Charlie Rose

slightly_optimistic  03/30/2012 10:04 AM Report

'Foreign Affairs' this month addresses the subject of selective exports of military technology. Lockheed Martin has just won a contract to sell jet fighters worth nearly $5 billion to Japan.

"the United States and Japan share a common interest in the region -- countering China -- and that a strong U.S.-Japanese alliance, bolstered by Japan's procurement of highly advanced weapons from the United States, is the most effective check on Chinese expansion in the region. As long as the two countries' regional interests continue dovetail, that strategic logic will win out."

slightly_optimistic  03/29/2012 06:49 AM Report

Re 03/24/2012 03:21 AM - much of the R&D expenditure in the US results in hi-tech defense equipment that is subject to export restrictions?

finalfantasytown  03/26/2012 01:17 AM Report

The purpose of democracy is in the thinking titled in 'Reconstruct the world map, peace or war?', which would have been submitted one week ago, but was delayed by manipulation of spy who should be shot, in the comment of Christine Lagarde's interview on March 12th.

finalfantasytown  03/26/2012 01:15 AM Report

This is the revised comment of Richard McGregor & Damien Ma on Bo Xilai.

Chinese communist party currently needs courage, confidence, and wisdom to take the left wing from easten Germany and form the pole. Also the government has to be military strong. Some Chinese peoples have taken advantages of government policy to manipulate real estate and stock to rob and steal money from bank, and fill their greed on money. They even use money to control media, education, spy network in order to weaken people, poison people, and break Chinese communist party and government. If it is necessary, operate political purge and cultural revolution. Chinese communist party needs support. The history of Human being, I believe, is one-way. When physicists show us the physical world is composed of infinite small and infinite large, it is clear that we are stuck in the maze. Each time when histories have repeated, natural resources counting down the time human being in this world have been wasted, certainly time has been wasted. The whole nature has beared the burden from us. No one with shame will say human being, who has experienced several thousand-year histories, is still young. Simutaneously, we push ourselves closer to the hopeless. So let's form two poles, one explores the way we were in, and the other explores the way we are going out.

slightly_optimistic  03/24/2012 03:21 AM Report

More research and development is the anwer? However a former chair of the US President's Council of Economic Advisers cast doubt. Laura Tyson wrote last week in Project Syndicate that although the US remains the global leader in R&D investment, the nation ranked only eighth in 2009 at 2.9% of GDP. We were told that defense accounted for more than 50% of R&D for the last quarter century. But defense spending is now being cut back.

Moreover "engineering accounts for only 4% of all bachelors' degrees in the US compared to 19% in Asia – which now accounts for half of all engineering degrees being awarded – and 33% in China".

finalfantasytown  03/24/2012 01:28 AM Report

Is there a topic on paradise. If just sending people one by one to the pole without paradise, they all die there.

finalfantasytown  03/24/2012 01:17 AM Report

I imagine the guests in this topic should major in engineering and focus on making ship.

finalfantasytown  03/24/2012 12:57 AM Report

no face, no shame, no secret. Translating them into Chinese, a good idea to design new edition RMB can be understood. This idea should be used to all people who have communist instinct. Although I think communism in and around the pole does't need money, they need money to buy ticket to get there.

anne4444  03/23/2012 04:32 PM Report

Here are 12 dimensions in the universe:3 physical dimensions, 3 non-physical dimensions, time, universe expansion, possibility, parallel dimension, merging/separation and duplication.

The highest physical l being in our universe is a nine dimensional intelligent being. After that, we can only see non-physical spiritual beings.

The 48 dimensional intelligent beings are purely high vibrating frequency of female energy filled with information; they have no form, no face and no gender as we defined, but they can transform themselves into anything. They created us and our universe.

==============================================================

New understanding of Buddhism’s eight senses or eight consciousnesses:

5 senses: sight, hearing, taste, touch and smell by eye, ear, tongue, skin and nose.

6 sense: intuition and compassion by the invisible soul inside our body

7 sense: invisible and immortal “data cable” transferring information between 6 sense and 8 sense during sleeping.

8 sense: our united non-separable soul kept together within mother earth. Invisible and immortal.

===============================================================

When we look into the sky, we are all humble by the creation.

There are total 48 dimensions in our universe. 36 dimensions are inaccessible to us. Our souls can access 12 dimensions (12 strand soul DNA) while this material world with plant earth limits us to only 3 dimensions with Double Helix DNA.

Knowledge is limitless, so does intelligent being.

Our soul has no difference; we are united as one. Our differences in body, senses, sex, intelligence, power and wealth, is only the trap into darkness which prevent us to unite our other half soul into the lightness.

Gelles  03/23/2012 06:08 AM Report

Dear Ricardo and Optimistic Friend,

What is missing in discussions of jobs, trade and sound money, is the coming era of abundance, based on revolutionary technology in info-tech, biotech and nano-tech (new materials, expecially from plentiful carbon which we ought not butn). Review Peter Diamondis "Abundance" in book form and on video. Also make common cause with Singularity University and Keynesian solutions to deamnd and supply based on full employment of all consumers as workers supported by robots and money created on purpose.

The choices available to the great powers, in the absence of totalitarian maniacs whose wholsale destruction of peoples and property must not be repeated by religious fanatics with oil underground. None of here want to lose the best values of East and West that can be reduced to THE GOLDEN RULE.

