"...your half of the blogosphere..." News Flash! Drezner and Yglesias sign Treaty of Tordesillas!

Chavez is indeed a tempest in a teapot. Matt touches on this here without seeming to fully grasp it.

August 6, 1993.

Quoting Simon Willard: Chavez is indeed a tempest in a teapot. Matt touches on this here without seeming to fully grasp it.

How do you figure? I'm not Yglesias's biggest fan but I thought he kept a reasonable perspective on Chavez's clownish posturing. I guess the whole visit-Cuba-first segment was overthinking it a little, but Chavez HAS tossed a lot of Venezuela's money at neighboring leaders and may still retain some influence from that.

Drezner's point about needing 60-67& of the populace to get anything past would make sense if indeed, the Senate was based on population. But, when you look at the makeup of the GOP and the population of those states, they add up to about 39%.

i can't tell if you're serious. are you a chavez fan or something? also, i can't believe i'm agreeing with KS but i've never had any use for yglesias. it kind of scares me that left wingers actually consider him a source of "insight." wtf would you read a generic "blog" instead of any other form of investigative journalism?

Quoting Titstorm: i can't tell if you're serious. are you a chavez fan or something?

Chavez has been a tremendously successful leader for Venezuela, perceptions of him in the western media aside. Under his time in office extreme poverty has been cut in half and the economy has diversified away from the oil sector. I'd suggest you look at this study for more information. http://www.cepr.net/documents/public...la-2009-02.pdf Drezner's argument that a "couple of months" of oil at $40 dollars a barrel is unfounded. Venezuela built up a large currency reserve while prices were high, and can handle a current account deficits for at least two years if oil prices stay where they are now. I should also add that Yglesias's comments about Chavez's "anti-Semetic" campaign shows his ignorance about Venezuela. I have found no domestic Jewish group that calls Chavez anti-Jewish, and would be surprised if there was. The reason Chavez is popular is because he has delivered major increases in quality of life to the majority of the population, it isn't very mysterious.

Quoting Branigan: The reason Chavez is popular is because he has delivered major increases in quality of life to the majority of the population, it isn't very mysterious.

The usual formula by which Latin American leaders become hated enemies inside the USA, as any student of history is aware. (Major increases in the quality of life for the population come at the expense of massive profit for Western corporations, as any libertarian/"free" trader can tell you.)

"successful," as in, making himself into the new Castro?
what person, in their right mind, would bother to point out anything he's done that's good even if it were true?:
http://en.wikipedia.org/wiki/Critici...go_Ch%C3%A1vez
this guy essentially just made himself "king for life" of these poor folks and you're defending him?

Quoting Titstorm: "successful," as in, making himself into the new Castro?
what person, in their right mind, would bother to point out anything he's done that's good even if it were true?:
http://en.wikipedia.org/wiki/Critici...go_Ch%C3%A1vez
this guy essentially just made himself "king for life" of these poor folks and you're defending him?

Thank you for the link to wikipedia. Is there any specific criticism you want to level? And he didn't make himself king for life, he still needs to run for re-election. I didn't see anyone criticizing Bloomberg to anywhere near the same degree when he tried to eliminate term limits in New York, and he didn't even put it up to a vote! I also didn't see anyone calling Margret Thatcher a dictator, either. And the good things I said he did are true. He did cut extreme poverty in half and he did enact policies that lead to an expansion of the non-oil sector. I suggest you look at the link I posted, it's quite illuminating.

Quoting Branigan: Chavez has been a tremendously successful leader for Venezuela, perceptions of him in the western media aside. Under his time in office extreme poverty has been cut in half and the economy has diversified away from the oil sector. I'd suggest you look at this study for more information.

http://www.cepr.net/documents/public...la-2009-02.pdf

Drezner's argument that a "couple of months" of oil at $40 dollars a barrel is unfounded. Venezuela built up a large currency reserve while prices were high, and can handle a current account deficits for at least two years if oil prices stay where they are now.

I should also add that Yglesias's comments about Chavez's "anti-Semetic" campaign shows his ignorance about Venezuela. I have found no domestic Jewish group that calls Chavez anti-Jewish, and would be surprised if there was. The reason Chavez is popular is because he has delivered major increases in quality of life to the majority of the population, it isn't very mysterious.

A study based on the government's own figures isn't a study, it's propaganda. I could find a Wall Street Journal "study" that says the opposite. AFAIK the CIAV is the only domestic Jewish organization and it has explicitly called

i wasn't going to argue specifics because he's so uniformly worthless it's laughable you'd defend him. seriously, though, are you a troll?...you're actually defending hugo chavez. think this over for a second....think about the "big picture" and ask yourself....of all the political leaders to defend is it really worth it to choose this piece of crap?
and it doesn't seem like your thanks for the wiki link is genuine! i'm offended! how could this be?? if you'd have taken 3 seconds to look at it you'd have seen the section entitled "poverty" and it has a few things to say about your "study." no offense, but you're political sense should have sniffed out a stinker when you saw an obscure study that actually bothered to defend this guy. the other comparisons you made aren't even worth responding to. the doctor recommends 2 full years of Economist, Newsweek and NYT reading and then we'll see where you're at

Quoting pampl: A study based on the government's own figures isn't a study, it's propaganda. I could find a Wall Street Journal "study" that says the opposite.

AFAIK the CIAV is the only domestic Jewish organization and it has explicitly called Chavez anti-Jewish (after he had a dozen police raid them in search of "subversive activity") so I don't think you looked very hard. I'd say the ignorance being shown isn't Yglesias's.

