Is the White House trying to engineer a recession? This Wall Street pro explains the vision. (1 Viewer)

[Captain Adverse]

I disagree with this whole thing. Trump thinks he can apply tariffs to these countries with no side effects. He is not aware that tariffs raise prices for consumers and they buy less because of it. The companies make less money and their stock goes down. During the campaign he said that China and others would have to pay the tariff right into our Treasury. I heard him say that in his first term as well. Republicans are weak on the Economy and it's too bad Harris did not take advantage of it. Then, we would not have all this uncertainty in the markets. Y/N

Nonsense. Trump is perfectly aware of how tariffs work and the effects (temporary or otherwise) on the economy.

What your side of the argument misses is that these other nations you worry about already have various forms of tariffs on U.S. products that prevent them from being competitive in their markets. For one good example (and I have mentioned this before) just review J.D. Vance's speech to the gathering of European leaders. He talked about how Germany has several levels of tariffs and taxes that price U.S. made cars out of competition in the German market, while the USA did not treat German cars imported for sale that way.

I repeat, every nation that Trump has placed tariffs on already had protectionist tariffs against American goods in their own nations, including both Canada and Mexico.

 

[ashurbanipal]

You weren't clear but I made it clear how that mechanism works. They can leverage the value of their stock for liquidity.

Is that how you read the history of this discussion? I guess I'd say you haven't understood or remembered correctly. I wrote, in post #16:

But then, the companies whose stocks are purchased will have more cash to spend, which in turn will drive inflation further.

You then wrote, in post #20:

When you purchase a company's stock they don't have more "cash to spend".

To which I responded, in post #23:

Not in every case, but in many cases, yes they do, through two avenues. First, companies regularly either split stock or make secondary offerings and sell shares directly on whatever exchanges they've listed, in which case, the sale of those shares raises capital directly. Secondly, and more commonly, companies own a certain share of their stocks directly and can sell those without making a secondary offering. Anything that drives up the price of those shares leads to unrealized gains in their available capital--most usually, companies will simply seek loans against the value of those shares.

To which you responded, in post #29:

Feels like you are attempting to use the exception to prove the rule. Buying and sharing stocks does not give a company money to spend. You are talking about ways they can leverage the value of those shares for liquidity and that is different.

To which I responded, in post #40:

Well, maybe I wasn't clear, but all that is needed for my point to go through is that when people buy a company's stock, that company tends to have more money to spend.

To which you responded as you did, in post #46, just above. My original claim was that when money goes into stock, the companies whose stock is purchased will have more money to spend. I did not say that the purchase price of the stock is given directly to the company, or anything else like that. You said, in your first reply, that my claim (i.e. that companies whose stock is purchased will have more money to spend) is false. I gave you clarification on the mechanisms I was calling upon in the next post, and you accused me of "using the exception to prove the rule"--which doesn't make any sense. Then you claim to have made everything clear by explaining that the companies can leverage the value of their stock for liquidity...which is what I said two responses prior, and which has exactly the implication that my first claim (i.e. that companies whose stock is purchased have more money to spend) is true.

I'm not sure why you'd think you were the one to have clarified anything, unless you're saying that you clarified what you meant and are now agreeing with what I said.

The layperson version of that would be having your home raise in value by $250k. The fact someone would pay more for your home doesn't automatically put money in your pocket but you can go to a bank and ask for new higher mortgage or HELOC based on the higher value and that CASH would be liquidity you can spend or use.

Which is one of the two mechanisms I outlined in post #23. So, you're agreeing with me, while apparently claiming that you're arguing. Weird.

 

[ashurbanipal]

Well there is risk and reward of course but most people are seeking the maximum return with the minimal risk for their capital. It isn't about clairvoyance, but if you are a novice in an area and decide to get in because you've heard about the returns then in reality the best returns are likely already past.

Let's make it a bit more concrete. Let's imagine I am tech bro. I might be an angel developer on social media or AI before they become a big deal. I'd make speculative but informed decisions about it well before the public knows about it. I'd get in on the ground floor where the big returns happen. By the time the general public can utter the phrase ChatGPT, it's years and a far smaller return later.

Flip it. Let's say tech is going through difficult times and returns are hard to find. I "hear" that everyone is moving into commercial real estate warehouses. I am a novice here so I try to find some people like myself and invest in the next round of warehouses being built to be leased to an Amazon or equivalent. By the time I "hear" this since it is not my area of interest, the people with real knowledge have probably built and flipped four rounds of warehouses to "investor groups" with each one getting more expensive, as more people hear about it and want to invest and thus generating a less likely positive return.

Most people stick with what their expertise is in and what they do is make great gains when the times are good, and minimize their losses and buy out competitors when times are bad. They stay in their lane and work their strengths.

I understand the process you're outlining. I guess I'd say that's not what I would mean by "misallocation" or what, probably, others have meant by that same term or synonymous terms in this thread or elsewhere. I have no problem, in principle, with what you've outlined above, though I would point out that in practice, how it all plays out is that knowledge/information is intentionally kept unevenly distributed, which is expressly something that Adam Smith warned about (one of two things about which I wish people would pay more attention to what he said).

I exist in a similar environment, and wish it were not the case. Specifically, I work at an R1 university, and I have access to a lot of information that is behind a paywall for most people, and, had most people access to that information, it would likely change the public conversation substantially on a great many topics. So if you're arguing that we should have a freer flow of information, I agree. Otherwise, I think you're just talking past most people, and vice versa.

A proper return in my opinion is return that returns the initial investment, throws off additional cash and outpaces inflation. If I have a company making 5% a year but the real rate of inflation is 10% then I'm losing purchasing power.

