Duke

You've probably heard the jokes about American manufactured consumer items. Higher prices for less quality. I can literally rip an American Apparel shirt down the back when I put it on. But yes, every developing country you go to you'll find fly by night, short-term thinking operations. That's par for the course in most developing countries you go to. China separates itself from the rest to a certain degree in the last 20 years and that's why manufacturing has grown there. Wages are getting too high to make clothes now though. The Korean people I know have factories in places like Indonesia or (increasingly) Bangladesh if they make clothes. That's why Coach has recently increased their prices in the last year as wages have been rising in the manufacturing areas of China.

I disagree. If Western countries were less regulated and unionized, both the West and China would be vastly richer than they are today.

I do not know how to decipher that sentence. The "average" Chinese citizen is vastly richer today than he was in 1991. Also, the median American has not gotten richer since 1991, although maybe the average American has. Take a look at the numbers for significantly economically reformed megacities with FTZ's like Shanghai http://en.wikipedia.org/wiki/List_of_Chinese_administrative_divisions_by_GDP_per_capita#Historical_GDP_per_capita_.28PPP.29 China is enormous and does not contain one economic system. This is hard for outsiders to understand, because many people come from places where there is national regularity in the economic system. China is best looked at like we look at whole continents--it is a massive land mass with over a billion people, many cities of over 100 million, many administrative regions with vastly different economic systems, many cultures, races, languages, etc. Imagine if Obama set up a Hong Kong in New Orleans, and you can understand the regional differences in government. "China" has not really developed massively in the last 20 years. Coastal cities with free trade zones have developed massively in the last 20 years. The rural interior is run by a nearly identical economic system as it was 20 years ago--take Tibet for example. The government has redistributed money from some areas to help improve transportation networks and infrastructure in the impoverished areas, but those areas have not seen significant home grown growth. Note that it is not a simple as just the interior vs the exterior though, the province of Inner Mongolia has been undergoing a commodities boom. Interior areas like Chongqing have loosened industrial and trade regulations. If you go to China, you'll see what a free market economist would expect to see: relative prosperity in the freer areas and less prosperity in the more regulated areas.

China grew because the theory itself is correct--more freedom equals more prosperity. You may want to build up your knowledge on the economic history China and its economic reforms before you question why the theory itself is wrong. Note that having a party in power with "communist" in their name does not influence economic growth; what influences economic growth are the laws and economic regulations that such a party would put in place. The majority of China's prosperity is derived from the areas in which people have been set free to a large degree. Much of the country has not undergone economic reform, but the illegal migration of millions of people to these more free areas is what is driving economic growth. If the Hukou registration system is abolished, expect a boom in China that will far surpass the last 20 years as hundreds of millions of people will crowd themselves into coastal FTZ's.

I don't think there will be a difference really. The most hardcore, right-wing Republican in the senate has a budget proposal that will only reduce deficit spending by 500 billion. That means that the US will still go in the hole at a trillion per year, not counting the entitlements that both Republicans and Democrats are afraid to touch. Not counting all the municipalities and states that are set to go bankrupt. And it's unlikely Rand Paul's proposal will even be passed. In fact, I think most of the damage has already been done. There's going to be a recession and moderate inflation whether we like it or not. The only thing political change could do is prevent us from having high inflation rather than moderate inflation, if, in the one in a million chance we could get the unelected Federal reserve to stop injecting money into the economy. But more than likely with the debt spiraling out of control there will be no choice but for them to start monetizing it. I doubt they would default on it. If we follow Austrian business cycle theory, then we know that we need the recession. We have two decades of cheap money coming out of the Fed, so obviously there has been malinvestment on an enormous scale. There really is no getting around that problem.

Enlightening as usual.

Thanks for the tip Ray. I'll go and study economics. Congratulations to you and your wife, I hope you had a great meal.

Option 1: You invest your money in foreign stocks, precious metals and commodities, at get it out of the US currency. You diversify your income streams to include payments from different currencies. You end up weathering the inflationary depression with a good standard of living. In fact, you can buy up more cheap American companies after the collapse. Option 2: To be a moral patriot, you continue earning solely in the US currency. Instead of running from the enemy like a scared coward and buying Asian equities and dividend yielding companies that produce natural resources, you buy US treasury bills and and hold US dollars. Outcome: You are poor when the US government turns your savings into nothing. A Chinese businessman buys your house from you since you need money.

You buy futures options on the GLD ETF? Sorry I don't know that much about options. Is there any way for a more conservative investor who is sure that gold and precious will go up in the long term hedge against short term downturns? That's a good idea with your mortgage, inflation will favour debtors. I will look into getting some kind of locked-in loan but I don't want a house and I am young and starting out so I don't know how easy it will be. But I think housing prices are still overvalued. The government might phase out Fannie Mae and Freddy Mac over the next 7 years which should help lower artificially high home prices.

Oh, you're comparing Europe to the US. Europe is in bad shape too but I think ultimately the Euro will be more sound than the US dollar. I eat at an all you can eat beef pork seafood and sushi buffet for $10 in Korea. (Last year it was $9 though). The question is whether someone would want to move to the US and earn the US currency, when 1) The US recession hasn't been allowed to come and one could end up losing their job 2) There is no way of paying off the largest debt in the history of the world other than by printing the US dollars that you would be earning.

So if there is an economic crisis that is largely isolated to the US and the US currency, you want to be earning what will be a worthless currency?

First question, why would someone want to be in the US of all places? And as for TIPS, aren't they tied to the government manufactured CPI? I find it hard to believe that every place in existence is experiencing price rises except for the US, when the US has been printing like mad. If you look at every commodity out there, they've gone up dramatically. And prices at the stores seem to have gone up or the packaging has gotten smaller. I find it hard to trust that government statistic. It seems about as truthful as the creative fantasy novel known as the Financial Crisis Inquiry Report.

Different people have certain percentage per year definitions of hyperinflation so I just avoided using that term. I'm just wondering what Objectivists are going to be doing to prepare for increases in the cost of goods due to all the money creation that has gone on since 2008. Also, it looks like QE2 could be extended beyond what was originally predicted, and I have no doubt in my mind that there will be a QE3 (and more) unless the government balances the budget (which won't happen). Somebody has to buy up the debt, and it's not private equity that's doing it anymore. In fact, the Fed is set to surpass both China and Japan combined as a US treasury holder this year. A lot of people feel that QE2 is just a veiled monetization of the debt because buyers and drying up.

I'm interested in hearing how Objectivists out there are preparing for inflation, if they are doing so. If not, why not?

What do you mean by the first statement, "If one pushes their muscles to their limits"?