Hello IV and Reuter's Hires Jolly Bengalis

The first comment posted to this fine new blog is by my friend IV (pronounced Fore! like the Huey Lewis album). Thanks IV! You can read what he has to say here. IV has always been one of my favorite people and I'm glad we're back in touch.

I hope he continues to post and keep me on my toes. He has a diverse educational background which I hope he'll tell us about and isn't afraid to irritate me (in fact, I'm sure he would enjoy it.) He grew up on the mean streets of Fort Wayne near the intersection of Monarch Drive and Maplecrest Avenue. That was a tough neighborhood. He lives in Chicago now and works for a firm that is a CIA front "consulting" firm that specializes in either using technology to disrupt the plans of America's enemies (the French) or bioweapons designed to eliminate third world poverty (they ain't poor if they're dead). I'm not sure which.

Now for the topic of the day: Trade Restrictions, Tax Two from The Pure Investor

What brings this up? The announcement found here from Reuters that they are shipping some editorial jobs to India. I dislike Reuters for their inability to call "terrorist" terrorist. Also, another friend of mine (unidentified until he posts a comment) who lives in Seattle wishes to get into trade with that fine country. This friend has recently spent much time in India and has brought in a priceless import. Finally, John Kerry has been going around calling the head of companies who outsource jobs to India "Benedict Arnold CEOs." Let me get this straight: He wants to internationalize the war, but be xenophobic towards trade. So they're good enough to go die with/for us to make the war cheaper, but not good enough to trade with.

Anyone who has read my book (not many of you) knows I'm not a fan of many CEOs. But their stated sole job is to get the cheapest labor possible to provide higher returns to their shareholders. That's it. It's all about the benjamins, baby!

Two reasons I'm not afraid of outsoucing: First, in the short-term the loss of jobs helps the US economy sort out efficiencies in our systems. This discussion bores me. Second, in the long-term, the problem will take care of itself. This is done by the monetary exchange system.

From my book on why we need not have been afraid of Japan during the 80's.

The Pure Investor doesn’t worry that other countries are not buying
American goods. If they wish to continue to trade with the U.S., they will
be forced to open up their system. Monetary exchange is the pry bar that does
it. When Toyota builds cars in Japan and sells them in the U.S., the
Pure Investor knows that they are paid with U.S. dollars. The Pure
Investor knows that the Japanese company must convert the dollars they were paid
into Japanese yen to get them back Japan. But, like any commodity, as they
sell dollars and buy yen, the price of the yen will rise and, conversely, the
price of the dollar will fall. If the yen continues to rise, it will take
more dollars to buy a yen and Japanese products will become progressively more
expensive to Americans. The American goods will become cheaper relative to
Japanese goods until no one is willing to buy anything made in Japan over
something made in the U.S.

Taken a little bit further, the Pure Investor
contemplates what else can Japanese manufacturers do with the U.S. dollars they
earned from selling to Americans other than converting them to Yen and taking
them back to Japan. First, they can buy U.S. goods. While this
hasn’t happened to the extent that American business and government would like,
the Japanese people are hurt more than U.S. citizens are. Their government
has imposed on them a limited number of goods that they can purchase.
Japanese freedom has been limited. The second thing the Japanese can do
with their dollar is to invest in U.S. securities. If they do this, they
obviously value U.S. businesses and believe it has a good future and will offer
a good return. When this happens, U.S. companies use the Japanese money to
expand their own businesses that increase U.S. employment and stock
prices. The third thing that the Japanese can do with their U.S. dollars
is to build factories in the U.S. to build their goods. They have already
done this to a large extent. This has increased U.S. employment and tax
revenue. Toyota has a factory in Georgetown, Kentucky; Mercedes Benz
opened a plant in Tuscaloosa, Alabama; Nissan’s facility is in Smyrna,
Tennessee; and BMW manufacturers the ultimate driving machine in Spartanburg
County, South Carolina. Across the United States, communities once solely
dependent on agriculture have diversified their economic bases with foreign
industry. The final option the Japanese have is to trade their dollars for
the currency of another country with someone who wants U.S. dollars. The
effect of this is the same as listed above; the U.S. benefits.