By the way, the blog is interesting if you want to follow the topic of economic global imbalance, and probably known to the economist crowd here. As the author says himself, he is quite pessimistic about the dollar since some time now, but at the moment facts are proving him wrong, what does puzzle him.
What I have not seen in this blog and never had the courage to ask in its comments , being my english and economist skills too poor, is how sure are we that the deficit of the US with china is a real threat considering the following. At least 60% of the volume of export resort to multinational or american companies. The chinese goods cost 1 to produce, and are sold for 10 in the west -ask any industrial manager, but I shouldn't lay too far. Where are the nine other dollars landing? If we say 2 to 5 end in the pocket of the retailer, where do we find the remaining at least 5 bucks in the trade statistics? Between Shangai and Albuquerque, over the Cayman Islands or London, someone has to decide, and I don't believe that "someone" like paying taxes. But at the end, I don't know of any American successful businessman who wish to buy the Mansion with pool in China for his retirement, so maybe you can count that the money will still flow from "abroad" into the US, at the end of the day. I don't know if someone can quantify that factor, but I would love to know. La répartie est dans l'escalier. Elle revient de suite.
The chinese goods cost 1 to produce, and are sold for 10 in the west -ask any industrial manager, but I shouldn't lay too far. Where are the nine other dollars landing? If we say 2 to 5 end in the pocket of the retailer, where do we find the remaining at least 5 bucks in the trade statistics?
By the way, this is why the argument that "oil only makes up 2% of the GDP (or whatever %)" is fallacious. After oil input has fed several layers of intermediaries, each of them making a modest profit, the economic impact of oil is not commensurate with its GDP impact. guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper
Second, I don't know if you meant your comment on the "middleman" to be pejorative or not. But the traders, the distributors, the marketeers, the transportation, the Internet that gives more visibility to smaller and foreign producers, etc. etc. etc. are critical to these products arriving in the US and Europe. They are not production costs, but there are lots of real costs in there. True in the beginning there may be some nice profit margins, but soon other suppliers and other channels of distribution start competing, and prices and margins fall.
I also make a point about the effect that adding a layer of intermediaries has on the GDP. guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper
The Asian central banks had a clear mercantilistic purpose behind their buying, but the motivation for this new money isn't as clear. Are they reaching for yield? After all, US Treasury Bonds yield 1 percent more than Eurozone bonds, or 3 percent more than Yen bonds. Are they seeking security? Maybe, but then why are they also buying corporate bonds and equities? Are they paying protection money to keep the US Army out of their nice little kingdoms? That seems unlikely, but stranger things have happened.
I would agree with that view on US equities. I would also agree with the view on the dollar in the medium term--3 to 5 years. I don't know what will happen in the next several years. But I wouldn't be surprised if that is a real winning investment strategy over the next five years.
