EU slaps $200m trade sanctions on US imports

Times Online ^ | November 05, 2003 | BY AFP IN BRUSSELS

[Norse]

>From what you are saying " capital(money ( but dosen't >have to be ))" gets "invested" ( not spent? ) in other >countries -

Invested AND spent

>Since our money supply is NOT dependant on the amount of labor we do

Our money supply is dependant on the demand for money in the marketplace, which is dependant on the amounts of products and services offered in the marketplace. So, therefore, money is supply is dependant on the amount of labor. That's how it is supposed to be, anyway. If demand for money increases and the extra money is not supplied, serious problems arise, like deflation, which can crush an economy. In fact, that's what just happened.

[milan]

No, why did you have to tell me that...

Maybe I will just go with the mustang.

[Bonaparte]

Ok, I got you into this so I'll get you out of it. Just checked, and Lexus is produced only in Japan, except for a Canadian plant (in Cambridge) that just started making Lexus SUVs.

So you're safe buying one. The French facility produces only regular Toyotas. Of course, in the future you might have to buy replacement parts that are French made (eek!). Dontcha love globalization? If you want to be sure you never, ever have to buy a replacement part that is French made, get something like a Lamborghini. All the parts will always come from the same little town in Italy. Hope this helps. :-)

[Bonaparte]

Of course, you can always keep your options open and consider one of these.

A friend's son bought one and took me for a little spin. Very, very impressive.

[milan]

The vette was a little too high $$ for me...got 3 kids. How about this?

You can get those little things tricked to push over 230 HP! Seen the movie "The Italian Job"?

[Bonaparte]

LOL! Those new minis are a scream, aren't they? Haven't seen that film but I'll check it out sometime.

Actually, the Z06 is priced competitively with the Lexus but with a lot more oomph (and upkeep, insurance, etc. -- yikes!). You'll be broke but grinning.

[RS]

"If demand for money increases and the extra money is not supplied, serious problems arise, like deflation, which can crush an economy. "

"What needs to happen is for the dollar to be anchored at one gold price, with all other currencies anchored to the dollar.

... and tying the money supply at a fixed price to a finite supply of gold would solve this problem how ?

[gathersnomoss]

This is a New Rising Sun. We do know who our new allies are after 9/11/01.

[Norse]

cuz gold changes in value less than any other commodity and is the first one to show variances in the dollar price when the value of the dollar changes - everything follows gold

[RS]

"cuz gold changes in value less than any other commodity and is the first one to show variances in the dollar price when the value of the dollar changes - everything follows gold"

???? If you peg the dollar to Gold then Gold does NOT change in value, nor can you increase the money supply without the government buying and hoarding Gold. Your statements contradict each other.

[Norse]

>???? If you peg the dollar to Gold then Gold does NOT >change in value, nor can you increase the money supply >without the government buying and hoarding Gold. Your >statements contradict each other.

Actually they dont. In a world where the dollar is pegged to gold, the government doesn't have to hold 1 ounce of gold at all. The gold price is simply used as an indicator. If the gold/dollar price rises, that means that there is excess dollar liquidity and dollars need to be mopped up. If the gold/dollar price falls, that means the marketplace is demanding more dollars and it is time for the Fed to put more dollars into the marketplace.

In a gold standard where gold is exchanged at the gold window for dollars, the government need not hoard gold either.

This is really basic classical supply side economic stuff. Go pick up a condensed version of Adam Smith's Wealth of Nations, read some Jean Baptist Say. This is the stuff that capitalism was built upon

[RS]

"Actually they dont. In a world where the dollar is pegged to gold, the government doesn't have to hold 1 ounce of gold at all. . If the gold/dollar price rises, "

". If the gold/dollar price rises, ..." ??????

If the gold/dollar price rises compared to WHAT ??
Since somehow you've pegged every other currency to dollar/gold - what measures any change ?

Cost of Oil? Silver? Big Macs?

[Norse]

If the dollar becomes more valuable compared to gold, the dollar price of gold falls. And vice versa. Eventually, the changes will filter through the entire economy, beginning with commodities and moving through like dominoes affecting industries at different points. Which is why the CPI is a lagging indicator.

