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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
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:You weren't clear but I made it clear how that mechanism works. They can leverage the value of their stock for liquidity.
Ash said:But then, the companies whose stocks are purchased will have more cash to spend, which in turn will drive inflation further.
trumptman said:When you purchase a company's stock they don't have more "cash to spend".
Ash said: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.
trumptman said: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.
Ash said: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.
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.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.
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).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.
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.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.
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.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.
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.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.
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.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
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.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.
Sure. I agree. Not sure what the point is, though.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.
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.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.
The government spending on the military build up, increased private sector manufacturing ie it takes steel to build tanks and ships.
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
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
Excellent.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.
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.It is not ONLY government spending that drives inflation.
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.There is also their long discussed relationship with the Fed
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?...reserve requirements for banks
For example? (Not that I necessarily disagree).the type of loans allowed to be offered to consumers and so on.
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).Also the flip side of the government spending is DEFICIT FINANCING
Oof....How am I doing?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.
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.Trump is perfectly aware of how tariffs work....
I suggest you take a gander at "trumponomics" -the podcast.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.
But check out his head economic adviser, Stephen Miran.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.
Oh boy...But check out his head economic adviser, Stephen Miran.
Id like to know what you think..
My sentiments exactly.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.
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.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.
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.
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.I never took Econ 101
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.Under this terrifying plan, there will be a shortage of labor, I suspect. Frantic deportations will surely shrink the labor pool.
If I understand what you mean by "carbon based industry", I think we're already leading the world.Also, there will be a shortage of expertise for the kinds of technical jobs required to reboot carbon based industry
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.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?
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.And can it proceed if Repubs lose badly in the mid-terms?
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.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.
As a blanket policy this is a bad idea for reasons we can discuss.he wants to have factories back in the USA.
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.we should NEVER depend on computer chips or any other electronics "made in China,"
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.
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).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 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.So, I think *rump is pushing short-term pain, for long-term gain.
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.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.
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.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.
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 >
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.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.
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."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.
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