OT of an OT: Ethanol

[Will]

Renegade 13 said:
Actually, you should think about it in another way. Canada is better off exporting more, since we really don't need those resources, or else we obviously wouldn't be exporting them. On the other hand, the US obviously does need those very same resources, or else they wouldn't be buying them. Therefore, in a trade war, Canada has the advantage since there's more 'stuff' that the US needs that Canada has, and less stuff Canada needs that the US has. In other words, the US needs Canada more than Canada needs the US, giving us the advantage in a trade war. Then again, we shouldn't deceive ourselves into thinking either country would "win" a trade war. Both sides would lose, it's just a matter of to what extent. We're better off as trading allies, trading with each other rather than certain other places from overseas who may not ultimately have the best interests of either country at heart.

I say your reasoning here is invalid. Somolia has imports per capita far lower than either the US or Canada. By your reasoning, people in Somolia must really not need anything. Really! They like starving to death!

No, the reason the US imports more is because the US has a lot of very rich people, and they like to buy things, lots of things. Sometimes they never even use what they buy, or use them once but never again. They don't need these things, but they want them. Also, on the particular subject of imports from Canada (since we're talking about a trade deficit with Canada), I believe a large portion of that deficit is from timber and beef. While people in the US may enjoy their wood-finish interiors, printing out emails instead of reading on a screen, and their Big Macs and steak dinners, we in no way need them.



But yes, if all economic activity between the US and Canada stopped, it would hurt for both. Using a completely arbitrary example, and one that has absolutely no facts whatsoever to back it up, I would imagine it would be like what would happen if everyone in Texas suddenly decided they weren't going to buy or sell anything made outside of their state anymore. Both economies would take a pretty big hit. However, I would have to agree with Hunpecked here. If the same were to happen between the US and Canada, it would have a much worse impact on Canada, simply because it is the smaller economy.

Anyway, back to the topic of Ethanol... after looking a bit more into just how much gasoline the US consumes per annum, and how much ethanol an acre of land can currently yield, and how much an acre could theoretically yield... I don't think it could replace gasoline unless there are some major changes. Specifically, we would need the equivalent of a hybrid car for ethanol fuel and have them be the dominant type of personal vehicle. There would also need to be a decrease in single commuters and a corresponding increase of carpooling and mass transit usage. And even then, if all available land went towards production of ethanol, I'm not sure if it would entirely cover the needs of a still-growing population. Yes, it sort of worked in Brazil, but that included the domestic oil production, and the number of vehicles per capita is much much smaller, etc. It seems the best option is to use agricultural waste to produce ethanol to be used in blends with gasoline, to lower the usage of oil (and probably the price per unit of fuel, with the way things are going now), while pursuing more agressive conservation and "greener" energy production methods.

[Renegade 13]

Will said:
I say your reasoning here is invalid. Somolia has imports per capita far lower than either the US or Canada. By your reasoning, people in Somolia must really not need anything. Really! They like starving to death!

No, the reason the US imports more is because the US has a lot of very rich people, and they like to buy things, lots of things. Sometimes they never even use what they buy, or use them once but never again. They don't need these things, but they want them. Also, on the particular subject of imports from Canada (since we're talking about a trade deficit with Canada), I believe a large portion of that deficit is from timber and beef. While people in the US may enjoy their wood-finish interiors, printing out emails instead of reading on a screen, and their Big Macs and steak dinners, we in no way need them.



But yes, if all economic activity between the US and Canada stopped, it would hurt for both. Using a completely arbitrary example, and one that has absolutely no facts whatsoever to back it up, I would imagine it would be like what would happen if everyone in Texas suddenly decided they weren't going to buy or sell anything made outside of their state anymore. Both economies would take a pretty big hit. However, I would have to agree with Hunpecked here. If the same were to happen between the US and Canada, it would have a much worse impact on Canada, simply because it is the smaller economy.