OK, sure. Now that you've explained what you mean, I have no problem with that in principle, though in practice, it can sometimes lead to immoral circumstances.

However most wealth is not distributed. It is not liquid. If I own a home and you rent an apartment and my home is worth a million dollars and your apart adds zero to your net worth the disparity between us is essentially infinite. However I don't distribute or spend my home. I live in it.

Wealth is not money. Your home, in the above example, is part of your wealth. All the other stuff you own, even stuff you couldn't get a dollar for at a garage sale, is part of your wealth. Well, I guess we should except anything you own that has literally no use or value to anyone--presumably, for instance, you own the dust in your home, but it's of no use and no one would purchase it from you. Your clothes, medicines, dishes, electronics, vehicles, garden beds, tools, appliances, books, pets, blankets, picture frames, light bulbs, cleaning products, Halloween decorations, candles, furniture, etc. are all part of your wealth, however.

 

[CaughtInThe]

They are blowing up EVERYTHING

 

[ashurbanipal]

You note that we trade with others and cooperate with others but then "magically" this is all subverted. It isn't subverted. Some people have just gotten very good at trading and others offer little or nothing to trade. At some point all they can trade is their labor and sometimes not even that.

That's not what I mean. I mean that there's a genealogy to how a set of ideas have been translated from one age to another. One example is that, at the founding of this country, we self-consciously adopted capitalist economics because, of all the systems available at that time, it was the one that was thought to produce the goods we need better than any other system. But over time, the ideal has shifted from "system that best produces the goods everyone needs" to "capitalism." People forgot that we want a system that produces certain goods (which would include, among other things, just economic outcomes), in favor of a kind of shorthand--"capitalism." That shorthand was gradually adopted as the new ideal, and the reason for capitalism being adopted in the first place--the actual ideal toward which all economic systems should strive--has been lost among most people's concepts. That's the subversion I'm talking about. Now, we have a great many people who would rather live in the Blade Runner universe because it is capitalist, rather than the Star Trek universe because it is socialist--even though life in the Star Trek universe is obviously vastly better than in the Blade Runner universe.

Social media platforms have gotten good at data mining to the point that from the persepctive of their users they are getting everything for the cost of nothing. No one is forcing them to use a Facebook, Instagram or X but they do and do so for free except the cost is the datamined.

They could declare they aren't getting their proper share of the pie but

I don't think that's the argument. The argument is that someone like Elon Musk, whose net worth is many billions of times greater than that of his employees, cannot be many billions of times smarter or work many billions of times harder than even the dumbest and laziest human being who ever lived--let alone be many billions of times smarter than his dumbest employee or work many billions of times harder than his laziest employee. Anyone who understands order of magnitud will see that such is obviously impossible. So then, why does he have all that wealth, while so many in this economy struggle, even though they work full time and do a good job? Something has gone very wrong when wealth distribution is that out-of-whack. Musk would have nothing if it weren't for all the people who have worked for him. Ditto all the other wealthy elite.

Definition of absolute and relative poverty - Economics Help

Definition of absolute poverty and relative poverty. Also definition of primary and secondary poverty and multidimensional poverty indexes.

www.economicshelp.org

Relative poverty is a real concept.

Yes, of course. So is justice. The idea behind market economics is to make the mechanism by which wealth is distributed decentralized--it's down to individuals making contracts. The problem is that once all the means of production are owned, wealth no longer tracks hard and smart work. The lazy and stupid can get rich while the diligent, conscientious, and intelligent can be quite poor. Indeed, I'd imagine that Musk probably has workers who are smarter and who work more than he does, and still do not have much in the way of wealth.

Well the point is that you have needs and then wants but beyond a certain level the rate of return with regard to happiness for each dollar spent on those wants does not grow proportional to the spending. I can have a great $40 ribeye or perhaps a $4000 ribeye but I do not believe you could convince me one is 100 times better nor do I believe I would experience that.

Sure. I agree. Not sure what the point is, though.

 

[ashurbanipal]

Nonsense. Trump is perfectly aware of how tariffs work and the effects (temporary or otherwise) on the economy.

What your side of the argument misses is that these other nations you worry about already have various forms of tariffs on U.S. products that prevent them from being competitive in their markets. For one good example (and I have mentioned this before) just review J.D. Vance's speech to the gathering of European leaders. He talked about how Germany has several levels of tariffs and taxes that price U.S. made cars out of competition in the German market, while the USA did not treat German cars imported for sale that way.

I repeat, every nation that Trump has placed tariffs on already had protectionist tariffs against American goods in their own nations, including both Canada and Mexico.

You raise an interesting point, though only one side of it. There's a Russian word/concept called khalyava that comes into play here. The concept itself just denotes something gotten for free, or rather, free in terms of in-kind reciprocation. The parents who give their children an allowance are giving khalyava, as is the king who distributes the spoils of his recent war among his subjects. This latter example is the crux of the issue, though: he who can give to others what they need without requiring in-kind payment is the one who is in charge, while the ones who accept the khalyava become subject to the one providing the khalyava.

The reason the United States is a superpower is because we've been providing khalyava to other nations. They depend on us, they become subject to us. If we can allow those countries to sell to us without tariff, while letting them tariff our goods, we are providing them khalyava. Take that away, and there's an implicit admission that suddenly they're on the same level as us (where before, we were above them).

Now...I'm not so sure the above justifies the trade imbalance we've run for so long--so don't hear me as saying that our objecting to tariffs they impose is something we should not do, or even that we shouldn't impose in kind if they don't remove those tariffs. I'm merely pointing out there's a difficult-to-quantify-but-very-real dimension to this problem that isn't often discussed.

