91d9b15a   
   XPost: soc.culture.baltics, soc.culture.czecho-slovak, soc.culture.russian   
   XPost: soc.culture.nordic   
   From: ddfr@daviddfriedman.nopsam.com   
      
   In article   
   ,   
    holman@mappi.helsinki.fi (Eugene Holman) wrote:   
      
   > In article <8k6fa45q7r59p3ok2amcn7ib5afrt6lb7q@4ax.com>, James A. Donald   
   >  wrote:   
   >   
   > > On Thu, 14 Aug 2008 21:36:26 +0300, Markku Grönroos   
   > > > No, that is not the point. He has been told by people who know about the   
   > > > Finno Soviet trade that what he says about it is baloney.   
   > >   
   > > Those people appeared to be commies, therefore liars.   
   >   
   > Do tell. Which participants in this discussion are commies?   
      
   I don't think any of the participants are communists, but my impression   
   is that your view of the world, and probably the views of some other   
   participants, have been substantially distorted by Marxist (perhaps also   
   pre-Marxist mercantilist) ideas.   
      
   > Even if they   
   > are, do you regard all commies as liars by default? The communist   
   > officials in Eastern Europe and thr Soviet Union were running a tremendous   
   > socio-economic experiment, unfortunately at a frightening cost in both   
   > human rights and money, to construct a more equitable and efficiant   
   > society. They were wrong, and they evetually conceded that they had   
   > failed. They were not just a bunch of thugs.   
      
   How do you know? By the time we are discussing, isn't it likely that the   
   people in power were mostly thugs, with a few surviving idealists? Being   
   a person in power in the USSR in the postwar period surely resulted in a   
   pleasanter life--better housing,a better car, better access to food and   
   medical care--than being an ordinary citizen. So why reject the   
   conjecture that most of the people in power were there for their own   
   interest, not because they wanted to construct a more equitable and   
   efficient society? Did any significant number of them choose to reject   
   the advantages--a much higher standard of living than the average   
   Russian got--out of a commitment to equality?   
      
   I'm curious, by the way, as to whether you would make a similar   
   judgement about the Nazis, or the Italian fascists, or other ugly   
   regimes that claimed noble objectives of one sort or another.   
      
   ...   
      
   > > I incorrectly asserted that Finns received rubles of doubtful value,   
   > > when in fact they received non interest bearing IOUs of doubtful value   
   > > - which error does not change the substance - that the Soviets were   
   > > thoroughly screwing the Finns.   
   >   
   > What is money but an IOU (a slang abbreviation for "I owe you")?   
      
   Fiat money isn't really an IOU, since the issuer isn't offering to   
   redeem it, even in the future. If I have a dollar in my wallet, what   
   does the issuer owe me?   
      
   > What is   
   > inflation but the longer-term erosion of the value of the IOU? Western   
   > trade was based on the value of the dollar or other "hard" currencies, all   
   > of them inflation-prone to some degree, as IOUs.   
      
   That would be true if, when someone in the U.S. paid in dollars, the   
   recipient was required to sit on the dollars for some extended period of   
   time--but that wasn't the case. The recipient could use the dollars to   
   buy stuff then and there, or use them to buy interest bearing   
   securities. As long as inflation is anticipated, it doesn't erode the   
   value of assets, even if that value is commonly denominated in the   
   inflating currency.   
      
    The IOUs in the Russo-Finish trade, on the other hand, didn't bear   
   interest, and the recipient didn't get to decide when he would spend   
   them. By the end of the period, Finns were indeed sitting on large   
   quantities of non-interest bearing IOU's.   
      
   > Finnish-Soviet trade was based on the value of the raw materials being   
   > exchanged for industrial products. The dollar value of most raw materials   
   > has increased as the value of currencies erodes due to inflation, so this   
   > plus the discount given to the Finns as loyal clients compensates   
   > handsomely for the lack of interest.   
      
   Are you familiar with the distinction between the real interest rate and   
   the nominal interest rate? Insofar as the increase in the dollar value   
   of raw materials was due to inflation, the Finns were still losing the   
   real interest rate as a result of any gap between their delivering goods   
   to the Russians and the Russians delivering goods to them.   
      
   I've seen the figure for the size of the debt at the end of the period,   
   along with statements implying that it only became large near the end.   
   On the other hand, the accounts also suggest that people were surprised,   
   at the end, by how large it had become--which suggests that the size of   
   the debt earlier wasn't readily available public information.   
      
   > More importantly, even if the Soviets   
   > were sometimes tardy in paying, they and their successors, the Russians,   
   > eventually settled all outstanding debts in full.   
      
   With or without interest? Measured in dollars or measured in oil?   
      
   Let me expand on that last question. Suppose the Finns send the Russians   
   a bunch of baggy suits in 1960, get oil in exchange in 1962. Is what   
   they get the quantity of oil that, at the rates used for the barter   
   exchange, they would have gotten if they payment had been made in 1960?   
   Or did they get credited with a number of "dollars" (or Finnish marks)   
   based on some measure of the value of the suits in 1960, and repaid with   
   a quantity of oil corresponding (with discount) to that amount of money   
   at 1962 oil prices? Your argument above about the dollar value of raw   
   materials only works in the former case.   
      
   > Summa summarum. The Finns were big-time winners in Finnish-Soviet trade.   
   > It would not be as indstrialized, prosperous, and competitive in the world   
   > marketplace today, or have the engineering and marketing expertise to run   
   > this industrial infrastructure had it not been for the radical changes   
   > forced on and undergone by the initially primarily agrarian and   
   > forestry-based Finnish economy between 1944 and 1952.   
      
   That's your assertion, I'm sure you believe it, and it might even be   
   true. But I don't see how you can have adequate basis for believing it.   
   Quite a lot of other countries, after all, went from relatively poor to   
   relatively rich over the same period without those special circumstances.   
      
   --   
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