PLAYPEN: Covid-19 Everything Political

[Slobodan Blagojevic]

I think Slobo was referring to the famous German hyperinflation after WWI...

Of course.

[Alan Klein]

Trump did an unconventional thing when he introduced tax cuts when the economy was doing well on its own. It was unnecessary and left the US with no leeway if/when the economy subsequently slowed, Covid notwithstanding. Normally governments replenish their coffers in good times.

Actually, the Fed did raise interest rates for about three years back up from .25% to 2.5% starting in 2016.  Then the stock market started to go down in 2019.  So the Fed got nervous about the economy and started to lower rates again in 2019.  Then Covid hit and the Fed dropped their pants, I mean dropped their interest rates to about 0.25% from 1.25% on Mar 15th, 2020 and started up the printing presses again.   Trump promised tax cuts which was a good thing to do.  It help the business community be more competitive to other corporations in other parts of the world that have lower tax rates then America.  For example, we became more competitive with your country Canada.  Maybe that's why you don't like Trump and object to the tax reductions.
Click on the 5Y icon and you'll see the Fed rates over the last five years. 
https://tradingeconomics.com/united-states/interest-rate

[Chris Kern]

Trump did an unconventional thing when he introduced tax cuts when the economy was doing well on its own.

Trump didn't introduce the tax cuts that were enacted while the Republican Party still controlled both chambers of Congress.  It's not even clear he ever understood the contents of the bill Congressman Paul Ryan of the state of Wisconsin, then the speaker of the House of Representatives, negotiated with the business and against-all-taxes "tea party" wings of the party.

U.S. tax "reform" laws are inherently extremely complex, and Trump is notoriously averse to policy details.  He reportedly often becomes impatient with documents longer than a single page.  Apparently, his attitude while the tax bill was being formulated was that it was the responsibility of the Republican Congress to determine its provisions.  As it turned out, some of them were in direct contradiction to positions he had taken during the 2016 presidential campaign.  (For example, he strenuously opposed the "carried interest" provision for owners of private equity funds and the law that Congress passed preserved it.)

Of course, Trump signed the bill into law, so it is reasonable to hold him responsible for its consequences.  But except for a few long-held positions (e.g., international trade is a zero-sum game, tariffs are paid by the countries whose products they are levied against rather than the importers of those products), Trump is a rare president―unique, at least in my lifetime―who has no interest in policy, and who perceives the actions of the government through a narrow lens of whether they enhance or detract from his public image.

[Ray]

(e.g., international trade is a zero-sum game, tariffs are paid by the countries whose products they are levied against rather than the importers of those products)

That doesn't sound right to me. As I understand, tariffs are paid by the importers and collected by the Government. An increase in tariffs has the effect of increasing the price of the product in the countries that have imported the product. That increase in price is eventually paid by the consumer of the product, so the consumer of the goods indirectly pays the tariff, not the country that produces the goods.

[Chris Kern]

As I understand, tariffs are paid by the importers and collected by the Government. An increase in tariffs has the effect of increasing the price of the product in the countries that have imported the product. That increase in price is eventually paid by the consumer of the product, so the consumer of the goods indirectly pays the tariff, not the country that produces the goods.

Correct on all counts.  Trump's long-held belief about tariffs is simply wrong.

[Alan Klein]

Trump didn't introduce the tax cuts that were enacted while the Republican Party still controlled both chambers of Congress.  It's not even clear he ever understood the contents of the bill Congressman Paul Ryan of the state of Wisconsin, then the speaker of the House of Representatives, negotiated with the business and against-all-taxes "tea party" wings of the party.

U.S. tax "reform" laws are inherently extremely complex, and Trump is notoriously averse to policy details.  He reportedly often becomes impatient with documents longer than a single page.  Apparently, his attitude while the tax bill was being formulated was that it was the responsibility of the Republican Congress to determine its provisions.  As it turned out, some of them were in direct contradiction to positions he had taken during the 2016 presidential campaign.  (For example, he strenuously opposed the "carried interest" provision for owners of private equity funds and the law that Congress passed preserved it.)

Of course, Trump signed the bill into law, so it is reasonable to hold him responsible for its consequences.  But except for a few long-held positions (e.g., international trade is a zero-sum game, tariffs are paid by the countries whose products they are levied against rather than the importers of those products), Trump is a rare president―unique, at least in my lifetime―who has no interest in policy, and who perceives the actions of the government through a narrow lens of whether they enhance or detract from his public image.

Trump campaigned on reducing taxes for corporations and for people.  He got that.  Of course he asked for more than Congress gave him.  But that's how he and any smart negotiator deals.  You ask for more and settle for less but just about where you hoped to end up.  Of course there were a few things he would have liked to get also but didn't.  No president gets 100% of every little detail.  Congress doesn't work that way.