 

[multivita-man]

The government spending on the military build up, increased private sector manufacturing ie it takes steel to build tanks and ships.

Increases in defense spending don't have an immediate impact, and it's not like we doubled defense spending. It went from like 5% to 6% IIRC, though would have to check notes.

Of course it sort of crowded out productive domestic manufacturing ( ie in vehicles) and generally led to the relative decline in manufacturing as part of the US economy

Any increase in defense manufacturing would have been welcomed in the absence of domestic manufacturing. It would not have "crowded out" productive manufacturing. It didn't lead to the decline in non-defense US manufacturing, which was already well underway and was going to happen anyway because companies wanted cheap labor.

The last two years post covid had a deficit of roughly 6% of GDP each year, the economy grew at 3% or less. The economy had growth only because of deficit spending. Not a good base to build on

It's better than spending nothing and letting the economy implode, which would have take a decade to recover from. There's absolutely nothing wrong with using stimulus to recover from a black swan event that shutters economic production, even if the stimulus went considerably beyond the amount of production and consequently became monetary inflation (on top of transitory inflation).

The real problem we're dealing with is that, as was the case with the Great Recession bail out, and the second Gulf War and the War on Terror, we never increased tax revenues to pay for the increases in spending. Not only did we not increase taxes, we actually cut them, blowing the deficit wide open within the span of 25 years. And now we have an oligarchy that basically dictates to our political leadership what they will and will not pay for. Predictably, we have a government that's teetering on illiberal authoritarianism and an economy that's flirting with neo-feudalism.

 

[Econ4every1]

I'm going to slow your roll a bit here. I'm especially going to to do that since you presumed my answer and then flooded the thread with replies on that presumption. I can relate I assure you.

Excellent.

It is not ONLY government spending that drives inflation.

Yeah, the only here is key. But, I think it better to say, the US government (in the last 50 years anyway) rarely drives inflation.

There is also their long discussed relationship with the Fed

First, let's make sure we agree . The Fed is part of the government. I like to say, the Fed is independent within the government, not independent of the government.

What's interesting and somewhat ironic, is that Fed policies that attempt to slow inflation, like increasing interest rates, not only have very little effect, but in fact, can make things worse.

Because of the nature of the most recent bout of inflation wasn't driven by demand exceeding supply, rather supply went lower than demand. For the former, increased interest rates are more effective, in the latter, raising rates make things worse. Why? Because the problem is supply falling under demand. The solution to that problem is that as COVID lifted, companies needed access to short term funding to get businesses back up and running, at least until profits started to roll in. The result was higher costs to get back into business. Add to that the interest income stream that was dumping hundreds of billions of dollars into the hands of the investor class which explains why, even during COVID as businesses were slowing or stopping all together, the stock market was propped up by interest income.

But maybe you could share more about the relationship with the Fed, do you have another take?

...reserve requirements for banks

Right now, as you probably know there are no reserve requirements, but I'm curious what you think about that, should banks be required to maintain minimum reserve levels? I so, what should they be?

the type of loans allowed to be offered to consumers and so on.

For example? (Not that I necessarily disagree).

Also the flip side of the government spending is DEFICIT FINANCING

The thing that most people don't understand is that government's don't fund spending though the sale of bonds. The government spends dollars into the economy making those dollars available to the public which in turn makes it possible for people to purchase bonds (and pay taxes).

The order of operations, if taken back to the beginning looks like this....

Gov Spending----->Bond Sales---->exports (money in)---->Imports (money out)----->taxing---->(Debt is cumulative total of net bond sales)---->Gov Spending----->Bond Sales---->exports (money in)---->Imports (money out)----->taxing---->(Debt is cumulative total of net bond sales)---and so on....

Everything starts with government spending (you cannot begin with government taxes or bond sales under current rules). Now in fairness the US had a very large pile of gold when the system began, but the two were decoupled a long time ago and were really only there after that to provide the warm and fuzzies. Further, that pile of gold is miniscule next to the value of privately held assets

Taxes don't (within our lifetimes), pay for borrowing. That's not to say that could never be the case, but not how things have gone so far and if taxes ever did contribute to pay for spending, the economy would be very, very different.

Tariffs could be an attempt to shrink the trade deficit which, while it might in theory reduce the flow of money out of the country, conversely it will also reduce the flow of lower cost goods into the country. This will result higher prices and increased inflation. It could also cause foreign investors to sell their dollar denominated bonds and spend them in dollar markets, which likely would increase demand in the US relative to supply and when coupled with tariffs could make a bad situation worse, but I concede, the effect is far from certain.

Before you and I go on a flood of words and images we should just settle up right there and see if we are talking to each other or past each other.

Oof....How am I doing?

 

[Econ4every1]

Trump is perfectly aware of how tariffs work....

Trump is the least articulate President this nation has had in my over 50 years. Find me one, just one, candid (not reading off a prompter) well articulated intelligent answer to a economic question he's ever given. Preferable one without pithy insults or childish name calling.

Just one.

I'll wait.

Trump knows less about tariffs than I know about what's at the center of a black hole.

Tariffs are Trump's hammer and everything else is a nail.

 

[Cassandra]

Nonsense. Trump is perfectly aware of how tariffs work and the effects (temporary or otherwise) on the economy.

What your side of the argument misses is that these other nations you worry about already have various forms of tariffs on U.S. products that prevent them from being competitive in their markets. For one good example (and I have mentioned this before) just review J.D. Vance's speech to the gathering of European leaders. He talked about how Germany has several levels of tariffs and taxes that price U.S. made cars out of competition in the German market, while the USA did not treat German cars imported for sale that way.

