When the Dollar Bill Comes Due

[Kidlicious]

When that's the case then there is some other constraint/s to the system. You can't fix the problem by eliminating trade barriers. You have to do something else.

In this case one of the constraints is definitely the exchange rate. Don't you agree?

[Whoha]

Originally posted by Lawrence of Arabia
because the number of jobs that are being outsourced and creating structural unemployment, as a ratio to the job market as a whole, is incredibly small.

At what point does the loss of employed consumers and money taken out of the economy begin to become a problem?

[Lawrence of Arabia]

At what point does the loss of employed consumers and money taken out of the economy begin to become a problem?

no idea, its different for every economy. but remember the idea of comparative advantage. we will continue to make more jobs in the sector where we are relatively more efficient at production.

When that's the case then there is some other constraint/s to the system. You can't fix the problem by eliminating trade barriers. You have to do something else.

why is it a problem if we have an open economy where people choose not to trade? if imports are more expensive then domestic stuff, people will choose not to buy higher priced imports.

In this case one of the constraints is definitely the exchange rate. Don't you agree?

yes, that could be one of the reasons why two countries dont trade.

[Kidlicious]

Originally posted by Lawrence of Arabia
why is it a problem if we have an open economy where people choose not to trade? if imports are more expensive then domestic stuff, people will choose not to buy higher priced imports.

Can you have a price where there is no exchange?

yes, that could be one of the reasons why two countries dont trade.

So it's just like a trade barrier, right?

[Lawrence of Arabia]

Can you have a price where there is no exchange?

sure, even with no 'constraints' as you call them.

So it's just like a trade barrier, right?

yep.

[Kidlicious]

Originally posted by Lawrence of Arabia
sure, even with no 'constraints' as you call them.

That's called a surplus isn't it? Why would there be a surplus?

yep.

That should be a breakthrough for you.

[Lawrence of Arabia]

That's called a surplus isn't it? Why would there be a surplus?

what? i dont follow.

That should be a breakthrough for you.

maybe, but i still dont see your point.

[Kidlicious]

Originally posted by Lawrence of Arabia
what? i dont follow.

An equilibrium price the market clearing price. If the market doesn't clear then you have a surplus. But how can you have a surplus in a free market?

maybe, but i still dont see your point.

If the exchange rate is the contraint to the system, and allowing it to be set by the market is further constraining the system. Then fixing it will eliminate the contraint.

[Lawrence of Arabia]

An equilibrium price the market clearing price. If the market doesn't clear then you have a surplus. But how can you have a surplus in a free market?

no, there wouldnt be a surplus. just because we dont trade doesnt mean that we arnt at equilibirum. it means that relative prices are different and people will choose the cheaper one. there is no surplus since people dont demand the higher priced good and thus it will not be imported

If the exchange rate is the contraint to the system, and allowing it to be set by the market is further constraining the system. Then fixing it will eliminate the contraint.

you cannot fix an exchange rate to provide equal prices across the board. a fixed exchange rate leads to problems such as corruption, stunted growth in certain sectors, and less economic growth on a whole. a fixed exchange rate like chinas, one which is fixed below the market value, will lead to less imports for them, and more exports. free trade is where you let the value of a countries goods and services and the demand for them in other countries be determined by the exchange rate: the more people value them, the more their currency will appreciate. this is a very usefull mechanism, because it means that you can then turn it around, and import more. a win win situation. free trade is not where you fix the exchange rate so it covers the difference between the prices of goods in two countries, because it not longer allows for demand and supply to work, and then you run into shortages/surpluses.

[Velociryx]

*shakes head at the direction this thread has taken*

I have one thing to say:

The cat.

-=Vel=-
(which makes as much sense as some of the junk in this thread!)