CIAV has explicitly said Chavez was not anti-semitic, at least in response to the incident where Chavez was accused of saying that the Jews killed Jesus. If there's something more recent where they changed that stance, I'd like to see it. And I'm sure the Wall Street Journal would say the opposite. The US media has always opposed leftist Latin American leaders, unsurprisingly. If you don't want to rely on statistics to determine the effects of Chavez's presidency, what do you want to look at?

Quoting Titstorm: i wasn't going to argue specifics because he's so uniformly worthless it's laughable you'd defend him. seriously, though, are you a troll?...you're actually defending hugo chavez. think this over for a second....think about the "big picture" and ask yourself....of all the political leaders to defend is it really worth it to choose this piece of crap?
and it doesn't seem like your thanks for the wiki link is genuine! i'm offended! how could this be?? if you'd have taken 3 seconds to look at it you'd have seen the section entitled "poverty" and it has a few things to say about your "study." no offense, but you're political sense should have sniffed out a stinker when you saw an obscure study that actually bothered to defend this guy. the other comparisons you made aren't even worth responding to.

Yes, I was being sarcastic about the wikipedia link because I'm not going to read an entire wikipedia page when you can just tell me what your argument is. No, I am not trolling, I genuinely do think Chavez has been a good leader (though not without his faults). The only real argument I see under

Quoting Branigan: If you don't want to rely on statistics to determine the effects of Chavez's presidency, what do you want to look at?

That's really not an honest question, is it? The issue wasn't "statistics" broadly, it was "statistics compiled by people with an interest in what those statistics show." So the answer to your question would be something like "peer reviewed studies performed by researchers unlinked to the Chavez government," don't you think?

Quoting AemJeff: That's really not an honest question, is it? The issue wasn't "statistics" broadly, it was "statistics compiled by people with an interest in what those statistics show." So the answer to your question would be something like "peer reviewed studies performed by researchers unlinked to the Chavez government," don't you think?

I haven't seen any evidence that the statistics the Central Bank of Venezuela or the INE are inaccurate.

I also found the Iglesias and Drezner comments on Chávez shallow. They both seem to miss the point that Chávez is an important figure in Latin America and represents the hopes and dreams of many millions of havenots throughout the region, as Castro has for half a century. Dismissing Venezuela as an unimportant country entirely misses the point, just as the USA has entirely missed the point of the Cuban revolution. The USA is extremely unpopular throughout most of Latin America, and Obama has a chance to begin to change that. One step -- as Drezner and Iglesias note -- would be to reverse the immense folly of the embargo on Cuba and to resume full diplomatic relations with the soon-to-be-defunct Castros. I am not a big fan of Hugo Chávez and I'm less of a fan of Fidel Castro, but I do recognize that we have completely misread the social movements that both represent.

That was an enjoyable diavlog. I'd be happy to hear from Matt every week.

Quoting Branigan: I haven't seen any evidence that the statistics the Central Bank of Venezuela or the INE are inaccurate.

That doesn't answer the questions regarding the alignment of interests between those organizations and Chavez' government. Even if you take those stats at face value, btw, it would be easy to argue that the growth represented is almost entirely due to coincidence of Chavez' nationalization of the Venezuelan petroleum industry during a oil price bubble. Without data from the most recent couple of quarters it seems a bit premature to celebrate.

Quoting Branigan: CIAV has explicitly said Chavez was not anti-semitic, at least in response to the incident where Chavez was accused of saying that the Jews killed Jesus. If there's something more recent where they changed that stance, I'd like to see it.

And I'm sure the Wall Street Journal would say the opposite. The US media has always opposed leftist Latin American leaders, unsurprisingly. If you don't want to rely on statistics to determine the effects of Chavez's presidency, what do you want to look at?

"'We’re facing the first anti-Jewish government in our history,' Simon Sultan, president of Hebraica, told the Forward in an interview in his office, located in a tony Caracas neighborhood."
(Hebraica being the name of the CIAV community center that was raided) I'll ignore the silly question at the end. That's a pretty obviously wrong claim about "US media"
"For the roughly 60 percent of Bolivians who describe themselves as being members of an indigenous group, his [Morales's] administration has offered something new: a stake in their government and hope for the future." - Washington Post
"[Lula] has fueled Brazil’s growth through a deft combination of respect for financial markets and targeted social programs, which are

Yikes! I always thought sean hannity was totally nuts. At least now I can see the people he's complaining about actually do exist.

Daniel Drezner's depth of knowledge in poli sci and international relations is impressive. John

Quoting pampl: "'We’re facing the first anti-Jewish government in our history,' Simon Sultan, president of Hebraica, told the Forward in an interview in his office, located in a tony Caracas neighborhood."
(Hebraica being the name of the CIAV community center that was raided)

That's the opinion of one man. That doesn't reflect the opinion of the Jewish community of Venezuela as a whole. Chavez has attacked anti-Semitism plenty of times, and has made a distinction between his attacks on the Israeli government and the Jewish people as a whole. http://www.venezuelanalysis.com/news/4205

I'll ignore the silly question at the end. That's a pretty obviously wrong claim about "US media"
"For the roughly 60 percent of Bolivians who describe themselves as being members of an indigenous group, his [Morales's] administration has offered something new: a stake in their government and hope for the future." - Washington Post
"[Lula] has fueled Brazil’s growth through a deft combination of respect for financial markets and targeted social programs, which are lifting millions out of poverty, said David Fleischer, a political analyst and emeritus professor at the University of Brasília. Ms. Sousa is one such beneficiary.