I repeat, every nation that Trump has placed tariffs on already had protectionist tariffs against American goods in their own nations, including both Canada and Mexico.

I suggest you take a gander at "trumponomics" -the podcast.

Of course, it not Trump's plan. He is apparently taking the advise of Stephen Miran.

The plan is to bring the industrial base back to the U.S. to reduce the trade deficit and bring back labor jobs. The other part of the plan is to reduce the value of the dollar.

Biden attempted to protect w tariffs immature industries meant to de-carbonize the U.S. "Trumponomics" will kill innovation. It looks like a return to the carbon economy of the 19th century.

I don't see how this can end well since manufacturers will inevitably resort to automation. And the rest of the world will begin to look to China for innovation.

 

[Cassandra]

Trump is the least articulate President this nation has had in my over 50 years. Find me one, just one, candid (not reading off a prompter) well articulated intelligent answer to a economic question he's ever given. Preferable one without pithy insults or childish name calling.

Just one.

I'll wait.

Trump knows less about tariffs than I know about what's at the center of a black hole.

Tariffs are Trump's hammer and everything else is a nail.

But check out his head economic adviser, Stephen Miran.

Id like to know what you think...

 

[Econ4every1]

But check out his head economic adviser, Stephen Miran.

Id like to know what you think..

Oh boy...

TL;DR he's a tool.

Hard to know where to start....

He's a supply-sider
He thinks that tarriffs are good
He wants lower cooperate taxes and lower taxes on the wealthy
He wants more deregulation
He wants to to "re-industrialize" the US
He broadly opposes free trade
He wants less entitlements availible to the working class and poor
He thinks the problem of healthcare is that people abuse it because they don't have to pay enough for it
He's critical of demand side stimulus (helping poor people in a crisis)
He wants to promote "energy independence" with more growth in fossil fuels
He thinks economic growth can lower debt/ deficit
He thinks that the government can and does "crowd out" private investment.
He thinks government investment in Bitcoin is a good idea

And, like you said, Trump, who doesn't understand economics and better than a 5th grader, no wait, 2nd grader, is on board.

I could write a chapter on each of these points and why each one is wrong and have a book when I was finished.

I have a theory on the support of BTC. I think these morons are playing a long game, hoping to promote BTC and use their influence and power to infiltrate the Fed.He's said that he thinks the President should have more control over the Fed including firing - and I assume hiring - members of the Fed with the goal of either taking it over or removing it entirely. Getting BTC broadly accepted is the best to supplant the US dollar and the oligarchs control over money, but this, I admit is my own theory, I can't back this up with evidence just yet.

To sum up....Stephen Miran's supply-side vision centers on tax cuts, deregulation, and trade policies to boost domestic investment, manufacturing, and economic growth. He seeks to address structural challenges like dollar overvaluation and declining industrial competitiveness through tariffs, dollar depreciation strategies, and incentives for capital formation. While his ideas align with traditional supply-side economics, they also incorporate unconventional elements, such as linking trade and defense policies. Critics warn that his policies could have unintended consequences, but supporters view them as bold steps to strengthen the U.S. economy and promote reindustrialization. Ya know, stuff we've been trying for the last 40 years minus a few years of slight reprieve under Dems.

Literally everything he says he wants will make the nation weaker and favor the investor class and very wealthy and hurt the middle class and poor. Basically, he wants to bring Chinses style manufacturing (with all the the environmental and problems and worker exploitation) to the US (with masses of desperate low-skilled unemployed people willing to work for low wages), except with much greater automation, and run it with a Russian style mafia state run by a authoritarian and a handful of oligarchs.

These people literally believe that they are better than the little people. That they should rule you and I. That the law does not apply to them because they are chosen, special.

 

[Econ4every1]

I suggest you take a gander at "trumponomics" -the podcast.

Of course, it not Trump's plan. He is apparently taking the advise of Stephen Miran.

The plan is to bring the industrial base back to the U.S. to reduce the trade deficit and bring back labor jobs. The other part of the plan is to reduce the value of the dollar.

Biden attempted to protect w tariffs immature industries meant to de-carbonize the U.S. "Trumponomics" will kill innovation. It looks like a return to the carbon economy of the 19th century.

I don't see how this can end well since manufacturers will inevitably resort to automation. And the rest of the world will begin to look to China for innovation.

My sentiments exactly.

Interestingly, while they are imposing tariffs and trying to drive down trade, the world will look to evacuate their dollar positions (as the US purchases less imports from it's largest trading partners). This will likely result in high demand for goods in US dollar markets as foreign held US dollars (as treasuries redeemed will be greater than sold) are re-patriated (and potentially some demand driven inflation results), which will result, long term in a lower trade deficit. It could result in a lower debt (if the increase in demand were tempered with higher taxes) The problem is, the vast majority those dollars will be captured by the investor class, and with very low taxes for the wealthy will only result in greater economic disparity between the middle class and poor and those in the top 10%. In the meantime, interest rates will increase creating an interest income channel for the investor class and hardship for everyone else.

 

[Cassandra]

My sentiments exactly.

Interestingly, while they are imposing tariffs and trying to drive down trade, the world will look to evacuate their dollar positions (as the US purchases less imports from it's largest trading partners). This will likely result in high demand for goods in US dollar markets as foreign held US dollars (as treasuries redeemed will be greater than sold) are re-patriated (and potentially some demand driven inflation results), which will result, long term in a lower trade deficit. It could result in a lower debt (if the increase in demand were tempered with higher taxes) The problem is, the vast majority those dollars will be captured by the investor class, and with very low taxes for the wealthy will only result in greater economic disparity between the middle class and poor and those in the top 10%. In the meantime, interest rates will increase creating an interest income channel for the investor class and hardship for everyone else.

