There’s a economic problem in our country no one seems to know what to do about. Americans consume more than we produce. AKA we have a big trade imbalance.
In the simplest terms it goes a little something like this hypothetical. Americans make 100 apples per year and China makes 100 oranges per year. One apple is worth one orange. The thing is Americans eat 55 apples and sell the rest to China while China eats 45 oranges and sells the rest to America. So every year we rack up a deficit of 10 fruits a year. This deficit compounds on itself year after year and build a pretty big debt to China.
So, how to fix this?
Sell more apples to China and eat less oranges. Right? Chines people want more apples. After all some Chines still don’t eat enough.
Two problems though. Americans are used to eating 110 pieces of fruit a year, so which group of people end up eating less? As soon as we have a policy that takes away fruit from a given group, that group will be very loudly upset. The second problem though is even more complicated. China doesn’t really have the infrastructure to get more fruit to more people. They’re still building roads and trucks and buildings that support the ability of Chines people to consume more. So even if we stopped consuming as much and shipped more fruit to China AND the Chines people were given more cash to buy the fruit, the infrastructure to get the fruit to the buyer wouldn’t be there. And with more cash in hand the Chines people would just bid up the price of fruit (inflation).
So what happens when the Chines infrastructure is built up to the point that they are able to consume just as much as Americans? If more people in China have the real capability to buy more fruit then they will start wanting to cash in on the loans they have given the Americans all these years. With more buying power in the hands of the Chinese and less available credit in the hands of Americans, Chines people will be able to out bid the Americans for the 200 pieces of fruit available on the market.
We will see this effect in one of two ways, or maybe a little of both. Americans will see a decrease in wages or their wages will be worth less fruit. This may be the underlying cause of the inflation and stagnation seen in America during the ‘70s and ‘80s. Except in that case the scenario was played out with Japan and other maturing economies in the east. As Japan built into a full capacity infrastructure, Japanese people gradually were able to out bid Americans for goods, and since American productivity wasn’t rising fast enough to cover out debt payments we lost the bidding wars.
So what do we do? We can either eat less fruit, make more fruit or squeeze out more efficiency in the fruit making and consuming process.
Hopefully we’ll figure out a way NOT to go back to the inflation/stagnation we had in the ‘70s and ‘80s. HOPEFULLY we can get more efficient by consuming less energy while we make and consume the things we make and consume. Higher fuel efficiency, more renewable energy and so on. Hopefully we find ways to produce more goods with less inputs. Fewer people and less raw material to produce more goods. And Hopefully we can find ways to live fulfilling lives without needing to consume more. This may mean some consumption taken away from the rich in order to keep improving the lives and opportunities of the poorest. And almost definitely means finding fulfillment from things like family, spirituality and maybe just a simple apple.
In the simplest terms it goes a little something like this hypothetical. Americans make 100 apples per year and China makes 100 oranges per year. One apple is worth one orange. The thing is Americans eat 55 apples and sell the rest to China while China eats 45 oranges and sells the rest to America. So every year we rack up a deficit of 10 fruits a year. This deficit compounds on itself year after year and build a pretty big debt to China.
So, how to fix this?
Sell more apples to China and eat less oranges. Right? Chines people want more apples. After all some Chines still don’t eat enough.
Two problems though. Americans are used to eating 110 pieces of fruit a year, so which group of people end up eating less? As soon as we have a policy that takes away fruit from a given group, that group will be very loudly upset. The second problem though is even more complicated. China doesn’t really have the infrastructure to get more fruit to more people. They’re still building roads and trucks and buildings that support the ability of Chines people to consume more. So even if we stopped consuming as much and shipped more fruit to China AND the Chines people were given more cash to buy the fruit, the infrastructure to get the fruit to the buyer wouldn’t be there. And with more cash in hand the Chines people would just bid up the price of fruit (inflation).
So what happens when the Chines infrastructure is built up to the point that they are able to consume just as much as Americans? If more people in China have the real capability to buy more fruit then they will start wanting to cash in on the loans they have given the Americans all these years. With more buying power in the hands of the Chinese and less available credit in the hands of Americans, Chines people will be able to out bid the Americans for the 200 pieces of fruit available on the market.
We will see this effect in one of two ways, or maybe a little of both. Americans will see a decrease in wages or their wages will be worth less fruit. This may be the underlying cause of the inflation and stagnation seen in America during the ‘70s and ‘80s. Except in that case the scenario was played out with Japan and other maturing economies in the east. As Japan built into a full capacity infrastructure, Japanese people gradually were able to out bid Americans for goods, and since American productivity wasn’t rising fast enough to cover out debt payments we lost the bidding wars.
So what do we do? We can either eat less fruit, make more fruit or squeeze out more efficiency in the fruit making and consuming process.
Hopefully we’ll figure out a way NOT to go back to the inflation/stagnation we had in the ‘70s and ‘80s. HOPEFULLY we can get more efficient by consuming less energy while we make and consume the things we make and consume. Higher fuel efficiency, more renewable energy and so on. Hopefully we find ways to produce more goods with less inputs. Fewer people and less raw material to produce more goods. And Hopefully we can find ways to live fulfilling lives without needing to consume more. This may mean some consumption taken away from the rich in order to keep improving the lives and opportunities of the poorest. And almost definitely means finding fulfillment from things like family, spirituality and maybe just a simple apple.
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