The US media is less overt in it's bias against Morales or Lula

Quoting AemJeff: That doesn't answer the questions regarding the alignment of interests between those organizations and Chavez' government.

Even if you take those stats at face value, btw, it would be easy to argue that the growth represented is almost entirely due to coincidence of Chavez' nationalization of the Venezuelan petroleum industry during a oil price bubble. Without data from the most recent couple of quarters it seems a bit premature to celebrate.

I've seen no evidence that the Central Bank is manipulating figures to Chavez's benefit. If I do I'll change my mind. And of course, a lot of it has to do with high oil prices. The point is that Chavez put those high prices to good use, in ways that help the 2/3rds of Venezuelans who live in poverty.

Quoting Branigan: That's the opinion of one man. That doesn't reflect the opinion of the Jewish community of Venezuela as a whole.

Chavez has attacked anti-Semitism plenty of times, and has made a distinction between his attacks on the Israeli government and the Jewish people as a whole.

http://www.venezuelanalysis.com/news/4205

The US media is less overt in it's bias against Morales or Lula (and Lula really isn't all that much of a leftist), that's true. It's still undeniable that the bias does exist, especially when it comes to Latin America.

http://www.fair.org/index.php?page=3699

Actually I defend Chavez because I support democratic-socialism, which Chavez is making an effort to implement, and because I support alternate methods of development then the one proposed by neo-liberals. It's worth noting that I'm not the only one defending Chavez, Lula and Morales both do it to.

And again, the facts disagree with you when you call Chavez a crappy leader.

20% of Venezeulan Jews have fled the country since Chavez came into power. There's really no reason to take your word over the president of a local CIAV branch, especially considering you've already been proven wrong about "no domestic Jewish group" calling Chavez anti-Jewish. Actually, as a point

Supporting bad examples of democratic-socialism just makes you an ideologue. It's the difference between defending neo-liberalism's impact on south east Asia, and defending Pinochet's Chile.

Or like lumping Ahmadinejad, Kim Il Sung, Chávez and Castro together, as Drezner and Yglesias seemed content to do. The Chávez government is not anti-Semitic. What has concerned Venezuelan Jews the most is that Chávez has been a staunch critic of Israel. He kicked out the Israeli ambassador over the Gazan bloodbath, for example. That doesn't make him an anti-Semite or a dictator. There ARE human rights concerns in Venezuela and Chávez is a demogogue with a huge ego, but the country remains a democracy. Unlike Cuba, North Korea and Iran, people come and go as they please, there is a free press and there are fair and open elections.

Quoting pampl: You haven't actually given any facts that disagree though? Acting as a propaganda tool for Chavez doesn't count as facts. Here's a fact: despite booming oil prices, the UN's HDI fell as fast under Chavez as it had prior to him. I know the neo-liberal UN doesn't have the credibility of the Chavez government, which just a week ago was turned into one giant political billboard for his referendum, but maybe you'll accept it anyway.

Supporting bad examples of democratic-socialism just makes you an ideologue. It's the difference between defending neo-liberalism's impact on south east Asia, and defending Pinochet's Chile.

I'll respond to your other points later, but this is just untrue. Venezuela's is currently rated 61st by the HDI, up from 74th last year. They're number 30 in poverty. Edit: It was actually 74th in 2005, my mistake.

Quoting pampl: 20% of Venezeulan Jews have fled the country since Chavez came into power. There's really no reason to take your word over the president of a local CIAV branch, especially considering you've already been proven wrong about "no domestic Jewish group" calling Chavez anti-Jewish.

I still haven't seen anything that says CIAV as an organization has changed it's stance (they have defended Chavez from previous allegations of antisemitism), just a person who runs one of their community centers.

Actually, as a point of fact, it is deniable that your claimed bias exists. I'll do it right now: the U.S. media doesn't have a bias against leftist Latin American leaders. Your link just compares two countries, and one of them is Venezeula! That's completely irrelevant to your claim and laughably reductive. It's like saying the media is biased against Islamic countries because Darfur coverage was more negative than coverage of the Congo.

You will at least agree that the FAIR report proves that the US media reports a biased picture of Chavez, yes? As I said, coverage of Bolivia is a lot less overtly hostile, mostly because it's a lot harder to smear Morales. Here are a couple of

Quoting Wonderment: Or like lumping Ahmadinejad, Kim Il Sung, Chávez and Castro together, as Drezner and Yglesias seemed content to do.

The Chávez government is not anti-Semitic. What has concerned Venezuelan Jews the most is that Chávez has been a staunch critic of Israel. He kicked out the Israeli ambassador over the Gazan bloodbath, for example.

That doesn't make him an anti-Semite or a dictator.

There ARE human rights concerns in Venezuela and Chávez is a demogogue with a huge ego, but the country remains a democracy. Unlike Cuba, North Korea and Iran, people come and go as they please, there is a free press and there are fair and open elections.

Yeah, I didn't mean to imply Venezuela was worse than a dictatorship. Sorry if I did. Chavez's actions might be be stupid mistakes and not ill will but turning a blind eye to a state TV station calling Jews agents of Mossad or letting the Interior Ministry raid a Jewish community center (“It seems that the only interpretation is that this was an intimidation by the government,” says Abraham Levy Benshimol, president of CAIV) means that calling him an anti-Semite gives a pretty accurate impression

What bothers me about Drezner is that he buys wholesale that trade imbalances should somehow be corrected, when in fact they're completely meaningless statistics.

