Chinese Tariffs

[Krazy P]

And so it continues.

Bit by bit, the world community begins to add tariffs to protect their economies. With the news dump today of the current administration's plans to introduce tariffs on Chinese goods, the U.S. continues to walk down a familiar path - and one that ended badly.

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[deinotes]

Very smart to bite the hands that feeds you. ;)
But on the other hand china is already shifting away from the us bond market.

[LincolnBeardGuy]

I think tariffs are a wonderful tool to protect American business. We need to be more protectionist and isolationist in my opinion.

Globalization is only great in the long run for business owners who benefit from cheap labor. The working class receives zero benefit from competing against foreign labor. A global labor market will eventually reduce everyone to the mean which will yield a huge decline in living standards for American workers.

American workers will continue rapidly racing to the bottom unless we protect domestic labor.

[phej]

...We need to be more protectionist and isolationist in my opinion.

Yes, let's raise the prices of products domestically so that consumers will pay more because it will help businesses.

[MikeC]

I'm not against protectionism, but the collective American will be so much poorer without globalisation. Do not underestimate the effects of the resulting inflation AND unemployment if imported goods are unreasonably tariffed across the board.

[RBM]

So, the OP wants to compare 1930 to 2009, hmmm. I think the OP smacks of every thing looks like a nail and a hammer will fix the problem.

Anti-protectionism ideology is just like any other ideology - a problem unto itself.

Good Luck With That.

While I expected this response, and also expect this response to continue to spread, I don't expect it to actually fix anything of substance.

[Causa Mortis]

Globalization is only great in the long run for business owners who benefit from cheap labor. The working class receives zero benefit from competing against foreign labor. A global labor market will eventually reduce everyone to the mean which will yield a huge decline in living standards for American workers.

You've touched on the negative part of globalization: factor price equalization, which is a clear "negative" for unskilled labor. Unskilled labor's unit costs in the US are pretty high relative to many parts of the developing world, and this means trouble.

You've also completely ignored the good parts: increased economies of scale, improved diplomatic relations are corresponding lower chance of war, increased consumer choice, likely stabilizes inflation and interest rates, likely enhances overall consumer welfare, likely enhances productivity, likely decreases xenophobia.

American workers will continue rapidly racing to the bottom unless we protect domestic labor.

It won't continue forever. In time, unit labor cost equalization will occur and the standard of living will again rise.

[tokjd79]

I think tariffs are a wonderful tool to protect American business. We need to be more protectionist and isolationist in my opinion.

Globalization is only great in the long run for business owners who benefit from cheap labor. The working class receives zero benefit from competing against foreign labor. A global labor market will eventually reduce everyone to the mean which will yield a huge decline in living standards for American workers.

American workers will continue rapidly racing to the bottom unless we protect domestic labor.



I agree. Regardless of how some see it I am for increased isolation. We have been way to lenient with our trade policies in the past 40 years.

F&$K YOU NIXON!!!

[LincolnBeardGuy]

I'm not against protectionism, but the collective American will be so much poorer without globalisation. Do not underestimate the effects of the resulting inflation AND unemployment if imported goods are unreasonably tariffed across the board.

Only if you define wealth as how many foreign produced goods we can buy on credit.

Inflation is defined by a growth in the money supply - not a rise in price. Inflation often leads to rising prices but higher prices aren't always caused by inflation.

Tariffs help protect domestic industrial capacity which creates real wealth. Buying foreign goods on credit <> wealth.

I believe that in order to get better over time we'll have to endure much economic hardship as a nation, but without hardship there will be no longterm recovery. There is no simple easy painless way out of our economic mess.





LincolnBeardGuy added to this post, 11 minutes and 3 seconds later...

You've touched on the negative part of globalization: factor price equalization, which is a clear "negative" for unskilled labor. Unskilled labor's unit costs in the US are pretty high relative to many parts of the developing world, and this means trouble.

You've also completely ignored the good parts: increased economies of scale, improved diplomatic relations are corresponding lower chance of war, increased consumer choice, likely stabilizes inflation and interest rates, likely enhances overall consumer welfare, likely enhances productivity, likely decreases xenophobia.


