5f7a6604   
   27437ecd   
   XPost: soc.culture.baltics, soc-culture.czecho-slovak, soc.culture.russian   
   From: ddfr@daviddfriedman.nopsam.com   
      
   In article   
   ,   
    holman@mappi.helsinki.fi (Eugene Holman) wrote:   
      
   > In article   
   > , David   
   > Friedman  wrote:   
      
      
   > > > Finnish-Soviet trade was based on BARTER and clearing accounts. Barter   
   > > > means that you give a product or service a stipulated monetary value that   
   > > > is recorded in a clearing account. At that time a barrel of oil might   
   have   
   > > > cost $15 on the world market, and the USSR supplied to Finland at a   
   > > > discount, say $13.50. The Finns used the barrale of oil to make plastic   
   > > > bags, one barrel making 500 bags, the fair value of which would have been   
   > > > say $0.10/bag.   
   > >   
   > > By "the fair value" do you mean the value the Finns could have sold   
   > > those bags for on the world market?   
   >   
   > Yes.   
   >   
   > > > Thus the amount made from a barrel of oil was worth $50.   
   > > > The Finns took an additional 50% profit, thus we get the clearing price   
   > > > for the bags being $75.   
   > >   
   > > And why, in your view, were the Soviets willing to exchange a barrel of   
   > > oil  for $13.50/$.15 = 90 bags, when they could have sold the oil on the   
   > > world market for $15, bought the bags on the world market for $9, and   
   > > had $6 left over to buy other things? On your account, the Soviets would   
   > > have done far better for themselves trading on the world market.   
      
      
   > Secondly, Soviet trade officials appreciated long-term stability over   
   > short-term profitabiity. Setting prices for a period of one or five years   
   > allowed for a kind of stability and long-term planning that would not have   
   > been possible within a fraemwork where market prices fluctuated on a daily   
   > or weekly basis. Both the Finns and the Soviets thought that the   
   > predictability and ideological browny points that this system seemingly   
   > ensured was worth the price of one side taking short-term economic advange   
   > over the other.   
      
   That final point would explain why they made long term agreements at   
   fixed prices, but not why those prices were consistently unfavorable to   
   the soviets.   
      
   --   
    http://www.daviddfriedman.com/ http://daviddfriedman.blogspot.com/   
    Author of _Harald_, a fantasy without magic.   
    Published by Baen, in bookstores now   
      
   --- SoupGate-Win32 v1.05   
    * Origin: you cannot sedate... all the things you hate (1:229/2)