Wrong. 1) The tariff schedule that I advocate will only reduce imports by 50% because the tariffs are limited to only 5 nations. 2)The total goods exported from the U.S. in 2007 was 1.1 TRILLION dollars. If I could get to equal trade, which I cannot, the U.S. would imports 1.1 trillion dollars a year, or however much the exports from the U.S. totalled

Here is a sentence worth discussing. Sorry I did not see it earlier.

My perspective is derived from the Adam Smith insight that real wealth is created by a nation by the value of the goods and services created by the domestic economy (GDP based on that insight). Exports require increased domestic production. They add to GDP. Thus they are good.

Imports reduce the need for domestic production because they substitute for domestic production.

However, when exports and imports are equal, the exports add to GDP while the imports increase the options available to consumers and producers (producers want quality and cheap inputs into manufacturing).

Thus, equal trade is the best of all possible worlds. It eliminates export-led growth. It eliminates financial transfers. It makes both nations better off.

With equal trade (imports and exports equal) the nation with the smaller economy shows a more rapid rate of growth, compared with a nation with a larger economy. Hence, equal trade does not eliminate the trend toward equality of level of living througout the world. It does, however, slow down that trend, as compared to the realtiy of the past 30 years, when Japan, Taiwan, South Korea and now China are sending much more goods to the U.S than they purchase from the U.S.

THE U.S. MUST CHANGE PAST REALTIY BY UNILATERAL ACTION TO MOVE TOWARD EQUAL TRADE.

Emerging reserves haemorrhage as currencies fallReuters, Wednesday December 3 2008
By Peter Apps
LONDON, Dec 3 (Reuters) – Vast foreign reserves built up by emerging export countries are vanishing faster than they came as governments fight to defend currencies and economies, disappointing foreign investors who saw them as shock absorbers to the global economy.
In the years of good global growth, Asian manufacturing economies as well as resource producers such as the Gulf states and Russia saw reserves grow drastically.
Some analysts had hoped that would help compensate for the massive deleveraging and capital flight that has hit emerging markets in particular as the global financial crisis intensified after September.
That has seen emerging stock markets lose close on 60 percent of their value this year and emerging currencies come under increasing pressure and export revenues from manufacturing or resources dry up.
South Korea said on Wednesday its foreign exchange reserves — which were the world’s sixth largest at the end of October — had dropped to their lowest level in four years. One government adviser said it was pointless squandering the rest of the country’s reserves trying to lift the won currency, which has lost nearly 40 percent against the dollar this year.
Russian foreign reserves have fallen by around a quarter from their peak of $600 billion in early August to around $450 billion now, with attempts to prop up the rouble again accounting for the lion’s share of the fall.
Russia has since widened the band within which it allows the rouble to trade against a basket of currencies, effectively allowing gradual depreciation.
“The global economy is rebalancing and the buildup of forex reserves we saw in the last two years has been reversed,” said Lars Christensen, chief analyst and head of emerging markets at Danske Bank in Copenhagen. “It is hard to see how it can be (changed) as long as investors keep pulling out of the emerging asset class.”
Korea saw its exports fall by more than 18 percent last month, their biggest drop in seven years, while oil exporters such as Russia have seen crude prices plummet from close on $150 a barrel earlier in the year to under $50 now.
CHINESE PRUDENCE?
Overall, Asian foreign reserves excluding China’s shrank by $119 billion in October to $2.34 trillion, central-bank data showed.
But bucking the trend appears to be China, with $1.9 trillion in its reserves, making them the largest in the world having increased by an average $41.9 billion a month in the first three quarters of the year.
China says its reserves are continuing to rise, with the chief economist at the National Bureau of Statistics telling Reuters they would exceed $2 trillion by the end of the year. It releases data quarterly, not monthly.
In mid-November, the deputy governor of the People’s Bank of China said Beijing would not resort to “panic selling” of reserves, instead maintaining a “prudent and responsible” stance.
At the end of September, India’s reserves stood at $286.3 billion, down from $295.3 billion the previous month.
Korea’s foreign reserves dropped $11.7 billion to $200.5 billion last month — a fall of around 5 percent that itself followed a record $27.4 billion decline in October. Worries reserves might dip below $200 billion have themselves put greater pressure on the currency, with the government openly admitting it could not stem the fall.
“South Korea does not have enough capacity for massive forex intervention,” senior presidential economic secretary Bahk Byoung-won told reporters, saying that instead Korea would carry out “smoothing operations” in foreign exchange markets.
Russia also had little choice, analysts say.
UNSUSTAINABLE SUPPORT
“In this environment, currency “devaluation” should be part of the policy reaction for most export-oriented and commodity reliant countries,” Stephen Jen, global head of currency research at Morgan Stanley, said in a research note. “For Russia, oil prices have fallen by so much and the quantity of demand for oil and other minerals has collapsed as well.”
Lombard Street Research said in a research note Russia would ultimately have to float the rouble completely as it could only hold its current position for roughly 9 months given its reserves.
Few emerging economies have found haemorrhaging reserves to support their currency to be sustainable. Ukraine saw its reserves fall from a peak of $38 billion in August to $32 billion by the end of October before abandoning its band.
Its hrvynia is now down 30 percent this year, amongst the worst performing currencies, and Ukraine has had to turn to the International Monetary Fund for support.
Morgan Stanley’s Jen also said this week he had changed his view on the Chinese renminbi, now believing China could allow its currency to modestly and temporarily depreciate by five to 10 percent against the dollar even though it would strengthen again after the global recession ended.
Danske’s Christensen sees further risks to investors as governments look at other tools to protect currencies, with a rising danger they might be unable to get their money out.
“The only other way to protect your currency is to tighten interest rates and not many governments are going to do that right now,” he said. “There is a growing risk that some emerging countries could resort to capital controls.” (Additional reporting by Mike Dolan and Sebastian Tong, editing by Andy Bruce)