[BernardLanguillier]

https://www.youtube.com/watch?v=8Y_EwJdoOyk

Colin Powell telling it the way it is about Trump.

Nothing but clear cut facts and what they mean for the US and for democracy.

Cheers,
Bernard

[Alan Klein]

That doesn't sound right to me. As I understand, tariffs are paid by the importers and collected by the Government. An increase in tariffs has the effect of increasing the price of the product in the countries that have imported the product. That increase in price is eventually paid by the consumer of the product, so the consumer of the goods indirectly pays the tariff, not the country that produces the goods.

You're right on the basics.  But there is a caveat.  If you're an exporter, and the importing country adds a tariff, that raises the final price of your product.  That lowers sales.  So in order to keep sales up, the exporting country could lower prices to the importing distributor which will lower the final price before the tariff is applied.  It may not be one for one.  But it does lower the price.  So the exporting country would absorb at least some of the tariff's cost by charging less. 

[Alan Klein]

https://www.youtube.com/watch?v=8Y_EwJdoOyk

Colin Powell telling it the way it is about Trump.

Nothing but clear cut facts and what they mean for the US and for democracy.

Cheers,
Bernard

Colin Powell was the guy who lied for Bush to the U.N. about weapons of mass destruction in Iraq and helped get us into the costly Iraq War, a war that Trump opposed. Those are nothing but clear cut facts.   

[Ray]

You're right on the basics.  But there is a caveat.  If you're an exporter, and the importing country adds a tariff, that raises the final price of your product.  That lowers sales.  So in order to keep sales up, the exporting country could lower prices to the importing distributor which will lower the final price before the tariff is applied.  It may not be one for one.  But it does lower the price.  So the exporting country would absorb at least some of the tariff's cost by charging less.

That's a good point, Alan. When the US raises tariffs for Chinese products, maybe that will encourage the Chinese manufacturers to be even more efficient so they can lower their export prices. With those lower prices the Chinese will have more export options to other countries, especially considering the ongoing 'Belt and Road Initiative'. 

[Robert Roaldi]

That's a good point, Alan. When the US raises tariffs for Chinese products, maybe that will encourage the Chinese manufacturers to be even more efficient so they can lower their export prices. With those lower prices the Chinese will have more export options to other countries, especially considering the ongoing 'Belt and Road Initiative'. 

Another possibility is that over time China will just start trading more with countries other than the US. It's a big old world.

[Alan Klein]

That's a good point, Alan. When the US raises tariffs for Chinese products, maybe that will encourage the Chinese manufacturers to be even more efficient so they can lower their export prices. With those lower prices the Chinese will have more export options to other countries, especially considering the ongoing 'Belt and Road Initiative'. 

That's a two-way street.  Other exporters who are not charged US tariffs become more competitive to China.  If American importers have to pay more for the products and sub-assemblies, they move production either home or to other foreign countries like Vietnam, Taiwan, etc.  Or they just buy simila, but cheaper, products from other countries.  China loses the business. That's happening already.  That also forces China to lower the sales price and absorb tariff costs. 

The virus has also upped the ante.  A lot of Americans blame China especially their lying about it.  Americans are pushing Congress, both Democrats and Republicans, to protect American interests vis-a-vis China.  I read that other countries feel similarly to America. 

[Alan Klein]

Another possibility is that over time China will just start trading more with countries other than the US. It's a big old world.

No one including China want to walk away from the American market any more than we want to walk away from the Chinese market.  That's cutting your nose off to spite your face.

[Slobodan Blagojevic]

Guys, you just got schooled by Alan

[Ray]

That's a two-way street.  Other exporters who are not charged US tariffs become more competitive to China.  If American importers have to pay more for the products and sub-assemblies, they move production either home or to other foreign countries like Vietnam, Taiwan, etc.  Or they just buy simila, but cheaper, products from other countries.  China loses the business. That's happening already.  That also forces China to lower the sales price and absorb tariff costs. 

The virus has also upped the ante.  A lot of Americans blame China especially their lying about it.  Americans are pushing Congress, both Democrats and Republicans, to protect American interests vis-a-vis China.  I read that other countries feel similarly to America.

Alan,
I get a sense this view is not that of a free-market, capitalist system, which I thought you embraced. Isn't it in the interests of most of us that all countries should be encouraged to develop products they are best suited to produce, so we can all benefit from lower prices due to greater efficiency and/or the more favourable circumstances that might exist for the production of a particular product in a particular country.

