Posted on 03/24/2016 4:49:45 AM PDT by IBD editorial writer
Well, traditionally America (from the 1700s on) was built on higher, not lower, wages than everyone else. Land availability drove up wages by forcing businesses to mechanize, which in turn drove higher skills and higher wages. We rapidly caught up to England because of higher wages and higher skills.
Do you see the problem now?
“Of course I do. Our government spends like a drunken sailor so there is always a big supply of U.S. bonds that can be purchased by foreigners.If there wasn’t then they would buy corporate bonds and stocks.”
Obviously you don’t understand at all:
Every time you buy a Japanese car, you then have to pay higher taxes to pay for the interest they get on the US Savings Bond they bought.
If instead of gov bonds we had some products for them to buy then you’d get hired and paid by that company to produce produce some exports.
Instead, with our main export being gov bonds, the gov gets all the ‘returning dollars’ and your taxes must rise.
“You are trying to blame trade for all our problems.”
No I’m not.
“Big mistake. But it is yours not mine. And not Milton Friedman’s. “
I didn’t make any mistakes and neither did Milton Friedman, he said the ‘dollars will come back’ and they are.
“And you are mistaken about the Balance of Trade.”
No I’m not.
“As long as the Chinese and Japanese and the rest are doing anything with those $Dollars they are holding that will balance the books.”
As long as they’re holding their bonds, we have to pay interst on them.
“Of course they could burn them but I don’t anticipate that. “
Or we could sell them something other than debt. But I don’t anticipate that.
“Well, traditionally America (from the 1700s on) was built on higher, not lower, wages than everyone else. Land availability drove up wages by forcing businesses to mechanize, which in turn drove higher skills and higher wages. We rapidly caught up to England because of higher wages and higher skills.”
Traditionally we had lots of tariffs on foreign goods. The tariff of 1789 on British shipping, signed by George Washington himself, helped pay off the national debt, and gave rise to the Boston shipbuilding boon and the higher wages that resulted.
But there have been times of stagnant wages. The one that sticks out for me, since I was old enough to experience it myself, was during the Crater years. In fact it was stagflation as it was coupled with inflation as well as stagnant wages. Why they haven’t labeled this as stagflation can only be assumed as to who occupies the White House currently. In addition back then they were more honest about the inflation, whereas now they use games to suppress the real inflation we are beset with.
Well, we aren’t in real inflation yet, because inflation is first and foremost defined in terms of WAGES rising as well as prices, and that hasn’t happened. Moreover, some major prices have gone down-—housing, energy. Many tech items are falling.
I bought an Epson printer today, with a scanner (so it’s an upgrade from mine), including color and black and white. $150.
Are you kidding me? I remember paying several hundred dollars for a printer.
I think we are still in many sectors still in DEflation, especially housing and some industrial production. Yes, food items are rising in price. Haven’t bought a car recently, so I assume they are up.
Tariffs made some sense back then. There was no income tax and it was a convenient and mostly hidden way to collect the revenue required to finance the Federal Government. And I believe the tariffs were fairly modest, perhaps 2-3 percent.
Tariffs were used as a revenue source. If you believe they were intended to manage unemployment give us some references.
The first tariffs where for two things, revenue income (as you have noted) and protection of American Industry.
Housing prices have risen, but they are still down from their highs of 8 years ago. But that is because houses were way overpriced to begin with back then.
Energy prices have fallen because supply exceeds current demand (people are not driving as much because their money is needed elsewhere within their budget).
Tech equipment is being kept low because of where it is being manufactured. When tech equipment first comes out it is always expensive. It is known as the bleeding edge for that very reason. Because the first to acquire are always bleed of their money. I remember the first big monitor I purchased, had to have it. Had a waited a year I would have gotten it for a third of the price I had paid 1 year earlier.
Cars are definitely up. This is the least expensive car currently on the market: Nissan Versa 1.6 S: $12,825 (including destination charge).
What industries were protected? If I’m right about the 2-3 percent tariffs that doesn’t sound like too much protection. Were the tariffs on some products actually much higher? Were they as popular as they are here at Good Old FR where people seem anxious to pay extra for their next HDTV and send that money to our friends in Washington D.C.
Ok, but we have to watch out. When you start making too many exceptions, then the exception is the rule. Gold is down, silver is down, all the traditional measurements of inflation are down.
You would be better off excluding the few items like food that are up.
So we get back to wages as a key element of inflation.
Now, I agree housing was way, way overpriced-—but that was a 40 year bubble (See Sowell, “The Housing Boom and Bust”). Still, given where they should “normally” be houses are still way undervalued. We are trying to sell our house and are having trouble getting anywhere near the appraised value.
Devaluation relative to what?
In historical terms the dollar is pretty strong relative to other currencies - which is what matters in the trade context.
The strong dollar is making imports cheaper, enhancing buying power for those goods.
Devalued by the excessive printing of cash and the amount of cash in circulation. Also devalued by the excessive debt load being carried by this nation. The only thing really saving our bacon right now, is the fact that all the other countries have done the same coupled with our currency being one of four of the world’s reserve currencies. The Euro, British Sterling and the Japanese Yen are the other 3 reserve currencies. In Oct of this year the Chinese Yuan will make the 5th.
As you know appraised values are typically lower than selling prices. But in an economy such as the one we are currently in, people are exerting more caution. Another factor is that it is a buyers market. There are of course other factors like, location location location!!! But I'd say bargains are what are selling best right now. The job market of course plays a big part in pulling in people from other states that have a more urgent need for housing, and some of those may be renting instead of buying to see where the economy is headed. Haven't really been in the market for a new house, so I am not sure what the trade up market looks like. But I'm sure it is softer than was as well.
Like I said inflation is not that bad, until you get into the food purchase where it has been growing faster than elsewhere. It was running ion the double digits back in Carter's day. But we are still experiencing inflation. That coupled with stagnation in wages (going on for about 8 years running now) is reducing purchasing power and causing people to tighten their belts, as well as, be more cautious about large ticket items in particular.
Now if only today's protectionists would admit that their hated central bank is part of the very same program.
I agree about the risks of excessive money creation, but that usually results in inflation. Devaluation in the context of international trade is strictly currency vs. currency, and the dollar is actually pretty strong.
The GOP is the BOHICA-trade party.
What's your handicap?
The eGOP is for Free Trade, trade that screws America while they line their pockets.
Americans are for Fair Trade, trade that benefits all parties including Americans.
The real question is: "When did the progressives become the establishment Republicans, and turn the Republican Party into one of anti-American treasonous trade policies?"
Pro-American trade policies result in growth of the American economy. Anti-American trade policies result in stagnation and decline of the American economy.
William McKinley, speech before Congress in 1892:
"Under free trade the trader is the master and the producer the slave. Protection is but the law of nature, the law of self-preservation, of self-development, of securing the highest and best destiny of the race of man. [It is said] that protection is immoral.... Why, if protection builds up and elevates 63,000,000 [the U.S. population] of people, the influence of those 63,000,000 of people elevates the rest of the world. We cannot take a step in the pathway of progress without benefiting mankind everywhere. Well, they say, 'Buy where you can buy the cheapest'.... Of course, that applies to labor as to everything else. Let me give you a maxim that is a thousand times better than that, and it is the protection maxim: 'Buy where you can pay the easiest.' And that spot of earth is where labor wins its highest rewards."[50]
If other countries were not doing the same, printing up money, our printing would would cause the exchange rate to become devalued (as long as nothing changed in the foreign country). In some instances, when your currency is too strong, it is a good thing to devalue your currency. Then the goods you produce become more salable in the foreign marketplace.
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