On Wed, 30 Jan 2002 00:12:11 kilopascal wrote: ... >I'm sure that all depends on how big or small your economy is... > Indeed. That's why countries missing comparative advantages should "gang together" (and Europe has done just that!). However, that was not exactly the point being discussed.
>... With the "Collective Union" exporting more >then it imports would bring in enough cash to offset any inflation brought >by more expensive imports. Or, with increased competition of a global >economy, one can find alternative cheaper resources, thus negating the >imported inflation. > A resounding NO! We've been through this in those class discussions. If there is lack of internal productivity to offset that, and if one makes the reasonable assumption that prices are in equilibrium it becomes nearly unavoidable to "import inflation" in the end. The trick to this, John, is how YOU, the country, are doing. If you cannot increase your own productivity you'd be at the mercy of external markets (plus the fact that you'd not be competitive enough, either)! And even if you do succeed in keeping up with your productivity increases one day you'll "hit the limit", so to speak, and will not be able to continue gaining on it. Then what??? This is the problem in Canada, well documented and reported by the last administrations. More on Canada below. >Also, in checking the currency charts today, I noticed a majority of the >currencies listed had also fallen in value relative to the dollar, thus all >falling together, there is relative stability when compared to each other. >This reduces the negative effects of imported inflation as well. > ? I cannot follow your logic here, John. Sorry. Assuming everybody loses and the dollar wins, what's happening is that the US would be richer and richer and richer and able to buy everyone out, not needing even to gain anything in its GDP! Think about it! Extrapolate it to the limit. Evidently one would have to assume that the US products would continue to be attractive to the international markets. This is why the US does so well. It stays ahead of the competition bringing up products the others cannot produce (so, price is irrelevant!) and continue to command a premium for it!!! Then it uses such wealth to continue staying ahead in the game, refueling its prosperity! It also, with the smart use of technology, continues gaining in productivity thus making the products that are price-sensitive competitive in the market as they'd be produced cheaper! True, the exercise above is applicable here, too, and one day they, too, will hit the wall. But by that time they've become so rich that they may have purchased all the other ones out!!! ;-) That's why American businesses have a vested interest in mergers and acquisitions and extend their tentacles all over the world everywhere they can! Talk about great strategy!!! >And, if you are speaking in the long term, who is to say where the Euro or >the dollar will be in the next few years? > For the sake of the EU I'll hope that the euro will start gaining back on the dollar, there just is no better alternative IMHO! ... >Interesting about Canada. Despite a weakness of the Canadian Dollar, one >does not notice a decrease in the Canadian standard of living... You wish, my friend! We've been hearing more and more reports of significant increases in poverty in this country and, ah, BTW, we've lost our enviable position of being the #1 country in the world for standard of living. We've dropped to 5th (if I'm not mistaken) now! > But, what I am told is that Canadians can no longer afford to >buy American goods or vacations and have found alternate countries to buy >goods from and places to spend their vacations. So, who is really hurting? > ? I fail to see how you cannot see the problem, my dear friend! Do you consider the fact that you would not be able to 'afford', as you put it, vacationing in the US and other *clear* restrictions 'not hurting'??? Prosperity to me is exactly the opposite! It's the ability to do whatever you want and can, isn't it? Or am I missing something?... ... >That concept of a strong currency may have been true in the old days of >small nation-states, but may no longer apply in the new era of mergers of >nations into economic unions or trade blocks. The issue is much more complex, dear John. I continue sustaining that the benefits of a stronger currency far outweigh its potential disadvantages, especially with regards to power! Mergers and acquisitions strategies are meant to extend your control and ability to dictate to the market! That is called gaining market share! The more share of the market you have the better you would be to win against the competition. This is like attempting to become a monopoly without actually violating the law! (again, very smart!...). And unions between countries are mostly aiming at avoiding being at the mercy of other players that may be more interested in bringing you down or controlling you! (and, also, obviously, secure some independence) > When the decline of the Euro >verses the Dollar proves to increase growth in Europe and a long term >recession in the US, then we will know the old consensus no longer applies. >... To the degree that the US can stay ahead in technology leadership, play its cards right in extending its domination in world markets via acquisitions I can't see how they'd ever hurt! Yes, there is the recession aspect, but think about it. Why is it that the entire planet is in recession? Is this a coincidence of cycles, really? Hmm... I don't think so. You see, if others are suffering, too, that's not too bad for the US, as others would not be having the opportunity to regain lost ground! True, diversification mechanisms would become more and more rare and available. But would you really care if you had the power to withstand the waves? Only the populace would suffer, but the rich? Ha, ha, ha... Marcus Is your boss reading your email? ....Probably Keep your messages private by using Lycos Mail. Sign up today at http://mail.lycos.com