All of those good parts can still be achieved with a more equal level of trade. We shouldn't be running a massive trade imbalance year after year. What method other than tariffs would you use to correct such a large imbalance?


It won't continue forever. In time, unit labor cost equalization will occur and the standard of living will again rise.

It can continue a LOT longer. Technically you are correct, but 1st world living standards have a long ways to fall before our goods and services will be competitive with 3rd world labor. Why would we want to even entertain the scenario of unit labor cost equalization? A solution at one time was to become a knowledge and service economy to replace manufacturing, but then we started sending those jobs overseas too. Next we tried the FIRE economy, but that has finally proven its flaws as well.

I don't understand what's wrong with a sustainable and stable economy instead of more economic gimmicks designed to temporarily live above our means at the expense of future generations?

[hubcap]

Those who cannot remember the past are condemned to repeat it

[Causa Mortis]

All of those good parts can still be achieved with a more equal level of trade. We shouldn't be running a massive trade imbalance year after year. What method other than tariffs would you use to correct such a large imbalance?

A large increase is taxes or private rates of savings. Large macroeconomic trade imbalances are driven by macroeconomic forces, ie a low rate of savings relative to investment.

It can continue a LOT longer. Technically you are correct, but 1st world living standards have a long ways to fall before our goods and services will be competitive with 3rd world labor.

Wages don't have to fall all the way to a 3rd world level. They have to fall to unit price equalization - ie the greater levels of real productivity will allow for significant higher wages in the US than in other parts of the world.

Think of it like this - if I make 100 widgets per day and get 100 dollars for my work, or a dollar per widget, while a Chinese worker makes 10 widgets per day for 7.50 per day, or about 75 cents per widget there's a gap in factor prices. Under trade, wages will be bid up in China and bid down in the US until both have unit labor price equalization. This doesn't mean that the standard of living in the US will be the same as it is in China because we're generally much more productive.

I don't understand what's wrong with a sustainable and stable economy instead of more economic gimmicks designed to temporarily live above our means at the expense of future generations?

Neither do I, but trade isn't a "gimmick" its good policy that enhances growth, contains inflation, improves foreign relations, allows for greater levels of economies of scale, and discourages xenophobia.

Its unfortunate that those who lack cutting edge skills and who aren't flexible will be hurt by this, but you can't expect the 70% of society that's generally benefiting from the globalization of the economy to want to change the way things are.

[Hamburglar]

Those who cannot remember the past are condemned to repeat it

For some reason or another it is usually those who cling to the past who are condemned to repeat it. Can't put my thumb on why.....

[Tristan]

Can't put my thumb on why..........as it would have no bearing on this instance. A tariff is stand-alone evidence that a man disregards history.

We should be thanking China for their willingness to send us tires for so little money. Especially since our money isn't even worth as much anymore. Instead, the President is going to increase the relative price of tires and print more money. Harrumph.

[Hamburglar]

..... A tariff is stand-alone evidence that a man disregards history.



Unless it is a means to some end.

[thod]

Yes, let's raise the prices of products domestically so that consumers will pay more because it will help businesses.

In producing tyres in the US, the price of the tyres will rise. However the demand for labour to make those tyres will also rise leading to higher wages. The money made by the tyre workers is spent in the economy supporting other jobs. If you are unemployed, you can clean your house or you can hire a cleaner to do so. The first case means you keep your savings, the latter leads to a cash outflow. The negative trade balance represents a wealth outflow.

The rich would have built factories in the US and taken a margin. Now they build factories overseas but still take their margin. The losers are US labour not capital. The nations savings flow out of their pockets and into those of overseas labour. They may get a cheaper product but they are lowering their own wages. Prevent any Chinese imports and the US factories will start up again, wages will rise, and there will be jobs for all. It would suck for China, they would have to develop their own consumption, but would be good for the US.

They understand this. Overseas companies do not win contracts in China, nor can they operate without severe restrictions. Globalisation is one sided. Every nation wishes to export whilst protecting its own markets and they do so. The US has been sold a vision, the other nations do not play by those rules. Thus the US is a sucker.

