Wilbur Ross performing some heavy USD zombie eradication today...
Awesome job by @SecretaryRoss at Davos, entirely deconstructing the ridiculous economic arguments of the panel globalists. If you follow economics closely this is a MUST WATCH:https://t.co/7hj1fNxJbU
— TheLastRefuge (@TheLastRefuge2) January 24, 2018
42 comments:
The political message that reversing the strong dollar policy sends is that the US is withdrawing from global leadership. That is how it will be interpreted in other capitals anyway.
all the panelists kept saying "US leadership!... US leadership!...." blah blah...
What the hell is that????
To these USD zombies "leadership" means aka running perpetual USD trade deficits forever so everybody can get paid in USDs...
the Cargill guy is going to have to learn how to get paid in Yuan and Rubles and Euros... if he doesnt want those currencies then dont export to those nations in the first place and go play some golf...
Trump has made the accounting relationship (MBA Wharton) between the US trade deficit and the fiscal deficit so he is going to work to reduce the trade deficit to bring the fiscal deficit down and get himself some fiscal space for infrastructure, military tech refresh and eventually some healthcare...iow he is trying to get his domestic agenda better funded by reducing the deficit..
These guys better get used to accepting foreign currency in payments... or go to blockchain coins or something because Trump is on a jihad to lower the fiscal deficit thru shrinking the external deficit... its going to happen if the USD zombies were smart they would plan accordingly...
Economics is not the sole determinant geopolitically nor is military power.
It's national interest and the future.
US global leadership means ensuring allies and others that their future in terms of national interests lies with the US.
If the US says, We're going it alone, what will other countries do.
Especially when China is courting them, and the growth is coming out of Asia, where China is rising and the US setting.
"You are either with us or against us."
Nothing new here.
Trump's the accounting/finance/economics "genius" who claimed that under Obama US GDP was zero! "Who ever heard of that?" he asked. Er, nobody that's who, you innumerate simpleton.
Wharton must have some phenomenally easy courses if he can get an MBA. Remember this is the genius who had he simply put his daddy's money in a tracker index would be worth over $20 billion. From what we know of the tax records he has been forced to release, he's unlikely to be a billionaire, and what he has is a result of stiffing contractors and claiming bankruptcy so often that apparently no one in New York will do business with him. Trump knows next to nothing; he even found the US constitution completely baffling and gave up listening to it being read to him! Not only had he never read it or prepared to read it, he had to have it read to him! The man's a complete imbecile. Time to get over it rather than concocting farcical tales of his foresightedness. For as Trump's favourite man of all time says "...and the truth will set you free".
Here he manifestly understands this accounting:
https://www.vox.com/world/2017/6/30/15903178/trump-south-korea-trade-debt
“The United States has trade deficits with many, many countries, and we cannot allow that to continue ... with South Korea right now, but we cannot allow that to continue. This is really a statement that I make about all trade: For many, many years the United States has suffered through massive trade deficits; that’s why we have $20 trillion in debt.”
Checkmate..,
Trump knows next to nothing; he even found the US constitution completely baffling and gave up listening to it being read to him! Not only had he never read it or prepared to read it, he had to have it read to him!
Believe what you want, John, but at least Trump is on record saying that he will protect Article XII of the U.S. Constitution. If am not mistaken, no other presidential candidate or president has ever pledged such unequivocal support for Article XII. ;)
The 7 Articles of the US Constitution
http://www.dummies.com/education/politics-government/the-7-articles-of-the-us-constitution/
I would further say that what he just did with his tax cuts in this regard, where he has removed the financial incentive for the US multinationals to save gross earnings offshore to avoid the 35% corporate taxation exhibits an operational knowledge of these systems that is in excess of ANY MMT person out there... and I mean ANY....
The MMT people STILL dont fully understand how what Trump has come up here works...
Checkmate?
The moron doesn't realize that imports are a real benefit and the down side is exporting jobs.
What the US needed to do and still needs to do is to use its enormous fiscal space to fund R& D, infrastructure, and innovation, like China is doing, institution policy that achieve growth, price stability, and full employment by employing the principles of MMT.
" like China is doing,"
China is a disgrace and the whole thing there is to hack the west in order to acquire premiere western currency...
