Having just finish Kessler’s Running Money, I was very interested in his theory about the margin surplus vs. the trade deficit.? John, I suggest you find the time to read the one chapter in the book that breaks down this theory nicely and is really the best part of the book whether or not you care about hedge funds.? But what it amounts to is that we shouldn’t worry about our trade deficit because we have what can be termed a “margin surplus” where our intellectual property gets exported without being put on the books to manufactories in Asia who then export to the US creating what looks like a deficit but is really money in the pockets of the US companies that produced the IP in the first place.? Kessler assures the reader that the US is still the source of most high margin business and therefore shouldn’t worry about losing the support of foreign creditors when it comes to our debt.? They will invest in the US, virtually giving us our money back for all the foreign items we buy like Beemers and flat-screen TVs and all is well.? So buy foreign and watch our coffers grow, paradoxical as that sounds.? I’m sure I managed to butcher that so a careful reading of his “rejected paper” is recommended.

I’d like to point to?a recent article?at Minyanville that?perhaps draws a moustache on the picture he paints.? Perhaps the world is changing enough since Kessler finished his book in a way that he didn’t see coming.? Again, I could use the perfect storm analogy to wonder if there isn’t a mix of factors occuring right now that might weaken his argument or prevent us from leveraging it any more for the time being.? At the very least this is a great summary of the bearish (economically speaking) worldview prevalent in the non-mainstream media.