[Holiman]

The US is the economic leader in the world and the idea of isolation would utterly desolate our economy towards a true depression regardless of how much we import its not as simple as numbers. Our industries rely on global partners both for goods we import and those we export to attempt to change that would drive must corporations and industries into leaving the US and not re investing further. We are a global world for better or worse most companies look to china india and africa for all future growth markets. The US must look outward there has never been a positive outcome from protectionism nor can anyone honestly argue that isolationism works.

[timetraveler]

And so it continues.

Bit by bit, the world community begins to add tariffs to protect their economies. With the news dump today of the current administration's plans to introduce tariffs on Chinese goods, the U.S. continues to walk down a familiar path - and one that ended badly.

To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.


Okay make the case for why nationalism is a bad thing?

[Tristan]

Unless it is a means to some end.

Yeah, specifically, to screw your own consumer base over.

In producing tyres in the US, the price of the tyres will rise. However the demand for labour to make those tyres will also rise leading to higher wages. The money made by the tyre workers is spent in the economy supporting other jobs. If you are unemployed, you can clean your house or you can hire a cleaner to do so. The first case means you keep your savings, the latter leads to a cash outflow. The negative trade balance represents a wealth outflow.

The rich would have built factories in the US and taken a margin. Now they build factories overseas but still take their margin. The losers are US labour not capital. The nations savings flow out of their pockets and into those of overseas labour. They may get a cheaper product but they are lowering their own wages. Prevent any Chinese imports and the US factories will start up again, wages will rise, and there will be jobs for all. It would suck for China, they would have to develop their own consumption, but would be good for the US.

They understand this. Overseas companies do not win contracts in China, nor can they operate without severe restrictions. Globalisation is one sided. Every nation wishes to export whilst protecting its own markets and they do so. The US has been sold a vision, the other nations do not play by those rules. Thus the US is a sucker.

You're quite the mercantilist. Mercantilism does not consider the dangerous truth that money is a commodity. We send our dollars out for real goods, and eventually, the dollar's value falls due to supply and demand. Eventually, there will be too many dollars in the hands of foreign countries, and the dollar-denominated (American) goods and services will be more attractive than Euro/yuan/yen-denominated goods and services. At this point, America will export. And think about the dollars themselves: we are selling dollars at a high rate of exchange with imports now, and buying the dollars back at a lower rate of exchange through our exports later. We are selling high and buying back low, so we win that gambit.

If anyone has been sold a vision, it is China, frustrated holder of $1.5 trillion in US bonds. The vision was of a steady, reliable, ever-valuable dollar. We have their goods, and they have our pieces of paper. But there really is mutual reliance. China can neither antagonize nor ruin us while they're so heavily-invested in us. For our part, while we're buying their goods, we will be keeping on best-of-terms. When money crosses borders, troops do not. Capitalism exists as much for diplomatic reasons as monetary ones. Your mercantilism really loses out: its vision of stable, gold-like money is antiquated, and its diplomatic ramifications are atrocious.

It is expensive for workers to shuffle to new jobs, but it is equally expensive to force the powerless consumer public to pay high prices in protected domestic markets. The solution is to provide focused aid in the form of unemployment insurance. We cannot simply halt technology and change, keeping our Luddite weavers around; they have to work themselves into more useful occupations.

[timetraveler]

I'm not against protectionism, but the collective American will be so much poorer without globalisation. Do not underestimate the effects of the resulting inflation AND unemployment if imported goods are unreasonably tariffed across the board.

Poorer how? There is no indication that global trade impacts or quality of life. We'd probably have better food if we grow it ourselves, we'd probably also have more jobs, and less junk we don't need from China and other places.

I do recognize global trade is required in a civilized society, but do we need this much? Make the case.





timetraveler added to this post, 8 minutes and 44 seconds later...

Yeah, specifically, to screw your own consumer base over.



You're quite the mercantilist. Mercantilism does not consider the dangerous truth that money is a commodity. We send our dollars out for real goods, and eventually, the dollar's value falls due to supply and demand. Eventually, there will be too many dollars in the hands of foreign countries, and the dollar-denominated (American) goods and services will be more attractive than Euro/yuan/yen-denominated goods and services. At this point, America will export. And think about the dollars themselves: we are selling dollars at a high rate of exchange with imports now, and buying the dollars back at a lower rate of exchange through our exports later. We are selling high and buying back low, so we win that gambit.

