[ExI] undercover at Walmart

[BillK]

On Sun, Feb 22, 2009 at 6:29 PM, Rafal Smigrodzki wrote:
> On Sun, Feb 22, 2009 at 12:10 PM, BillK wrote:
>> Yup. I agree with all that.
>> That's the long version of what I said.
>> The US deficit created inflated values all round the world,
>> (via complicated methods such as you described).
>
> ### This is a nice rhetoric trick - say "yes you are right", then say
> something completely unrelated or even meaningless, and then say "your
> statement confirms mine".
>


If you see no connection between the huge US trade deficit and the
current US debt mountain / financial collapse, then this might be an
area that you would be advised to investigate further.

The US debt mountain has been financed by foreign nations.

Way back in 2003, Warren Buffet warned about the problems that this would cause.
<http://money.cnn.com/magazines/fortune/fortune_archive/2003/11/10/352872/index.htm>

Quote:
America's Growing Trade Deficit Is Selling The Nation Out From Under Us.

Simply put, after World War II and up until the early 1970s we
operated in the industrious Thriftville style, regularly selling more
abroad than we purchased. We concurrently invested our surplus abroad,
with the result that our net investment--that is, our holdings of
foreign assets less foreign holdings of U.S. assets--increased (under
methodology, since revised, that the government was then using) from
$37 billion in 1950 to $68 billion in 1970. In those days, to sum up,
our country's "net worth," viewed in totality, consisted of all the
wealth within our borders plus a modest portion of the wealth in the
rest of the world.

In the late 1970s the trade situation reversed, producing deficits
that initially ran about 1% of GDP. That was hardly serious,
particularly because net investment income remained positive. Indeed,
with the power of compound interest working for us, our net ownership
balance hit its high in 1980 at $360 billion.

Since then, however, it's been all downhill, with the pace of decline
rapidly accelerating in the past five years. Our annual trade deficit
now exceeds 4% of GDP. Equally ominous, the rest of the world owns a
staggering $2.5 trillion more of the U.S. than we own of other
countries. Some of this $2.5 trillion is invested in claim
checks--U.S. bonds, both governmental and private--and some in such
assets as property and equity securities.

In effect, our country has been behaving like an extraordinarily rich
family that possesses an immense farm. In order to consume 4% more
than we produce--that's the trade deficit--we have, day by day, been
both selling pieces of the farm and increasing the mortgage on what we
still own.
----------------------

The whole article is well worth reading. He's a good writer.

BillK