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Forget "Free Trade" - Focus On Capital Flows
Submitted by Charles Hugh-Smith of OfTwoMinds blog,
In a world dominated by mobile capital, mobile capital is the comparative advantage.
In the classical definition of free trade espoused by 18th century British economist David Ricardo, trade is generally thought of as goods being shipped from one nation to another to take advantage of what Ricardo termed comparative advantage: nations would benefit by exporting whatever they produced efficiently and importing what they did not produce efficiently.
If trade numbers more accurately accounted for how products are made, it is possible that the United States would not have any trade deficit at all with China. The problem, in short, is that trade figures are currently calculated based on the assumption that each product has a single country of origin and that the declared value of that product goes to that country.Thus, every time an iPhone or an iPad rolls off the factory floors of Foxconn (Apple's main contractor in China) and travels to the port of Long Beach, California, it is counted as an import from China, since that is where it undergoes its final "substantial transformation," which is the criterion the WTO uses to determine which goods to assign to which countries.
Every iPhone that Apple sells in the United States adds roughly $200 to the U.S.-Chinese trade deficit, according to the calculations of three economists who looked at the issue in 2010. That means that by 2013, Apple's U.S. iPhone sales alone were adding $6-$8 billion to the trade deficit with China every year, if not more.
A more reasonable standard, of course, would recognize that iPhones and iPads do not have a single country of origin. More than a dozen companies from at least five countries supply parts for them. Infineon Technologies, in Germany, makes the wireless chip; Toshiba, in Japan, manufactures the touchscreen; and Broadcom, in the United States, makes the Bluetooth chips that let the devices connect to wireless headsets or keyboards.
Analysts differ over how much of the final price of an iPhone or an iPad should be assigned to what country, but no one disputes that the largest slice should go not to China but to the United States. That intellectual property, along with the marketing, is the largest source of the iPhone's value.
Taking these facts into account would leave China, the supposed country of origin, with a paltry piece of the pie. Analysts estimate that as little as $10 of the value of every iPhone or iPad actually ends up in the Chinese economy, in the form of income paid directly to Foxconn or other contractors.
There's nothing remotely "free" about trade based not on Ricardo's simple concept of comparative advantage but on capital flows unleashed by central bank liquidity.
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define money and capital first...
there has never been truly "free trade" within the jurisdiction of any government, period.
What can be said is that real capital and talent always go where they are respected.
They are ripp'ing it today
Chase those stawks fuckers!
#putin
breaking
press: Putin cancer - pancreas
Latest: (last reports in german only)
http://tersee.com/#!q=putin&t=text
I wonder what Zionist stooge they have waiting in the wings?!
"Lenin 2.0, please report to your on-deck circle..."
An American, not US subject.
"Now Neo-Lenin, they have us banksters on the ropes, and you're our last hope. Go in there and stop their anti-petrodollar defense, get the gold, and free up Syria for us. We're 'banking' on you Neo-Lenin. Go get 'em!"
So, I see you're spamming the threads with this today, and I go look at your comments, only to notice that ALL you do is spam ZH.
http://www.zerohedge.com/search/user_comments?name=observer007
So... you can go fuck off and die now, okay?
"What can be said is that real capital and talent always go where they are respected."
If by respected you mean to the highest bidder, then the guy has a point. Free monopoly money from the central bank can buy a whole lot of respect. The definitions of "money" and "capital" are perverted by cronyism.
Simply put, debt-money is NOT capital, but yet another fraudulent, leveraged claim upon it.
Yes, In truth a credit "money" system is worse than the vanilla variety of fiat. The interest component gives it the characteristics of a positive feedback loop. In a way it is "anti-capital", but try telling the public that.
my best friend's sister makes $80 /hour on the internet . She has been laid off for 7 months but last month her paycheck was $13987 just working on the internet for a few hours. visit site... www.Yelptrade.com
This is, strangely enough, the argument that will be made to ensure the end game concentration of power in the hands of stealthy globalists.
