International Transfers of Wealth

2. International Transfers of Wealth What is Dr. S driving at in this chapter?

3. U.S. exports, 2012 • $2.2 trillion exports • $2.7 trillion imports • $540 billion deficit • Top export markets: Canada, Mexico, China

4. Top U.S. exports?

5. Top U.S. exports? • Machines, engines • Electronics • Oil, fuels • Vehicles • Aircraft • Medical, technical equipment • Gems, precious metals

7. How does wealth move between nation?

9. How does wealth move between nation? • Direct investment in businesses

10. How does wealth move between nation? • Direct investment in businesses • Deposits in banks

11. How does wealth move between nation? • Direct investment in businesses • Deposits in banks • Purchase of bonds

12. How does wealth move between nation? • Direct investment in businesses • Deposits in banks • Purchase of bonds • Remittances from immigrants

13. How does wealth move between nation? • Direct investment in businesses • Deposits in banks • Purchase of bonds • Remittances from immigrants • Imperialism

14. How does wealth move between nation? • Direct investment in businesses • Deposits in banks • Purchase of bonds • Remittances from immigrants • Imperialism • Foreign aid

15. Dr. S Opines: “When it comes to international trade and international transfers of wealth, things are relatively straightforward but the words are often slippery and misleading…”

16. International investments • Why do rich countries invest in other rich countries?

17. International investments • Why do rich countries invest in other rich countries? • Our old friends property rights and framework of laws

18. International investments • Why do rich countries invest in other rich countries? • Our old friends property rights and framework of laws • Poor nations are poor for a reason

19. International investments • Why do rich countries invest in other rich countries? • Our old friends property rights and framework of laws • Poor nations are poor for a reason • Danger that due to corruption, unrest or ‘nationalization,’ you won’t get your money back

20. International investments • Remember the least corrupt nations?

21. International investments • Remember the least corrupt nations? • Denmark, Finland, New Zealand, Singapore, Sweden

22. International investments • Remember the least corrupt nations? • Denmark, Finland, New Zealand, Singapore, Sweden • And the most corrupt?

23. International investments • Remember the least corrupt nations? • Denmark, Finland, New Zealand, Singapore, Sweden • And the most corrupt? • North Korea, Somalia, Afghanistan, Sudan, Myanmar

24. International investments • Nationalization: confiscation of privately owned business by a government…e.g., Venezuela, Cuba, Argentina

25. Cuba: king of the nationalizers • Cuba expropriated all private businesses after 1959 communist revolution • Paid nothing to property owners • Extended even down to street vendors

28. International investments • Nationalization: confiscation of privately owned business by a government…e.g., Venezuela, Cuba, Argentina • Were GM, Chrysler and Citi nationalized?

29. Why does Dr. S say ‘don’t worry’ about trade deficits?

30. Why does Dr. S say ‘don’t worry’ about trade deficits? • International trade numbers don’t include services…only physical goods that move across borders

31. Why does Dr. S say ‘don’t worry’ about trade deficits? • International trade numbers don’t include services…only physical goods that move across borders • U.S. is a service-based economy

32. Why does Dr. S say ‘don’t worry’ about trade deficits? • International trade numbers don’t include services…only physical goods that move across borders • U.S. is a service-based economy • Trade ‘deficit’ numbers can be misleading

33. Why does Dr. S say ‘don’t worry’ about trade deficits? • International trade numbers don’t include services…only physical goods that move across borders • U.S. is a service-based economy • Trade ‘deficit’ numbers can be misleading • Nigeria, desperately poor, has a ‘trade surplus’

34. Trade Deficits • In fact, Dr. S contends that by investing in U.S., foreigners create more wealth here… it’s not a ‘zero sum’ game

35. Trade Deficits • In fact, Dr. S contends that by investing in U.S., foreigners create more wealth here… it’s not a ‘zero sum’ game • For most of its history, the U.S. has been a debtor nation, and one of the most prosperous in the world

36. Other ways wealth gets transferred

37. Bank deposits

38. Bank deposits • Swiss hold an estimated $1.7 trillion belonging to foreigners

39. Bank deposits • Swiss hold an estimated $1.7 trillion belonging to foreigners • U.S. banks estimated to hold more than $3 trillion in foreign deposits

40. Bank deposits • Swiss hold an estimated $1.7 trillion belonging to foreigners • U.S. banks estimated to hold more than $3 trillion in foreign deposits • What do banks do with that $? • Fractional reserve banking… it builds wealth

41. Sale of bonds

42. Sale of bonds • What is the U.S. debt?

43. Sale of bonds • What is the U.S. debt? $16.8 trillion

44. Sale of bonds • What is the U.S. debt? $16.8 trillion • Most nations regularly sell bonds to finances operations and capital projects

45. Sale of bonds • What is the U.S. debt? $16.8 trillion • Most nations regularly sell bonds to finances operations and capital projects • It’s a global business, with most being bought by foreigners

46. Sale of bonds • What is the U.S. debt? $16.8 trillion • Most nations regularly sell bonds to finances operations and capital projects • It’s a global business, with most being bought by foreigners • Mostly buy bonds of developed nations

48. Remittances • Remittances: money sent by foreign workers to their home countries