The Ben Stein/Jim Rogers dummy show
In a discussion today on the Fox News show, Cavuto on Business, Jim Rogers and Ben Stein were challenged by Neil Cavuto, who asserted that the U.S. budget deficit as a proportion of GDP was lower than in many European countries. (Neil is right.) However, in their responses both Rogers and Stein claimed, falsely, that Europe was running "surpluses." While many European countries do run balance of trade surpluses, their budget balances are in the red by amounts that are significantly higher than in the U.S.
Furthermore, the United States runs a trade deficit primarily for two reasons:
The first reason is that many of our trading partners have long employed policies that drive export driven economic growth for reasons of their own. They do this either through direct subsidy to industry, impediments to trade, currency manipulation or a combination of all three. Ultimately this is a cost to their citizens because the money could be spent on them or used to stimulate more domestic consumption. The result is that the United States enjoys a higher standard of living than these countries.
The second reason is that the United States economy has historically produced far higher returns on capital than other countries (due to our largely, free and open economy) and therefore investment capital has flowed here. This is often erroneously considered "lending" by foreigners to the U.S. but in reality the U.S. is NOT borrowing at all. In reality it is the other way around: foreigners put savings in the U.S. to grow their wealth and to sustain industries that create gainful employment for their citizens. If they didn't, they would be broke and poor. They have much more to lose than we do.
Both the budget deficit and the trade deficit are often spoken about out of context and without the necessary perspective to give a fair and balanced picture. It is meaningless to talk about debt when one does not consider income (economic growth) and assets too. For example, $1,000,000 in credit card debt might be devastating to someone who earns $100,000 per year, however, it is nothing to Bill Gates.
Furthermore, the United States runs a trade deficit primarily for two reasons:
The first reason is that many of our trading partners have long employed policies that drive export driven economic growth for reasons of their own. They do this either through direct subsidy to industry, impediments to trade, currency manipulation or a combination of all three. Ultimately this is a cost to their citizens because the money could be spent on them or used to stimulate more domestic consumption. The result is that the United States enjoys a higher standard of living than these countries.
The second reason is that the United States economy has historically produced far higher returns on capital than other countries (due to our largely, free and open economy) and therefore investment capital has flowed here. This is often erroneously considered "lending" by foreigners to the U.S. but in reality the U.S. is NOT borrowing at all. In reality it is the other way around: foreigners put savings in the U.S. to grow their wealth and to sustain industries that create gainful employment for their citizens. If they didn't, they would be broke and poor. They have much more to lose than we do.
Both the budget deficit and the trade deficit are often spoken about out of context and without the necessary perspective to give a fair and balanced picture. It is meaningless to talk about debt when one does not consider income (economic growth) and assets too. For example, $1,000,000 in credit card debt might be devastating to someone who earns $100,000 per year, however, it is nothing to Bill Gates.
posted by mike norman at 1:06 PM
2 Comments:
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Mike, Jim Rogers has more investment savvy in one of his dumps than you will ever have. I just saw you on Youtube as you ridiculed Peter Schiff on his bang-on assessment of sub-prime mortgages. It may have been at the beginning of 2007, but thank God for places like Youtube where your moronic assertions will live forever.
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