Federal Reserve and Monetary Policy: Trade is Protectionism

Dallas's Federal Reserve Bank's President Fisher's speech is an indication that this president has know ideal what the US economic future is. He has this to offer the US citizen:

“I am convinced that India would not have gotten on the ball if it were not for the example of China. India has been growing at a 7 percent clip, though for a shorter time. It has some disadvantages that China does not suffer from—a lack of gender equality, an underdeveloped educational system for the masses and the lingering problem with castes. But it has some enormous advantages in addition to a colonial legacy of widespread use of English, foremost among them a respect for intellectual property and the rule of law.

When it comes to China and India, I ask you to think beyond the headlines—beyond the hype—and keep their burgeoning economic miracles in perspective. Measured in dollars, the economic output of China is roughly that of one U.S. mega-state, California. India’s economy is 20 percent smaller than that of Texas.

As fast as China and India are growing, these two countries have a long way to go before they overpower the United States, as some alarmists claim they will. We are a $12 trillion economy. Let’s do the math together. Pick a number of, say, 3 percent for real U.S. growth—well within our recent experience. Just to match the dollar value of our annual increase in production, China would have to grow 21 percent. India would have to grow 56 percent.
That said, it is true that they are growing like “gee whiz”—thanks, to a great extent, to U.S. consumers of goods and services. China’s exports to the United States have doubled since we inked our bilateral World Trade Organization deal and by 1,600 percent over the past 15 years. India has become a major information technology and business-processing center for U.S. companies, and jobs are shifting to Bangalore from Baltimore and to Delhi from Dallas.”

China is a ”COMMAND ECONOMY” not a free market economy. China also pegged its currency to the dollar to weaken it (~40% less). A command economy is an inefficient economy. In effect, it is a monopoly with respect to a free market. The pegged means that China can attract foreign investors because their investment dollar goes 40% further. China's GDP is not what threatens the US. It is the cheap labor.

His India crack just shows he has no ideal how much of the US economic future is pinned on IT. IT was suppose to be the saving pitch for the US economy now that manufacturing is fleeing into China.

CAFTA is a “free trade” agreement. In reality, its is an other labor arbitrage path, the off shoring of labor. See Neoclassical Theory. From a “global work force” point of view, trade (international trade) is protectionism. Trade maintains the GDP of a country. This is in direct opposition to labor arbitrage, which equilibrates GDP.