Worried about the dollar? Worried about jobs? Worried about national security? Well then, you should feel very very good about a Chinese company buying Smithfield foods. Counterintuitive? Perhaps for some, but Im hoping not so for my regular readers.
Heres a little refresher course:
The dollar: China goes to great lengths to compete for our businessmaking us wealthier in the process (we enjoy more of lifes amenities as the world competes on price for our business)because they love U.S. dollars. They love U.S. dollars because we apparently yet produce goods (like hogs) and services they deem valuable. The Smithfield Foods acquisition proves it. Thank goodness we have more than just federal debt to offer the world.
Jobs: Trust me, Chinese management and workers are not about to descend upon tiny Smithfield, Virginia. Shaunghui bought Smithfield Foods to exploit, and export (or import), its business model (along with its hogs). But were not talking merely the preservation of Smithfield jobs, were talking $4.7 billion U.S. dollars (a few of them you sent to China to buy the monitor, tablet, or cell phone youre staring at right now*) flowing back to the U.S. You think Smithfields largest shareholders might be looking to grow other successful enterprises with their proceeds creating jobs in the process? Yyyyep!
(So the next time you cringe before buying an item made in China, remember all those U.S. jobs you helped create when Shaunghui bought Smithfield Foods.)
Worried about national security? This ones the easiest: Nobody ever shoots their customer (or supplier). Or, as an intuitive individual (most often ascribed to Frederic Bastiat) once said:
If goods dont cross borders, soldiers will.
Today's post was inspired by This CNBC video on the benefits of trade bestowed onto California home-sellers.
Here's economist Scott Sumner on the same thing going on in Australia:
Chinese are snapping up a lot of properties in Sydney. Aussie labor is employed building houses. The houses are traded for Chinese goods. The only special feature is that the houses don't physically leave Australia. Chalk up one more reason why current account deficits are an utterly meaningless number.