make of our service surplus? Are we "dumping" investment bankers into the world markets at "below market prices"? I won't even bother to ask if these buzzards are "predatory". ;)

To: Z Analyzer who wrote (5642)	2/20/1999 3:33:00 PM
From: Dave Hanson	Read Replies (2) \| Respond to of 9256

OT- trade, Krugman, Greider, etc. Have followed this exchange with some interest. I'm a U. Chicago doctoral candidate in philosophy who specializes in applied ethics, especially the morality of public policy. I'm no economist, but in this capacity I'm a pretty well read amateur. I've assigned Krugman's well written The Age of Diminished Expectations for a class in "Ethics, Economics, and Public Policy." I think highly of much of his work. I do find it unfortunate, however, that he can be so reactionary towards intelligent non-economists who often have something meaningful to contribute to the discussion. (Notable prominent examples of such folk include Bob Reich, former labor secretary, and Bill Greider, author and Rolling Stone.) Z, I have 2 books to recommend that you and others might be interested in. The first is by an accomplished economist who wrote a book about rhetoric and persuasion within the field of economics. His often stinging critique is certainly consistent with my experience with the field at Chicago and elsewhere. See amazon.com . Second is by Greider, written about global trade. amazon.com . I have not read it, but may if I can find the time. Even so, I find much of what I take his thesis to be quite plausible. (I come down in favor of NAFTA and GATT, and generally consider myself a free trader, but the economics profession has done a poor job, IMHO, of looking at the costs of the current trade regime and trying to confront them.) Anyhow, regardless of this book's merits, the comments on the Amazon writeup are instructive. Economists don't generally carefully critique books like this--instead, they go ballistic. Unfortunate. A last remark. In his reply to you, Lawrence suggests that it's better to have people designing web pages and trading stocks than making textiles. And, he has a point. But of course, there's no way that we can reasonably expect the typical laid off 40-something textile worker to turn around and found a small internet business. So what do we do to ease the transition? I have my own ideas, but won't take this discussion any more OT. Suffice to say that when we don't even consider this question. (Indeed, it is one that few readers of this thread will have to worry about, since we are Bob Reich's "Symbolic Analysts" who largely benefit from all this change.) 'nuff said for now. I do hope that more fruitful exchanges can take place between the pros and the amateurs in economics.