Comments on: What Global Rebalancing (aka The End of Foreign Funding Spree) Looks Like http://www.nakedcapitalism.com/2008/08/what-global-rebalancing-aka-end-of.html Sun, 22 Nov 2009 19:08:53 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: PeeDee http://www.nakedcapitalism.com/2008/08/what-global-rebalancing-aka-end-of.html#comment-13621 PeeDee Thu, 28 Aug 2008 00:14:00 +0000 http://www.nakedcapitalism.com/2008/08/what-global-rebalancing-aka-the-end-of-foreign-funding-spree-looks-like/#comment-13621 <i>Bottom line: if you are an American and plan on seeing the world, better do it sooner rather than later.</i><br/><br/>Or hold your net asset currency exposures in a PV-of-expected-expenditure weighted basket of currencies, and sleep well at night. JPY/EUR/USD gives you a pretty good spread.<br/><br/>Not that hard to do these days. Bottom line: if you are an American and plan on seeing the world, better do it sooner rather than later.

Or hold your net asset currency exposures in a PV-of-expected-expenditure weighted basket of currencies, and sleep well at night. JPY/EUR/USD gives you a pretty good spread.

Not that hard to do these days.

]]> By: Juan http://www.nakedcapitalism.com/2008/08/what-global-rebalancing-aka-end-of.html#comment-13620 Juan Thu, 28 Aug 2008 00:02:00 +0000 http://www.nakedcapitalism.com/2008/08/what-global-rebalancing-aka-the-end-of-foreign-funding-spree-looks-like/#comment-13620 Trade, as presented, has become more of a political than economic category, i.e. it continues a long-held notion that any good/svc which crosses an intl polit border = trade.<br/><br/>But, in 2006, “Related party trade” is trade by U.S. companies with their subsidiaries abroad as well as trade by U.S. subsidiaries of foreign companies with their parent companies. Related party trade accounted for 46.8 percent ($863 billion) of consumption imports and 30.8 percent ($319 billion) of total exports". USDC, U.S. GOODS TRADE: Imports & Exports by Related Parties: 2006 , May 10, 2007)<br/><br/>Rather than 'trade', most of this is intra-firm transfer which, on a world scale accounts for 1/3 to 1/2 of total trade. 'Rebalancing' might require a re-think. Trade, as presented, has become more of a political than economic category, i.e. it continues a long-held notion that any good/svc which crosses an intl polit border = trade.

But, in 2006, “Related party trade” is trade by U.S. companies with their subsidiaries abroad as well as trade by U.S. subsidiaries of foreign companies with their parent companies. Related party trade accounted for 46.8 percent ($863 billion) of consumption imports and 30.8 percent ($319 billion) of total exports". USDC, U.S. GOODS TRADE: Imports & Exports by Related Parties: 2006 , May 10, 2007)

Rather than 'trade', most of this is intra-firm transfer which, on a world scale accounts for 1/3 to 1/2 of total trade. 'Rebalancing' might require a re-think.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/08/what-global-rebalancing-aka-end-of.html#comment-13613 Anonymous Wed, 27 Aug 2008 23:17:00 +0000 http://www.nakedcapitalism.com/2008/08/what-global-rebalancing-aka-the-end-of-foreign-funding-spree-looks-like/#comment-13613 Does this take into consideration the possibility of formal or informal US restrictions on foreign trade? In other words, potential boycotts of Chinese or other foreign goods unless trade parity is reached? In a real downturn, things could get ugly and the US consumer could turn against China. Does this take into consideration the possibility of formal or informal US restrictions on foreign trade? In other words, potential boycotts of Chinese or other foreign goods unless trade parity is reached? In a real downturn, things could get ugly and the US consumer could turn against China.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/08/what-global-rebalancing-aka-end-of.html#comment-13591 Anonymous Wed, 27 Aug 2008 18:03:00 +0000 http://www.nakedcapitalism.com/2008/08/what-global-rebalancing-aka-the-end-of-foreign-funding-spree-looks-like/#comment-13591 According to U.S. Dept of State, United States 2006 GDP component makeup was:<br/><br/>67.8% Service<br/>12.4% Government<br/>12.1% Manufacturing<br/> 4.9% Construction<br/> 1.9% Mining<br/> 0.9% Agriculture, Forestry, and Fishing<br/><br/>Source: http://usinfo.state.gov/products/pubs/economy-in-brief/page3.html According to U.S. Dept of State, United States 2006 GDP component makeup was:

67.8% Service
12.4% Government
12.1% Manufacturing
4.9% Construction
1.9% Mining
0.9% Agriculture, Forestry, and Fishing

