BF2S Forums GM is getting another bailout

JohnG@lt wrote:

FEOS wrote:

Ummm GMAC =/= GM, fellas.

GM (the car company) is about to start paying back part of its bailout money...sort of.

GMAC (the financing company) is the one getting a bailout.

It's the same company under the same umbrella corporation.

JohnG@lt wrote:

National debt is very important. The balance of trade is not.

Dilbert_X wrote:

JohnG@lt wrote:

National debt is very important. The balance of trade is not.

So the national debt is the govt debt, cumulative balance of trade deficit is the debt of the nation.
I would have thought they were comparable.

Last edited by JohnG@lt (2009-11-17 15:17:49)

Mercantilism is an economic theory that holds the prosperity of a nation is dependent upon its supply of capital, and that the global volume of international trade is "unchangeable." Economic assets or capital, are represented by bullion (gold, silver, and trade value) held by the state, which is best increased through a positive balance of trade with other nations (exports minus imports). Mercantilism suggests that the ruling government should advance these goals by playing a protectionist role in the economy; by encouraging exports and discouraging imports, notably through the use of tariffs and subsidies.

Criticisms
Adam Smith and David Hume are considered to be the founding fathers of anti-mercantilist thought. A number of scholars found important flaws with mercantilism long before Adam Smith developed an ideology that could fully replace it. Critics like Hume, Dudley North, and John Locke undermined much of mercantilism, and it steadily lost favor during the 18th century. In 1690, John Locke made perfectly clear that prices vary in proportion to the quantity of money, but in general, the mercantilists did not put this together[citation needed]. Mercantilists failed to understand the notions of absolute advantage and comparative advantage (although this idea was only fully fleshed out in 1817 by David Ricardo) and the benefits of trade[citation needed]. For instance, suppose Portugal was a more efficient producer of both wine and cloth than England, yet in England it was relatively cheaper to produce cloth compared to wine. Thus if Portugal specialized in wine and England in cloth, both states would end up better off if they traded. This is an example of the reciprocal benefits of trade due to a comparative advantage. In modern economic theory, trade is not a zero-sum game of cutthroat competition because both sides can benefit.

Hume famously noted the impossibility of the mercantilists' goal of a constant positive balance of trade[citation needed]. As bullion flowed into one country, the supply would increase and the value of bullion in that state would steadily decline relative to other goods. Conversely, in the state exporting bullion, its value would slowly rise. Eventually it would no longer be cost-effective to export goods from the high-price country to the low-price country, and the balance of trade would reverse itself. Mercantilists fundamentally misunderstood this, long arguing that an increase in the money supply simply meant that everyone gets richer.[22]

The importance placed on bullion was also a central target, even if many mercantilists had themselves begun to de-emphasize the importance of gold and silver. Adam Smith noted at the core of the mercantile system was the "popular folly of confusing wealth with money," bullion was just the same as any other commodity, and there was no reason to give it special treatment.[23] More recently, scholars have discounted the accuracy of this critique. They believe Mun and Misselden were not making this mistake in the 1620s, and point to their followers Child and Davenant, who, in 1699, wrote: "Gold and Silver are indeed the Measure of Trade, but that the Spring and Original of it, in all nations is the Natural or Artificial Product of the Country; that is to say, what this Land or what this Labour and Industry Produces."[24] The critique that mercantilism was a form of rent-seeking has also seen criticism, as scholars such Jacob Viner in the 1930s point out that merchant mercantilists such as Mun understood that they would not gain by higher prices for English wares abroad.[25]

The first school to completely reject mercantilism was the physiocrats, who developed their theories in France. Their theories also had several important problems, and the replacement of mercantilism did not come until Adam Smith published The Wealth of Nations in 1776. This book outlines the basics of what is today known as classical economics. Smith spends a considerable portion of the book rebutting the arguments of the mercantilists, though often these are simplified or exaggerated versions of mercantilist thought.[26]

Scholars are also divided over the cause of mercantilism's end. Those who believe the theory was simply an error hold that its replacement was inevitable as soon as Smith's more accurate ideas were unveiled. Those who feel that mercantilism was rent seeking hold that it ended only when major power shifts occurred. In Britain, mercantilism faded as the Parliament gained the monarch's power to grant monopolies. While the wealthy capitalists who controlled the House of Commons benefited from these monopolies, Parliament found it difficult to implement them because of the high cost of group decision making.[27]

Mercantilist regulations were steadily removed over the course of the Eighteenth Century in Britain, and during the 19th century the British government fully embraced free trade and Smith's laissez-faire economics. On the continent, the process was somewhat different. In France economic control remained in the hands of the royal family and mercantilism continued until the French Revolution. In Germany mercantilism remained an important ideology in the 19th and early 20th centuries, when the historical school of economics was paramount.

rdx-fx wrote:

DrunkFace wrote:

rdx-fx wrote:

Every single man, woman and child in the USA has now contributed about $206 each to GM.  ($62B / $300M)

Not sure where you learnt maths. But...
12.5 + 5.6 does not equal 62.

My math is fine.

The original post, towards the end, stated "The taxpayers’ commitment to GM, including the previous two GMAC bailouts, already stands at $62 billion.".  Erring on the side of the lesser figure, in case the $62B already figured in the additional $5.6, I used 'just' the $62B.

So, where was it that you learned your reading comprehension and spelling?

Dilbert_X wrote:

JohnG@lt wrote:

National debt is very important. The balance of trade is not.

So the national debt is the govt debt, cumulative balance of trade deficit is the debt of the nation.
I would have thought they were comparable.

JohnG@lt wrote:

All a negative balance of trade means is that we import more goods than we produce export.

The national debt is nothing more than money owed by our government. The cause of it is extremely simple. The government spends more money than it receives in tax receipts. It is caused by absolutely nothing else.

Dilbert_X wrote:

But as I see it if you maintain a trade deficit you're steadily selling off your country.
The 'inward investment' is just people buying your assets instead of your goods.

I don't claim to understand non-mercantilist theory.
Either I haven't spent enough time on it or its another naked emperor.