The Politics/Religion/Conspiracies Deathmatch Thread

[The Dunster]

I only have undergraduate textbook knowledge on International Trade Theory so don't take anything I say as being how things actually work in the real world. I've tutored in the subject but never lectured or written a peer reviewed paper on the subject.

ToT is the international exchange ratio - it tells us how many of one good will exchange for another good in the world economy.
The price of exports divided by the price of imports is called the "commodity terms of trade".
IF you multiply the commodity terms of trade by the quantity of exports you get the "income terms of trade"
The domestic exchange ratio tells us how many of one good will exchange for another good in a different country.

Having a poor terms of trade is bad because it means you are at a relative disadvantage to other nations when it comes to producing goods.

If you read up on absolute and comparative advantage it might make more sense to you. Briefly,

Comparative advantage measures what a country can do best relative to another country or relative to the rest of the world. So assume Australia needs 5 inputs to produce wheat and ten inputs to produce textiles. Assume NZ requires 10 and 30 inputs respectively to make wheat and textiles - We then would say that Australia has a comparative advantage in producing textiles because Australia finds it twice as hard to produce textiles and NZ finds it 3 times as hard [Domestic exchange ratio].

With respect to Absolute Advantage -the example above tells us that Australia has an absolute advantage in both commodities because it can produce either commodity with fewer inputs than NZ.

This is very simple though and their is a mass of research and evidence showing that it's nowhere near as simple for reasons that are beyond my comprehension to do with how peoples decisions are rarely rational and how tastes and preferences are not universal

I don't know anything about trading or hedge funds - Mike Norman is a successful trader in NY and a good guy with a website you could check out.

https://www.pitbulleconomics.com/videos/