[ExI] undercover at Walmart

[Rafal Smigrodzki]

On Tue, Feb 24, 2009 at 8:25 AM, Stathis Papaioannou <stathisp at gmail.com> wrote:
> 2009/2/24 Rafal Smigrodzki <rafal.smigrodzki at gmail.com>:
>
>> ### Stat, do you really believe what you wrote? That the 4 billion
>> people who are involved in global trade would willingly subsidize the
>> equivalent of belly-button fluff removal over the period of many
>> decades in the hope of getting back some gold?
>
> No, they believe that the currency is valuable, for whatever reason;
> maybe the slackers used to be great and powerful and productive in the
> past.

### Again, you think that a lot of people are even more stupid than I
think they are.

------------------------

 The trading partners don't actually plan to buy up their assets,
> but end up doing so in desperation when the real situation becomes
> clear, which as you suggest has to happen sooner or later. This silly
> example illustrates two points:
>
> 1. If you stick to your guns about PPP GDP being a true reflection of
> productivity, then you would have to say that the slackers are very
> productive, and then suddenly become less productive when market
> perceptions change, even though there may be no change in their
> activity.

### Yes, of course! Imagine that all that the slackers do is use
machines to make polyethersulfone. They are the best at this job,
nobody else can get the quality and amount of polyethersulfone they
can, and as a result they are rich - they sell their PES abroad and
the whole world is clamoring for more, since PES is needed to make
protein filters. Although the slackers hardly ever do anything but
twiddle some dials on machines making a single physical product, they
can afford everything, and their GDP PPP is high. But one day somebody
invents a new depth filter made of unobtainium, except much cheaper
and better than PES. Although absolutely nothing changes about the
abilities of the slackers, suddenly they find their GDP go to zero, or
even below (if they insist on making PES).

Obviously, PPP of an individual's or a nation's work will change when
customers change their mind, even if the work and products in question
are exactly the same. It boggles my mind how this point even needs to
be addressed.

-----------------------------------
>
> 2. Sustained and increasing trade deficits will ultimately be resolved
> by transfer of real capital from the deficit state to the surplus
> state, once the latter gets nervous and calls in the IOU's. This will
> also be associated with a crash in the exchange rate as no-one will
> want to hold any more of the deficit state's currency, or as the
> deficit state attempts to inflate away the debt by printing money.

### Let the chairman of economics dept at GMU (a hotbed of
anarchocapitalism) answer this objection:

http://www.cafehayek.com/hayek/2009/02/everyone-has-a-favorite-horse-to-beat-mine-is-not-dead.html

Rafal