Originally Posted by Steve_NO
Pardon me if I suggest that's rather outdated thinking. The power to control information and technology will determine who rules the roost going forward, not who has the most pig iron production.

US industrial output still dwarfs all our competitors, in any case.


Steve I don't mean to pick on you, or to take a stick to a laboring horse, but this is exactly the kind of thinking that has led to our current economic problems.

We have heard everyone from Roach, to Schiff, to Kudlow, all the way up to Bernanke (as of yesterday) decry the fall of the dollar. We have rampant inflation on the necessities and people are starting to feel like the Fed needs to woe things up a bit and get this free fall under control.

At the same time we hear some of these same geniuses, usually from a right of center position, telling us that trade deficits don't matter. That America needs to grow past the point of being an industrial power. We'll do the thinking, they do the sweating.

I'm a scientist, not an Ivy League economist, but it seems to me like simple logic tells you that these two positions cannot be maintained at the same time.

As the years have passed and we continued to run a huge trade deficit without economic collapse I watched as some very smart and very educated men started to wonder if maybe it didn't matter. Maybe we could do the impossible and make it work. I think now these guys are starting to wake up to reality.

When you run the kind of huge trade deficits that we have the past couple decades you, by necessity, have to create additional money. If you do not you will watch the monetary base stagnate or even shrink. But as time goes by you start to export your inflation to the countries who now sit on huge piles of what used to be your money.

So far they have used the money different ways: financing our national debt (better for them as it makes debt slaves out of the very nation), buying up American industries and infrastructure, building up their military might, etc. In other words these counties are financing America into debtor's prison through the money we are sending them via our trade deficit.

Kind of ironic, no?

We would have never gotten away with it had it not been for the fact that the dollar is used as the reserve currency around the world. But the really ironic part is that because of having this status we were allowed to run very unhealthy levels of debt. And wake up 25 years later in a position similar to that of Brazil a decade or so back. Maybe even as bad as Argentina. Remember what the IMF made them do to get their fiscal house in order? Very painful medicine.

I look around after a couple decades of sending our production overseas and I see lots of other countries sitting on, literally, piles of money that reach to the sky. I see my own country in a hole that I really don't know if we can dig out of. I see these foreign companies buying up blue chip American companies, allowing America's government to go head over heels in debt to them, and I see the same Supply Side ideologues telling me that everything is just fine.

It boggles the mind.

Will

Smellin' a lot of 'if' coming off this plan.