As you may expect, I'll have to disagree here as well Seems I'm in a disagreeable state of mind right now

Your Somalia example is a poor example, since their domestic economy does not allow them to even meet the most basic needs of their people. They don't import much because they don't have the money to, not because they don't need to to meet their people's needs. Totally different situation than either Canada or the US.

Again, the idea that $100 Billion in trade deficits comes solely from the ultra-rich in the US is rather ridiculous. After all, Canada has it's ultra-rich as well and I'm sure they like their luxuries as much as their American counterparts. Not to mention it takes a lot of useless luxuries to equal $100 Billion in trade deficit! No, I believe the reason is more along the lines that your heavy industry down there, which you have far more than us of course (larger population and all that) doen't have the domestic supply of basic materials, materials that our mines, forests, farms and ranches have in abundance. Why else would you be importing them in such huge quantities? Also following your example of beef and lumber; perhaps you are correct, but only partly. Beef, sure it's somewhat of a luxury. After all, people could get by eating tofu and bread all day and supplementing with vitamins missed out on when not eating meat. But I'm sure they wouldn't like it! Like you said though, the States could get by fairly easily without our beef. Our lumber; yup, again you're partly right. You don't need wood-finished interiors or printed emails. But what else are you going to use for the floor joists in your house? Or the frame, or other such things. Construction is the major usage of Canadian softwoods in the US, and events such as the annual series of massive hurricanes you can expect every year makes the construction of thousands of replacement homes, not to mention all the repair that needs done, necessary. You need it.

I believe that, contrary to your belief, the mining industry is the largest exporter to the US from Canada, though forestry may be ahead slightly. Without our iron, our molybdenum, our copper, our metals of many varieties, your industry would grind to a near halt. It is not economical for countries to import metals from overseas; the huge weight:volume ratio makes it extremely costly, so in a trade war, all that heavy industry, in the American North-East especially, is going to hit a massive stumbling block.

I'm also not sure why you think that a trade war would have a bigger impact on Canada due to our smaller economy. As has already been demonstrated in this thread, the economies are roughly equal in terms of GDP per capita, average income, etc. Our economy is smaller because our population is nearly 10 times smaller! We don't need as large an economy as the US to support our population. Sure, when we could no longer export our minerals, our lumber, our farm products to the US, it would be a hit, a big hit. But Canada is working on establishing markets for our lumber and farm products in Asia, and is doing a good job of it so far. Our lumber could go overseas, and our beef already does. On the other hand, American beef is still fully banned in a lot of countries Canadian beef isn't (Japan comes to mind). We'd find alternate outlets for our surplusses. The States would have, I think, a harder time finding an alternate source of the raw resources that are imported from Canada.

In other words, I think Canada's economy would do all right. But at least we can agree that it wouldn't do either economy any favors!

[Renegade 13]

On the subject of Ethanol, I agree with your assessment Will. It may work as a supplement to gasoline, but I doubt it's up to the task of full replacement. For that, we need something else. Hopefully we can find that something else relatively soon, with the way fuel prices are going...

[Hunpecked]

Renegade: "Actually, you should think about it in another way. Canada is better off exporting more, since we really don't need those resources, or else we obviously wouldn't be exporting them."

Exactly. A great reason to export what you have lots of is to import what you don't have much of. Economics 101.

"On the other hand, the US obviously does need those very same resources, or else they wouldn't be buying them.'

Yup. We export dollars we have lots of and import all sorts of "stuff" we have less of.

"Therefore, in a trade war, Canada has the advantage since there's more 'stuff' that the US needs that Canada has, and less stuff Canada needs that the US has. In other words, the US needs Canada more than Canada needs the US, giving us the advantage in a trade war."

Canada depends on the US to buy 85% (!) of its total exports, which are worth about 36% of GDP. It gets some 59% of its imports from the US. The US gets 17% of its imports from Canada, which absorbs about 23% of US exports; all US exports are worth less than 10% of US GDP. The Canadian economy is 1/12 the size of America's. Everybody in the world wants to sell to the the USA (and Canada). It's less clear that the world, which happily maintains a trade surplus with Canada, would be willing to buy over six times what it already buys from Canada (Japan, Canada's second largest buyer, currently takes only 2% of Canadian exports). Let's get real here, folks.

