Replies to post #614331 on Zeev's Turnips Patch-No Politics (ZEEV)

[*~1Best~*]

BIG problem ~ "The American economy has gone away. It is not coming back until free trade myths are buried six feet under."

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That's what was preaching for years. We need to have Fair trade.

[brainlessone]

this is something I dont understand

But it wasn’t long before corporations discovered that the high speed Internet let them offshore a wide range of professional service jobs. In America, the hardest hit have been software engineers and information technology (IT) workers.

The American corporations quickly learned that by declaring “shortages” of skilled Americans, they could get from Congress H-1b work visas for lower paid foreigners with whom to replace their American work force. Many US corporations are known for forcing their US employees to train their foreign replacements in exchange for severance pay.

how can there be shortages of software engineers if the job is being off shored?

and this:

If an asset “insured” by a swap falls in value, the seller of the swap is supposed to make the owner of the swap whole. The purchaser of a swap is not required to own the asset in order to contract for a guarantee of its value. Therefore, as many people could purchase as many swaps as they wished on the same asset. Thus, the total value of the swaps greatly exceeds the value of the assets.*

The next step is for holders of the swaps to short the asset in order to drive down its value and collect the guarantee. As the issuers of swaps were not required to reserve against them, and as there is no limit to the number of swaps, the payouts could easily exceed the net worth of the issuer.

two things come to mind: one is that with this explanation, the issure of the swap has hundreds of times the liability as the underlying asset. All that has to be done is to make the liability no greater than the asset value and pay the holders only their percentage of the value loss. if this were done, then all the shorting stimulus would stop.

furthermore it means that the orginal plan which was to shore up the value of the underlying is exactly what must be done. buyin all the swap holders out at a govenment fiat price needs to occur.

and secondly, it means that all the money is being transferred to someone. somebody has the entire value of the shorted stock market and the shorted real estate sector and the shorted commercial loans

[brightness]

It's sad to see a nominal advocate of small government not understanding the inevitable mushrooming of government bureacracy associated with any coercive measures. Buying low and selling high is what people naturally want to do (and through that, resource allocation is optimized); how can free trade be stopped except for introducing more government coercion telling people at the point of a gun "stop doing that or else!"

Government coercion to preserve jobs that have less expensive replacements just makes no sense. There is fundamentally no difference whether the labor is rendered by Japanese in Japan, or Chinese in China or Indians in India, or magic machines in the US Virgin Islands that consumes only electricity without the need to be paid at all even at Indian wages! The laborious job is gone as soon as that magic machine is hooked up. Is anyone seriously suggesting banning such a machine? Then let's ban these:

http://video.google.com/videoplay?docid=-3043829711888168428

Just imagine how many jobs would be preserved if people have to do all that work with nothing more than a sharp knife! It's called Ludditism. BTW, machines like that second one is the reason why so much cheap labor is available around the world: the high productivity of modern farming, especially in the American Midwest, has liberated vast cross sections of the world population from back-breaking farm labor: by driving food commodities to such a low price level that many ex-farmers around the world have become jobless . . . just like the Erie Canal brought both food from midwest and farm girls from New England to the textile and other industries in the big northeast cities 100+ years ago.

The problem we have is not free trade, but managed trade and fiat money. Fiat money gives the market place the wrong signals regarding what new industry is worth pursuing when old jobs are creatively destroyed by improving technology. When the financial industry gets to keep big gambling wins and transfer losses to the rest of the society, employers in the rest of the economy simply can not compete against the financial industry. That's why college students in recent years have abandoned even high productivity industries like high tech and biotech in pursuit of finance. That's exhibit A for resource misallocation. When government jobs guaratee employment, healthcare and pension, unlike all private sectors jobs that have to cope with the competition and the risk of obsolescence, once again resources get misallocated to those heads you win and tail other people lose industries.

Managed trade is another big factor in why companies farm out jobs overseas. If big companies have to deal with foreign tinpot dictators on dictators' terms, instead of being backed up by taxpayer funded US military, the companies would think much harder before going overseas. That's the reality of empire building. Despite the jingoist fervor among the poor, empire building actually is a process of ripping off the average citizens and the poor to subsidize the rich. Fiat money and bloody-minded simpletons are what makes this possible. Without fiat money, and without a world-spanning imperial military, businesses would have to take their own chances with corrupt foreign dictatorial regimes. Then they'd be much less eager to ship jobs overseas.