If we default, all that foreign outsourcing is about to come to an end.

Dec 2011
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And it all happens without those evil trade barriers or tariffs.

It's going to end, and we're going to become the world's largest exporter because goods sold from here will be so incredibly cheap in everyone else's markets. And services? Oh, man. Every call center in Brazil, Mexico, South Africa and Manila will close overnight.

Everyone who ever defended foreign outsourcing is going to take it right in the face. China's economy is 50% dependent upon trade. They're going to take it in the face. The Middle Eastern oil sheiks are gonna take it in the face several times. Mexico's economy takes a bullet to the head, Canada's gets a bullet, Japan's economy gets a bullet, everyone gets a bullet!

Finally the world pays the price for making its living off bleeding America's working class. Our vein is about to run dry, vampires. What will you do now?

China to United States: Don't Default, For Our Sake | TIME.com

China to United States: Don’t Default, For Our Sake

One day after Republican House Speaker John Boehner promised to “stand and fight” over the budget, Chinese officials have pleaded with America’s deadlocked Congressmen to stand down. “The clock is ticking,” Chinese Vice Finance Minister Zhu Guangyao warned on Monday. “We ask that the United States earnestly takes steps to resolve in a timely way the political issues around the debt ceiling.”

And what if the clock runs out? Then China, the U.S.’s biggest creditor, will be left holding the bag. Its government holds $1.3 trillion in U.S. Treasury bonds and a whopping $3.5 trillion in dollar-denominated assets. It has racked up these holdings through an export-oriented trade policy, by which China sells goods and services to the U.S. and gets dollars in return. China then plows those dollars into the world’s safest investment, the U.S. Treasury bond.

That suited everyone just fine until the Treasury began ringing the alarm bell about a possible default on October 17th. A default could wreak havoc on the value of China’s dollar-backed assets. A huge portion of China’s wealth depends on the U.S.’s ability to pay down its loans.
 
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Mar 2012
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So you think default will be a good thing and will bring jobs back to the US?
 
Dec 2011
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724
So you think default will be a good thing and will bring jobs back to the US?
There is no good thing coming for the American working class. At the rate we were going, foreign cheap labor was eventually going to bleed out every job in this country that's not nailed down (like, say, gardeners). We'd just be a country full of unemployed people screaming for the Dole - you know, like Rome, right before the empire collapsed.

But a default? There's no scenario under a default that has us continuing to bleed out jobs. None whatsoever. This is going to severely damage the US dollar and to keep foreign labor cheap against our labor, countries are going to have to hyperinflate.

A devalued dollar makes American exports super cheap. Why has Ikea been outsourcing to America and allowing their workers to unionize? Because unionized American labor is cheaper than Swedish labor. Why has Germany been outsourcing BMW plants to America? Because American labor has been cheaper. Now imagine what will happen when the US dollar actually becomes cheap through devaluation? We start building iPads to send to China. What does that mean? A hell of a lot of jobs. And then there's all the call centers and biotech research and all that other stuff that has left America in pursuit of cheap labor. When WE become the cheap labor through devaluation... yeah, the jobs start flooding back here.

Or, at least, the jobs stop bleeding out.

This is why China is on its knees begging us not to default. It's not just because of all the dollars they own. The REAL reason is why they own those dollars: their economy is built upon vampirism - China built itself up on sucking us dry of jobs. In fact, the entire world's economy is built upon this vampire behavior... and our vein is about to run dry.

Ask yourself why have so many countries been working to keep our dollar propped up....
 
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Mar 2012
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There is no good thing coming for the American working class. At the rate we were going, foreign cheap labor was eventually going to bleed out every job in this country that's not nailed down (like, say, gardeners). We'd just be a country full of unemployed people screaming for the Dole - you know, like Rome, right before the empire collapsed.

But a default? There's no scenario under a default that has us continuing to bleed out jobs. None whatsoever. This is going to severely damage the US dollar and to keep foreign labor cheap against our labor, countries are going to have to hyperinflate.

A devalued dollar makes American exports super cheap. Why has Ikea been outsourcing to America and allowing their workers to unionize? Because unionized American labor is cheaper than Swedish labor. Why has Germany been outsourcing BMW plants to America? Because American labor has been cheaper. Now imagine what will happen when the US dollar actually becomes cheap through devaluation? We start building iPads to send to China. What does that mean? A hell of a lot of jobs. And then there's all the call centers and biotech research and all that other stuff that has left America in pursuit of cheap labor. When WE become the cheap labor through devaluation... yeah, the jobs start flooding back here.

Or, at least, the jobs stop bleeding out.

This is why China is on its knees begging us not to default. It's not just because of all the dollars they own. The REAL reason is why they own those dollars: their economy is built upon vampirism - China built itself up on sucking us dry of jobs. In fact, the entire world's economy is built upon this vampire behavior... and our vein is about to run dry.

Ask yourself why have so many countries been working to keep our dollar propped up....
Do you think the politicians are smart enough to have figured this out and that's why they seem hell bent not wanting this to end?
 
