Rebirth of Reason

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Tuesday, February 14 - 11:36pmSanction this postReply
OK, Sam Erica, I will take the bait. What is "balance of payments"?

As every voluntary trade brings profit to both parties, are you arguing that they should experience the same profit, lest one benefit at the expense of the other?

Kyrgystan exports tomatoes. Italy buys them. But K does not buy the same value in Fiats and Lamborghinis. Does it matter? The Italians are better off with Kyrgyz tomatoes even if all the Italian euros in Kstan are spent on American blue jeans.

SE: "You can’t have an economy that produces nothing but services.

Sure you can! In essence all "goods" are "services" because all men are created equal: what one person can produce, so can another person.

Granted that raw materials may be unequally distributed on the planet: Russia has the platinum America wants. China has a abundance of "lanthanides" or "rare earths."

If gold is money, what explains why South Africa is not Switzerland.
Edit added

Sam, as I said, I'm open for business.  I only stated above the well-known case for free trade.  Nothing new there.  But you disagree.  And you are not stupid.  In fact, you are pretty smart.  So, if you have an insight here, please share it.

(Edited by Michael E. Marotta on 2/15, 8:43am)

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Wednesday, February 15 - 9:40amSanction this postReply

I clearly stated that I wasn't arguing against free trade, in fact I'm strongly in favor of it. I was arguing for a balance of payments, i.e. having, in the long term, equal value of imports and exports. When you're arguing that in every voluntary trade each participant gains a value you'e not acknowledging that with continued imbalance of the flow of capital, the value of the currency of the importer will decline. The case is no different than interactions between two individuals. If I want to buy some tomatoes from Michael Marotta I will have to either borrow the money or deplete my savings. I can either borrow from Michael and promise to pay him later, or take out a loan from the bank. In either case, if this continues, Michael or the bank will eventually see that I am a higher risk investment than before because I haven't repaid any previous loan and they will demand higher interest in the future. My "currency" will decline in value and all future purchases will be more expensive and my standard of living will decrease. When you say that each partner in a trade is better off and you neglect to tell the rest of the story I am reminded of Bastiat's Broken Window Fallacy.


(Edited by Sam Erica on 2/15, 1:41pm)

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