rien — yes, depreciation is a fairly painless way for countries with limited fx debt to gain manufacturing market share — and yes, asia prefers reserves and autonomy to no-reserves and the imF (note: the US also values its sovereignty; remember all the un-bashing a few years back? so this isn’t just an Asian thing — tho it has a particular focus on freedom from IMF conditionality in the Asian context).

But right now many asian countries are intervening to keep their currencies from falling too fast. Asia also likes to avoid too much “volatility” and to give firms with fx debts a chance to adjust (among other things). I agree that once pressure eases, Korea is likely to resist won appreciation — but that is a different issue.

Elaine — as you know, my focus is on countries that are actively taking steps to hold their currency down to gain a competitive advantage. That currently doesn’t seem like an accurate description of japan. Look at the yen right now. Particularly the against say the won … and Japan’s recent trade data suggests a waning surplus as US/ EU demand shrinks. i would have expected longer lags here tho — as in the short-run japan benefits from the fall in commodity prices.

2fish — re Saudi and China. China’s exports are influenced by its exchange rate — certainly the pace of growth. This is pretty clear in the data — Goldman found a strong relationship between China’s RER and real export growth. there isn’t as clean a relationship with imports. Saudi imports will be more affected — as the price of Saudi exports is a function of the global oil market. But Saudi imports are above all determined by the amount of government sponsored investment and spending — which is financed either by the oil revenue stream or selling reserves. So a Saudi decision to keep spending and investment up even as oil falls — financing the resulting budget gap out of its accumulated savings (the treasury’s fx reserves at SAMA) — means far more imports and more global demand.

all — yes, reserves can also be lent to private firms to help them repay their external debt. that doesn’t generate demand for imports. but by avoiding widespread defaults, it can avoid a sharp contraction that would lead to a big fall in demand for imports. sometimes you act to avoid a adverse outcomes, not to generate a positive one …

Nouriel Roubini, economics professor at NYU Stern School and chairman of RGE Monitor, has earned the nickname “Dr. Doom” for his dire predictions about the economy over the last couple of years (most of which have come true).So it was a shocker when word got out on Wall Street that Roubini was the most bullish guy in the room at a recent dinner he hosted in NYC. There were even rumors Roubini’s retirement account was 100% in stocks (since confirmed).Has Dr. Doom become a raging bull?Not quite. But with the financial meltdown in full, protracted swing, it seems as if the rest of the world has caught up with him.”The mainstream is getting closer to my views about a very severe U.S. and global recession,” he says. “On the other side, I’m not in the Armageddon camp,” forecasting a severe recession through 2009, but not a repeat of the Great Depression.So why is Roubini’s 401(k) 100% in equities? He’s not an active investor, and “over 10 to 20 years equities outperform any other asset class,” he says in the accompanying video.Unlike so many others, Roubini’s not calling a bottom, for sure: He sees another 20%-30% downside risk for stocks, and advises that investors avoid all “risky assets,” including commodities for the foreseeable future. Instead, he recommends Treasuries and, over the medium term, corporate debt.In case you need further proof that Dr. Doom hasn’t lost his edge, Roubini predicts that macroeconomic news and earnings will be much worse than expected in the coming months, as the dollar weakens even further. “The surprise is how bad the the economy [will get].”At least there’s some things you can still count on in an uncertain world.

What, float?