Obviously he does not understand accounting. Firstly because his accountants who worked for him have said this to anyone who wants to listen. And he doesn't understand accounting because of his claim "...that’s why we have $20 trillion in debt". First of all, it's not a debt, further proving that anything Trump has to say is more of the same GOP propaganda. As Warren Mosler has explained that $20 trillion is the money supply. Korea, China and all the other countries the US has a deficit with do not control the money supply, as far as I know.
Trump cutting taxes doesn't prove that he understands accounting! Republicans like cutting taxes on the very rich, hiking up "debt" which they tearfully claim will make your children indentured servants of China and that's why it is necessary to cut Medicare, Medicaid and social security. For the life of me, I can't see how cutting taxes to the very richest will make people buy less from China, or Chinese buy more from America.
The tax cuts will do nothing to make companies "repatriate" their profits. This is all gibberish. If the tax cuts were aimed at the working and middle classes that would be one thing, but this is aimed at exactly the kind of people who are not going to consume and get the economy moving away from low wages and the unskilled work that the economy has been creating for a decade. US companies are sitting on record levels of money. If they wanted to invest it they would have. They don't want to invest it because business prospects look poor to them. Instead managers buy back their stock, inflate the price and give themselves whacking great bonuses and the like. Anyone who believes that the thirty years of deindustrialisation and behemoth corporations setting investing all that time and money in plants overseas are going to be lured back by a tax cut is drinking at the Trump Kool-aid fountain, with buxom figures gilded in gold leaf .
For more on this, see Magic Mike (when he had that wonderful beard) https://www.youtube.com/watch?v=hfknFHLPaSw
Matt: "The MMT people STILL dont fully understand how what Trump has come up here works..."
On the contrary, they understand all too well and they think it's economic stupidity.
Matt: Trump "...exhibits an operational knowledge of these systems that is in excess of ANY MMT person out there... and I mean ANY...."
Got it! So because Louie Gohmert and Sarah Palin or any number of other dummies who populate the GOP want to cut taxes on corporations, which they are genetically predisposed to do, that shows they are infinitely more intelligent than all the MMTers.
Matt: "China is a disgrace and the whole thing there is to hack the west in order to acquire premiere western currency..."
And there was the rest of the world under the mistaken belief that they were trying to develop their country through trade agreements that the US and others willingly signed. But no, they're hackers!
"doesn't realize that imports are a real benefit "
This is failing MMT mumbo jumbo appealing to incompetent unqualified womanish avocado toast and soy generation which is a minority...
They are not a benefit if they lead to atrophy of needed KSAs here... which is what has been happening...
lastgreek, anyone who believes there are seven articles is swallowing "fake news". The number of articles is whatever Trump says it is. If he says twelve, then it's twelve. Unless he says it's a different number on another day, then the previous statement that claimed that there were twelve articles is "fake news". Where else have I seen this tactic? Oh yes in 1984, with the memory hole.
Tom what you are saying is equivalent to saying no one should exercise..
"being soft and fat is a real benefit!"
It defies all common sense...
Matt, if imports aren't a benefit, you better burn your Chinese made flag then and all the other imports you consume.
Nice to know you only eat raw meat. I wouldn't know what to do without avocado toast. The bread coming from a mixture of organic millet and organic quinoa. Paired with a glass of organic hemp milk, you don't know what you're missing, man.
KSA? Kansas Sheriff's Association? Kingdom of Saudi Arabia?
John,
Civics is covered in 8th grade here and never re-visited unless you go to law school (which is why Barry Sotoro thought he visited all 57 states ie he did 8th grade in Indonesia...)
https://www.youtube.com/watch?v=wwMQ0u7IPpA
Trump is not a lawyer he hires them... he's a big business guy this is how they are (big assholes).... he has this figured out within the context of his Wharton MBA training...
They are not a benefit if they lead to atrophy of needed KSAs here... which is what has been happening...
There are not an absolute benefit and the relative benefit is adversely affected by policy makers' lack of understanding of MMT.
MMT predicts exactly what has happened and how it could have been avoided.
It is not too late to take advantage of surplus of real resource owing to imports, which also keeps inflation in check, by eradicating the deficit in jobs and domestic investment by using available fiscal space instead of obsessing over income statements and balance sheets showing "red ink."
Knight in Shining Armour? Kenya Scouts Association? Korean Student Association?
"Knowledge, Skills and Abilities"
Its a term here in the Human Resources discipline:
http://www.shsu.edu/dept/human-resources/managerstoolkit/KSA.html
"KSAs are knowledge, skills, and abilities that a person must possess in order to perform the duties of his or her position. KSAs are listed on each position’s job description and serve as a guide for applicants, employees, and departments to evaluate and assess a person’s likelihood for success in a job."
