The free trade policies / open economy is proving to be a valid concept. Now while our economy is rather weak the other nations of the world are stimulating our economy with the dollars they took in during earlier years. Thus the USA and its free trade policies have created another pole in the world economy. ROW is now stimulating the USA economy.
World leaders can not control the weather or the tide. The really wise leaders USE the tide to do what they want done if they can. If they can not then they simply fail. There are powerful forces of world freedom on the loose. These tidal forces were encouraged by Ronald Reagan in the 1980’s. A symtom of this has been the stock market going up during most of the time since then.
For quite some time people including me have worried about the significant trade deficit run with the Asian powerhouse industrial economies. The worry has been about collapse and economic ruin due to debt overhang caused by massive borrowing by the USA.
It appears events are playing out a different way than one might have thought years ago. Currently we are experiencing slow economic growth as of April 2007. However the DOW index has reached the record level of 13,000. This is very evidently due to R.O.W. ( rest of world ). The DOW companies that are experiencing upticks are the ones with exposure to ROW. The domestic economy is not so sizzling and thus no ROW and your stock will have no go. So it can be argued that the rest of the world is now stimulating the US economy. Where in the past the USA has been the locomotive of the world economy the roles are reversed now. How did this come about ?
For quite some time the other growing nations of the world such as Brazil and China have not played fair on the trade issue. Thus they have accumulated US Dollars because their governments have made it so difficult to spend the money. Only an inexperienced novice thinks they USA is not the fairest nation in the trade arena. I have direct experience with import / export from / to Brazil. You can ship anything legal you want from Brazil to the USA. Lord help you if you want to go the other direction. Taxes are extremely high.
For example: Brazilians receive a fraction of the wages that people in the USA make. Thus Brazilians could benefit from low cost used computers right ? Sorry R-O-N-G wrong. It is forebidden to import used computer equipment to Brazil. This is ostensibly to try to grow a domestic computer industry. But who in their right mind believes Brazil is going to compete with Taiwan in computer motherboards ???? Only a foolish liberal or a lying politician. Thus a person making 1/4 the USA national average has to buy computer equipment at prices 2X what they are here in the USA!!! The hill is 4 * 2 = 8 times steeper than in the USA !!!!
Other National economies have been rather closed off. We are the facilitator. Brazil as an example. Ask yourself can people in China buy something on ebay and receive it without problems the same way I can from China ? China as a group is un confident enough to use domestic consumption as the driver of its economy. It seems to need the USA for this “directive demand” to show its economy which way to go. This is probably a mathematically provable point. Their own demand is not as educated as the USA’s consuming public.
The Chinese and others are in possession of large piles of US Dollar cash. It was inevitable that as we shoveled US Dollars willy nilly into the mouths of the Chinese that they would finally start puking the dollars back at us. I say puking because they obviously have been VERY reluctant to just play fair and use the currency as efficiently as possible buying from us where it made the most sense. They have done everything they could to avoid buying from us in an attempt to grow their own economies first. It is understandable from a practical political point of view. ( which of course is very high on the impracticality scale if an engineer evaluates it ! )
The currency must rebalance in some fashion at some point. At some point if you are to do anything else than invest in real estate which has now gone soft in the USA, you must do something with the money other than stick it under your mattress. After all greenbacks in and of themselves can only warm your house if burnt or clean your bum if you use them as T.P. ( one square only per Cheryl Crow please!) unless you use them to buy something. Its just paper for god sake! Thus we are seeing a dynamic equilibrium coming into balance finally. The dollar is weakening and our large corporations are finally selling to ROW to the extent that its driving their stock price up.
Thus I have to marvel at the long range effect reaganomics has had. Here we are 20 years after Ronald Reagan left office and he’s still proving to be right in line with what world economic trends have turned out to be! This forward thinking from a guy who was really quite old when first elected! I have to chuckle because the democrats are the ones calling themselves progressive.
Many factions in the US political landscape want us to stop this marvelous process. It would be stupid to do so. We’re on track to a world that is more free, peaceful and open.
In the end these countries are absorbing all the best methods the USA has empirically found that an economy works best. There is no choice or opinion in this matter. It is a reality of physics and mathematics. They can either adopt the effective measures or suffer. Eventually the path of least energy/ path of most favorable output will be followed. Thus the turn around in flow of dollars. The dollar and American methods are becoming a de facto world standard for only one reason…..capitalism works best. If a method is not the best it will die and by evolution be replaced by some other method. For all these liberals who talk about believing in evolution its frightfully obvious they don’t understand the how the process of evolution works. But then it should be no surprise these libs only know how to talk. They don’t impress me as people who actually understand how to make anything work. Most engineers are conservatives of some variety. Its not a surprise either!
See a summary of Jeremy Grantham’s idea of a World Wide Bubble When Jeremy Grantham describes a world wide bubble it sounds an awful lot like an economic expansion monetized by our old friend the green back. We can be proud as a society to have acomplished what he describes. The results are what comes of the best idea in an ecosystem of ideas. If we want to remain the leaders, we need to keep the ideas coming and keep living by the ones we already have instituted.