Beware of totalitasrians, Mandarin-like economists and lawyers, and people who believe MONEY is short when MONEY is a function the the valude of THINGS THAT MONEY CAN BUY.

There is magic in money saved until it can be matched to output for sale. While it is saved, if the global system protects it from inflation, like we do for TIPS bonds, laborf and capital will WORK to produce the water, food, homes, health, entertainment, etc., that ordinary people cannot live without.

If we allow demand and prosperity to evaporate so that FDR's Second Bill of Rights, and the human rights we know are the essence of liberty, are destroyed by war or political manias, the era of Abundance will default to abundant WMD's and blood and guts to be spilled because we did not kill the replica's of 20th Century tyrants as soon as they showed their true colors in the 21st.

Too many of the Good Guys around fail to unite enough to influence popular opinion. Each GG is often selling books and ideas to glorify his own name and not make common cause with people in search of solutions made possible in our time that were impossible before we achieved exponential growth in knowledge to create the chance we have for peace over the decades immediately ahead.

http://outputbasedmoney.info

http://outputbasedmoney.info/.crs.htm

Ricardo_Amaral  03/22/2012 01:52 PM Report

Gelles, for you to understand what I am saying then watch this video:

By the way, as President Roosevelt predicted 68 years ago - the United States is becoming very fast a fascist state.

Obama Implementing Martial Law – March 19, 2012

http://www.youtube.com/watch?feature=player_embedded&v=MDAoYo9jkoI

.

Ricardo_Amaral  03/22/2012 01:46 PM Report

Gelles, I am glad that you are fine and in good health.

The Brazilian government is just fighting back to keep the manufacturing base in Brazil and prevent that it move to other countries because of unfair currency manipulations by the big boys.

I agree 100 percent with the measures that Brazilian Finance Minister Guido Mantega is adopting in Brazil to protect Brazilian jobs.

As a matter of fact some of the measures that he has been adopting I had suggested on my articles and postings on Brazzil magazine.

I am 100 percent also for the adoption of Franklin Roosevelt's "Second Bill of Rights" that he proposed on January 11, 1944 as per this video:

Franklin Roosevelt - Second Bill of Rights - January 11, 1944

http://www.youtube.com/watch?v=UwUL9tJmypI

By the way, as President Roosevelt predicted 68 years ago - the United States is becoming very fast a fascist state.

.

slightly_optimistic  03/22/2012 10:26 AM Report

Gelles, thanks for the response.

Some additional information. The consultants think the debt - combination of personal, business and public debt - is unsustainable no matter how much the economies of the West improve. The report was a bit sketchy however on how to write off the $tens of trillions of debt - and retain support from enough political and financial backers locally.

It was excellent research, nonetheless.

A senior employee of the BBC picked up the findings and put them together with work last year by economists Carmen Reinhart and Belen Sbranica on 'financial repression'. Such 'repression' is said to be "a combination of inflation and capital controls designed to erode the value of debts - and therefore of savings." This ploy was successful in righting Western economies after WW2.

But possible now? China, for example, has reduced its holdings of US government bonds from about three quarters of its foreign reserves to just over half.

It would be nice if the G20's Financial Stability Board could get involved in this recurring dispute between debtors and creditors/savers to come up with multilateral solution that will stand the test of time. Some international audit of the global economy will surely be necessary.

Gelles  03/22/2012 07:24 AM Report

Dear Optimistic ~

I notice lots of errors in my posted message. Sorry.

We have errors in our trade and payments systems. We should correct them in the light of experience.

Your idea of write-off is good. It is what we do today.

My idea is to call attention to proposed reform by paying off debt instead of writing it off.

Either way will work in the end. IMO.

Gelles  03/22/2012 07:17 AM Report

To: slightly_optimistic 03/22/2012 05:09 AM & friends --

You write -- for the West to become competitive, it will be essential to write off its unsustainable debt - estimated to be $11 trillion owed by the US, €6 trillion owed by the eurozone."

I would not WRITE OFF the debt we owe we intended to pay when it was promised.

I would repay it in PRODUCTION today and tomorrow that we owe the people we promised ro pay. If they do not want our production, I would pay them in accordance with promissory note behind the debt.

If this calls for dollars, I would pay in dollars.

America has all the dollars our production justifies. So we should pay the debt.

If the dollars received are spent too soon, our creditors may receive too little too soon. If they wait, they will receive full value.

Debt is a solemn promise and ought to paid with determined logic based on circumstances. If a nation runs short of money, debt can be paid off in stock equity or products or new debt or new money. I would be fair to credkitors and see what options they wanted.

If a creditor wants his collateral for secured debt I would give him that. If the debt is not secured, I would give him money.

So the problem is to define what is "money" and what is "debt".

These two words are defined by reading the debt instrument. American debt is all defined as paper dollars or bank deposits. We have all of these to pay all our debts and all our unfunded liabilities.

Individuals and private firms in debt do not have such ability to pay. Governments do -- via their central banks or pariaments.

Greece, Spain and Portugal may soon be strapped for money. They should pay money out if it was promised.

The money can be accompanied by a message --

..... "Please please do not spend this money before we have the production to back it up -- with goods and services you want. If you do not want such goods and services and will not wait until they are on sale -- you may find the money does not buy much."