I'm loving this solid day of good finance and economic related articles Tyler. Not hearing about the end of the world from fanatical commentors is a nice change of pace.
And of course we have people like "hook line and sinker" who can turn any article into a global elite, conspiracy type play. *sigh*
Charles won't let himself go there, yet. He repeatedly brings his readers to the point where "Globalism/Globalization" is recognized as either the cause of the problems he writes about, or severely execarbates those problems, and prevents governments from creating viable solutions.
Globalism/Globalization is THE Problem. National governments around the world have been subordinated to stateless entities controlled by stateless persons who are largely unaccountable to any nation-state. And for no reason at all, but for their stupefied acceptance of new age economic theories, central banks around the world enable this process.
Nations must renounce Globalism and re-construct nationalistic nation-centric economic poilicies. Bi-lateral treaties, coupled with tariffs and currency controls, worked reasonably well through mroe than two centuries until NAFTA/WTO (and soon the TPP) treaties took away the sovereignty of nations.
Tarriffs: A way for lobbyists and campaign contributors to squeeze the competition.
You are on the right track IMHO, especially with nation states which use fiat currency. You sound a lot like a localist. Do you also subscribe to Localism as a philosophy of government?
charles only has part of the puzzle
intellectual property, enviromental, and labor laws all come into play
if you're free to pirate hollywood ... don't mind paying 12yr olds 25 cents an hour ... and dump the hazmat out the back door of factory
hoo can compete?
I'm hard pressed to think of many countries where there is free movement of capital out. In is easy - it's getting the capital back from the non-liquid assets (what would you call buildings and machinery) that is the bitch.
There is a lot of friction = costs involved in moving manufacturing around. I believe what we have seen is multinationals rushing into China and setting up large enough plants / factories etc to export but also because they expected to get huge benefits from any market share in that populous country. Unfortunately, they fell victim to the age-old chinese practice of stealing your ideas and technology for nothing.
The FedRes and their partners in crime, the DC US, are "printing" cheap capital that is being used to export the American manufacturing base offshore. In effect, creating slaves of us all while also stealing our futures.
Jerry-rigged exchange rates are the clearest sign of that. That, and the fact that nearly all goods populating all retail stores, from clothing to hardware, are foreign made.
An American, not US subject.
"Guillotine the Fed!"
"Free trade" is neoliberal jargon which is synonymous with the word "mask" as in the mask a robber puts on before stealing your money.
I think in one sense this applies also to the cheap funding of Wall Street crushing the most important asset many countries have, their financial industry. We are not living anymore in the age of manufacturing but in that of finance.
"Free Trade" does not exist when you have countries like Germany and China that have a 19% VAT tax on foreign made goods. How can the USA compete????
The USA used to have an import tariff to protect our manufacturing sector, but Reagan got rid of it in the 1980s and it opened up the floodgates for job outsourcing to China. Reaganomics destroyed the American middle class and our manufacturing sector.
Where are our kids supposed to work?
Remember this next time you pass one of those giant brick factories thats empty, ruined, and graffitied.
do not confuse monied capital, which is just a mean of circulation, with commercial capital which is working capital, intellectual property, hard assets less external debt. The West has more and more monied capital and less and less net capital.
Would this also be a "Free market" unburdened by leverage?
Well, monied capital (large bank deposits) can be created artificially, for actual capital, much tougher to create, can not do it out of thin air.
Capital was a lot more mobile in the 18th Century than CHS portrays... just ask the Rothschilds. The Dutch, British and French East India Companies were founded early in the 17th century, by the 18th century the sheeples' mobile capital was being plied into the South Sea Company & the Mississippi Company before that European Debt Crisis.
In order for goods to flow in 18th century Mercantilism, someone had to "set out" in advance of the merchant fleets with boatloads of capital to build the industries to fill the ships that arrived later.