Quoting Unit: What bothers me about Drezner is that he buys wholesale that trade imbalances should somehow be corrected, when in fact they're completely meaningless statistics.

Who told you that?!

Quoting claymisher: Who told you that?!

Econ 101.

Quoting Unit: Econ 101.

Seems an awfully simplistic answer, even if true. My memory of my own Econ 101 experience supports what you're saying, a little, in that a trade deficit between two countries is not necessarily evil. Indeed, it can mean a lot of good things -- one country is richer and has found a way to obtain things more efficiently, the other country is poorer, but will benefit from the net gain. But long term? With really large deficits? At some point, that isn't a good thing. As we've seen in the US, it has led to, among other things, loss of manufacturing and then loss of lots of white-collar jobs, with nothing as good to replace them. It has also meant worrisome issues, like contaminated foods and other products coming into the country, thanks to less stringent oversight and regulation abroad, and it has contributed to problems like environmental damage and worker abuse in other countries. It also has meant that as this country scrambles to retain some balance, we end up selling a lot of things that may not be for the long term best. Like weapons and cigarettes. And there's a case to be made

Quoting bjkeefe: Seems an awfully simplistic answer, even if true.

My memory of my own Econ 101 experience supports what you're saying, a little, in that a trade deficit between two countries is not necessarily evil. Indeed, it can mean a lot of good things -- one country is richer and has found a way to obtain things more efficiently, the other country is poorer, but will benefit from the net gain.

But long term? With really large deficits? At some point, that isn't a good thing. As we've seen in the US, it has led to, among other things, loss of manufacturing and then loss of lots of white-collar jobs, with nothing as good to replace them. It has also meant worrisome issues, like contaminated foods and other products coming into the country, thanks to less stringent oversight and regulation abroad, and it has contributed to problems like environmental damage and worker abuse in other countries.

It also has meant that as this country scrambles to retain some balance, we end up selling a lot of things that may not be for the long term best. Like weapons and cigarettes. And there's a case to be made that

Quoting Unit: The deficits have lead to all of those things?

Look the logic is pretty simple: we don't keep track of the trade-deficit between California and North Dakota. I wonder why. You don't keep track of your trade-deficit with WalMart. It would be silly. Sorry to say, but the mentality that makes people worry about trade deficits is a nationalist and mercantilist one. Trade means cooperation not war. The more our trade deficit with China rises the more they are helping us and helping themselves. It measures the amount of nonzerosumness (Bob Wright would love this...) between our two countries (in a way). When Drezner talks about "countries that need to consume more" he sounds really silly.

Just ignoring national boundaries in the interest of deprecating nationalism and mercantilism doesn't sound like an argument to me. If capital flows only from the US to China while goods flow from China to the US, such a system provides concrete support for job creation in China with no complementary effect in the US. In that reductio it's an unsustainable system. In the real world it's an advantage for China. I'm nationalist enough to believe

Quoting Unit: The deficits have lead to all of those things?

I thought I said "contributed" in some cases. [Added: guess not, but that was my implication. Or intent, I guess would be a better word.]

Look the logic is pretty simple: we don't keep track of the trade-deficit between California and North Dakota. I wonder why. You don't keep track of your trade-deficit with WalMart. It would be silly. Sorry to say, but the mentality that makes people worry about trade deficits is a nationalist and mercantilist one. Trade means cooperation not war. The more our trade deficit with China rises the more they are helping us and helping themselves. It measures the amount of nonzerosumness (Bob Wright would love this...) between our two countries (in a way).

Jeff's already touched on this. I'll just add that you're starting to talk as though we lived in magical sparkle pony free FREE FREE! world. We don't. There are all sorts of sources of friction in the world, not least of which that it's pretty hard for people who used to work in factories in the US to just pick up and move to China when their plants close down. For example. In the long run, I buy your basic premise, that the flows

Quoting AemJeff: Just ignoring national boundaries in the interest of deprecating nationalism and mercantilism doesn't sound like an argument to me. If capital flows only from the US to China while goods flow from China to the US, such a system provides concrete support for job creation in China with no complementary effect in the US. In that reductio it's an unsustainable system. In the real world it's an advantage for China. I'm nationalist enough to believe that advantaging China's interests is not in my interest.

I don't quite understand what you're saying. China uses its resources to produce goods and services that we value thereby obtaining dollars which they can then use only to invest in the US. It's a process of job creation and of job destruction that ends up benefiting the consumers. Job creation and job destruction is not a relevant factor, it's a constant phenomenon, what matters is the innovation and progress that goes to the consumer's advantage. The trade deficit with Chine did not create any unemployment in the US. Finally, like every aggregate quantity it suffers from problems of measurement, e.g. ipods labeled Made

Quoting bjkeefe: I thought I said "contributed" in some cases. [Added: guess not, but that was my implication. Or intent, I guess would be a better word.]

Jeff's already touched on this. I'll just add that you're starting to talk as though we lived in magical sparkle pony free FREE FREE! world. We don't. There are all sorts of sources of friction in the world, not least of which that it's pretty hard for people who used to work in factories in the US to just pick up and move to China when their plants close down. For example.

Jobs are destroyed all the time, e.g. technology destroys jobs, are you against technological improvements? Heck, better infrastructure increases productivity and hence will destroy some jobs, are you against better infrastructure?