.

Dear Optimistic, I know you only said we were in danger of becoming less competitive in future than in the past. You have a point.

But if we become more logical and less competitive that may be a blessing.The logical future we seek is marked by full employment, full training and work, full quality control, and full balance of demand to supply and supply to reasonable need.

Our problmen, to me, is not too much debt. It is too little logic when the debt was promised and later whe it was to be repaid.

Of course, future debt could be forbidden and all future investment made with stock equities.

Gelles  03/22/2012 06:42 AM Report

Ricardo ~

I nearly "wheeled myself over the cliff to a rocky death and watery grave", (the way the Republicans want to do by privatizing Medicare / Medicaid), when I forgot to take my extended release nitro-glycerin at 7pm, 21 March (last night). Feeling pressure at 3am, I discovered my suicide gesture, took the pill, and enjoyed your post this answers.

I think I've recovered. As for the privatizing theives in the Republican party -- they are inviolation of the Golden Rule and need a beating at the polls.

Medical care is a human right from conception to burial (with a good life inbetween). It ought to be free to everyone who wants it.

Such care would be PAID FOR by PRODUCING the necessities of life for the madical care professionals who render it. Such production would be natural for any full employment advanced industrial nation. America's failure to to provide such production, as was proved possible and neccessary and was proposed by our greatest modern leader, President Roosevelt, (for whom I named my son Franklin,) on 11 January 1944, in the Second Bill of Rights.

http://www.outputbasedmoney.info/2nd-bill.htm

http://www.outputbasedmoney.info/2nd-bill.htm

This nation has not yet passed the Second Bill of Rights. This is a crime against America and the whole human race.

I hope Brazil is setting examples better than ours. Is it doing that?

Thanks for your post.

slightly_optimistic  03/22/2012 05:09 AM Report

Re the inability of the G20 to promote financial stability: 'The G-Zero world'. [03/21/2012 01:17 PM]

Import certificates would of course help if Washington could get the idea past the key political sponsors. But there is still a huge debt to service. Top consultants have suggested recently that apart from long-term austerity for the West to become competitive, it will be essential to write off its unsustainable debt - estimated to be $11 trillion owed by the US, €6 trillion owed by the eurozone.

Ricardo_Amaral  03/21/2012 07:54 PM Report

Gelles, here is the Republican Party solution for the United States regarding its Medicare and Medicaid programs. Here is what is in store for American senior citizens in the coming years:

America The Beautiful

http://www.youtube.com/watch?v=OGnE83A1Z4U

.

Gelles  03/21/2012 07:47 PM Report

All of us on the CR Forum agree IMO with the necessity of all continental nations to maintain a coherent industrial base and not attempt to exchange intellectual property and temporary patent monopolies for the product of hard work by our neighbors.

Hard working neighbors deserve high wages just as much as we do. They must sell to themselves.

Nothing precludes some foreign trade and great deal of altruistic assistance by advancded industrial nations in order to replicatde tghe Chinese miracle (and Asian Tiger miracles) that catapulted hundreds of millions of people up from marginal agriculture to potential middle class standards in decades not centuries.

But, when corporatism tries to ensalve global labor and retreat to gated communuities, it should be arrested for sqauandering our legacies and treating us all as serfs.

Warren Buffet is a Christian with Christian charity in his DNA. That DNA asks not for absolute free trade.

It asks for absolute common sense in business and in living with the Golden Rule -- ahead of meaner slogans justifying gross inequality -- that will bite you hard and and bleed you until you obey the conscience of our species.

Gelles  03/21/2012 07:20 PM Report

Thanks Ricardo_Amaral (for your 03/21/2012 11:15 AM) bringing Warren Buffet back where his IMPORT CERTIFICATE solution belongs.

I have included his solution in my top agenda for more than five years. He pinpointed the problem of racing to the bottom of global wages by so many American corporations and investors, since 2003. You can read his article via Google directly from Forbes or my copy of it at

http://www.outputbasedmoney.info/7286.htm

http://www.ustaxreform.us/7286.htm

Gelles  03/21/2012 07:08 PM Report

THE BLOG

of John Gelles

July 28, 2006

I was listening to Senator Byron Dorgan on Charlie Rose PBS TV. He favored the following solution to the value of a dollar under pressure from an unfavorable balance of payments: that is from an excess of imports over exports which can de-industrialize and pauperize America --- if it is ignored.

This website has for years been willing to solve this problem solely with government spending to protect our defense industries and employ every American at a very fair union wage (or, in lieu of a job, to promote self-employment at a very fair rate of return on capital invested and work performed.)

The import certificate solution brings in the whole economy --- I support it without reservation.

