OT of an OT: Ethanol

[Hunpecked]

Renegade: "Actually, you should think about it in another way. Canada is better off exporting more, since we really don't need those resources, or else we obviously wouldn't be exporting them."

Exactly. A great reason to export what you have lots of is to import what you don't have much of. Economics 101.

"On the other hand, the US obviously does need those very same resources, or else they wouldn't be buying them.'

Yup. We export dollars we have lots of and import all sorts of "stuff" we have less of.

"Therefore, in a trade war, Canada has the advantage since there's more 'stuff' that the US needs that Canada has, and less stuff Canada needs that the US has. In other words, the US needs Canada more than Canada needs the US, giving us the advantage in a trade war."

Canada depends on the US to buy 85% (!) of its total exports, which are worth about 36% of GDP. It gets some 59% of its imports from the US. The US gets 17% of its imports from Canada, which absorbs about 23% of US exports; all US exports are worth less than 10% of US GDP. The Canadian economy is 1/12 the size of America's. Everybody in the world wants to sell to the the USA (and Canada). It's less clear that the world, which happily maintains a trade surplus with Canada, would be willing to buy over six times what it already buys from Canada (Japan, Canada's second largest buyer, currently takes only 2% of Canadian exports). Let's get real here, folks.

"Then again, we shouldn't deceive ourselves into thinking either country would "win" a trade war."

Well of course. The juxtaposition of two world class economies along an extended border is a match made in heaven. The only way it could be better would be if Mexico had an economy as advanced as Canada's, which would make the US and Canada even richer.

BTW, the close integration of the two economies is yet another reason Renegade's initial claim is obviously wrong: the US economy couldn't be "in the crapper" without dragging the smaller Canadian economy down with it--an unfortunate side effect of an otherwise lucrative partnership.

"I'm forced to disagree with you here. It's a very foolish economic policy to borrow endlessly; it'll end up biting you in the rear end."

Renegade misunderstands me here. I don't advocate deficit spending; quite the opposite. I was just pointing out that an economy "in the crapper" can't support US-scale budget deficits, at least not at today's low-by-historical-standards interest rates. Continued deficits may well bring down the US economy in the future, but as we've seen from recent economic statistics, that hasn't happened yet.

"I also disagree that it takes a strong economy to support such huge deficits, since if the economy was truly strong, such borrowing wouldn't be necessary in the first place!"

Renegade is confusing politics with economics. Borrowing isn't "necessary" as he suggests, it's just a choice American politicians have made. They could just as well finance government spending through taxes, as Canada has since 1997, and take the political heat for it. If Canada's government chose to lower taxes tomorrow and finance 20% of its spending through borrowing, would the Canadian economy suddenly be "in the crapper?"

"It's not so much that the lenders have great confidence in the future economy of the country, it's that there such a huge collateral to secure it!"

The US government's only "collateral" is its promise to repay its bonds; creditors don't get the pink slip to an aircraft carrier or the deed to the White House. The Treasury can only repay those bonds if the economy provides enough revenue to do so. Now creditors can use these bonds to buy "collateral" anywhere in the world, but only if sellers are themselves willing to accept these bonds, i.e. if they're confident of repayment. If Brazil, for example, were to default on its foreign debt, would its creditors suddenly own Rio?

"Also, perceived as being great does not necessarily translate well into reality, as SJ mentioned."

In today's modern financial markets I'm sure there are a number of ways to make money "betting" against the US economy. No doubt SJ and Renegade have already done so. Right?

"However, I do think I'd rather be in charge of the Canadian economy than the American. I think it has better prospects."

I hope to God that nobody is ever "in charge" of either economy. It didn't work for the Soviet Union and it wouldn't work for either Canada or the US.

[Suicide Junkie]

If Canada's government chose to lower taxes tomorrow and finance 20% of its spending through borrowing, would the Canadian economy suddenly be "in the crapper?"

No, but I would call the country "going down the tubes"

Think of it this way:
Imagine how much lower taxes could be, if you didn't have to pay interest on your debt! Better yet, calculate it.

[Fyron]

Or, you know, reduce spending so the govt. doesn't have to borrow or raise taxes...

[capnq]

Tonight's episode of the CBS Evening News had a story about Brazil's ethanol program.

I don't have the bandwidth to doublecheck if that URL works; if it doesn't, go to CBS and search for "ethanol".

[Jack Simth]

I *think* This is the link you're looking for....

Might be a cookie issue, but it seems to work for me.

[Phoenix-D]

Imperator Fyron said:
Or, you know, reduce spending so the govt. doesn't have to borrow or raise taxes...

From..where, exactly? If you nuked everything except SS, Medicare, and defense, and interest payments we'd STILL be in a deficit..

[Atrocities]

You guys need to learn the golden rule. Nothing means nothing were all going to die. So if you can't effect change, learn to live with what is what and f*** the rest. It don't mean jack for were all going to be long dead and forgotten by the time that it matters. And by then, no one will care. So nuff said, move on.

[Baron Munchausen]

Atrocities said:
You guys need to learn the golden rule. Nothing means nothing were all going to die. So if you can't effect change, learn to live with what is what and f*** the rest. It don't mean jack for were all going to be long dead and forgotten by the time that it matters. And by then, no one will care. So nuff said, move on.

In other words, don't worry what this crushing debt will do to your grandchildren and great-grandchildren. Just enjoy the faked affluence now.

[Atrocities]

Baron Munchausen said:

In other words, don't worry what this crushing debt will do to your grandchildren and great-grandchildren. Just enjoy the faked affluence now.

No, they will pass it on to the next generation just like we are doing now. At least they will have ethonal powered cars though.

[Will]

Well, part of the reason that Clinton managed to get surpluses by the end of his time in office was by realizing that the US wasn't in an arms race with the USSR any longer. Then Bush got in office, and brought with him a bunch of advisers from the Reagan and Bush Sr. era, who are still of the mindset that the US needs a large standing army (while slashing taxes to boot, 'Reaganomics'). Only problem is, there isn't a national enemy to justify it. The closest thing we got is "terrorism", and that's not something you fight by throwing more bodies at it, it's fought via infiltration.

You might say that countries like China could become an enemy, but I don't think so. Both the US and China have too much to gain by staying on each others' good sides, and the Communism boogeyman is no longer effective as a justification for the 35-and-under age group (people who grew up watching USSR fall).

Let the tax cuts expire, freeze military spending at the current amount (sans Afghanistan/Iraq spending) for a decade or so before allowing it to grow with inflation again, and there will be a federal budget surplus again. After that, you only need 536 miracles to get that surplus to pay off the debt to a more reasonable level (say, $1 trillion instead of the over $8 trillion it's at now). Because every time you get a politician to pass up the opportunity for budgeting something to make themselves look good, it's a miracle, and it would take convincing 435 Reps, 100 Sens, and 1 Prez to make that happen.

Anyway... ethanol. Not only would it be cool to have cars that use it, but if you drink it in little tiny cups, the world gets all wobbly!