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comparative advantage

“We’re in the early stages of a depression now. It’s going to be a horrific experience for average Americans who are going to watch their standard of living plunge. The cost of living is going to escalate dramatically. We are going to see soaring prices for the basic necessities of life, like energy, clothing, and other things. Education and health-care costs are going to continue to spiral out of control. Millions of more Americans are going to lose their jobs, and all of us are going to lose our freedoms and our rights. As the government gets bigger, it tries to end the crisis; but its policies are creating, perpetuating, and making it worse.” — Peter Schiff

Just keep printing money and pumping it into the system. Since the dollar is really not valued on anything anymore it will drive us into hyperinflation. The only way to actually solve this crisis is to discover a new system; a Bretton Woods System II, but this is beyond most and obviously above most everyone else around the world as well.

So we need to spend? Spend at home right? So borrow and spend, borrow and spend, who gets rich in the end? Who gets ownership over everything – the Banks, all those big giant buildings in every city – you know the biggest buildings in your city – any city, its all the same, the banks. The people that got us into this whole damn mess are the same ones who will profit! So this whole bailout deal is just like a blood transfusion for a patient with a giant chest wound, “he is running out of blood!” – so instead of fixing the chest wound we will just pump our patient full of blood, if that doesn’t work, we will increase the amount of blood – oh by the way, our children will be having to pay back all that money for a very very long time.

Comparative advantage is flawed

Still, you forget to mention the number 1 flaw of comparative advantage. Let me give you a homey example of trade’s disadvantages.

If Canada sells lumber to Japan and the Japanese sell us high-tech gadgets, then one factor to take into account is the skilled expertise of both country’s labour force.

The Japanese can develop a highly intelligent team of electronic engineers (to produce hight tech gadgets) while unintelligent Canadian lumber jacks cut down trees.

Does USA/Canada really benefit through comparative advantage? We turn into a bunch of dumb tree cutters as opposed to highly skilled techo producers.

The worst situation is for banana republics who must compete to sell low-value items such as bananas and coffee beans… They will need to find enough markets for their bananas to get some of those sweet high-tech Japanese gadgets.

Don, tell it like it is. Comparative advantage assumes trade benefits everyone, and it doesn’t

Here is another question for you to grunt over: What is the difference between relative gains and absolute gains?

So, if Japan is becoming wealthy, through comparative advantage, at 5 times fast a rate as the Canadian tree cutters…Japan is benefiting 5 times as much relative to Canada.

What does a country do in a liberalized trade environment when its only comparative advantage is in raw materials and the overriding goal of its citizens is not the production of goods or services, or of contributing to the general well-being, but the avoidance of physical labor at all costs, and the individual accumulation of the tokens of wealth by any means other than actually generating wealth or legitimately earning one’s share of the economic pie? It is clear we’re about to find out.

Peter Schiff: “We’re in the Early Stages of a Depression”

In August 2006, Peter Schiff, president of Euro Pacific Capital, offered what many considered to be an outlier prognosis for the economy: The exuberance would end, real estate prices would crash back down to earth, and consumers would revert to saving from spending. In short, a deep recession was in the works.

As outlandish as he may have sounded at the time, he was right. Four years and the worst recession since the Great Depression later, Schiff stands alone again with a bleaker diagnosis for the economy: an inflationary depression.

In an interview, Schiff, president and chief global strategist of Euro Pacific Capital, a candidate for U.S. Senate in Connecticut, and author of the new book How an Economy Grows and Why It Crashes, said he thinks the government’s policies — massive fiscal stimulus and a zero interest-rate policy — have put the U.S. on a track for a collision course. Motley Fool

This entry was posted on Wednesday, August 11th, 2010 at 7:44 am and is filed under All Posts, North America. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

4 Comments

  1. August 11, 2010 @ 11:28 pm


    MeltUp: The Beginning Of A US Currency Crisis And Hyperinflation
    Economics
    MeltUp: The Beginning Of A US Currency Crisis And HyperinflationThe documentary proves through facts and statistics how hyperinflation in the U.S. is now inevitable and how Americans could soon see the end of entitlement programs they have become dependent on to live and survive.

    Meltup features Gerald Celente, Peter Schiff, Ron Paul, Marc Faber, Jim Rogers, Tom Woods, and others.

    NIA believes Meltup is the most important economic documentary ever produced in world history and a must see for you, your friends, and family members.

    Also NIA urges to spread the word about the documentary to help those you care about survive the hyper-inflationary crisis that is ahead.

    The National Inflation Association is pleased to announce that its new documentary ‘Meltup’ has surpassed 33,000 views in 24 hours and is currently the #1 top favorited news video of the day on YouTube.
    Watch the full documentary now
    http://www.youtube.com/watch?v=eb1n1X0Oqdw&feature=player_embedded

    http://www.youtube.com/watch?v=E4ez21OItqQ&feature=channel

    Posted by Allan
  2. August 12, 2010 @ 7:02 am


    Interesting article but simply not true, deflation is the enemy, other than hyperinflation everything else should happen as he said it would

    Will Quantitative Easing Spur Inflation? Job Creation? Credit Expansion? Do Anything?

    http://globaleconomicanalysis.blogspot.com/2010/08/will-quantitative-easing-spur-inflation.html

    Mish has spent alot of time explaining why inflation can’t won’t come back.

    Posted by rob in madrid
  3. August 13, 2010 @ 6:08 am


    The bottom line, we are all doomed! Everyone on this entire planet is doomed! Sorry to be blunt. But if you’ve ever read Revelation and Daniel, and even Ezekiel, and just really pay attention to everything that is going on in the world, you know that time is short. The only hope for us is Jesus! You ever hear the saying, “Things get worse before they get better?” Well it is true. I hate to say it but things are going to get worse, much, much worse. And that is when a man will appear on the scene and tell everyone that he has come to save them. Do not believe him! He is not Jesus Christ but in fact he is anti-Christ. For those who say no to him and yes to Christ, eternal salvation awaits them. Christ will appear within a few years and destroy anti-Christ and set up his kingdom on earth forever and ever Amen.

    Posted by Erick
  4. August 17, 2010 @ 10:55 pm


    How ironic that spot-on economic forcaster, Peter Schiff talking about the US economy being like a doomed “ship” like the Titanic, because Peter’s Family name “Schiff” means “Ship” in German!

    Posted by Marty

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