In the long run, I buy your basic premise, that the flows work to the good of eliminating inter-country disparities in wealth, and also, can be a win-win for both (all). But in the short term, the changes are not smooth, and a lot of people get hurt during the transitions. Also, the piling up of debt itself becomes an issue with ripple effects; e.g., interest payments, loss of confidence in a country's currency and bonds, leverage gained by a country whose other policies we might wish we

Quoting Unit: Jobs are destroyed all the time, e.g. technology destroys jobs, are you against technological improvements? Heck, better infrastructure increases productivity and hence will destroy some jobs, are you against better infrastructure?

I think we're done.

Quoting Unit: I don't quite understand what you're saying. China uses its resources to produce goods and services that we value thereby obtaining dollars which they can then use only to invest in the US. It's a process of job creation and of job destruction that ends up benefiting the consumers. Job creation and job destruction is not a relevant factor, it's a constant phenomenon, what matters is the innovation and progress that goes to the consumer's advantage. The trade deficit with Chine did not create any unemployment in the US. Finally, like every aggregate quantity it suffers from problems of measurement, e.g. ipods labeled Made in China when in fact they are merely assembled there and the various parts, the know-how, etc come from other countries (as you see it gets pretty silly to keep track of nationalities).

Sure. But what I argued was that in the abstract, outflow of capital doesn't create jobs, while a combination of inflow and demand for goods certainly does so. Economic relationships are obviously far more complex than this, I'm sure we all acknowledge that. But if you assume that these factors are (proportionally) creating jobs in

Quoting bjkeefe: I think we're done.

I gather you agree then.

Quoting AemJeff: Sure. But what I argued was that in the abstract, outflow of capital doesn't create jobs, while a combination of inflow and demand for goods certainly does so. Economic relationships are obviously far more complex than this, I'm sure we all acknowledge that. But if you assume that these factors are (proportionally) creating jobs in China, but not in the US (and that doesn't seem trivially false), then I think that arguing that nationalism isn't relevant from the POV of a citizen from either nation is denying something real and important.

What outflow of capital are you talking about? Every dollar spent on Chinese goods comes back in the form of investment in US assets. That's why I can't follow your reasoning.

Quoting Unit: What outflow of capital are you talking about? Every dollar spent on Chinese goods comes back in the form of investment in US assets. That's why I can't follow your reasoning.

Every dollar, really? Some of it comes back as loans, the interest on which is another outflow. Some of it is invested locally. Much of it pays the salaries of Chinese workers, or constitutes ROI for Chinese business owners, etc...

Quoting Unit: I gather you agree then.

No, Unit. I do not agree. I am just not interested in going around in circles with you while you make ridiculous analogies and say, Huh? Huh? What about that, huh?

Quoting Unit: What outflow of capital are you talking about? Every dollar spent on Chinese goods comes back in the form of investment in US assets. That's why I can't follow your reasoning.

If you mean by US assets US government treasuries, then you are correct. Chinese direct investment in the US isn't enormous, as far as I know. They did buy a stake in Merrill Lynch (or was it Black Rock?) a couple of years ago, a decision they must be regretting. In effect, China has been financing the US budget deficit for some time and thus supporting the dollar, which of course has kept the prices of Chinese imports low. This massive injection of capital into treasuries also helped keep US interest rates abnormally low. Hence one could say that the Chinese made possible the sub-prime crisis....

Quoting Unit: What bothers me about Drezner is that he buys wholesale that trade imbalances should somehow be corrected, when in fact they're completely meaningless statistics.

OK. Econ 101 is not the end of economics. It's just the start. And it's true, people make too much of bilateral trade imbalances. The old econ 101 example is that massive trade imbalance with your employer. Most people don't buy anything from their employer at all, and buy a little from a great number of different shops, etc. But you didn't say "bilateral trade imbalances." As for the a country's net trade imbalance, it's true, there's no imbalance. We get lots of goods, and they get our money. So there's no imbalance. Sometimes economists will joke about trade imbalances just being an error in bookkeeping (This is why people hate economists). But it's pretty obvious that what Drezner was talking about, and what most normal people are concerned about it, is the current account balance, which is the balance goods and services. And that really does matter. If your country runs a current account deficit for years and years the transition out of it can be calamitous. Think Iceland. To really get a

Quoting AemJeff: Every dollar, really? Some of it comes back as loans, the interest on which is another outflow. Some of it is invested locally. Much of it pays the salaries of Chinese workers, or constitutes ROI for Chinese business owners, etc...

Every dollar. If some dollars don't come back then we got one over the Chinese: imagine they produce stuff using their resources, we gave them piece of paper with dead-presidents on it. What a deal. In reality, whatever they do with their dollars they eventually come back to the US because that's where you can buy stuff using dollars.

Quoting Francoamerican: If you mean by US assets US government treasuries, then you are correct. Chinese direct investment in the US isn't enormous, as far as I know. They did buy a stake in Merrill Lynch (or was it Black Rock?) a couple of years ago, a decision they must be regretting.

In effect, China has been financing the US budget deficit for some time and thus supporting the dollar, which of course has kept the prices of Chinese imports low. This massive injection of capital into treasuries also helped keep US interest rates abnormally low. Hence one could say that the Chinese made possible the sub-prime crisis....

Let's not confuse the propensity of Uncle Sam to run up huge debt with the trade-deficit. If the US govt didn't need to borrow so much money all the time, then the Chinese would have to buy other dollar-denominated assets.