IMPORT CERTIFICATE

PROTECTIVE TARIFF

Squanderville versus Thriftville

by Warren Buffett

in FORTUNE

Copyrighted work reprinted here is for educational non profit purposes --- and at the teachable moment. It was offered free to me on the internet (as a member of a wide audience) and is copied here free to others adding to its value) --- it is fair use of the work

Squanderville versus Thriftville

fortune | oct 2003 | Warren Buffet

By Warren E. Buffett

I'm about to deliver a warning regarding the U.S. trade deficit and also suggest a remedy for the problem. But first I need to mention two reasons you might want to be skeptical about what I say. To begin, my forecasting record with respect to macroeconomics is far from inspiring. For example, over the past two decades I was excessively fearful of inflation. More to the point at hand, I started way back in 1987 to publicly worry about our mounting trade deficits -- and, as you know, we've not only survived but also thrived. So on the trade front, score at least one "wolf" for me. Nevertheless, I am crying wolf again and this time backing it with Berkshire Hathaway's money. Through the spring of 2002, I had lived nearly 72 years without purchasing a foreign currency. Since then Berkshire has made significant investments in -- and today holds -- several currencies. I won't give you particulars; in fact, it is largely irrelevant which currencies they are. What does matter is the underlying point: To hold other currencies is to believe that the dollar will decline.

Both as an American and as an investor, I actually hope these commitments prove to be a mistake. Any profits Berkshire might make from currency trading would pale against the losses the company and our shareholders, in other aspects of their lives, would incur from a plunging dollar.

But as head of Berkshire Hathaway, I am in charge of investing its money in ways that make sense. And my reason for finally putting my money where my mouth has been so long is that our trade deficit has greatly worsened, to the point that our country's "net worth," so to speak, is now being transferred abroad at an alarming rate.

A perpetuation of this transfer will lead to major trouble. To understand why, take a wildly fanciful trip with me to two isolated, side-by-side islands of equal size, Squanderville and Thriftville. Land is the only capital asset on these islands, and their communities are primitive, needing only food and producing only food. Working eight hours a day, in fact, each inhabitant can produce enough food to sustain himself or herself. And for a long time that's how things go along. On each island everybody works the prescribed eight hours a day, which means that each society is self-sufficient.

Eventually, though, the industrious citizens of Thriftville decide to do some serious saving and investing, and they start to work 16 hours a day. In this mode they continue to live off the food they produce in eight hours of work but begin exporting an equal amount to their one and only trading outlet, Squanderville.

The citizens of Squanderville are ecstatic about this turn of events, since they can now live their lives free from toil but eat as well as ever. Oh, yes, there's a quid pro quo -- but to the Squanders, it seems harmless: All that the Thrifts want in exchange for their food is Squanderbonds (which are denominated, naturally, in Squanderbucks).

Over time Thriftville accumulates an enormous amount of these bonds, which at their core represent claim checks on the future output of Squanderville. A few pundits in Squanderville smell trouble coming. They foresee that for the Squanders both to eat and to pay off -- or simply service -- the debt they're piling up will eventually require them to work more than eight hours a day. But the residents of Squanderville are in no mood to listen to such doomsaying.

Meanwhile, the citizens of Thriftville begin to get nervous. Just how good, they ask, are the IOUs of a shiftless island? So the Thrifts change strategy: Though they continue to hold some bonds, they sell most of them to Squanderville residents for Squanderbucks and use the proceeds to buy Squanderville land. And eventually the Thrifts own all of Squanderville.

At that point, the Squanders are forced to deal with an ugly equation: They must now not only return to working eight hours a day in order to eat -- they have nothing left to trade -- but must also work additional hours to service their debt and pay Thriftville rent on the land so imprudently sold. In effect, Squanderville has been colonized by purchase rather than conquest.

It can be argued, of course, that the present value of the future production that Squanderville must forever ship to Thriftville only equates to the production Thriftville initially gave up and that therefore both have received a fair deal. But since one generation of Squanders gets the free ride and future generations pay in perpetuity for it, there are -- in economist talk -- some pretty dramatic "intergenerational inequities."

Let's think of it in terms of a family: Imagine that I, Warren Buffett, can get the suppliers of all that I consume in my lifetime to take Buffett family IOUs that are payable, in goods and services and with interest added, by my descendants. This scenario may be viewed as effecting an even trade between the Buffett family unit and its creditors. But the generations of Buffetts following me are not likely to applaud the deal (and, heaven forbid, may even attempt to welsh on it).

Think again about those islands: Sooner or later the Squanderville government, facing ever greater payments to service debt, would decide to embrace highly inflationary policies -- that is, issue more Squanderbucks to dilute the value of each. After all, the government would reason, those irritating Squanderbonds are simply claims on specific numbers of Squanderbucks, not on bucks of specific value. In short, making Squanderbucks less valuable would ease the island's fiscal pain.

That prospect is why I, were I a resident of Thriftville, would opt for direct ownership of Squanderville land rather than bonds of the island's government. Most governments find it much harder morally to seize foreign-owned property than they do to dilute the purchasing power of claim checks foreigners hold. Theft by stealth is preferred to theft by force.

So what does all this island hopping have to do with the U.S.? Simply put, after World War II and up until the early 1970s we operated in the industrious Thriftville style, regularly selling more abroad than we purchased. We concurrently invested our surplus abroad, with the result that our net investment -- that is, our holdings of foreign assets less foreign holdings of U.S. assets -- increased (under methodology, since revised, that the government was then using) from $37 billion in 1950 to $68 billion in 1970. In those days, to sum up, our country's "net worth," viewed in totality, consisted of all the wealth within our borders plus a modest portion of the wealth in the rest of the world.

