Re: Stiglitz on Soros--question for Leigh

["William B. Ryan" <william_b_ryan@xxxxxxxxxx>]

LH:  "You may find a paper I wrote on this entitled "The failings of
the floating exchange rate system" available from http://www.pcug.org.au/~leigh
"
---

I downloaded all the papers and will read them.

LH: "If by capital formation you mean investment, then there was $720
billion of investment over that period of which $256 billion was investment
in equipment."
---

Is that net new investment or replacement cost in the form of a revolving
fund?  Isn't it your contention that net bank credit is equal to the
current account deficit?  Or is it net investment by foreigners in Australia?

LH:  "Are you implying here that the Australian dollar is overvalued
or that Chinese workers are more efficient?"
---

I am on record as saying that foreign trade should be conducted on a
barter basis, similar to the way that the old Soviet Union traded.  Relative
"valuation" between currencies is irresolvable in the absence of a centralized
monetary authority which would require centralized sovereignty and we're
not quite ready for that.

As to the efficiency of Chinese workers, they might be more efficient
or they might not be.  It is entirely beside the point.  Persistent trade
imbalances are not caused by relative efficiencies or comparative advantage
but predatory pricing, which will continue so long as there are cultural,
political and social differences between nations.

An Australian manufacturer, let's say, pays good wages and maintains
a safe and pleasant workplace with a clean smokestack.  He is required
to compete in his own domestic marketplace against "competitors" who
can enslave their workforce under subsistence conditions, pollute their
environment, and recover almost the entirety of their costs of production
in their protected domestic "market."  Everything they sell into Australia
is pure profit no matter what the exchange rate.  No matter what the
exchange rate, they can drop their prices to whatever it takes to capture
more and more of the Australian market from their Australian "competitor."


The Australian industrial base continues to degrade and there is nothing
to stop it so long as discussion is limited to deciding whether it is
better to fill pothole A or pothole B.

LH:  "You are welcome to come up with better metaphors for explaining
evidence."
---

Your "pool of goods" presumes that its quantity is unaffected by entrepreneurial
activity, money or credit.  That doesn't fit the facts.

http://www.geocities.com/new_economics

--
William B. Ryan
william_b_ryan@xxxxxxxxxx - email
voicemail/fax - 1-866-678-3967 - toll free



---- "Leigh Harkness" <Leigh@xxxxxxxxxxxxxxxxxxxx> wrote:
> Bill wrote:
>
> > I am quite willing to admit that there might be a correlation between
> > bank credit in Australia and its current account deficit for the
> period
> > in question.  It appears to me that there has been no net capital
> formation
> > in Australia during that period
>
> Before you come to conclussions such as that, why don't you check the
> facts.
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