Quoting bjkeefe: No, Unit. I do not agree. I am just not interested in going around in circles with you while you make ridiculous analogies and say, Huh? Huh? What about that, huh?

It's a mystery to me what could possibly be ridiculous with what I said. I can only say that I was dead-serious.

Quoting claymisher: OK. Econ 101 is not the end of economics. It's just the start. And it's true, people make too much of bilateral trade imbalances. The old econ 101 example is that massive trade imbalance with your employer. Most people don't buy anything from their employer at all, and buy a little from a great number of different shops, etc. But you didn't say "bilateral trade imbalances."

As for the a country's net trade imbalance, it's true, there's no imbalance. We get lots of goods, and they get our money. So there's no imbalance. Sometimes economists will joke about trade imbalances just being an error in bookkeeping (This is why people hate economists).

But it's pretty obvious that what Drezner was talking about, and what most normal people are concerned about it, is the current account balance, which is the balance goods and services. And that really does matter. If your country runs a current account deficit for years and years the transition out of it can be calamitous. Think Iceland. To really get a handle on what the current account balance means you've got to consider factors like investment, exchange rates, interest rates, etc. It's complicated. Jokes about accounting identities from

Quoting Unit: Every dollar.

If some dollars don't come back then we got one over the Chinese: imagine they produce stuff using their resources, we gave them piece of paper with dead-presidents on it. What a deal. In reality, whatever they do with their dollars they eventually come back to the US because that's where you can buy stuff using dollars.

I'm not sure how you think you can justify an apparently zero-sum argument; but, the Chinese and the Americans aren't the only players, and currency is as fungible as something can be. Dollars will buy plenty of oil in Sudan.

Quoting AemJeff: I'm not sure how you think you can justify an apparently zero-sum argument; but, the Chinese and the Americans aren't the only players, and currency is as fungible as something can be. Dollars will buy plenty of oil in Sudan.

That's what I'm saying: every $ finds its way back to the US.

Quoting Unit: There have been myriads country-wide bankruptcies in the history of the world, with myriads causes and explanations.

If there's a country that cratered while running a current account surplus, I would love to hear about it. Seriously, that would be a pretty interesting case.

Quoting claymisher: If there's a country that cratered while running a current account surplus, I would love to hear about it. Seriously, that would be a pretty interesting case.

Oh I see. You don't think China is in trouble right now?

Quoting Unit: I can only say that I was dead-serious.

Yes. I surmised that. That's why I lost interest in the discussion.

Quoting bjkeefe: Yes. I surmised that. That's why I lost interest in the discussion.

Do you have a short attention span?

Quoting Unit: Do you have a short attention span?

It's probably more accurate to say that I have a lack of patience. For nonsense. And pig-headed zealotry.

Quoting Unit: Oh I see. You don't think China is in trouble right now?

You've heard of "balance of financial terror," right? What's your point? Are you taking the position that current account processes all just work themselves out, and it's no big deal? What?

Quoting Unit: Let's not confuse the propensity of Uncle Sam to run up huge debt with the trade-deficit. If the US govt didn't need to borrow so much money all the time, then the Chinese would have to buy other dollar-denominated assets.

I'm not confusing the trade deficit with the budget deficit. I am just contradicting your statement that the US trade deficit with China works to the advantage of Americans. If the Chinese were directly investing in US companies, that would be true. But all they are doing is recycling their dollars into treasuries. This has had three unfortunate consequences: 1. Strong dollar and cheap Chinese imports (thus further aggravating the trade deficit) 2. Low interest rates (directly contributing to the housing bubble) 3. Increased leverage over the US. China, Japan and the Golf States now own something like 50% of the American national debt.

Quoting bjkeefe: It's probably more accurate to say that I have a lack of patience. For nonsense. And pig-headed zealotry.

It's not the first time this happens: we're having a perfectly normal discussion involving abstract reasoning, I say a few value-neutral statements, some thought-experiments, and you freak out. It seems you have plenty of patience to engage in partisan bickering with "conservatives", but not much patience for intellectual discourse.

Quoting Unit: It's not the first time this happens: we're having a perfectly normal discussion involving abstract reasoning, I say a few value-neutral statements, some thought-experiments, and you freak out. It seems you have plenty of patience to engage in partisan bickering with "conservatives", but not much patience for intellectual discourse.

Oh, stop whining. You can tell yourself you're being "value-neutral" and proposing "thought-experiments" all you want, but you're not. What you did during our exchange was parrot your Econ 101 textbook and when that failed to impress, resorted to "analogies" that were only thus by your assertion. If you want to think of this as "intellectual discourse," fine. It's a free country. But you'll have to find someone else to agree with you to continue it.

Quoting Francoamerican: I'm not confusing the trade deficit with the budget deficit. I am just contradicting your statement that the US trade deficit with China works to the advantage of Americans. If the Chinese were directly investing in US companies, that would be true. But all they are doing is recycling their dollars into treasuries.

This has had three unfortunate consequences:

1. Strong dollar and cheap Chinese imports (thus further aggravating the trade deficit)

From my point of view the trade deficit can be as big as it wants to be, so "aggravating" is your opinion.

2. Low interest rates (directly contributing to the housing bubble)

Why not fault the Fed Chairman instead of some weird abstract and misplaced measure of trade?

3. Increased leverage over the US. China, Japan and the Golf States now own something like 50% of the American national debt.