If anyone has been sold a vision, it is China, frustrated holder of $1.5 trillion in US bonds. The vision was of a steady, reliable, ever-valuable dollar. We have their goods, and they have our pieces of paper. But there really is mutual reliance. China can neither antagonize nor ruin us while they're so heavily-invested in us. For our part, while we're buying their goods, we will be keeping on best-of-terms. When money crosses borders, troops do not. Capitalism exists as much for diplomatic reasons as monetary ones. Your mercantilism really loses out: its vision of stable, gold-like money is antiquated, and its diplomatic ramifications are atrocious.

It is expensive for workers to shuffle to new jobs, but it is equally expensive to force the powerless consumer public to pay high prices in protected domestic markets. The solution is to provide focused aid in the form of unemployment insurance. We cannot simply halt technology and change, keeping our Luddite weavers around; they have to work themselves into more useful occupations.


You seem to be describing deflation, but deflation cannot happen because of the US debt. So we will have inflation as a way to pay back the debt, it's really the only way to pay back the debt. I do agree that capitalism exists for diplomatic reasons, that doesn't change the fact that what we have isn't really capitalism as described by Adam Smith, and we will never have true capitalism.

And as far as focused aid, you don't describe where that money is going to come from. If the unemployement rate reaches 20% what good is focused aid then? The economy we have and world order we have is completely unsustainable, and everybody knows it except for the wealthy 1% who don't notice it because they don't have to work and don't have debts.

Technology and change, useful jobs, none of this matters if the population in countries like China, India and other places outpaces the growth rate of the USA. The best solution to the unemployement crisis is deflation, most of those cheap chinese good you find at Walmart we don't really need. Once we stop consuming junk, we can then reduce the working hours from 40 hours a week to 20 hours a week if deflation reduces he cost of living. This will solve unemployement because the jobs will be more spread out.

If we have inflation and salaries stay the same, then the cost of living will out pace salaries, as will personal and national debt and we will be in for another economic collapse probably within a few years tops.

[IrishGuy]

And so it continues.

Bit by bit, the world community begins to add tariffs to protect their economies. With the news dump today of the current administration's plans to introduce tariffs on Chinese goods, the U.S. continues to walk down a familiar path - and one that ended badly.

To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.
I don't like tariffs, but part of the reason why we are here is because of China's artificially devalued currency. Devalued currency is what has given them such an edge on manufacturing, and also contributed to the speed with which manufacturing jobs have left the United States.

If China were to float it's currency right now it would hurt in the short term but would be beneficial in the long term since it would help create more consumption in China and more manufacturing in the United States or in the rest of the world. The last 20 years the United States has become a country of consumption and China country of production. This is only sustainable as long as the United States (or someone else) can keep paying for Chinese goods....

[curiousgeorge01]

Maybe China has an alternative reason for devaluing it's currency. Accumulate money first maybe?

[Causa Mortis]

I don't like tariffs, but part of the reason why we are here is because of China's artificially devalued currency. Devalued currency is what has given them such an edge on manufacturing, and also contributed to the speed with which manufacturing jobs have left the United States.

If China were to float it's currency right now it would hurt in the short term but would be beneficial in the long term since it would help create more consumption in China and more manufacturing in the United States or in the rest of the world. The last 20 years the United States has become a country of consumption and China country of production. This is only sustainable as long as the United States (or someone else) can keep paying for Chinese goods....

Its only sustainable as long as the Chinese continue to want to lend to the US and as long as US consumers want to borrow from the Chinese. These things can continue for quite some time.

A de-pegging is necessary though, I think, for both China and the US in the long run. For China, such a move would give the Chinese real control over their money supply. If they ever reach a point where unemployment falls below 5% and inflation starts to take off, they either have to radically reduce government spending, or reduce the Ms which will effectively break the peg.