[RS]

"If the dollar becomes more valuable compared to gold, the dollar price of gold falls. "

But you have already pegged the dollar to gold-

"Pegged" means the dollar price of gold does not change -
By your own example it CANNOT become more or less valuable with respect to gold. Then you went on to lock all other currencies to the dollar - so again just WHAT is used to measure a rise or fall in this universal medium of exchange you have invented as the solution ?

[Norse]

I didn't invent this. Again this dates back thousands of years to the Roman Empire, but was expressed in more detail by the economists of renaissance Scotland and France. Which is why you need to pick up some very important texts.

As for rise and fall of the Universal Medium - the point is...there IS NO rise or fall. It is completely stable and does not CHANGE in value. That is the goal, no change. The correct amount of dollars are supplied when needed at all times, not more, not less. This is decided upon by the marketplace.

[Norse]

>But you have already pegged the dollar to gold-

OK I see what you are asking. At the margin the price of gold will change a small amount, indicating the need for action. The only way for the dollar to be completely stable is for a real gold standard, but a peg would suffice as long as the gold price is kept within a small margin.

[RS]

"The correct amount of dollars are supplied when needed at all times, not more, not less. This is decided upon by the marketplace."

Again you dont make sense - The "marketplace" does not control the amount of dollars available - this is totally against the laws of supply and demand. It is exactly the scarcity or excess of goods or money that make capitalism work.
For example - you have fixed the price of gold to a certain dollar amount - The jewelers all go to the gold market to buy their stock - the first one there buys up all he can afford, then the next until it runs out. The last jewelers go out of business. No smart capitalist can buy gold where there is an excess and ship it over to where there is a shortage, because the price of gold is fixed.

Lets say there is an excess of sugar - but a shortage of corn - do you increase the dollars in circulation or remove them ?

Just what is the mechanism for removing dollars ? Does the government take them away as taxes and NOT spend them ?

[maui_hawaii]

The tax scheme, known as the Foreign Sales Corporation (FSC) scheme, was ruled illegal by the World Trade Organisation (WTO) in January 2002 as it was seen as giving an unfair advantage to American exporters.

The WTO has no authority to levy any penalties in and of itself. Thats just a symbolic piece of crap. The EU just doesn't like competition.

I say we give them the same treatment they give us.

And finally, when everyone else does things 'to make them more competitive' its ok. When we do it, its bad....What gives?

Its sheer discrimination against the big bad hegemon aka the USA...

[maui_hawaii]

Better yet, we can kill two birds with one stone.

Slap the HOLY HELL out of tarriffs on Euroweenie products made in China. There are tons.

VW spare parts all the way electric razors...all bound for the good old US of A.

[Norse]

Hey there...

OK - I will break up the two subjects of "wealth creation" and how the gold standard operates so that this learning process is less complicated...Just remember for now how a gold standard works - when more products and services are brought into the marketplace, the demand for money increases, and people exchange gold for dollars at the gold window, keeping the dollar value stable. And vice versa.
For a gold peg, the Fed either pumps money into the marketplae or takes it out depending on movement of the gold/dollar price.

Wealth creation - When someone brings a new product or service to the marketplace, and new dollars are not injected into the marketplace to reflect the new wealth, the value of the dollar rises. Lets go for an example. Say person 1 produces x and person 2 produces y, and person 3 produces Z. They have X amount of dollars in the marketplace that they use to trade their goods and services with each other. Each of the dollars represents wealth created, in other words the products they bring to the market. Say person J brings another product. The dollars just became more scarce relative to the products being offered in the marketplace, and therefore their value just increased. Dollars need to be injected or created in the market in order to stabilize the value.

As for the mechanisms, what happens is the Fed buys interest bearing debt from the treasury department. These bonds are held by banks, and the fed simply buys these bonds and gives the banks money, injecting liquidity. It can even print money and send it to taxpayers, if it wishes. But the first method is the one used.

As for removing liquidity, they just sell the bonds.

For now, just stick to thinking about how the gold standard operates and how wealth is created. You can then think abou the effects on different actors in the marketplace - like jewelers or people who buy gold and sell it in other places. These aren't easy concepts to understand...better to stay on track.