Thanks for the lengthy responses. I never took Econ 101 but I am a nerd and I read a lot. The other economist who has helped me understand the big picture is Mark Blyth from Brown U. ..He is quite brilliant.

It is a terrifying scenario. I still have a some questions:
Under this terrifying plan, there will be a shortage of labor, I suspect. Frantic deportations will surely shrink the labor pool.

Also, there will be a shortage of expertise for the kinds of technical jobs required to reboot carbon based industry.

And, why, do you think, would Musk sign on to a project that intends to the kill electric vehicle industry and probably autonomous ones, as well?

And can it proceed if Repubs lose badly in the mid-terms?

 

[Captain Adverse]

I suggest you take a gander at "trumponomics" -the podcast.

Of course, it not Trump's plan. He is apparently taking the advise of Stephen Miran.

The plan is to bring the industrial base back to the U.S. to reduce the trade deficit and bring back labor jobs. The other part of the plan is to reduce the value of the dollar.

Biden attempted to protect w tariffs immature industries meant to de-carbonize the U.S. "Trumponomics" will kill innovation. It looks like a return to the carbon economy of the 19th century.

I don't see how this can end well since manufacturers will inevitably resort to automation. And the rest of the world will begin to look to China for innovation.

Thank you for the reference I bolded in your post. I was not aware of Mr. Miran aside from name recognition from various videos and media documents who made mention of him. I will peruse it at my leisure.

But first I am well-aware that Trump's goal is to bring industry back to the USA, as you might find in a number of my prior posts in various threads, even without your reference to Mr. Miran. Trump has made that policy clear in certain areas of his "tariff war" efforts in public statements. Statements regarding certain items (like cars, steel, aluminum, computer hardware and software, etc.) that he wants to have factories back in the USA.

TBH I agree with those efforts. We have become too dependent on foreign producers of those critical items, especially China when it comes to steel. They literally buy our steel waste, ship it back to China, break it down and remake it, and then sell it back to us. Yet for them, even with the costs, they are making both a profit and creating a major strategic economic dependency.

Trump wants to cut ties like that. Moreover, we should NEVER depend on computer chips or any other electronics "made in China," because they may often contain "trojan horse" technology leaving us vulnerable. Making things HERE not only benefits American workers, but it cuts the costs of prepping, storing, and shipping to the USA, and completely eliminates tariffs. It also allows inspection to ensure no "funny business" within those products.

What bugs me is how so many Americans "on the Left" fail to see the problems with being a primarily consumer economy rather than a producer and user economy. Aside from the fact that we have enemies like China in our supply chain, we are failing to build a strong industrial based economy which profits our people, not foreigners.

You also presume too much. Yes, it is possible, even likely to have companies seek to fully automate, but there will still need to be repair and other technician jobs even so. Just like in Germany.

So, I think Trump is pushing short-term pain, for long-term gain. If only people on the LEFT who say they support the common worker would put their money where their mouths are, the process would benefit EVERYONE. I support this effort. But Trump may have to break a few eggs before a decent omelet of an economy occurs.

 

[Econ4every1]

I never took Econ 101

I realize you are probably just pointing out your lack of experience on the topic, but it reminds me how important it is to understand that econ is not a topic that lends it's self to intuition or simple explanations. That's not to say that it's beyond most people's capacity to understand, rather, the simple explanations that are taught in early econ lessons are all too often cited as evidence for a particular position as if a position or idea is consistent with lessons taught in the first year of econ are representative of the real economy and all too often are cited as proof that something is true.

The hardest part of understanding econ, is generally not in understanding specific ideas, like, for example the claim that; 'inflation happens when there is too much money chasing too few goods'. Econ 101, right? While that's true, it lacks the context necessary to understand the cause or informing decisions about what to do about it. Moving beyond econ 101 is essential for understanding not only what the causes are (in this cases what causes inflation) in real world contexts, but how best to solve it given real world constraints.

For example, the claim that too much money chasing too few goods causes prices to rise could just as easily be said, inflation happens when there is too little supply relative to consumer demand. It's really interesting how each of these statements say the same exact thing, but seemingly emphasize different aspects. The latter explanation emphasizes too much spending, the former emphasizes too little supply, thus inflation is entirely contextual phenomenon. Friedman is famous for saying that; "Inflation is always and everywhere a monetary phenomenon". Now he had more to say on this topic which I believe, at least partially, redeems the ignorance of how people trot out this statement (though I think that most Monetarists, while right about some things are wrong or lack the necessary context to understand the implications of their claims), but this is what people tend to remember and recite. This statement is often rolled out as a profound insight into money and more specifically on the topic of inflation, when it fact it is little more than, at best, a trivial tautology. It would be like saying; "drowning is every and always an aquatic phenomenon". The statement offers no real insight, but it sounds profound to those at the left side of the Dunning Kruger chart.

The inflation of the late 1970's and early 80's can only be understood in the context of deviation of an expected norm. It wasn't demand that increased, it was supply (of oil) that decreased. COVID resulted in a decrease in supply, which during COVID was met with a decrease in demand (hence very little inflation during the pandemic), but when COVID ended, demand surged within weeks, but supply took months (or longer) to recover. There were other factors (corporate profit taking, i.e. greed), but I want to keep this short-ish.

The point is, that difficulty of understanding econ isn't understanding specific ideas about, inflation, debt, trade ect, but understanding it in a broader context. I like to say, I can explain every aspect of driving a stick shift to an 8 year old boy. Steering, braking, clutch and all the other elements of driving and I could expect that he understands and could explain back to me what each thing does and why it's important, but if I threw him the keys, he still wouldn't be able to drive. It's putting all the pieces together that's important. It's relationships, how one aspect affects another and that takes more than causal understanding.

