| Moderated by: Joe Kelley | ||
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Joe Kelley Administrator
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http://www.lewrockwell.com/orig6/sandstrom6.html
Purchasing Power is a concept that defines the advantage of trade. Strip away all the bullshit, the volumes upon volumes of words written in the effort to define trade, economy, industry, agriculture, commerce, and even Law, strip all that away and find the common denominator. Why trade at all? Does one wish to increase Purchasing Power? It is the same question. Example: 150 Billion USD flows from consumers of food to producers of food. Now the producers of food 'own' 150 Billion USD. Those producers now have 150 Billion USD that increases Purchasing Power for the producers of food. 150 Billion USD is then used to purchase something. Perhaps that Purchasing Power is used to purchase advanced farming equipment. Suppose that all of that 150 Billion returns to the producers of farm equipment. Note: The producers of food fire all their workers since they sent all that Purchasing Power out of the country. The producers of food automate farming. The producers of food now produce food at lower costs. Too bad for the farm worker? Hold on. 150 Billion returns to the producers of farm equipment increasing Purchasing Power of the farm equipment industry. That industry then moves a factory to a location that has a huge supply of workers who do not have employment. 150 Billion finds the former producers of food who need work. Purchasing Power increases for all those involved in producing farm equipment, in the former land of unemployment; in the former land of hand produced food supplies. The new farm equipment producers need raw materials. That 150 Billion USD is then sent to the producers of raw materials. The producers of raw materials currently utilize human labor in extraction of raw materials. The raw material producers now have new Purchasing Power i.e. 150 Billion USD. The producers of raw materials send the 150 Billion USD to the producers of mining equipment. Note: The producers of raw materials fire all the workers and begin automating the process of extracting raw materials. Raw materials then cost less and those cost savings also increase Purchasing Power. Too bad for the miners? Hold on. The producers of mining equipment receive 150 Billion USD, increasing their Purchasing Power, and find “out of work” miners to work at making mining equipment. The producers of mining equipment construct a factory near the mines. The 150 Billion USD floods the local economy with “new construction” jobs, at first, and new factory jobs later. Automated factor jobs Few workers to fill those jobs leaving more workers for more jobs High paying jobs Reduced costs of mining equipment Increased purchasing power Is this too confusing? Recap (so far): 150 Billion USD paid to farmers. Farmers pay 150 Billion USD for farm equipment to automate farming and fire workers. Food costs lower. Farm equipment manufacturers send 150 Billion USD to unemployed workers to build automated factories. Farm equipment costs lower. Automated factories pay 150 Billion USD for raw materials to automate mining and fire workers. Raw material costs lower. Automated miners pay 150 Billion USD for mining equipment. Mining equipment manufacturers pay 150 Billion USD to unemployed workers for automated mining equipment factories. Mining equipment costs lower. Food prices lower. Farm equipment prices lower. Raw material prices lower. Mining equipment prices lower. That is Trade in action so far. Each step of the way, as the 150 Billion USD "Purchasing Power" moves along in the progress of trade, each step lowers the cost of production due to automation and employment. Automation and employment Automation lowers costs of production. Unemployment frees up workers for new construction, new industry, and human prosperity. Employment inspires constructive participation in trade and creates consumers of food, farm equipment, raw materials, and mining equipment. The trade cycle, once free, does not end. Lower costs of food, farming equipment, raw materials, and mining equipment increase Purchasing Power for anything desired by those involved in that trading cycle. Example: Previous to Free Trade (actual not political = true not false): Food cost = x Farming equipment = x Raw materials = x Mining equipment = x After Free Trade = 150 Billion USD Food cost = x-y Farming equipment = x-y Raw materials = x-y Mining equipment = x-y 150 Billion USD, the investment in Free Trade, is accomplished simply by allowing people to buy food at lower costs from a country currently producing lower cost food, subtracting that 150 Billion USD, IS, or is equal to y. Why trade at all? More Purchasing Power Why not? Because Power will go from those who have it and that flow of Power will go to those who have not. Who has the power? Before pointing the finger; look in the mirror. This:  Point the finger while looking in the mirror. Not this:  Ask not what the world does to you. Ask what you do to the world. |
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