As usual, you lefties completely discount organization and management skills to ZERO... not even aware of them...
What do you think all of those students who were studying in the Business School were doing??????
"All the world revolves around the Economics Department!"
Sorry its a failed Discipline...
Matt, there is an enormous difference between Obama misspeaking and time and time again Trump displaying staggering ignorance. If after he clearly misspoke, Obama was asked how many states there are in the United States, the former constitutional professor would have no difficulty in saying fifty, and he may even explain that some of them are commonwealths and give you any other number of details. Trump doesn't misspeak. He clearly just doesn't know. Claiming that this is civics class stuff that is never revisited is an argument for mass ignorance.
"Matt, if imports aren't a benefit, you better burn your Chinese made flag then and all the other imports you consume."
The previous policy is going to take some years to reverse... and btw all the perennial trade surplus nations have to do to get Trump off their back is buy some stuff from the US to balance the trade and Trump goes away...
Only their corruption which is conducted in the USD stops them from doing this... its not like we dont have products they can use...
" the former constitutional professor " right you are making my point..
Ask Obama how much a Class A office leasehold improvement costs per square foot to get done in Manhattan and see what he says...
Matt, clearly the KSA stuff was a joke! It would be unusual if I knew all those KSA acronyms without googling them.
"KSAs are knowledge, skills, and abilities that a person must possess in order to perform the duties of his or her position..."
You'd better inform Trump then because he has none. You'll find him on the golf course.
We have business guys in there running it now this is what they do.. you got the market skyrocketing, labor shortages developing, bonus munnie flying all around, tax cutting, trade wars threatening, etcc..
this is what these guys do... things are going to improve here (material systems)... these are material guys... they havent even got it really rolling yet...
there is no "natural" archetype for those who end up getting into the political leadership positions..
Obama people were intelligensia, Trump people are material acquierers, sometimes its a military person, etc..
Things are going to improve here in our material outcomes with these guys over the Obama people... Obama people legacy is bazillions of student debt with dubious material benefit...
Matt: " the former constitutional professor " right you are making my point..
Well, no. In fact you're making MY point. Which is to say, that you agree that Obama was misspeaking and would indeed know how many states there are in the union. So your defence of Trump not knowing, and clearly not reading, the constitution doesn't stand up. Is it too much to ask for a president to understand the constitution that he is promising to "preserve, protect and defend" What's the point of making such a promise if you don't understand it? It makes the whole thing a farce.
Matt: "Ask Obama how much a Class A office leasehold improvement costs per square foot to get done in Manhattan and see what he says..."
And what would FDR, Lincoln or Jefferson have said? Eisenhower would have probably shot you in the head for a question like that. According to you, if they didn't have a ready answer to this most important of questions, then they are not worthy presidents.
When you reject orthodox economics, and refuse to spout their koans about exports a cost and imports a benefit, you are labeled ignorant. It's a flipping accounting identity, the statement is patently false except except when at full employment. We've almost never been at full employment. So the statement has almost never been true. We've surplus, unused labor and resources, the real tragedy would be to hoard that real wealth when so many around the world are deprived basic necessities and domestic citizens lack financial resources. What is wrong with economists? Examine assumptions, it's not cute or funny anymore to puke out your econ 101 nonsense. It harmful toxic sludge for the mind.
Matt: "What do you think all of those students who were studying in the Business School were doing??????"
CAPM, VAR, modern portfolio theory, and loads of the other junk that saw the most advanced finance firms beg for state intervention in 2008.
Matt: "...all the perennial trade surplus nations have to do to get Trump off their back is buy some stuff from the US to balance the trade and Trump goes away..."
Unless the nation state is going to be doing the buying, like military hardware which they don't need, it'll be the consumer who'll be doing the buying. For obvious they don't really want anything. If they had wanted to consume US products, they would have done so. Explain how a Chinese consumer who doesn't want to buy anything from the US is going to be persuaded to do so? Germany runs whopping surpluses against the US. How are you going to get a German to buy anything they don't want to buy over and above what they already consume? The other matter is that the US, like most advanced economies, is predominantly a service economy. There are even fewer US services a Chinese will demand as opposed to the goods they have pretty much no use for.
Matt: "Only their corruption which is conducted in the USD stops them from doing this... its not like we dont have products they can use..."