Lastly, economics in any organized society as much a question of morality as it is money. Almost anything worth doing at scale requires money. What should be done is a question of values and values are the foundation of what each of us things is right and wrong, good and bad.

Ok, so rant off. Apologies if that sounds preachy or you know some/ all of this, but I hope that you find some of all of this interesting. I think understanding econ is every persons responsibility. If you want my opinion on anything, just ask.

 

[Econ4every1]

Under this terrifying plan, there will be a shortage of labor, I suspect. Frantic deportations will surely shrink the labor pool.

In specific areas, sure. Farming and meatpacking, without looking it up, are two that come to mind. Food is one of several critical needs, like housing, energy, medical care, education and three that I think are important in modern societies, transportation, information and communication.

Also, there will be a shortage of expertise for the kinds of technical jobs required to reboot carbon based industry

If I understand what you mean by "carbon based industry", I think we're already leading the world.

And, why, do you think, would *usk sign on to a project that intends to the kill electric vehicle industry and probably autonomous ones, as well?

In 2022 I started telling people I thought Tesla would be bankrupt as a company by 2027 (5 years). The company is no longer a world class innovator. I'd argue that the cars aren't really the innovation, but the scale of battery production that Tesla created and his refusal to bow down the status quo in the global car parts supply chain and lastly how his cars are marketed to the public.

Other factors are that full self driving he claimed was always a lie
Cyber Truck is a dismal failure.
His insane promises about the capabilities of Robotaxi, which he said would be delivered 5 years ago.
The Tesla Roaster, also announced the same year, 2019 and promised for 2020, 5 years ago. He claimed it would have a 600 mile range, which would take up 3/4ths of the space that the car would, as shown, occupy.
And that's just a few

Basically, I think he knows that Tesla is dying. The current president is his last best hope to revitalize the company, hence the $400 million dollar contract that someone uncovered for armored Cyber Trucks, which were later downplayed. So my 5 year prediction now hinges on his relationship with the current president and republican lead government to subsidize his two largest companies, SpaceX and Tesla, especially since China is now beating Tesla in within 5 years will almost certainly be the global leader in EV's at every level.

Either way, being an Oligarch pays a lot better than either.

And can it proceed if Repubs lose badly in the mid-terms?

If they loose, no, but I don't expect the R's will play fair. They stand at a lot of the doors and control many key's and that will likely only get much, much worse. I think what we'll see over the next two years can only be described as a slow-rolling coup because by the time the Mid-terms come, most R's are going to suffer buyers remorse. If elections are even close to fair, the shift in Congress will be historic IMO.

 

[Econ4every1]

especially China when it comes to steel. They literally buy our steel waste, ship it back to China, break it down and remake it, and then sell it back to us. Yet for them, even with the costs, they are making both a profit and creating a major strategic economic dependency.

Recycling steel and the benefits really depend on how it's processed. There can be significant environmental impacts if standards aren't followed. China has, at best, a mixed record here. So while it may appear that recycling scrap US steel is a win for China, the long term environmental impacts are a cost they will have have to pay sooner or later.

That said, we agree that steel production is a strategic resource and being able to produce it at some scale is important, the problem is, one I'm sure you understand all to well, subsidization or tariffs, which would be required to keep steel stateside, has mixed results. Market advantages (subsidies or tariffs) given without cost or expectation can lead to sub standard results. The US auto industry is a great example.

So how do you think a protected or subsidized national industry could be discouraged from achieving sub par results?

he wants to have factories back in the USA.

As a blanket policy this is a bad idea for reasons we can discuss.

we should NEVER depend on computer chips or any other electronics "made in China,"

Quite right, and reading ahead, this comment "...Americans "on the Left" fail to see the problems with being a primarily consumer economy rather than a producer and user economy." There are few people that know, of any ideology that doesn't believe that chips need to be made in the US, just from a strategic perspective. More broadly, the farther left you go the more complaints you'll hear about exploiting foreign workers. Historically the right hasn't had a problem exploiting the labor and resources of another country.

You are 100% right that imbedded code can be hidden in hardware and software and likely is already here. I've seen strategic assessments that expect that a hot war between the US and China would likely result in trojans' being deployed and much of the nations communication and infrastructure could be affected, likely taking 3-5 months to fix and resulting in 100's of billions of not trillions of dollars in damage and, indirectly, a significant death toll.

Huge tariffs on the US's largest trading partners is not an intelligent approach to address you and my concerns.

It will disincentivize innovation just like it did in the US auto industry that's now struggling to keep up globally. For anyone that doesn't understand this, if a person makes a product and it costs $100 to make in a competitive market, but in US markets it takes $110, if the government

You shouldn't make this particular issue a partisan one, I think you'll find good company on left who recognize there are good reasons to maintain certain strategic resources and products here in the US. for economic and security reasons. I'm with you on this topic.

 

[oneandrew9]

All of you are missing what Trump is actually doing. He is not deliberately creating a Recession. What he is doing is filling the Treasury with money that was allocated for Ukraine, Dept. of Ed, USAID, Global Warming to name a few. Then, add to those funds, money taken in with tariffs. When all that maximizes, he will declare corporate tax break time and go laughing all the way to the bank with his share of tax break. For me, it's so obvious. There's nothing illegal here, it's just unethical which Donald's middle name.