Again, I'd rather point the finger at the people who go into debt in the first place (Uncle Sam in this instance), than to the people who want to save their money (the Chinese in this instance).

Quoting bjkeefe: Oh, stop whining. You can tell yourself you're being "value-neutral" and proposing "thought-experiments" all you want, but you're not. What you did during our exchange was parrot your Econ 101 textbook and when that failed to impress, resorted to "analogies" that were only thus by your assertion.

If you want to think of this as "intellectual discourse," fine. It's a free country. But you'll have to find someone else to agree with you to continue it.

Saying that increases in productivity destroy jobs is Econ 101.

Quoting claymisher: You've heard of "balance of financial terror," right?

What's your point? Are you taking the position that current account processes all just work themselves out, and it's no big deal? What?

No I haven't heard of that term. I think I explained my point, but I'll try again: trade is cooperation between individuals living in different countries. Capturing such a complex phenomenon via an aggregate number such as the trade-deficit leads people and commentators astray. It encourages nationalistic and mercantilist fallacies of thought. There's nothing to work out and yes it's not a big deal unless you want to make it so.

Quoting Unit: From my point of view the trade deficit can be as big as it wants to be, so "aggravating" is your opinion.

You missed my main point: the recycling of dollars into treasuries, and the resultant strengthening of the dollar, benefits China at the expense of the US (by reducing the price of Chinese exports). This is not supposed to happen according to the advocates of unlimited "free trade." In theory, when a country runs a trade deficit with another country, currencies should adjust to reflect this fact, i.e. the surplus of dollars held in Chinese banks should have caused the dollar to depreciate.

Quoting Unit: Why not fault the Fed Chairman instead of some weird abstract and misplaced measure of trade?

Interests rates are determined by a multitude of factors, including the willingness of foreigners to buy treasuries. Do you really think that any other country in the world, EXCEPT THE US, could have held its interest rates so low for so long without an enormous influx of foreign capital? In any other country such a large trade deficit as the US has run for over a decade (along with a large budget deficit) would

Quoting Unit: No I haven't heard of that term. I think I explained my point, but I'll try again: trade is cooperation between individuals living in different countries. Capturing such a complex phenomenon via an aggregate number such as the trade-deficit leads people and commentators astray. It encourages nationalistic and mercantilist fallacies of thought. There's nothing to work out and yes it's not a big deal unless you want to make it so.

If you're really concerned about nationalistic and mercantilist uprisings (and I am), you'll take care to address international imbalances so that the inevitable adjustments don't involve 25% unemployment and sudden popular support for protectionism. By the way, do you have any opinions about national savings and investment, or do they just work themselves out too?

Quoting claymisher: If you're really concerned about nationalistic and mercantilist uprisings (and I am), you'll take care to address international imbalances so that the inevitable adjustments don't involve 25% unemployment and sudden popular support for protectionism.

By the way, do you have any opinions about national savings and investment, or do they just work themselves out too?

What inevitable adjustments? Where are the equilibrating forces? Does the trade-imbalance between California and North Dakota pose you a problem?
As I've already said a trade-deficit is a capital-account surplus. About national savings and investment, these are macro aggregate quantities as well and as such make very little sense. Let's just say that the information they carry is very very rough. I'll grant you that they are slightly more informative than the trade-deficit. But again I wouldn't want the govt to try and stir them in any way or direction.

Quoting Unit: What inevitable adjustments? Where are the equilibrating forces? Does the trade-imbalance between California and North Dakota pose you a problem?
As I've already said a trade-deficit is a capital-account surplus.

About national savings and investment, these are macro aggregate quantities as well and as such make very little sense. Let's just say that the information they carry is very very rough. I'll grant you that they are slightly more informative than the trade-deficit. But again I wouldn't want the govt to try and stir them in any way or direction.

California and North Dakota use the same currency. They're in the same country. There's labor market mobility. This gets us back to friction. You can't pretend friction doesn't exist. What do you have against aggregates? Oh no, aw crap, never mind.

Quoting claymisher: California and North Dakota use the same currency. They're in the same country. There's labor market mobility. This gets us back to friction. You can't pretend friction doesn't exist.

What do you have against aggregates? Oh no, aw crap, never mind.

Aggregates are not that informative: they're extremely large averages and hide the movements of, say, *relative* prices which are potentially much more important. I don't understand what you mean by friction. What exactly should I not pretend it does exists?

Quoting Francoamerican: You missed my main point: the recycling of dollars into treasuries, and the resultant strengthening of the dollar, benefits China at the expense of the US (by reducing the price of Chinese exports). This is not supposed to happen according to the advocates of unlimited "free trade." In theory, when a country runs a trade deficit with another country, currencies should adjust to reflect this fact, i.e. the surplus of dollars held in Chinese banks should have caused the dollar to depreciate.

How do you figure that reducing the price of Chinese exports damages the US? Are American consumers not part of the US?

Interests rates are determined by a multitude of factors, including the willingness of foreigners to buy treasuries. Do you really think that any other country in the world, EXCEPT THE US, could have held its interest rates so low for so long without an enormous influx of foreign capital? In any other country such a large trade deficit as the US has run for over a decade (along with a large budget deficit) would have resulted in higher rates of interest.

If you're right then it's even more puzzling

Quoting Unit: Aggregates are not that informative: they're extremely large averages and hide the movements of, say, *relative* prices which are potentially much more important.

I don't understand what you mean by friction. What exactly should I not pretend it does exists?