Additionally, because the U.S. was in a net ownership position with respect to the rest of the world, we realized net investment income that, piled on top of our trade surplus, became a second source of investable funds. Our fiscal situation was thus similar to that of an individual who was both saving some of his salary and reinvesting the dividends from his existing nest egg.

In the late 1970s the trade situation reversed, producing deficits that initially ran about 1 percent of GDP. That was hardly serious, particularly because net investment income remained positive. Indeed, with the power of compound interest working for us, our net ownership balance hit its high in 1980 at $360 billion.

Since then, however, it's been all downhill, with the pace of decline rapidly accelerating in the past five years. Our annual trade deficit now exceeds 4 percent of GDP. Equally ominous, the rest of the world owns a staggering $2.5 trillion more of the U.S. than we own of other countries. Some of this $2.5 trillion is invested in claim checks -- U.S. bonds, both governmental and private -- and some in such assets as property and equity securities.

In effect, our country has been behaving like an extraordinarily rich family that possesses an immense farm. In order to consume 4 percent more than we produce -- that's the trade deficit -- we have, day by day, been both selling pieces of the farm and increasing the mortgage on what we still own.

To put the $2.5 trillion of net foreign ownership in perspective, contrast it with the $12 trillion value of publicly owned U.S. stocks or the equal amount of U.S. residential real estate or what I would estimate as a grand total of $50 trillion in national wealth. Those comparisons show that what's already been transferred abroad is meaningful -- in the area, for example, of 5 percent of our national wealth.

More important, however, is that foreign ownership of our assets will grow at about $500 billion per year at the present trade-deficit level, which means that the deficit will be adding about one percentage point annually to foreigners' net ownership of our national wealth. As that ownership grows, so will the annual net investment income flowing out of this country. That will leave us paying ever-increasing dividends and interest to the world rather than being a net receiver of them, as in the past. We have entered the world of negative compounding -- goodbye pleasure, hello pain.

We were taught in Economics 101 that countries could not for long sustain large, ever-growing trade deficits. At a point, so it was claimed, the spree of the consumption-happy nation would be braked by currency-rate adjustments and by the unwillingness of creditor countries to accept an endless flow of IOUs from the big spenders. And that's the way it has indeed worked for the rest of the world, as we can see by the abrupt shutoffs of credit that many profligate nations have suffered in recent decades.

The U.S., however, enjoys special status. In effect, we can behave today as we wish because our past financial behavior was so exemplary -- and because we are so rich. Neither our capacity nor our intention to pay is questioned, and we continue to have a mountain of desirable assets to trade for consumables. In other words, our national credit card allows us to charge truly breathtaking amounts. But that card's credit line is not limitless.

The time to halt this trading of assets for consumables is now, and I have a plan to suggest for getting it done. My remedy may sound gimmicky, and in truth it is a tariff called by another name. But this is a tariff that retains most free-market virtues, neither protecting specific industries nor punishing specific countries nor encouraging trade wars. This plan would increase our exports and might well lead to increased overall world trade. And it would balance our books without there being a significant decline in the value of the dollar, which I believe is otherwise almost certain to occur.

We would achieve this balance by issuing what I will call Import Certificates (ICs) to all U.S. exporters in an amount equal to the dollar value of their exports. Each exporter would, in turn, sell the ICs to parties -- either exporters abroad or importers here -- wanting to get goods into the U.S. To import $1 million of goods, for example, an importer would need ICs that were the byproduct of $1 million of exports. The inevitable result: trade balance.

Because our exports total about $80 billion a month, ICs would be issued in huge, equivalent quantities -- that is, 80 billion certificates a month -- and would surely trade in an exceptionally liquid market. Competition would then determine who among those parties wanting to sell to us would buy the certificates and how much they would pay. (I visualize that the certificates would be issued with a short life, possibly of six months, so that speculators would be discouraged from accumulating them.)

For illustrative purposes, let's postulate that each IC would sell for 10 cents -- that is, 10 cents per dollar of exports behind them. Other things being equal, this amount would mean a U.S. producer could realize 10 percent more by selling his goods in the export market than by selling them domestically, with the extra 10 percent coming from his sales of ICs.

In my opinion, many exporters would view this as a reduction in cost, one that would let them cut the prices of their products in international markets. Commodity-type products would particularly encourage this kind of behavior. If aluminum, for example, was selling for 66 cents per pound domestically and ICs were worth 10 percent, domestic aluminum producers could sell for about 60 cents per pound (plus transportation costs) in foreign markets and still earn normal margins. In this scenario, the output of the U.S. would become significantly more competitive and exports would expand. Along the way, the number of jobs would grow.

Foreigners selling to us, of course, would face tougher economics. But that's a problem they're up against no matter what trade "solution" is adopted -- and make no mistake, a solution must come. (As Herb Stein said, "If something cannot go on forever, it will stop.") In one way the IC approach would give countries selling to us great flexibility, since the plan does not penalize any specific industry or product. In the end, the free market would determine what would be sold in the U.S. and who would sell it. The ICs would determine only the aggregate dollar volume of what was sold.

To see what would happen to imports, let's look at a car now entering the U.S. at a cost to the importer of $20,000. Under the new plan and the assumption that ICs sell for 10 percent, the importer's cost would rise to $22,000. If demand for the car was exceptionally strong, the importer might manage to pass all of this on to the American consumer. In the usual case, however, competitive forces would take hold, requiring the foreign manufacturer to absorb some, if not all, of the $2,000 IC cost.

