[OPE-L:3795] Re: Predicting market prices

Paul Cockshot (wpc@cs.strath.ac.uk)
Mon, 9 Dec 1996 02:11:57 -0800 (PST)

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>To my previous comment and question:
>Paul C responded in [OPE-L:3787]:
>> You can start by looking at the trade surplus/deficit.
>To which I will respond now with similar brevity:
>Then what?
>In solidarity,

Assume that total exports = $100 billion, and total imports $120 billion
so country absorbs $20 billion surplus from rest of world.

This is easily enough dealt with when one uses the national income
statistics, which enable you to tell if the surplus comes in in
the form of loans or in the form of propertyincome from other
countries. In the I/O tables it is harder to deal with since
these dont provide details of financial flows.
The i/o table has a row showing import content of each
product category and a column showing how much of each
category is exported.

I/o tables deal solely with commodity flows, so the method
that I use is to value each $1 of imports in terms of the
labour content of $1 of exports ( derived from the
exports column). The value is then the amount of domestic
labour that has to be expended to obtain the product,
either directly, or indirectly via trade.

I think that it would be wrong to value each $1 of imports as
containing $0.83 as would be implied by the trade imbalance if
we assumed that the $120 billion were obtained by exporting
$100 billion. They were not. There would be adjustments in the
capital accounts to compensate for the missing $20billion.

If ones concern is relative values, the trade surplus or
deficit is not relevant. If ones concern is over whether a
country is an exporter or importer of surplus then the
trade surplus is relevent.
Paul Cockshott