Its only necessary in the US for social justice reasons; the peg clearly is hurting unskilled labor, and Buffet has rightly written of concern over the country becoming a "nation of sharecroppers" - which is exaggeration but not totally out of bounds.

Maybe China has an alternative reason for devaluing it's currency. Accumulate money first maybe?

Its the standard industrial-military-mercantalism approach that most nations took. The special thing about China is that they're 200 years late, and so get to add all the advances in technology that have occurred since 1800 in about 30 years. Eventually they're going to see strongly diminishing marginal returns on capital and will have implemented most obviously beneficial technological innovations.

Once that happens, growth becomes much, much more difficult; innovation and the political willpower to allow creative destruction to go on are probably the most important variables. I know some incredibly bright Chinese students, but I don't know how creative they are, and whether or not they have the willpower to let a lot of firms fail remains to be seen.


Technology and change, useful jobs, none of this matters if the population in countries like China, India and other places outpaces the growth rate of the USA.

...

Of course real growth rates in China and India will outpace growth rates in the USA for a long time to come.

Going from a third world country to a first or near first world economy is about one thing: capital/person. Accumulate the capital necessary to pull people from subsistence farming to industrial or service work and you get a gigantic spike in per person output per hour.

Growth here is very, very simple, simply keep domestic savings robust and the economy will grow very well. Add in the fact that China and India are behind technologically and I think you can understand why both are experiencing very rapid rates of growth.

Once you hit a certain level of capital though - enough roads, bridges, schools, internet connections, etc - adding more units of capital adds a lot less value. The first bridge you build across a river adds huge economic value. The second bridge you build in the same city adds less value but still adds significant value; it reduces travel times, maybe rationalizes a bit more economic activity. The third adds less value still, and so on and so forth, until you come to the 23rd bridge, which doesn't add any value whatesoever.

Once you hit this level of capitalization, capital just isn't that important in explaining real income. Japan has a significantly higher capital/worker ratio than the US does, yet US real output - including output per hour - is significantly higher in the US than in Japan.

Why? Growth once a nation is adequately capitalized is more a function of innovation and creative destruction than anything else. The plague of the modern industrialized society is an excess of production to a certain extent and capital to a great extent. Innovation creates new demand for capital that's desired by the market, creative destruction removes capital from inefficient sources and transfers to efficient ones.

Going back to comparing Japan to the US economy, the Japanese have not demonstrated a great deal of creativity in areas that are key to the market since the early 1980s (a lot of cool ideas, but nothing the market really snapped up a la fuel injectors, which created their own industrialized boom in the 1970s, or internet technology) and they don't allow creative destruction in any meaningful sense with large firms. Thus they've seen little growth over that period.



That actually doesn't mean anything for US wages though. Wages are influenced by gaps in comparative unit costs across borders, but that's far from the whole story, and unit factor price equalization on labor has, in my view, largely occurred. Wage growth here will largely be a reflection of shifts in marginal productivity.

The best solution to the unemployement crisis is deflation, most of those cheap chinese good you find at Walmart we don't really need. Once we stop consuming junk, we can then reduce the working hours from 40 hours a week to 20 hours a week if deflation reduces he cost of living. This will solve unemployement because the jobs will be more spread out.

This one is kinda facepalm.

1. Deflation has a cyclical relationship with unemployment:
a. Exogenous fall in aggregate demand or the money supply causes excess factors of production, ie unemployed labor and capital
b. The unused capital and labor then are willing to work for less than they were before.
c. This causes deflation.
d. As prices are falling, the cost of holding money becomes positive; your dollars will buy more tomorrow than they will today. As a result, you demand more money and fewer real goods.
e. Loop back to a, only now the cycle is self-reinforcing and endogenous.

You cure unemployment in a couple of ways, but the easiest way to do it in the short term is to increase inflation. This is precisely what the Federal Reserve is doing right now.

2. Reducing the workweek from 40 hours per week to 20 hours per week would cause an inflation because it would reduce real output. Money*Velocity=Price*Real Output. If your economy has a money supply of 100, a velocity of 1, a price level of 1, and a real output of 100 widgets per 40 hour work week and you cut the workweek in half, your real output will fall.