 

[oneandrew9]

All of you are missing what Trump is actually doing. He is not deliberately creating a Recession. What he is doing is filling the Treasury with money that was allocated for Ukraine, Dept. of Ed, USAID, Global Warming to name a few. Then, add to those funds, money taken in with tariffs. When all that maximizes, he will declare corporate tax break time and go laughing all the way to the bank with his share of tax break. For me, it's so obvious. There's nothing illegal here, it's just unethical which Donald's middle name. If a Recession occurs because of all this, it's just a side effect.

 

[Econ4every1]

Yes, it is possible, even likely to have companies seek to fully automate, but there will still need to be repair and other technician jobs even so. Just like in Germany.

I agree that repairs on automated infrastructure would help create jobs, but there would likely still be a net loss of jobs when comparing pre-automation factories to modern automation. Look at Tesla's factory vs any US car maker, Tesla factories do not employ as many as other car companies. That said, I want to be clear, automation isn't bad, it can be very good. It allows a nation to create more output per citizen, the problem comes when the owners of production have replaced workers and feel they have no obligation to share their wealth. Why would low to medium skilled workers want to live in a society where automation put them out of work, and the wealthy factory owners use their wealth to out compete the poor and middle class for virtually everything, including politicians who slash taxes, funding for education, healthcare and now we can expect retirement in the form of SS to be on the chopping block. I mean, it may be more "efficient", but that efficiency will make a large segment of the US population worse off as they are forced to work low wage jobs (as the demand for those jobs will far outpace the supply).

There our countless examples of the investor class pooling mind numbing amounts of money to consolidate whole industries, at first appear to provide better service at a lower price only to raise prices once coopetition is narrowed to just a small handful of mega companies who would rather increase their profit per customer than to increase their market share via increased competition.

Despite the claims of some people in this forum (maybe you?), wealth disparity eventually results in the wealthy using their wealth to reduce the standards of living for everyone else.

Simple example. When I was a kid, every decent sized lake around suitable for enjoyment had public and private areas. Usually the public areas were large relative to the size of the lake and were easily accessible. Today, countless lakes, a natural resource that should belong to everyone are increasingly shutting out any public assess. Literal gated communities for private only access. Just a simple example of increasing wealth being used to consume resources, where only a handful of wealthy people have access, when in the past thousands of people could have enjoyed these areas.

So, I think *rump is pushing short-term pain, for long-term gain.

I will concede that a well thought out plan that included some of the elements this administration is proposing might have some success in some areas. However, in practice the speed and haphazardness this administration has gone about things is producing only chaos and he has you fooled into thinking this is about making the lives of average people better. Let's keep in touch here and revisit this topic this time next year and the year after. I predict the only people that will benefit are those in the top few percent of the economy. For people like me, who have modest savings and 1-2 homes and are set to inherit a little something from our working class baby boomer parents, things will likely stay the same economically, but be worse societally.

If only people on the LEFT who say they support the common worker would put their money where their mouths are, the process would benefit EVERYONE.

That will be a common theme in the coming years. Failure will be pinned on those that have no power in government or society. The political right has ALL of the power in the Federal Government and they will have only themselves to blame when this absurd experiment fails. I hope I live long enough to see the nation recover.

 

[oneandrew9]

Nonsense. Trump is perfectly aware of how tariffs work and the effects (temporary or otherwise) on the economy.

What your side of the argument misses is that these other nations you worry about already have various forms of tariffs on U.S. products that prevent them from being competitive in their markets. For one good example (and I have mentioned this before) just review J.D. Vance's speech to the gathering of European leaders. He talked about how Germany has several levels of tariffs and taxes that price U.S. made cars out of competition in the German market, while the USA did not treat German cars imported for sale that way.

I repeat, every nation that Trump has placed tariffs on already had protectionist tariffs against American goods in their own nations, including both Canada and Mexico.

Well, you need to understand that European consumers have nowhere near the buying power of Americans, or even access to credit. Forcing parity with them puts their Economies at a serious disadvantage. Germany is about the size of 2 states while the US is 25x larger. But, Trump is not aware of how tariffs work. I heard him say 2x that these countries will pay the tariffs right into our Treasury (where he has accesss to it). Wow, is that dumb. The first time he was corrected by Kudlow who is not part of this administration.You can tell this by looking at his tariff war. He started out full gangbusters against all of them and then retreated to tariffs on imported liquor. That's because his advisors have explained it to him. Trump is nothing more than a schoolyard bully with a criminal mind.

 

[EdwinWillers]

Oh boy...

TL;DR he's a tool.

Hard to know where to start....

He's a supply-sider
He thinks that tarriffs are good
He wants lower cooperate taxes and lower taxes on the wealthy
He wants more deregulation
He wants to to "re-industrialize" the US
He broadly opposes free trade
He wants less entitlements availible to the working class and poor
He thinks the problem of healthcare is that people abuse it because they don't have to pay enough for it
He's critical of demand side stimulus (helping poor people in a crisis)
He wants to promote "energy independence" with more growth in fossil fuels
He thinks economic growth can lower debt/ deficit
He thinks that the government can and does "crowd out" private investment.
He thinks government investment in Bitcoin is a good idea

< snip >

My kinda guy! (Save for the Bitcoin nonsense)

Couple points though:
Tariffs are a tool to change behavior - you make it sound like he believes in persistent tariffs, which is nonsense.
Taxes - sheesh, where have we heard THAT claptrap before? Right out of the lib's propaganda talking points
Deregulation - again, broadbrushing it as a standing order - congress, not unelected bureaucrats is the proper entity to be regulating anything. That you don't think we're over-regulated now only shows just how ignorant you are of the problem, let alone the solution.
Re-industrializing the US - what in the Wide Wide World of Sports is wrong with that???
"Broadly opposes free trade?"
Entitlements are destructive disincentives. 'nuff said.
Healthcare - gross, gross over-simplification of his position
"Energy independence" - what's wrong with that? Fossil fuels are our only current path to that and a stepping stone to other technologies, but only if we can develop them in independence, not under coercion.
Economic growth CAN lower debt / deficit! What is your solution? Recession? Depression?