Source: http://usinfo.state.gov/products/pubs/economy-in-brief/page3.html

]]> By: Lune http://www.nakedcapitalism.com/2008/08/what-global-rebalancing-aka-end-of.html#comment-13589 Lune Wed, 27 Aug 2008 16:53:00 +0000 http://www.nakedcapitalism.com/2008/08/what-global-rebalancing-aka-the-end-of-foreign-funding-spree-looks-like/#comment-13589 2 comments:<br/><br/>1) I wonder how accurate the "gravity" model is when looking at trade in services. I can understand the "divide by distance" bit as a crude approximation of the difficulty of transporting manufactured products. But in the internet age, services have essentially zero transport costs. Whether your call center is located in Mexico or Bangalore doesn't really change the transport costs.<br/><br/>2) This analysis is limited by looking only at trade in manufacturing. Does anyone know what percentage of our trade is currently manufacturing vs. services? The U.S. economy is much more dependent on services and changes in the services trade may be far more important to the picture than changes in manufacturing. 2 comments:

1) I wonder how accurate the “gravity” model is when looking at trade in services. I can understand the “divide by distance” bit as a crude approximation of the difficulty of transporting manufactured products. But in the internet age, services have essentially zero transport costs. Whether your call center is located in Mexico or Bangalore doesn’t really change the transport costs.

2) This analysis is limited by looking only at trade in manufacturing. Does anyone know what percentage of our trade is currently manufacturing vs. services? The U.S. economy is much more dependent on services and changes in the services trade may be far more important to the picture than changes in manufacturing.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/08/what-global-rebalancing-aka-end-of.html#comment-13587 Anonymous Wed, 27 Aug 2008 16:21:00 +0000 http://www.nakedcapitalism.com/2008/08/what-global-rebalancing-aka-the-end-of-foreign-funding-spree-looks-like/#comment-13587 Simply going to an electric infrastructure would readjust where we get our imports from.<br/><br/>Our current largest form of electric energy comes from coal (almost 50% as of 2006). This would mean that while petroleum demand would decrease, coal (amongst other sources of raw energy material) would increase.<br/><br/>As of April 2007, the DOE released in its coal review showing that the U.S. demand for coal out strips supply.<br/><br/>The moral of the story? With the devaluing U.S. dollar, that will hopefully induce import prices to elevate beyond those of local alternatives.<br/><br/>Sources:<br/> Net Generation by Energy Source by Type of Producer -- http://www.eia.doe.gov/cneaf/electricity/epa/epat1p1.html<br/> U.S. Coal Supply and Demand (2007 Review) -- http://www.eia.doe.gov/cneaf/coal/page/special/feature.html Simply going to an electric infrastructure would readjust where we get our imports from.

Our current largest form of electric energy comes from coal (almost 50% as of 2006). This would mean that while petroleum demand would decrease, coal (amongst other sources of raw energy material) would increase.

As of April 2007, the DOE released in its coal review showing that the U.S. demand for coal out strips supply.

The moral of the story? With the devaluing U.S. dollar, that will hopefully induce import prices to elevate beyond those of local alternatives.

Sources:
Net Generation by Energy Source by Type of Producer — http://www.eia.doe.gov/cneaf/electricity/epa/epat1p1.html
U.S. Coal Supply and Demand (2007 Review) — http://www.eia.doe.gov/cneaf/coal/page/special/feature.html

]]> By: Anonymous http://www.nakedcapitalism.com/2008/08/what-global-rebalancing-aka-end-of.html#comment-13586 Anonymous Wed, 27 Aug 2008 16:09:00 +0000 http://www.nakedcapitalism.com/2008/08/what-global-rebalancing-aka-the-end-of-foreign-funding-spree-looks-like/#comment-13586 One of the problems of these studies is that it is a closed system. It assumes that the production and jobs are going back to US once China, Japan and East Asia appreciate against USD. No, jobs will go to Vienam, India, Africa...The system is an open end system. It should at least use game theory to model the market erter/exit decision in the international trade. One of the problems of these studies is that it is a closed system. It assumes that the production and jobs are going back to US once China, Japan and East Asia appreciate against USD. No, jobs will go to Vienam, India, Africa…The system is an open end system. It should at least use game theory to model the market erter/exit decision in the international trade.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/08/what-global-rebalancing-aka-end-of.html#comment-13584 Anonymous Wed, 27 Aug 2008 14:58:00 +0000 http://www.nakedcapitalism.com/2008/08/what-global-rebalancing-aka-the-end-of-foreign-funding-spree-looks-like/#comment-13584 An alternative view - <br/>$400B/year - end the Iraq/Afghan wars.<br/>$700B/year - switch to an electric infrastructure for transportation.<br/><br/>There is your adjustment. An alternative view –
$400B/year – end the Iraq/Afghan wars.
$700B/year – switch to an electric infrastructure for transportation.

There is your adjustment.

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