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To: Destro
"The flaw in this crazy theory of economics is the willingness of Asians to continue to buy US bonds. The question is quite simple: Why buy a bond with a 1–2% yield when the currency in which the bond is denominated is plunging?"

Why indeed? Because the currency value isn't important. The real wealth is the manufacturing capability. It is in the Asian's interest (maybe not the Japanese, but certainly the Chinese) to keep financing this until they have transferred as much technology and manufacturing capability from the US as they can.

Right now the US is not acting as a whole. Consumers act in their best interest buying the lowest price. Business owners sell out for the value of the projected aftertax cashflows when the real value to America of the firm is not just the owners cashflows but the cashflows to the Employees and the Taxes generated, not to mention that having the industry and the capacity are of immense value in their own right.

Meanwhile government does nothing. Having been raised on the theory of Comparative advantage, Government thinks this will all eventually work itself out. Even though the trend should be apparent by now. In truth, comparative advantage and continued free trade will drive the total wealth of the world will go up even as the US wealth is driven down to the asian levels.

I'm not as concerned about the debt. This is wartime. We were attacked. The debt is still denominated in U.S. dollars so we can inflate out of it. But the loss of production capacity and the transfer of technological knowhow is stupidity beyond measure.

8 posted on 02/20/2004 4:18:47 PM PST by DannyTN
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To: DannyTN
Ricardo's comparative advantage was concieved in the era and was about plantation cash crop economies of several centuries ago. Since England could not grow cotton but the American South could, etc. England still had to have something of value that she could create in order to trade for the cotton. In this modern era what will be America's comparative advantage? India and China are producing more and better educated techs then we are - and hungry ones too. Please someone tell me what will Americans do in the future that the Chinese and Indians will not learn to do also?
16 posted on 02/20/2004 4:45:02 PM PST by Destro (Know your enemy! Help fight Islamic terrorism by visiting www.johnathangaltfilms.com)
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