You're going to see a significant inflation. Assuming that you produce roughly the same number of widgets per hour whether your week is 20 hours or 40 hours, you've now got double the price level as velocity and the money supply have not changed. So 100*1=1*100, if you halve the real productivity (100 to 50), then you have to get a rise in the price level.

3. Wages are ultimately a reflection of marginal productivity. I don't have the time to explain this one, but this is one area where economics is pretty spot-on in terms of its assessment.

4. Who decides what's junk and what's valuable consumption? The Junk Czar?

[Krazy P]

Global trade is bad?

Wow - so you want to head back to a standard of living in the past - like medieval times?

Or how about the 1930s?

For those needing a bit of an education on China, the U.S. and "how things work",

here you go...

To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.

One little quote:

"The idea that China may decide not to finance our deficit makes no sense.

“It’s the equivalent of believing the sun travels around the earth,” says Jim Glassman, senior U.S. economist at JPMorgan Chase & Co. "

If you want to worry about something, worry about the collapse in the velocity of money in the last 3 months or so... (hint - it has fallen farther than... the 1930s and ... falling velocity = deflation).

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In fact, take a look around the St Louis Fed site for some real reasons to worry. Lots of graphs doing funny stuff!

[Tristan]

You seem to be describing deflation, but deflation cannot happen because of the US debt. So we will have inflation as a way to pay back the debt, it's really the only way to pay back the debt. I do agree that capitalism exists for diplomatic reasons, that doesn't change the fact that what we have isn't really capitalism as described by Adam Smith, and we will never have true capitalism. I figured I was describing the weakening of the dollar's foreign exchange value, and that effect upon our goods, which (while linked) is not exactly inflation or deflation.

And as far as focused aid, you don't describe where that money is going to come from. If the unemployement rate reaches 20% what good is focused aid then?Yes, I shouldn't have said "provided." Nothing is ever "provided." I wanted to be brief. Workers should buy unemployment insurance so as to pool the risk and alleviate the immediate pains of job loss. Whether unemployment is 4% or 25%, protectionism won't reduce pain any more than leaving everything alone. I'm sorry, but there is literally no solution to unemployment in any system. Everything has been tried, and nothing has worked. When the economy is growing, there is low unemployment. When the economy crashes, unemployment is high. The most that can be done is to pool the risk. Indeed, at first glance, unemployment insurance would appear to be similar to protecting the market with tariffs, but the difference is that it allows the necessary adjustments to occur.

[RBM]

How about a Picture, just an old fashioned type plane jane picture:

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From Revealed: The ghost fleet of the recession (To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.)

Hat Tip, PrinceHamlet (To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.-540406)

[Causa Mortis]

If you want to worry about something, worry about the collapse in the velocity of money in the last 3 months or so... (hint - it has fallen farther than... the 1930s and ... falling velocity = deflation).

To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.

In fact, take a look around the St Louis Fed site for some real reasons to worry. Lots of graphs doing funny stuff!

The collapse in V is extremely problematic, but there's been no drop in the money supply as there was in the 1930s. Friedman et al generally argue that the collapse in velocity in the 1930s was a result of an exogenous collapse in demand and a decrease in the money supply due to runs on banks. The collapse in velocity was largely in response to shifting expectations about future prices - people expected deflation, and this exaccerbated the seriousness of the depression, but the collapse in V was reflective of the problem and probably was not causal.

The Fed has responding appropriately, and eventually the accumulation of high real money balances and falling prices will cause people to substitute back to preferring more goods over balances. Monetary lags are usually seen as taking between 6 months and a year to really work their way through the economy, and I think the worrisome thing is that unemployment is rising and inflation is very subdued for a ~50% increase in M2 and a ~13% of GDP deficit, both of which should be inflationary.

In short, ceterus paribus, an exogenous decrease in velocity will produce a deflation but can be offset by appropriate monetary and fiscal measures. Those measures are in place.

[timetraveler]

"Wage growth here will largely be a reflection of shifts in marginal productivity."

I don't think wages have anything to do with productivity. CEO's of banks get high wages.