There is no free lunch in the IC plan: It would have certain serious negative consequences for U.S. citizens. Prices of most imported products would increase, and so would the prices of certain competitive products manufactured domestically. The cost of the ICs, either in whole or in part, would therefore typically act as a tax on consumers.

That is a serious drawback. But there would be drawbacks also to the dollar continuing to lose value or to our increasing tariffs on specific products or instituting quotas on them -- courses of action that in my opinion offer a smaller chance of success. Above all, the pain of higher prices on goods imported today dims beside the pain we will eventually suffer if we drift along and trade away ever larger portions of our country's net worth.

I believe that ICs would produce, rather promptly, a U.S. trade equilibrium well above present export levels but below present import levels. The certificates would moderately aid all our industries in world competition, even as the free market determined which of them ultimately met the test of "comparative advantage."

This plan would not be copied by nations that are net exporters, because their ICs would be valueless. Would major exporting countries retaliate in other ways? Would this start another Smoot-Hawley tariff war? Hardly. At the time of Smoot-Hawley we ran an unreasonable trade surplus that we wished to maintain. We now run a damaging deficit that the whole world knows we must correct.

For decades the world has struggled with a shifting maze of punitive tariffs, export subsidies, quotas, dollar-locked currencies, and the like. Many of these import-inhibiting and export-encouraging devices have long been employed by major exporting countries trying to amass ever larger surpluses -- yet significant trade wars have not erupted. Surely one will not be precipitated by a proposal that simply aims at balancing the books of the world's largest trade debtor. Major exporting countries have behaved quite rationally in the past and they will continue to do so -- though, as always, it may be in their interest to attempt to convince us that they will behave otherwise.

The likely outcome of an IC plan is that the exporting nations -- after some initial posturing -- will turn their ingenuity to encouraging imports from us. Take the position of China, which today sells us about $140 billion of goods and services annually while purchasing only $25 billion. Were ICs to exist, one course for China would be simply to fill the gap by buying 115 billion certificates annually. But it could alternatively reduce its need for ICs by cutting its exports to the U.S. or by increasing its purchases from us. This last choice would probably be the most palatable for China, and we should wish it to be so.

If our exports were to increase and the supply of ICs were therefore to be enlarged, their market price would be driven down. Indeed, if our exports expanded sufficiently, ICs would be rendered valueless and the entire plan made moot. Presented with the power to make this happen, important exporting countries might quickly eliminate the mechanisms they now use to inhibit exports from us.

Were we to install an IC plan, we might opt for some transition years in which we deliberately ran a relatively small deficit, a step that would enable the world to adjust as we gradually got where we need to be. Carrying this plan out, our government could either auction "bonus" ICs every month or simply give them, say, to less-developed countries needing to increase their exports. The latter course would deliver a form of foreign aid likely to be particularly effective and appreciated.

I will close by reminding you again that I cried wolf once before. In general, the batting average of doomsayers in the U.S. is terrible. Our country has consistently made fools of those who were skeptical about either our economic potential or our resiliency. Many pessimistic seers simply underestimated the dynamism that has allowed us to overcome problems that once seemed ominous. We still have a truly remarkable country and economy.

But I believe that in the trade deficit we also have a problem that is going to test all of our abilities to find a solution. A gently declining dollar will not provide the answer. True, it would reduce our trade deficit to a degree, but not by enough to halt the outflow of our country's net worth and the resulting growth in our investment-income deficit.

Perhaps there are other solutions that make more sense than mine. However, wishful thinking -- and its usual companion, thumb sucking -- is not among them. From what I now see, action to halt the rapid outflow of our national wealth is called for, and ICs seem the least painful and most certain way to get the job done. Just keep remembering that this is not a small problem: For example, at the rate at which the rest of the world is now making net investments in the U.S., it could annually buy and sock away nearly 4 percent of our publicly traded stocks.

In evaluating business options at Berkshire, my partner, Charles Munger, suggests that we pay close attention to his jocular wish: "All I want to know is where I'm going to die, so I'll never go there." Framers of our trade policy should heed this caution -- and steer clear of Squanderville.

========END OF BUFFET WORLD FAMOUS ARTICLE ========

FORTUNE editor at large Carol Loomis, who is a Berkshire Hathaway shareholder, worked with Warren Buffett on this article.

Squanderville versus Thriftville (Warren Buffett)

RoseColoredGlasses  03/21/2012 05:21 PM Report

I would like everyone to know or remember that the San Francisco Bay Bridge steel was manufactured in China where workers were kept in dorms, worked 12 hour shifts, and got paid at first 9$/day until somehow they were granted $12 a day. I found it interesting the former CEO of Morgan/Stanley claimed that unlike China, there is no political unrest here in the U.S. and "no one storming the white house." and although 15% official unemployment here, everyone still gets up and goes to work (???). Guys like him are the reasons for OWS. But, an interesting pt. brought up was that Chinese thought Democracy was coming, but instead the government fortressed its government owned large industries. Does anyone else see China invading the U.S. with its vast, vast army of poverty-driven soldiers? It is foreseeable that it is in China's global interests (which some at that panel said the Chinese's poverty would keep China out of the Global game) to keep such a mass population interested in other things besides their consumptive selves.

slightly_optimistic  03/21/2012 01:17 PM Report

It was interesting to hear at the end of the discussion of Ian Bremmer's forthcoming book on the G-Zero world that many countries, including China, are helping to produce.

