Saturday, 12 January 2013

Charlie Sheen wasnt winning, and neither is Germany

Raedwald stumbles upon the worst kept secret in mercantilism.

It doesnt work.
Japan tried it for forty years following the second world war, the very second they tried to keep a single yen of their export earnings, their economy failed, and didnt recover, twenty years later its still in perpetual recession.

China has tried it for the last twenty, China didnt even manage twenty years of stagnant wages, its actually being forced to slash net pay to fight off workers in India, Pakistan, Vietnam and Indonesia, amongst others.

So why would Germany do any better?

Trade, is FUCKING AWESOME

Free Trade between two consenting partners is awesome, quite possibly the greatest inter nation interaction there can be.

But you cant "win", because the other side cant "lose", if they were losing, they would simply cease to trade.

The US has lived on welfare for 60+ years, and nations have been fighting to beggar their poor to provide cheap loans to buy cheaper goods to the US.
Germany was happy to set up the same arrangement for the Southern States.

Trade is awesome, but it has to balance over a sub generational time scale.
If you have an export surplus for a decade, you arent getting that first year surplus back, ever.

Without intervention, there would never be a decade long surplus, currency differentials would widen to shut off the sustained one directional export, and would continue to widen until the surplus was reversed, and then there would be another surplus, which currency fluctuations would again counter.

2 comments:

  1. Read at least the basics of trade theory, please.

    The very basic is approx like this:

    Robinson can catch 10 fish a day, but sucks at climbing palm trees and can only harvest 2 coconuts a day.
    Friday can get 2 fish or 10 coconuts a day.
    Now each on his own would probably balance his effort and have 5 items of one kind and 1 item of the either kind a day.
    Now if they trade and specialise, each can focus on his best skill and both can eat 5 fish and 5 coconuts each. Win-win.
    "Winning" in trade is not about surpluses at all.

    From there on trade theory gets more complicated at every step. Your take on trade is actually obsolete by about three centuries or so.

    ReplyDelete
  2. SO,
    Read again please
    You have just agreed with me....


    ""Winning" in trade is not about surpluses at all."
    Tell that to China, Japan and Germany, not me, I already know that sustained trade surpluses are bad...

    ReplyDelete

Go **** yourself