Twistedpixel said:
HappySqurriel said:
Twistedpixel said:
There are a lot of pros to the concept of mercantilism or running a country like a company. Inflows being imports ought to be the same or smaller than exports. A fiscally prudent country can be run a lot like a large multinational company. I suspect that a lot of economic policy is made without the understanding of how other countries actions may effect the local initiatives, like for example cheap credit for consumers. People don't need to replace their TV's every 4 years.
I see absolutely no reason for cheap credit for consumers, all it does is get the people with the least self control into trouble and take money away from productive enterprise.
Im also appalled that governments have lost sight of cheap energy as a source for economic growth. When a machine can replace human labour at a higher productivity, everyone benefits. |
As much as I personally agree with this approach as a short/mid-term strategy for most countries, a large portion of the world economy needs to be a net importer; and eventually the economies of the net-exporters will exceed the size that the net-importers can handle and some countries will be forced to switch positions. The long term strategy for a country is to invest the money they receive from their trade surplus, and to use that to finance their trade deficits, in order to avoid going into debt to grow their economy.
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Invest money from their trade surplus to finance their trade deficits? How does that work? Most countries which currently have trade surpluses have had them for a while and the same applies to countries with trade deficits.
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When you have a massive trade surplus it is inevitable that the valuation of the currencies will change and (therefore) reduce the competitive advantage you have (typically through inflation), or you will be forced to build up a massive reserve of foreign currency. If you choose to take this foreign currency and invest it in its country of origin you will (hopefully) build up a very large portfolio of investments and, in a similar fashion to retirement, you can slowly drain this investment portfolio to survive the reversal of the balance of trade without significant inflation or deflation.