The advance notice for the book tells us that "the diverse political and economic values of the G20 have produced global gridlock. In a world where so many challenges transcend borders—from the stability of the global economy and climate change to cyber-attacks, terrorism, and the security of food and water—the need for international cooperation has never been greater."

Strangely neither the official forums of the G20 nor indeed the G20's Financial Stability Board have highlighted this fundamental flaw that is apparently preventing essential multilateralism. When these public organisations were launched they were surely intended to be more than sinecures.

tabs  03/21/2012 12:54 PM Report

Now comes part 3:

Briefly Mr Bremmer stated in affect that the US was the only nation that could afford to have a Global foreign policy and military presence. Either Mr Bremmer does not know or has conveniently forgotten that since 1968 the US has been running fiscal DEFICITS. The method of disguising this deficit and attending debt was and is by placing the Social Security Trust Fund and Payroll Taxes into the General Account. Thus the US government has used and is using an accounting gimmick of changing a debt into an accounts payable. Mr Bremmer calculations and assessment is thus skewed and his opinion can not be considered to be a reliable indicator.

The US has not been able to afford a Guns and Butter policy without borrowing massive amounts of money. Or by raising taxes to cover the shortfall, which would have dampened economic activity. The chicken are now coming home to roost as the Can now bounces back every time the political elite tries to kick it down the road some more. Case in point, this morning Mr Bernanke before Congress when asked if the current levels of deficit spending and attending increase in debt is sustainable said, "NO IT IS NOT."

Ricardo_Amaral  03/21/2012 11:15 AM Report

Gelles, I want to send my congratulations to Guido Mantega - Brazil's Finance Minister - since Guido Mantega is doing all the right moves to protect manufacturing jobs in Brazil.

Brazil vows to Protect Manufacturing – March 20, 2012

http://www.youtube.com/watch?v=y3_-oj-a0jk

Without a strong manufacturing sector - a country is screwed. How is Brazil working to protect it's economy - and can America do the same thing?

*****

Just a reminder!!!!!!

According to Warren Buffett the US is heading for sharecropper society.

Berkshire Hathaway annual letter to investors in March 2005

Warren Buffett, one of the world's most successful investors, has launched his most withering attack to date on the US trade deficit, describing Americans as "rich spending junkies" who could turn into a nation of "sharecroppers".

In his annual letter to investors in Berkshire Hathaway, the fund he has run for more than 30 years, Mr Buffett painted a bleak picture of a future US in which ownership and wealth had continued to move overseas, leaving the economy in thrall to foreign interests and faced with financial turmoil and political unrest.

Mr. Buffet's remarks go on:

...A country that is now aspiring to an "Ownership Society" will not find happiness in - and I'll use hyperbole here for emphasis - a "Sharecropper's Society." But that's precisely where our trade policies, supported by Republicans and Democrats alike, are taking us.

.

Gelles  03/21/2012 06:38 AM Report

There are four systems implied by "Gelles 03/21/2012 05:50 AM", below: PRODUCTION, CONSUMPTION, SAVINGS and TAXES. Unless we remove all taxes from PRODUCTION and SAVINGS we will suffer counter-productive effects likely to defeat democracy.

Freedom without the Golden Rule is anarchy and savagery. Freedom without human rights is an invitation to instability. Corporatism without government leads to master-slave mind-sets. Corruption in government, policing and law is a chronic disease that will destroy everything if given half the chance. The four main systems are constrained to satisfy sub-system objectives in great array and constant motion.

Imagine a future where carbon is used for lasting real wealth not short term profit going up in smoke. Imagine a future better than the past.

Gelles  03/21/2012 05:50 AM Report

The futures of the global new order (political) and global trade and monies (economic) are bothe unknowable and endlessly predicted by experts and inexpert ordinary people conversing with peers or worrying to themselves.

These futures assume we have survived the risks of global war and other man-made or natural disasters, including black swans that are huge but not fatal. Therefore, such futures are fundamentally optimistic.

Politically speaking, the Republican desire for smaller government and more laissez-faire pursuit of American exceptionalism with no more money than we own rings false and sad: sad because we seem to have learned very little betwee 1932 and 2008.

Their opposition by Barack Obama and his executive branch amd political allies are anxious to build lasting prosperity, but they are less into military Keynesianism and more into legalistic niceties and inaction than the situation calls for.

For the situation is quite plain: Russia's WMD's and Asia's mega-populations have challenged leadership by the Western World under the protection of the military forces and folding money of the USA.

I challenge all of you to work your guestimates out, of the political and economic future is question, on the following thought experiment assumption: inside the USA's 50 sovereign states and national boundaries there is found within half a year more GOLD and PRECIOUS METAL SUBSTITUTES than all the debt and laibilities (funded and unfunded) of our national, state and local governments, and private sectors.

If you do the above you will conclude that the money to buy the guns and the guns to buy the money are not related to each other as static tangibles.