3. Wages are ultimately a reflection of marginal productivity. I don't have the time to explain this one, but this is one area where economics is pretty spot-on in terms of its assessment.


Why should I believe it just because economists say its true? show me.
Your math does make sense but only assuming this is true, and I don't have faith so I require evidence.

[Causa Mortis]

I don't think wages have anything to do with productivity. CEO's of banks get high wages.

Its because the marginal difference between an ineffective bank manager and an effective one is quite high. A bad one will drive the company into the ground. A good one will have a huge impact on profit. Thus their expected marginal productivity is quite high.


Why should I believe it just because economists say its true? show me.
Your math does make sense but only assuming this is true, and I don't have faith so I require evidence.

You want evidence that MV=PY? Its true by the definition of the terms.

But if you want more:

To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts._theory_and_evide nce

Or you wanted evidence for MPL=W?

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[deinotes]

Global trade is bad?

Wow - so you want to head back to a standard of living in the past - like medieval times?

Or how about the 1930s?

For those needing a bit of an education on China, the U.S. and "how things work",

here you go...

To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.

One little quote:

"The idea that China may decide not to finance our deficit makes no sense.

“It’s the equivalent of believing the sun travels around the earth,” says Jim Glassman, senior U.S. economist at JPMorgan Chase & Co. "

If you want to worry about something, worry about the collapse in the velocity of money in the last 3 months or so... (hint - it has fallen farther than... the 1930s and ... falling velocity = deflation).

To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.

In fact, take a look around the St Louis Fed site for some real reasons to worry. Lots of graphs doing funny stuff!

Yeah the us is now in deflation territory but it will be mayor inflation if not hyperinflation in the "long" run.
China is already encouraging it's citizens to buy tangible assets to save their wealth.
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And have made numerous threats and are already moving outside of the realm of the dollar.
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Yes china is better of with America but if there is going to be a trade war it's america who suffers and china will take it lose and move on.
Also i would take the numbers from the fed with a salt of grain it seems the American government is trying harder and harder to paint a rosy picture.
A number of years ago they stopped giving the m3 numbers To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.

I would advise this site for your numbers
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[curiousgeorge01]

Its the standard industrial-military-mercantalism approach that most nations took. The special thing about China is that they're 200 years late, and so get to add all the advances in technology that have occurred since 1800 in about 30 years. Eventually they're going to see strongly diminishing marginal returns on capital and will have implemented most obviously beneficial technological innovations.


Yes you're right. I just think they have a motive for not doing that...yet.

[jesse]

Tariffs and nationalistic protectionism of the economy are excellent ways to harm your own economy, even if it might win you an election. These measures can be viewed from numerous angles and perspectives, however when we take the simple route and look at the problem through the eyes of economists, they do the opposite of protecting your economy in your country.

I like to think of tariffs and economic protectionism as indirect taxes and special privileges either pitched as a way to save failing business or the other option: a way to get a chokehold on the market and keep competition out, especially the foreign variety.

In a free market economy a business has to innovate and keep ahead of competition by constantly finding ways to hone their craft and reduce their waste and inefficiency of their operations. Tariffs seem to be enacted due to pressure by both trade unions, special interest lobbies for industry because they know they have not done their work in innovating and keeping the ball rolling in terms of business. A tariff will increase the cost of imports and maybe buy the inefficient business some time but more often than not, instead of taking the opportunity to reform and rethink their practices, they'll relax and enjoy the special privilege enacted and enforced by government.

Bottom line is that most governments are hypocrites by stating their support of free trade and reducing and eliminating trade barriers while doing the complete opposite in many forms. Here's one, agricultural subsidies.

[SirJac]

Protectionism only makes sense if you take a narrow point of view. The reason why these things lead to trade wars is because raising tariffs provokes other nations to do the same to you. If you put up tariffs to protect jobs in one industry, other countries will put up tariffs that will cause you to lose jobs in another. You can't go into protectionist policies assuming that everyone else won't return the favor.

You arn't saving jobs, your just changing what industry loses. If China reacts by increasing tariffs on raw materials, then all you've done is saved your tire jobs at the expense of jobs elsewhere that will be lost due to lower exports.

No one ends up better off from trade wars.