China and Currency

Re: [spiers] China and Currency


On Mon, 13 Feb 2006 19:24:20 -0800 (PST), M A Granich wrote
:

> Could driving the deficit up to astronomical levels be
> the big mistake? I'm far from an expert, and I don't
> like paying taxes anymore than the next guy, but my
> naive view says we should pay the bills.

Deficit levels don't really matter, what matters is the kind of deficit. I run
a deficit with my
grocer for food... if it is cheese and bread and fruits and wine and veggies and
fish, that is
good, assuming I live within my budget and am buying sensibly. If it is
twinkies and potato
chips and Red Bull, that is bad, and worse if i bust the budget with my
purchases. On the
other hand I sell things to people from whom I rarely buy anything, if at all.
Taxes are just
forced purchases, which take precedence over all other family needs.

If USA is buying from overseas machinery and equipment, raw materials and iems
we cannot
make, then the deficit does not matter, regardless of the size. In fact, USA ran
large deficits
out first 80 years or so, very large, but they were good deficits. If we are
buying things we
can make, something is wrong, and if we are paying for it through refinanced
houses, then
something is very wrong. You'd have to follow the money, but the problem would
get back to
how much currency is issued in USA and at what rate interest was set.

(The solution would be to forbid the govt to touch currency or interest rates).

Exports can be good or bad too... do we export things we made or raw
materials... of the
things we made, are the consumer goods or are they machinery and equipment?
Exporting
shoes is good, excporting a shoe-making machine is bad becuase its value, the
ability to
make shoes, is exported. Exporting subsidized goods is very bad indeed.
Subsidies,
currency and interest rate manipulation generate the bad kind of exports.

John

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