When the Dollar Bill Comes Due

[Kidlicious]

Kuciwalker,

Not to an economist. Economists are not very emotional anyway.

[Kuciwalker]

*sigh*

[Kidlicious]

I think "pleasure" is not the best word, because economists don't mean it as an emotion. A better word is "utility" or the satisfaction of a need or want.

edit: The word specifically means a choice that is not based on emotions. Sorry Kuciwalker. That's the context.

[Lawrence of Arabia]

We aren't just talking about one industry. We are talking about a general increase in import costs. Anyway, one industry isn't going to start building factories right away anyway. It takes almost six months to decide to build the factories alone. Companies don't react to short run prices like that. Expansion decisions are based on long range forecasts.

(reserved space for later commentary)

[Kidlicious]

Originally posted by Lawrence of Arabia


(reserved space for later commentary)

What is this?

[Kidlicious]

As much of a Keynesian as I am, I also believe in rational expections. There has to be expectations that long run demand will be greater. With general inflation you generally get poor expectations.

[Imran Siddiqui]

Originally posted by Kidicious
We aren't just talking about one industry. We are talking about a general increase in import costs. Anyway, one industry isn't going to start building factories right away anyway. It takes almost six months to decide to build the factories alone. Companies don't react to short run prices like that. Expansion decisions are based on long range forecasts.

They don't have to build new factories, but update the technology in existing ones. There are a plenty of automotive factories that don't have the best tech because the aren't required to produce that much volume. For example, a good number of American plants in Mexico aren't fully automated because they aren't required to put out that much volume.

The bottom line is that factories across the US can produce more than they are already. When they can capitalize on this, what some are calling long term, development, they will upgrade the technology.

[Whoha]

Originally posted by grumbler
In large part because the much of the deficit is for petroleum, which the US consumes in increasing but produces in decreasing amounts. Another factor is the general antipathy to "buying American" right now, despite the more advantageous prices.

The "free market" isn't really "free" in the sense of being perfectly rational. If it was, the French would be looking more closely at California wines, for instance.

No, Year to date for 2005 Petroleum has only made up 10% of our imports.

[Kidlicious]

Originally posted by Imran Siddiqui


They don't have to build new factories, but update the technology in existing ones. There are a plenty of automotive factories that don't have the best tech because the aren't required to produce that much volume. For example, a good number of American plants in Mexico aren't fully automated because they aren't required to put out that much volume.

The bottom line is that factories across the US can produce more than they are already. When they can capitalize on this, what some are calling long term, development, they will upgrade the technology.

I think you underestimate the level of modernation in plants these days. Plants have been modernizing greatly in these last two decades. How do you think we've made so much productivity gains.

That's not the real issue though. The US plants don't compete directly with exports very much. There is far less competition than you think. To alleviate the problem US companies would have to move into whole new industries. New plants would have to be built. Those plants would be incredibly inefficient at first, because there would be a shortage of "know how" in the new industries.

[Imran Siddiqui]

The US plants don't compete directly with exports very much.

In fact US industry does compete with most imported goods. Simply because there is a comparative advantage someone else, doesn't mean those industries do not exist in the US. For most foriegn exporting companies there is a US equivalent. Our agricultural goods compete with imports. Our industrial parts compete with those coming from overseas. Our automobliles compete with imports.

[Kidlicious]

Originally posted by Imran Siddiqui

The US plants don't compete directly with exports very much.

In fact US industry does compete with most imported goods. Simply because there is a comparative advantage someone else, doesn't mean those industries do not exist in the US. For most foriegn exporting companies there is a US equivalent. Our agricultural goods compete with imports. Our industrial parts compete with those coming from overseas. Our automobliles compete with imports.

If the US doesn't have a comparative advantage that means that in a free trade system they produce very little of that good in comparison to that which is imported. Therefore there is not enough capacity in the US to affect the price in the short run.

[Imran Siddiqui]

Who says they are affecting price? They are just taking advantage of their goods' lower, relative price, and exploiting that advantage.

Furthermore, if our companies did not compete with imports, why are the labor unions campaigning for higher tariffs? Obviously that would mean that their businesses compete against imports... or are you saying that labor unions don't know what they are doing?

[Lawrence of Arabia]

wait, i thought . . .

Of course it's a given. Everything is a given according to your little models. Go on with your little fantasy world and don't worry about anything. The free market always takes care of everything. In fact, that's all you have to say.

anyways . . .

[Kidlicious]

Originally posted by Imran Siddiqui
Who says they are affecting price? They are just taking advantage of their goods' lower, relative price, and exploiting that advantage.

Are we not talking about inflation? Maybe we aren't. That's what happens when you have different threads going. I'm pretty sure you were saying that the US companies would be able to pick up all the slack though.

Furthermore, if our companies did not compete with imports, why are the labor unions campaigning for higher tariffs? Obviously that would mean that their businesses compete against imports... or are you saying that labor unions don't know what they are doing?

They want higher prices for their goods. If they can get trade barriers the market price will go up.

[Kidlicious]

Originally posted by Lawrence of Arabia
wait, i thought . . .



anyways . . .

You can't apply a concept universally. That's my point. Free trade and tax cuts are not always the right answer.