Yes that's it the new arm of massive social destruction in Oligarchy world : Fiat nomadic oppression, all electronically cooked in a fiat CB micro oven, to buy whats left of world's resources and to build the robotic new "no sheeple required" age. Whatever the cost in "funny money"-- Hey its funny 'cos it buys your human tummy, now not even the birthplace of humanity as we can test tube that!
Run, run, run, Oligarchy Nemrods, you are in the eye of the cyclone. Robots will never run a human world against the will of the people as long as there is spark of resistance.
How many will be sacrificed for your corrupt dynamics of "we are changing the world" be seen for what it is : Everything changes so that nothing changes.
We need a new rage to fight the OLigarchy page of lies, damn lies and false fiat statistics of this age.
After counter-reform, counter-revolution, aka fascism, we are deep into counter-enlightenment of false, financialized capitalism age that uses every trick in the book to recook their obscurantist sleight of hand.
This is the negation of western civilization's time line; but what's new !
The world defeated Tilly and Wallenstein fighting for Universal empire of Habsburgian counter-reform, the world defeated Mussolini and Hitler and Stalin fighting for counter-revolution against basic human rights.
Now we have to fight the sons of counter-enlightenment in all their regressionary glory, the neo-con, neo-robotic predatory mantra, and that is a fight they will never win.
Before we face the new challenge of peak world resources and invent a new paradigm.
Every age knows its steep ascent of the Eiger face, or that of Anapurna. Same shit time and again. The spice of life.
Thanks Charles Hugh-Smith, for looking into the discrepencies between modern free market theory and reality.
What is referred to in the essay as "mobile capital" in my mind can be brought in line with classical economic theory by instead using the term 'monopolies'. There is a monopoly on capital creation/debt-creation/loan-creation/money-creation, I'm not precisely sure what the best term for it would be right now.
The power of monopolies has always been a caveat to laissez-faire economic policy, because monopolies have the potential to erase most of the positive effects that come from free trade and efficient markets.
anglo-pirate profiteers! criminal globalist bankers with no rules, morals, thats why they don't want borders.
OFF WITH THEIR HEADS!
TO ARMS TEUTONIC KNIGHTS!!!
I contend outflows from both the Euro-zone and Japan are helping to support the American markets. The Fed recently whacked the dollar down but for how long? For months the major world currencies have traded in a narrow range as if held in limbo by some great force. This has allowed people to think we were on sound footing as central banks across the world continued to print and pump out money chasing the "ever elusive growth" that always appears to be just around the corner. Recently some currencies have made multi-year highs or lows depending on the match-up .
John Maynard Keynes said By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens. While there are not many Bond Vigilantes there are a slew of Currency Vigilantes and they are ready to make their presence known. Weakness in the value of the Yen, Pound, and Euro must
not go unnoticed. More on why this may be a signal that currency trading is about to get very wild in the article below. Please note, this may also be sending a signal that the whole system is unstable and the stock market is about to drop like a stone.
http://brucewilds.blogspot.com/2014/10/fed-concerned-that-stong-dollar.h...
Portable property, Mr. Pip.
how about LOWER TAXES..... and LESS GOVERNMENT....
what free trade is he referring to ..... more ivory tower unicorn fairy dust thinking...
it takes a decade in china to get the right connections (payoff parties) from the town / province / labor / commie party and EVERYTHING is decided in Beijing Peking... so again... what free trade... NAFTA.... a joke fucking amerika out of taxes and jobs... trade with china... only crony capitalists benefit... remember when Gates wasn't paying off the pols in the ussa and they sledge hammered him with an antitrust aciton... pay for lawyers or pay the cheaper political whores... yep.. that's the advice warren (owes $2.5 billion in back taxes) gave to billy boy... and exactly where did billy boy get the os he made his fortune from?? ask ibm...
we live in a feudal system not a free trade system and the screw is turing daily... vote for hope and change and get obola... and obolanomics (total corruption and pure commie political agenda)...