Comments on: GDP: the best kind of bad news http://blogs.reuters.com/felix-salmon/2010/08/27/gdp-the-best-kind-of-bad-news/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: rodgermitchell http://blogs.reuters.com/felix-salmon/2010/08/27/gdp-the-best-kind-of-bad-news/comment-page-1/#comment-17900 Wed, 01 Sep 2010 13:46:08 +0000 http://blogs.reuters.com/felix-salmon/?p=5126#comment-17900 TFF,

Actually, I don’t care whether foreign interest in U.S. securities disappears, altogether. The U.S. government has no need to trade T-securities for dollars. A monetarily sovereign nation produces its own money by spending. Borrowing its own money is a relic of the gold standard days.
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Rodger Malcolm Mitchell

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By: TFF http://blogs.reuters.com/felix-salmon/2010/08/27/gdp-the-best-kind-of-bad-news/comment-page-1/#comment-17871 Tue, 31 Aug 2010 18:44:51 +0000 http://blogs.reuters.com/felix-salmon/?p=5126#comment-17871 Rodger, the trade imbalance is over half a trillion dollars annually. Do you really expect foreign interest in US securities to continue growing at that pace?

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By: rodgermitchell http://blogs.reuters.com/felix-salmon/2010/08/27/gdp-the-best-kind-of-bad-news/comment-page-1/#comment-17854 Tue, 31 Aug 2010 12:43:18 +0000 http://blogs.reuters.com/felix-salmon/?p=5126#comment-17854 One way or another, the present situation is unsustainable.”

Why unsustainable?

Rodger Malcolm Mitchell

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By: TFF http://blogs.reuters.com/felix-salmon/2010/08/27/gdp-the-best-kind-of-bad-news/comment-page-1/#comment-17812 Mon, 30 Aug 2010 15:43:20 +0000 http://blogs.reuters.com/felix-salmon/?p=5126#comment-17812 Rodger is essentially correct. Our trade deficit is necessarily matched by foreign investment in US securities. (Think China and Japan buying US Treasuries.) In a crisis, there are various ways that these obligations can be repudiated, devalued, or outright nationalized.

The problem with those solutions is that any of them would destroy the business-friendly climate that has allowed us to support a massive trade imbalance over the last 15 years. If foreigners are unwilling to invest in the US, then they will be unwilling to accept dollar-denominated payments in excess of their current needs.

One way or another, the present situation is unsustainable.

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By: rodgermitchell http://blogs.reuters.com/felix-salmon/2010/08/27/gdp-the-best-kind-of-bad-news/comment-page-1/#comment-17794 Mon, 30 Aug 2010 13:29:42 +0000 http://blogs.reuters.com/felix-salmon/?p=5126#comment-17794 For a monetarily sovereign nation, a trade deficit never is bad news for a monetarily sovereign nation. It means the monetarily sovereign nation is trading the money it easily creates, at the push of a button, for goods and services.
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The word “deficit” has even economists confused. It properly should be called a “trade surplus,” because while we receive hard-to-produce cars and clothing, all our trading partners get is our money, which the central government can create in infinite quantity, with no effort whatsoever.
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The situation is different for the PIIGS, which are not monetarily sovereign, and so do not have the unlimited ability to create money.
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The key is monetary sovereignty, which must be understood in any discussion of trade or government deficits.
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Rodger Malcolm Mitchell

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By: GROCK http://blogs.reuters.com/felix-salmon/2010/08/27/gdp-the-best-kind-of-bad-news/comment-page-1/#comment-17791 Mon, 30 Aug 2010 08:27:25 +0000 http://blogs.reuters.com/felix-salmon/?p=5126#comment-17791 A trade deficit is not always bad news.

In a recessionary period manufacturers and traders cut back on inventories in order to preserve cash.

A time then comes that whilst it appears one is still in the recessionary period those same manufacturers and traders decide that the time is right to start rebuild their raw materials and stock in order to satisfy what they perceive as increased demand which hopefully would result in increased exports and sales.

The problem is, have they got the timing wrong and or is the defecit in imports over exports as a result of sucking in consummer products as opposed to the materials required for export products.

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By: rodgermitchell http://blogs.reuters.com/felix-salmon/2010/08/27/gdp-the-best-kind-of-bad-news/comment-page-1/#comment-17778 Sun, 29 Aug 2010 04:13:06 +0000 http://blogs.reuters.com/felix-salmon/?p=5126#comment-17778 Yes, FX fluctuations are not inflation. Glad we have that settled. So?

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By: FifthDecade http://blogs.reuters.com/felix-salmon/2010/08/27/gdp-the-best-kind-of-bad-news/comment-page-1/#comment-17776 Sun, 29 Aug 2010 01:37:36 +0000 http://blogs.reuters.com/felix-salmon/?p=5126#comment-17776 Yes, but there is a difference between causal and correlated relationships. You should separate your arguments for what goes on inside a country (inflation) with what happens outside (FX fluctuations).

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By: rodgermitchell http://blogs.reuters.com/felix-salmon/2010/08/27/gdp-the-best-kind-of-bad-news/comment-page-1/#comment-17767 Sat, 28 Aug 2010 15:11:04 +0000 http://blogs.reuters.com/felix-salmon/?p=5126#comment-17767 The hyperinflation of Germany was caused by the onerous payment conditions put on them as a result of WWI. The hyperinflation of Zimbabwe was caused by civil war, Robert Mugabe and his band of criminals. In both cases, money printing was a result of the hyperinflation, not the cause.
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In nearly all cases, hyperinflation causes money printing, not the other way around, and is caused by economic circumstances unique to each country.
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Did you look at the report at INFLATION?
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Rodger Malcolm Mitchell

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By: FifthDecade http://blogs.reuters.com/felix-salmon/2010/08/27/gdp-the-best-kind-of-bad-news/comment-page-1/#comment-17766 Sat, 28 Aug 2010 13:59:23 +0000 http://blogs.reuters.com/felix-salmon/?p=5126#comment-17766 Hmm, so printing money never undermines the value of the currency? You seem to have forgotten what happened in Europe in the 1930s, and in Zimbabwe in the last decade when hyperinflation from printing extra money severely weakened the currency.

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