Fonseca33

Notice I wasn't talking about unemployment, but rather the duration of unemployment and why it lasts longer in Europe. As for actual unemployment, most countries also exclude discouraged workers. The BLS and OECD publish Unemployment rates which adjust to US concepts, and the result is little changed.

Let me repeat: All other contries also exclude discouraged workers, including the UK.

http://books.google.com/books?id=MU3...um=2&ct=result

You have no idea what you are talking about! Trade Deficit lessens GDP! Exports add to GDP, while imports take away. If a country is importing more than exporting, then that means that trade is taking away from GDP. To put this in current perspective, America's trade deficit is falling due to the much needed weaker dollar (after several years of an overvalued dollar). Up until now, the USA has had a huge trade deficit which was unsustainable. When you run a trade deficit you force countries to buy your debt. UK trade deficit keeps going up because its currency has not devalued yet. America is one step ahead in this, since it allowed its currency to depreciate, which is a self-correcting mechanism that will eventually render its trade deficit relatively small. This is good.

Trade defecit does not prop the economy, sorry. In fact the only reason the US is not in recession on a technical basis is because its trade deficit has been declining as a % of GDP. As a % of GDP, America's trade deficit is nothing too big. There are countries with much worse trade deficits.

I do not believe the dollar will lose reserve status anytime soon. Most currency traders agree, although some do predict it. Looking at official figures, the dollar is more of a reserve currency today than it was in 1995.

Once again, you don't know you are talking about. At expense of its export base? EXPORTS ARE BOOMING NOW.

http://www.gulf-daily-news.com/Story...&IssueID=31114

Meanwhile, thanks to the strong currency, exports from Europe are declining:

http://www.bloomberg.com/apps/news?p...&refer=germany

"German, French Exports Decline on Euro"

Fonseca33

When America's poorest states are richer per person than countries like Spain and Italy, and just as rich as France, Germany, it makes that little comment seem foolish.

Europe's poorest countries, all in E. Europe, are well below their Western counterparts, so lets not act like in Europe there are no differences. Ever been to Albania and then to Paris? Big difference. Plus, the US is a single country. Within the UK there is a tremendous difference between some poor town Scotland and The City. All countries have disparities.

Fonseca33

What does that have to do with the fact that unemployment lasts alot longer in Europe vs. the US? Nothing.

fatbrit

Some have much more disparity than others. The US has gone beyond the socially acceptable limit: too much money is held by too few people and the "trickle down" theory has been shown to have as much credibility as Intelligent Design.

Vladimir

Except Estonia for example. Though as i listen their GDP is fake too and they on its way of reccesion too.

Fonseca33

You are right. I was talking about disparities among countries. Within countries, some have more than others. The US, having more than 33% of all the world's millionaires, large companies, and billionaires, is obviously going to come up as a country with large disparities, which is correct, although the fact that it has a very large middle class makes this disparity look less disturbing compared to places w/ no middle class like Brazil, Mexico, India, etc. This gap has grown in not just the US, but all over the world. Look at London...a city that has grown only because Oligarchs from Russia and the ME have invested capital due to tax loopholes.

Vladimir

This is due state min salaries. In USA 1300$. In Germany 2500$. This make instrument of regulate number of oligarchs from unnormal profits. In Russia such steps already doing.

RoadWarriorFromLP

Sure it does, because it allows consumers to acquire goods more cheaply from abroad than they could if they were sourced at home. They increase their consumption of their goods accordingly, which increases GDP and keep domestic inflation rates low. Their purchasing power increases thanks to the labor arbitrage achieved from the imports.

The alternatives to importing these goods would be to produce more of them domestically at higher prices (higher labor rates), which would necessarily reduce consumption and the business infrastructure that imports and retails them. US businesses achieve growth by selling these imports, which adds to GDP.

"Booming" is a relative term. US exports clearly cannot keep apace with the US appetite for imports, obviously, otherwise the US wouldn't attempt to support such a massive trade deficit. That trade deficit that can only be supported through foreign investment (read: debt.)

The weakening dollar and soaring commodity prices suggest that the system is cracking. Only a textbook idealist could believe that a weak dollar is good for the United States. The US is import dependent and has no basis for creating a trade balance.

If the dollar continues to lose value at this pace, there is no reason to believe that it will continue to remain a reserve currency over the long run, as no foreign treasury will wish to stay heavily invested in a rapidly depreciating asset.

Tootsie Frickensprinkles

You're not just stating facts, you're arguing causation. It tells me what real knowledge and experience you have in making those arguements .. or lack thereof as the case may be.

fatbrit

I'm still looking for the American middle class, I'm afraid! Those are the ones with negative equity in their homes, credit cards maxed out, and just about to lose their jobs, are they? Probably not long before we look like Mexico.

fatbrit

I think many of us are having grave doubts about his employment claims.

RoadWarriorFromLP

I am too, actually. Did pretty well in Econ 101, but failed to take the higher level class.

fatbrit

Maybe it's one of those neocon universities? The style of argument -- copious amounts of questionable data poured on the doubters -- would certainly fit.

RoadWarriorFromLP

To be fair, he's correct about certain aspects (the stuff that you get in the first couple of semesters of university). But there is a failure to connect dots which suggests either a lack of higher level study or else an ideological tinge that does not permit him to acknowledge commonly accepted counterarguments.

For example, his point about GDP is accurate if viewed in a micro vacuum, but obviously not on point if viewed in the macro. The US achieves substantial economic growth subsidized by imports that is sufficient to increase the other components that comprise GDP (consumption, investment, government spending) to a figure much greater than than the trade deficit.

The economy is a large feedback loop in which one event triggers other events, and he seems to have missed that. The fact that the dollar could lose half of its value without barely making a dent in the trade deficit is a clear indication that a falling dollar is not going to fix the trade deficit. For that to occur, we'd have to either rapidly expand our export base and/or stop enjoying imported energy and foreign trinkets. I can't see anything like that happening anytime soon.

Tootsie Frickensprinkles

Indeed.