[quote]Vegita wrote:
orion wrote:
Vegita wrote:
I’m not following some of the sentiments against this idea. If I spend $10 dollars on a shower curtain made in china, lets assume the US retailer gets $4 out of that. the rest of the money goes to the chinese company who made the product, and the shipping company who shipped it over here.
And if I bought an $11 dollar shower curtain that is made in the USA, $11 of those dollars (minus tax of course) are able to be re-spent by an american. So this decision I made has kept approx $6 more circulating in the american economy.
How does this not help our economy out. I’m seriously asking i’m not being rhetorical or anything, it just seems like it would make sense to me.
V
comparative advantage, or rather the loss of it, and inflation.
I do not understand what comparative advantage means and I thought inflation was the result of the fed printing money that is not backed by anything. More money in circulation + less GDP = Higher inflation? Am I wrong? If anything if we kept more money in the US and the fed had to print less as a result, wouldn’t the dollar grow stronger?
V[/quote]
The fed does not have to print anything. It just does.
However, money that sits in Chinese banks is not in circulation. Now just imagine what would happen if they sold your IOU (or not renewed them, same difference) and spent their dollars in the US. That would be the inflatocalypse.
Comparative advantage means that even though you might be better at producing stuff than another country it still does not pay to produce it because you are even better at something else.
It is not hard to see when say England trades wool for Spanish wine. Both are better off. But lets say England could also produce cheaper and better wine that Spain. Should England do that?
Not necessarily. Maybe England is so much better at producing wool that it is best for all involved if they concentrate on doing that and simply buy the wine from Spain.
Samuelson example is this:
Suppose that in a particular city the best lawyer happens also to be the best secretary, that is he would be the most productive lawyer and he would also be the best secretary in town. However, if this lawyer focused on the task of being an attorney and instead of pursuing both occupations at once, employed a secretary, both the output of the lawyer and the secretary would increase.
So, you do not want to compete in the cheap crap business with China, you want to build Computers and Ipods and buy cheap crap from China.