Recently, Australia lost its car-manufacturing industry because it just couldn't compete with Japan, South Korea, China, Thailand and other more efficient car-manufacturing countries. The government tried to address the problem by subsidizing our car industries, but that was eventually considered to be a waste of money. Raising the tariffs on imported cars was considered, but that would have meant that all those who are lacking wealth and who have mortgages to pay, which is the majority of the population, would be worse off and have greater debt.

Around a year ago I bought a very nice new modern car manufactured in South Korea, a Kia Cerato. It cost me only A$20,000, which is equivalent to around US$14,000. It includes an unlimited-kilometre warranty for 7 years. It's rare to see a car insured for that period of time. I'm very pleased with it. The tariff was zero, but there was a 10% GST (Goods and Services Tax that applies to almost everything, except basic food, medicines, education courses and a few other products and services.)

[Alan Klein]

Alan,
I get a sense this view is not that of a free-market, capitalist system, which I thought you embraced. Isn't it in the interests of most of us that all countries should be encouraged to develop products they are best suited to produce, so we can all benefit from lower prices due to greater efficiency and/or the more favourable circumstances that might exist for the production of a particular product in a particular country.

Recently, Australia lost its car-manufacturing industry because it just couldn't compete with Japan, South Korea, China, Thailand and other more efficient car-manufacturing countries. The government tried to address the problem by subsidizing our car industries, but that was eventually considered to be a waste of money. Raising the tariffs on imported cars was considered, but that would have meant that all those who are lacking wealth and who have mortgages to pay, which is the majority of the population, would be worse off and have greater debt.

Around a year ago I bought a very nice new modern car manufactured in South Korea, a Kia Cerato. It cost me only A$20,000, which is equivalent to around US$14,000. It includes an unlimited-kilometre warranty for 7 years. It's rare to see a car insured for that period of time. I'm very pleased with it. The tariff was zero, but there was a 10% GST (Goods and Services Tax that applies to almost everything, except basic food, medicines, education courses and a few other products and services.)

I'm opposed to tariffs as is Trump. I also agree that in a capitalist system, government shouldn't be playing favorites except in the area of certain military defense products.  Other than that, fair competition should extend equally across national borders just as we have equal national rules across the borders of our 50 states.  No one state can set up rules that make their products more competitive than products made in other states. For example, a few years back, New York State charged higher sales taxes on wine produced in other states sold in NY.  They did that to protect the NY wine industry.  The Supreme Court found that unconstitutional. It was a tariff, in effect within my own country.  In order for a good free market system to work, you have to have an even playing field. 

The purpose of the tariffs was to pressure China to stop stealing intellectual property from our industries and to drop Chinese tariffs on American products and other impediments to US corporations working freely in China as we allow them to work in ours. If we can establish more equitable rules regarding these issues, then we could drop tariffs.  The whole world would benefit as well as other countries could have more equal and fairer acceess to China.  So if America can win on this issue, or at least ameliorate it to some extent, Australia would benefit as well, as would others. 

[Ray]

Well, let's hope it all works out well, but I'm a bit skeptical.

[Alan Klein]

Well, let's hope it all works out well, but I'm a bit skeptical.

So am I.  However, past presidents complained to China about these issues.  Nothing ever happened.  It only got worse.  At least the present administration is trying something.  Before the virus hit, there was an initial framework agreed upon.  It was a first step.  Unfortunately Covid 19 quashed that deal and may have made things worse.  Australia's in a pickle as well. China's a big customer of yours.  Yet your government has relied on the west for security as well as other Asian countries. China's really expanding into the South China Sea and elsewhere.  You need them for markets.  But do you trust their future intentions politically and geographically? Frankly, you're between a rock and a hard spot.  It's not easy knowing what to do.  Maybe we should ask a couple of global warming experts what they think.

[Ray]

I guess such squabbling and bickering over resources, and who gets what and how much, is part of the human condition. It's probably been going on for hundreds of thousands of years.

As long as such bickering doesn't escalate into military conflict, we should be okay.

[Alan Klein]

I guess such squabbling and bickering over resources, and who gets what and how much, is part of the human condition. It's probably been going on for hundreds of thousands of years.

As long as such bickering doesn't escalate into military conflict, we should be okay.

Of course, most wars start over territory and resource disputes.  Japan needed oil and other resources that incentivized them to take over China and other parts of Asia kicking off WWII.  Of course America contributed to that by blocking Japan regarding petrol.  Now, China's Nine Dash line claim to the South China Sea is about territory and resources as well.  Certainly Australia is a juicy target what with all the natural resources you have.  Let's hope cool heads continue and we can work these things out peacefully.