..... They are related to reality only as a dynamic system of production that can support BOTH military force and the industrial capacity to keep it ahead of all challenge by other powers outside the circle of their dependable democratic friends and allies.

This being the fact of the matter, all this crap about DEBT and our GREAT GRAND CHILDREN is just crap, and bombast and boasts about exceptionalism, free trade and free markets, is just that. Unless we form a party or bi-partisan government that can build a demcratic system of production and its military capability, the future will stink. Europe and Asia do not want the responsibilities we have -- and when they are ready for more than they have they will tell us so by joining in our circle in tighter and tighter unions over time.

SharkswithfrikingLazers  03/21/2012 02:48 AM Report

Charlie, Chi-merica and remember James?

James Chanos, President, Kynikos Associates. He is the man who predicted the Enron downfall and now predicting a housing bubble in China

http://www.charlierose.com/view/interview/10960

He would have been good to have on with Zhang.

SharkswithfrikingLazers  03/21/2012 02:37 AM Report

Real unemployment is at 14-15% and two on this panel agree.

Why can't we really measure this?

In the age of supercomputers and supercolliders we can not measure unemployment?

Social Security collects the tax on workers, can't they count who is paying and who has dropped off the roles?

Something . . . ?

SharkswithfrikingLazers  03/21/2012 02:14 AM Report

John Mack spoke about this.

Economist Yasheng Huang compares China to India, and asks how China's authoritarian rule contributed to its astonishing economic growth -- leading to a big question: Is democracy actually holding India back? Huang's answer may surprise you.

http://www.ted.com/speakers/yasheng_huang.html

SharkswithfrikingLazers  03/21/2012 02:09 AM Report

Yes the social tension issues are huge—pollution and how people are treated.

Not to mention the forced marriage suicides and the selling of organs of prisoners.

SharkswithfrikingLazers  03/21/2012 02:07 AM Report

Well said Zhang, the Chinese people do have a voice and it is Weibo (pronounced WAY-BOR).

So the Chinese government is not democratic but is much more constrained.

SharkswithfrikingLazers  03/21/2012 02:03 AM Report

'Nothing but respect for the Chinese government by the citizens.'

This is a true statement from the eyes of the customers of Yum Brands.

This is a false statement from the eyes of a consultant who looks at political risk.

Interesting panel indeed.

SharkswithfrikingLazers  03/21/2012 02:00 AM Report

Yes, when you are mostly a one trick pony and you run out your cheap thing--like cheap labor--you are in trouble. Your big car has the big engine but how will it take the curve.

So . . .

China moves to a market economy up to 2009 but then the crisis and the government puts money into state companies and state capitalism gets so much more powerful over private companies.

Hmm . . . capitalism and communism.

SharkswithfrikingLazers  03/21/2012 01:52 AM Report

It was said, from 300M going to 600M Chinese in the consuming class.

Run capitalists, run!

However, 300 million more folks at the oil teat may cause one, possibly two problems.

tabs  03/20/2012 05:24 PM Report

Now Comes Part 2:

In 9 AD Roman General Publius Quinctilius Varus crossed the Rhine River with 3 Roman Legions to help quell rebellious Germanic Tribesman. General Varus met his end in the Teutoburg Forest where he and his 3 Roman Legions were wiped out nearly to the man. Emperor Augustus from that time on wandered the halls of the Palatine at night exclaiming, "Varus Where are my Eagles?"

There is a special chapter in history where General Varus, George Armstrong Custer and Bruce Ismay of the White Star Line all hold court in infamy. Mr Mack and his friends on Wall Street are going to be included in that litany. For Mr Mack among others presided over financial corporations that precipitated what amounted to the biggest financial debacle in history. It was only by the quick thinking and action of Paulson, Geithner and Bernanke that pulled the world back from a Global collapse. Mr Mack is guilty of the sin of NOT REALISTICALLY ASSESING the RISK, that he was allowing his corporation to take. This was largely due to the fact that he only understood risk in the abstract and had never seen for himself the REAL consequencs of the risk that he was taking. There was a reason why the US and world did not suffer from a similar debacle from 1945 to 2008 and that was because the people who were in charge at the time had lived through the real consequences of risk taking. It was called the Great Depression, and it instilled the fear of God and thus prudence in them. This chapter of history has not yet been concluded, it is not yet certain that the events unleashed in 2008 will not bring the Global economy low as the problems created have morphed into being one of the monetary and fiscal policy of the nations of the world.

Further we are now to understand that the former hawker of CDO's and CDS's is now in the business of selling US Corporations to foreign based investors?

One wonders if the wearing of some sort of Scarlet Letter might be appropriate for Mr Mack?

tabs  03/20/2012 04:36 PM Report

One is absolutely sure that the Chinese leadership was appreciative of this Round table and their conclusion that China has problems. The are glad to be so informed. However their wish was that some solutions were suggested instead.

vongleichent  03/20/2012 02:34 PM Report

Great round up. I love how we get to hear only from the best minds on the various topics.

REMant  03/20/2012 12:18 PM Report

IMHO inflation is causing Chinese wages to rise, and increasing wealth disparity there. This is in large part the result of continuing to mkt to the West in the face of their monetary policies, which are in effect a tariff. Tho I have recently read that stocks are considered undervalued. It was only a generation ago that pollution was nightly news in both the US and Europe.