"Then again, we shouldn't deceive ourselves into thinking either country would "win" a trade war."

Well of course. The juxtaposition of two world class economies along an extended border is a match made in heaven. The only way it could be better would be if Mexico had an economy as advanced as Canada's, which would make the US and Canada even richer.

BTW, the close integration of the two economies is yet another reason Renegade's initial claim is obviously wrong: the US economy couldn't be "in the crapper" without dragging the smaller Canadian economy down with it--an unfortunate side effect of an otherwise lucrative partnership.

"I'm forced to disagree with you here. It's a very foolish economic policy to borrow endlessly; it'll end up biting you in the rear end."

Renegade misunderstands me here. I don't advocate deficit spending; quite the opposite. I was just pointing out that an economy "in the crapper" can't support US-scale budget deficits, at least not at today's low-by-historical-standards interest rates. Continued deficits may well bring down the US economy in the future, but as we've seen from recent economic statistics, that hasn't happened yet.

"I also disagree that it takes a strong economy to support such huge deficits, since if the economy was truly strong, such borrowing wouldn't be necessary in the first place!"

Renegade is confusing politics with economics. Borrowing isn't "necessary" as he suggests, it's just a choice American politicians have made. They could just as well finance government spending through taxes, as Canada has since 1997, and take the political heat for it. If Canada's government chose to lower taxes tomorrow and finance 20% of its spending through borrowing, would the Canadian economy suddenly be "in the crapper?"

"It's not so much that the lenders have great confidence in the future economy of the country, it's that there such a huge collateral to secure it!"

The US government's only "collateral" is its promise to repay its bonds; creditors don't get the pink slip to an aircraft carrier or the deed to the White House. The Treasury can only repay those bonds if the economy provides enough revenue to do so. Now creditors can use these bonds to buy "collateral" anywhere in the world, but only if sellers are themselves willing to accept these bonds, i.e. if they're confident of repayment. If Brazil, for example, were to default on its foreign debt, would its creditors suddenly own Rio?

"Also, perceived as being great does not necessarily translate well into reality, as SJ mentioned."

In today's modern financial markets I'm sure there are a number of ways to make money "betting" against the US economy. No doubt SJ and Renegade have already done so. Right?

"However, I do think I'd rather be in charge of the Canadian economy than the American. I think it has better prospects."

I hope to God that nobody is ever "in charge" of either economy. It didn't work for the Soviet Union and it wouldn't work for either Canada or the US.

[Suicide Junkie]

If Canada's government chose to lower taxes tomorrow and finance 20% of its spending through borrowing, would the Canadian economy suddenly be "in the crapper?"

No, but I would call the country "going down the tubes"

Think of it this way:
Imagine how much lower taxes could be, if you didn't have to pay interest on your debt! Better yet, calculate it.

[Renegade 13]

What it boils down to is I'm not going to convince you, and you're (Thermodyne, Will, Hunpecked) not going to convince me. Might as well leave it at that. I'm sure everyone is getting tired of me rebutting, and you counter-rebutting and so on. Might as well stop....but don't view it as me conceeding your arguement, since I'm not

[Fyron]

Or, you know, reduce spending so the govt. doesn't have to borrow or raise taxes...

[capnq]

Tonight's episode of the CBS Evening News had a story about Brazil's ethanol program.

I don't have the bandwidth to doublecheck if that URL works; if it doesn't, go to CBS and search for "ethanol".

[Jack Simth]

I *think* This is the link you're looking for....

Might be a cookie issue, but it seems to work for me.

[Hunpecked]

Suicide Junkie: "Imagine how much lower taxes could be, if you didn't have to pay interest on your debt! Better yet, calculate it."

Once again: I don't like deficit spending. I'm just pointing out that deficits in and of themselves do not mean an economy is "in the crapper", especially when the economic data are screaming otherwise.