Earlier I wrote ... bjkeefe used a good word: friction. All that econ 101 stuff is like physics 101. Assume there's no friction, assume you're in a vacuum, etc. Try to build an airplane like that! The same is true for economics. Pretty much everything after econ 101 is about the frictions of the real world.

Quoting claymisher: Earlier I wrote ... bjkeefe used a good word: friction. All that econ 101 stuff is like physics 101. Assume there's no friction, assume you're in a vacuum, etc. Try to build an airplane like that! The same is true for economics. Pretty much everything after econ 101 is about the frictions of the real world.

Yea I read that earlier and I couldn't make out what you want meant by it. Can you maybe provide an example relevant to the current discussion so I can understand what you're trying to say. An analogy with physics doesn't help me much, I know what friction means.

Quoting Unit: If you're right then it's even more puzzling why Greenspan kept the rates so low for so long.

My sentence should have read: Do you really think that any country in the world, even the USA, could have held its interest rates so low for so long without an enormous influx of foreign capital? It was easy for Greenspan to keep rates low when the Chinese et al. were so happy to lend Uncle Sam money.

Quoting Francoamerican: My sentence should have read:

Do you really think that any country in the world, even the USA, could have held its interest rates so low for so long without an enormous influx of foreign capital?

It was easy for Greenspan to keep rates low when the Chinese et al. were so happy to lend Uncle Sam money.

Franco, thanks for the clarification. But again, why do you call it "foreign" capital? We just finished saying that they are investing the dollars that they acquired from us by selling us stuff. So how does this make their investments "foreign"? Let's do the following experiment and take the union of China and the US and change all the aggregate quantities and measurements from "national" ones to "ChinaUS" ones. I think such new aggregate quantities would be closer to reality. We would then have a "ChinaUS" trade-deficit, a "ChinaUS" national saving etc...

Quoting Unit: Franco, thanks for the clarification. But again, why do you call it "foreign" capital? We just finished saying that they are investing the dollars that they acquired from us by selling us stuff. So how does this make their investments "foreign"? Let's do the following experiment and take the union of China and the US and change all the aggregate quantities and measurements from "national" ones to "ChinaUS" ones. I think such new aggregate quantities would be closer to reality. We would then have a "ChinaUS" trade-deficit, a "ChinaUS" national saving etc...

I suppose one could regard it in that light, but unlike you I lack the rose-tinted glasses to see it that way. The fact remains that Americans are debtors and the Chinese are creditors. The Chinese collect interest while we pay interest (yes, I pay taxes in the US too), and personally I would prefer to be a creditor rather than a debtor. Turn it however you wish, you cannot transform a national trade and budget deficit into a joint savings account.

Unit, I appreciate your determination to see the world as rational individuals maximizing their welfare. I think economists have been too guilty of oversimplifying, what with the representative agent and representative goods and whatnot. And I think disaggregated models are the wave of the future. (Google axtell macroeconomics for some really cool stuff). Back to metaphors for a second ... in physics and chemistry you have electrons, atoms, molecules, compounds, gasses, objects, etc. Science is trying, but we don't really understand how solids interact based on the properties of atoms. Think of how much Newton figured out without knowing hardly anything at all about atomic chemistry. Same with biology. We knew a lot about the functions of organs before we knew DNA even existed. The point is we can know about macro phenomenon without fully comprehending micro fundamentals. We don't talk about a lung as being merely aggregated lung cells. It's a lung. I think I can help clear this up a little. In regular economic models you have things like the Walrasian auction and the Arrow-Debreu model which simplify exchange as being like an auction where everybody trades everything all at once. In real life you actually have to

Quoting claymisher: Unit, I appreciate your determination to see the world as rational individuals maximizing their welfare. I think economists have been too guilty of oversimplifying, what with the representative agent and representative goods and whatnot. And I think disaggregated models are the wave of the future. (Google axtell macroeconomics for some really cool stuff).

Back to metaphors for a second ... in physics and chemistry you have electrons, atoms, molecules, compounds, gasses, objects, etc. Science is trying, but we don't really understand how solids interact based on the properties of atoms. Think of how much Newton figured out without knowing hardly anything at all about atomic chemistry. Same with biology. We knew a lot about the functions of organs before we knew DNA even existed. The point is we can know about macro phenomenon without fully comprehending micro fundamentals. We don't talk about a lung as being merely aggregated lung cells. It's a lung.

I think I can help clear this up a little. In regular economic models you have things like the Walrasian auction and the Arrow-Debreu model which simplify exchange as being like an auction where everybody trades everything all at once. In real life you actually have to

Quoting Francoamerican: I suppose one could regard it in that light, but unlike you I lack the rose-tinted glasses to see it that way. The fact remains that Americans are debtors and the Chinese are creditors. The Chinese collect interest while we pay interest (yes, I pay taxes in the US too), and personally I would prefer to be a creditor rather than a debtor. Turn it however you wish, you cannot transform a national trade and budget deficit into a joint savings account.

I don't mind rose-tinted glasses that much, but I don't like over-simplifications. The US doesn't trade with China, individuals in the US do. I'm somewhat skeptical of the claim that the Chinese people are somehow much better off than us as a result of trade. You have a point about our national debt, I too am very angry that our children will inherit large asphyxiating amounts of debt. Ultimately, the point is that cooperation is better than independence and confrontation. The real benefit of free trade with China is that we get to share their innovations, we get to tap into their human ingenuity. It's a slow and cumulative process that adds to the human pool of