The six Náufragos
by Peter Schiff - President of Euro Pacific Capital, Inc.

In one of his most recent comments, Stephen Roach of Morgan Stanley, perhaps the only economist of Wall Street understands that at least in part the economic distress that is loom, regretted once again that a "co-dependent global economy can not live without over-consumption of Americans. " This reflects the popular delusion that the Americans are doing that as a favor to the world to consume the fruits of their labor.

The world does not depend on the consumption of more Americans than the medieval slaves depended on the consumption of their lords, who typically took 25% of what they produce. What would have been disastrous for the servants if their not you ask this tribute. Think of all the unemployment that the slaves would have suffered if they had not work so hard for the benefit of their lords. What have they done with all the extra free time?

According to economists of the modern day, if you decide to increase what they take, say to 35%, this would have been the equivalent of an economic boom for the servants, which would then have more work guaranteed. It is a pity that the slaves had no economic advisers or central bankers to encourage such progressive policies!

I have written about this lately (see my previous comments entitled "CNBC Redefines the Word 'Sacrifice'," 10/Fev/2005 and "The U.S. is Not a Special Case, Just an Extreme One," 18/Jan/2005). Both articles are archived in the comments section of my website, in www.europac.net / archives.asp. However, I would put the ridiculous assumption that the world benefits from the excess consumption of America and has something to fear from its termination in order to rest once and for all. Consider the following analogy.

Suppose that six Náufragos are found abandoned on a desert island, five Asians and one American. Moreover, suppose the Náufragos decide to divide the workload between them as follows: (for the sake of simplicity, the only desire of Náufragos is to satisfy the hunger) Asia is a gamekeeper, another fisheries and a third of discover vegetation. A fourth is responsible for preparing the food, while the fifth is given the task of collecting firewood to light the fire. The American is given the task of eating.

So, on our island five Asians work all day to feed an American, who spends his day to tan on the beach. He is equivalent to that employed in the service sector, operating a tanning salon in that none of the Asians on the island uses. At the end of the day, the five Asians showed a banquet carefully prepared for the U.S., which sits at the head of a special table, built by the Asians specifically for this purpose.

Realizing that subsequent banquets only come if the Asians were living to provide them, it gives them only a few crumbs from his table to sustain its work the following day.

Economists say the modern day that this American is the only engine of growth to drive the economy of the island and that, without his voracious appetite, the Asians there are unemployed. The reality, of course, is that the best thing the Asians could do to improve their destinations would be voting for the American withdrawal from the island. Without the U.S. to consume their food would be a bit more willing to eat themselves.

Alternatively, they could spend less time on tasks related to its food, spending the extra time to more leisure or to meet other needs, which previously were not met because much of their scarce resources were dedicated to feeding the American.

Now, some of you are thinking that this analogy is biased because the economy of the real world the Americans pay for their food, so that the Asians in the real world that provide meals receive value in exchange for their efforts. OK, let's assume that the American on our island pays for their food the same way as in the real world the Americans pay for their, shop issuing promissory (IOUs). Let's assume that at the end of the meal the Asian American to submit an account, which he paid through the issuance of promissory who want to represent future payments of food.

However, all Náufragos know that the promissory can never be recovered, as America did not have food or the means or the intention to provide something in the future. But the Asians accept them anyway, and each night add them to piles of promissory collected in previous days. Are Asians in a better position as a result of this accumulation? Are they less hungry? No, of course.

Now let's assume that another castaway Asian nothing to the island, and assumes the role of central banker. From there, every day the central banker charges imposed on other Asian island's confiscating a portion of the crumbs of food that the American throw them of their table. The central banker then agree to return the pieces to other Asian every day, in exchange for the daily accumulation of the same notes the American, less a small percentage for itself, because the central banker also has to eat.

Does the existence of a central banker change anything? Is that Asians have something more to eat because their own central banker to return a portion of the food they had taken? Do the promissory the U.S. has some value because most can now be exchanged this way? No, of course.

Well, if it makes sense for the six alleged support an alleged Asian American, it makes no sense to billions of Asian real-world pay millions of Americans of the real world. The fact that they do so in exchange for promissory worthless in any way alter this reality.

It is not a discussion that in the short term by allowing the U.S. dollar will collapse (as it dumped millions of Americans out of the island), there will be some temporary disruption to the Asian economies. Of course, there will be some initial losers, particularly among those Asians who currently take advantage of this situation. However, these gains occur only at the expense of much greater losses suffered by the wider Asian population.

Ultimately, the cessation of the excessive consumption of America - which is a burden that the Asians now have to shoulder and not a benefit to make you enjoy - will be the best thing that could happen to the people of Asia. Like the slaves to be freed from their masters, their scarce resources will be finally released in order to meet their own needs and desires, and their standards up accordingly. Moreover, since their savings were available to finance additional investments in capital, instead of being lost by American consumers, then onwards their future standards of living would rise much faster.

Unfortunately for the Americans, being kicked out of Asia means that just the joy of the train and have to go back to work. In simple terms, this means more fish and hunt and eat much less.
29/Mar/05

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