You claim to have a wealth of knowledge about economics, but it's also clearly tainted by your rather obvious and biased political ideology - which doesn't exactly speak well to your "solutions" to our economic problems - and frankly which only make them worse, and have made them worse...

 

[jaypatriot]

That's not what I mean. I mean that there's a genealogy to how a set of ideas have been translated from one age to another. One example is that, at the founding of this country, we self-consciously adopted capitalist economics because, of all the systems available at that time, it was the one that was thought to produce the goods we need better than any other system. But over time, the ideal has shifted from "system that best produces the goods everyone needs" to "capitalism." People forgot that we want a system that produces certain goods (which would include, among other things, just economic outcomes), in favor of a kind of shorthand--"capitalism." That shorthand was gradually adopted as the new ideal, and the reason for capitalism being adopted in the first place--the actual ideal toward which all economic systems should strive--has been lost among most people's concepts. That's the subversion I'm talking about. Now, we have a great many people who would rather live in the Blade Runner universe because it is capitalist, rather than the Star Trek universe because it is socialist--even though life in the Star Trek universe is obviously vastly better than in the Blade Runner universe.


I don't think that's the argument. The argument is that someone like Elon Musk, whose net worth is many billions of times greater than that of his employees, cannot be many billions of times smarter or work many billions of times harder than even the dumbest and laziest human being who ever lived--let alone be many billions of times smarter than his dumbest employee or work many billions of times harder than his laziest employee. Anyone who understands order of magnitud will see that such is obviously impossible. So then, why does he have all that wealth, while so many in this economy struggle, even though they work full time and do a good job? Something has gone very wrong when wealth distribution is that out-of-whack. Musk would have nothing if it weren't for all the people who have worked for him. Ditto all the other wealthy elite.


Yes, of course. So is justice. The idea behind market economics is to make the mechanism by which wealth is distributed decentralized--it's down to individuals making contracts. The problem is that once all the means of production are owned, wealth no longer tracks hard and smart work. The lazy and stupid can get rich while the diligent, conscientious, and intelligent can be quite poor. Indeed, I'd imagine that Musk probably has workers who are smarter and who work more than he does, and still do not have much in the way of wealth.


Sure. I agree. Not sure what the point is, though.

Your rant looks like it came from the Bernie Sanders "Wealth of Envy" book for all those people not smart or lucky enough to be Elon Musk.
You wrote: " So then, why does he have all that wealth, while so many in this economy struggle, even though they work full time and do a good job? Something has gone very wrong when wealth distribution is that out-of-whack. Musk would have nothing if it weren't for all the people who have worked for him. Ditto all the other wealthy elite."

Well, boo-hoo, some people are richer than others. And it has always been that way.
I got my knowledge of wealth and power from the movie "Fiddler on the Roof".
For a poor man, Tevye was very wise. He knew that being very rich meant others would listen to him. That doesn't mean he was smart; just very rich.
Tevye said:
"The most important men in town would come to fawn on me!
They would ask me to advise them like a Solomon the Wise
"If you please, Reb Tevye..."
"Pardon me, Reb Tevye..."
Posing problems that would cross a rabbi's eyes!
And it won't make one bit of difference if I answer right or wrong
When you're rich, they think you really know!
If I were rich, I'd have the time that I lack to sit in the synagogue and pray
And maybe have a seat by the Eastern wall
And I'd discuss the holy books with the learned men, several hours every day
And that would be the sweetest thing of all"

You are concluding that being fabulously wealthy means "something is out of whack".
Prepare yourself for the shock when you realize
THERE HAVE ALWAYS BEEN VERY WEALTHY PEOPLE IN THIS WORLD".

 

[MTAtech]

"Traders are starting to price in the possibility that the U.S. economy might fall into a recession — and one Wall Street veteran says that might actually be the Trump administration’s plan.

Charlie McElligott, a strategist at Nomura dubbed Wall Street’s most wired analyst by the Financial Times for his manic missives focused on the options market, laid out the argument in a note to clients.

He said President Donald Trump and his administration need an engineered recession to cause a growth slowdown and disinflation that will translate into Fed rate cuts and a meaningfully weaker U.S. dollar for the next phase of his economic agenda.

In another note to clients on Wednesday morning, McElligott cited remarks made by Treasury Sec. Scott Bessent on a focus on small business and consumers that will require a “rebalance,” as Trump in front of Congress on Tuesday night spoke of being “okay” with a little disturbance from tariffs.

The idea is that Fed rate cuts and supply-side stimulus from tax cuts and deregulation will then be able to build up the economy without the need for government spending."

Link

This is a good, simple explanation of what Trump is trying to do. It's a pretty tall order and I'm not sure that what works on paper will happen in the real world. And indeed, there are many critics of this idea. These are weeds I'm not eager to wade into.

Seems kind of silly, if true. 'Create a recession so the Fed will lower interest rates, that aren't needed now.' I always believed there are two competing theories about behavior -- the 3 dimensional chess theory, that the decision maker has this all planned out vs the incompetence theory -- the decision maker has no clue. I lean towards the later theory, as Trump has displayed incompetence for a long time.

In desperation he claims that Americans need to suffer or detox for President Biden’s (imaginary) sins when Trump’s message throughout the campaign was that he would fix everything on Day One. It’s also remarkable, if you think about it, that Trump officials are in effect offering excuses for a recession that hasn’t happened yet and is at this point only a possibility.