Mar 2012
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So you think default will be a good thing and will bring jobs back to the US?
You know, with respect to free trade, [MENTION=18782]Jacquelope[/MENTION] and I have exchanged our barbs, but she's 100% correct. Defaulting, or frankly, preferably, simply balancing the budget, has an amazing impact on the dollar, it will depreciate. The foreign countries who were able to recycle their dollar earnings (and keep their currency artificially low), won't be able to do that anymore, the dollar will slide and the trade deficit will finally come back into balance because foreigners aren't going to just ship us containers filled with neat stuff without expecting things in return. It happened in Argentina, the Argentine currency was pegged to the dollar, that peg was unrealistic, they depegged/devalued appurtenant to a default and what pulled them out was an export led recovery. The problem is that in the immediacy of the default there was a depression. The US government's debt coupled with its current status as a reserve currency imposes a massive Dutch disease on the US economy; US debt crowds out US exports. Because of the inherent imbalances in global trade, Japanese, South Korean and Chinese exporters, dependent on foreign sales, need their currencies to be undervalued and when these countries accumulate foreign reserves and create the macroeconomic conditions for their currencies to appreciate, they complain to their governments who respond accordingly and sell their local currencies, parking their dollars in US bonds, to ensure that the exporters can continue to export. This is simply unsustainable and is placing insurmountable burdens on our industrial middle class to sustain their living standards. In 2010, President Obama promised to double US exports by 2015 and in light of the economic circumstances, there does not appear to be any real choice; either the United States is going to have an export-led recovery or the unsustainable global dance of entrenched exporters and entrenched importers is going to collapse.
 
Last edited:
Mar 2012
60,050
41,496
New Hampshire
You know, with respect to free trade, [MENTION=18782]Jacquelope[/MENTION] and I have exchanged our barbs, but she's 100% correct. Defaulting, or frankly, preferably, simply balancing the budget, has an amazing impact on the dollar, it will depreciate. The foreign countries who were able to recycle their dollar earnings (and keep their currency artificially low), won't be able to do that anymore, the dollar will slide and the trade deficit will finally come back into balance because foreigners aren't going to just ship us containers filled with neat stuff without expecting things in return. It happened in Argentina, the Argentine currency was pegged to the dollar, that peg was unrealistic, they depegged/devalued appurtenant to a default and what pulled them out was an export led recovery. The problem is that in the immediacy of the default there was a depression. The US government's debt coupled with its current status as a reserve currency imposes a massive Dutch disease on the US economy.
I think it is an interesting theory and quite probable, although probably not the way we should have gone about it!
 
Mar 2012
5,217
933
Do you think the politicians are smart enough to have figured this out and that's why they seem hell bent not wanting this to end?
Few reasons, the first is that if the dollar slides and trade rebalances, that's actually going to be seriously inflationary, literally you'll have less goods coming in from abroad and more goods leaving being chased by the same number of dollars. Ultimately, we're a country consuming more than its producing, so there's the pain of bringing that back into balance, we will actually be consuming less. Better to come to grips with that today, that's what debt is, it permits you to consume today and it slowly erodes your standard of living with each passing day.
 
Dec 2011
1,810
724
Do you think the politicians are smart enough to have figured this out and that's why they seem hell bent not wanting this to end?
Not just no, but hell no, they're not smart enough. They've got the wool pulled over their eyes by politicians of our foreign trading partners, hence we we're still heading into the drooling maw of the TPP.

I think it is an interesting theory and quite probable, although probably not the way we should have gone about it!
You're absolutely right about that.

Few reasons, the first is that if the dollar slides and trade rebalances, that's actually going to be seriously inflationary, literally you'll have less goods coming in from abroad and more goods leaving being chased by the same number of dollars. Ultimately, we're a country consuming more than its producing, so there's the pain of bringing that back into balance, we will actually be consuming less. Better to come to grips with that today, that's what debt is, it permits you to consume today and it slowly erodes your standard of living with each passing day.
That is part of my point. We have to deal with this eventually, either now or later. The dollar as the world's reserve currency is as much a curse as it is a perceived blessing.

Then there's another issue, too - namely, that we're going to run out of natural resources if we keep up at this rate. What is America's landfill footprint anyway? I bet we're worse than anyone.

BTW I'm a he, not a she. :D
 
Aug 2013
1,391
551
NYC
You know, with respect to free trade, [MENTION=18782]Jacquelope[/MENTION] and I have exchanged our barbs, but she's 100% correct. Defaulting, or frankly, preferably, simply balancing the budget, has an amazing impact on the dollar, it will depreciate. The foreign countries who were able to recycle their dollar earnings (and keep their currency artificially low), won't be able to do that anymore, the dollar will slide and the trade deficit will finally come back into balance because foreigners aren't going to just ship us containers filled with neat stuff without expecting things in return. It happened in Argentina, the Argentine currency was pegged to the dollar, that peg was unrealistic, they depegged/devalued appurtenant to a default and what pulled them out was an export led recovery. The problem is that in the immediacy of the default there was a depression. The US government's debt coupled with its current status as a reserve currency imposes a massive Dutch disease on the US economy; US debt crowds out US exports. Because of the inherent imbalances in global trade, Japanese, South Korean and Chinese exporters, dependent on foreign sales, need their currencies to be undervalued and when these countries accumulate foreign reserves and create the macroeconomic conditions for their currencies to appreciate, they complain to their governments who respond accordingly and sell their local currencies, parking their dollars in US bonds, to ensure that the exporters can continue to export. This is simply unsustainable and is placing insurmountable burdens on our industrial middle class to sustain their living standards. In 2010, President Obama promised to double US exports by 2015 and in light of the economic circumstances, there does not appear to be any real choice; either the United States is going to have an export-led recovery or the unsustainable global dance of entrenched exporters and entrenched importers is going to collapse.
You are right but you are wrong.

What I mean to say is, just about everything you said is correct, but I think your premise is flawed. While a reduction in the debt would depreciate the dollar and help US expeorts, I don't think that would be anywhere near enough to counter the effects of slashed government spending.