Every country in the world is now corrupt because every administration for four decades or so has immiserated its own population to the advantage of US corporations. China didn't do that. Japan didn't do that. Germany didn't do that. Korea didn't do that. Mexico didn't do that. The US strong-armed any number of countries into signing "free trade agreements" and now it's crying unfair. The US certainly has many products the rest of the world can use. That isn't the issue. The issue is, simply put, does the US have any products they want to buy or buy more of? If there were, they'd buy them or more of them. A typical European, Chinese or Japanese isn't going to buy more than one iphone or whatever. They're certainly not going to buy any American style cars.
It all shows a paucity of vision by Trump and co. The US is a predominantly service economy, and it should expand as quickly as possible into that sphere. That way the precious US dollars don't get hoarded up by those "corrupt" foreigners. The other amazing shortsightedness is lack of investment in infrastructure and 21st technologies. Even China is ahead of the US in infrastructure and in many 21st century technologies. Is China holding back US investment in high speed rail and green tech? Man up!
We'll see this shifting away from the US as China ramps up the next phase of its developmental plan, which is to wind down the emphasis on exports to fund investment and shift to increasing the ratio of consumption to investment to grow the home market in the transition to a "modernly prosperous economy."
China has either already reached the Lewis turning point or is close to it. The leadership is aware of the this and is shifting policy.
This is the big hurdle of developing countries. If China manages it well, the Chinese economy will quickly replace the US and EU markets combined in domestic consumption and its rate of growth.
Transnationals absolutely must have access to this market to maintain or increase share in the coming years. They obviously know this. Combine this with the Eurasian-Asian-African market as the world island is bridged by the New Silk Road, and the handwriting is on the wall.
If the US is smart they will focus on doing something similar in Latin America or China will take that, too.
Tom: "There are not an absolute benefit and the relative benefit is adversely affected by policy makers' lack of understanding of MMT. MMT predicts exactly what has happened and how it could have been avoided."
I'd love to see this hammered out more. Any references? Or just your own thoughts would be great.
The reality is that we live in a republic and the leadership and majority want modest fiscal spending, lower taxes and smaller trade deficits to boost rates of growth. Perfectly workable policy mix, even though Understanding MMT could change the public's mind, and be "better" but for now, it isn't an option to use a JG and counter cycling fiscal policy more aggressively.
Tom: "We'll see this shifting away from the US as China ramps up the next phase of its developmental plan, which is to wind down the emphasis on exports to fund investment and shift to increasing the ratio of consumption to investment to grow the home market..."
Which will presumably mean US corporations currently using China as a cheap factory will see it as a huge export market instead. Apple and the like will acquire gazillions of yuan as they presently do but may not end up exchanging it into dollars, or will they? Does the US current account then show a beneficial change because Apple and friends don't exchange yuan for dollars, and China's central bank doesn't buy bonds? It seems to suggest that if China really takes off as an export market, then the current account may not change, what with no need to change the yuan into dollars? Confusing or what?
The MMT economists have been talking about this for a long time.
All economists agree that imports are benefit in real terms of trade. The importing country is getting real resources including embedded labor. What's not to like about that?
Well, it means declining investment in firms being replaced and increasing unemployment.
A currency sovereign has the fiscal space to put those idling resources to use to maintain optimal capacity and full employment.
Basic to this is increasing spending on basic research, funding R&D, and upgrading and adding infrastructure. The US is only doing this in defense, which is strategically distributed throughout the states and congressional districts. It's not enough, and from the economic point of view, expending real resources on defense is like exports in real terms. The output is not available to domestic consumers.
The US should have been fine about exporting textile manufacturing, etc., that is, low level operations, focusing instead on high level.
But even high level operations cannot be dominated globally for long owing to the spread of technology, which is what is happening.
So the US also has to focus in the service sector, since it is largely local or regional and cannot easily be competed with from abroad.
The MMT solution is let the external save in your currency as much as it wants, and accommodate the saving desire of the domestic private sector, which requires running a government deficit offsetting the non-government surplus.
But that requires most people taking the blinders off.
Ryan, I don't think "modest fiscal spending" is either possible or desirable, certainly not in the near future. There are far too many structural problems, and what would be cut to make the spending "modest"? The choices are social security, Medicare, Medicaid and the military. Cuts to the first three would be disastrous. Cuts to the military would be desirable but ultimately also economically hazardous, unless a plan can be devised to turn swords into ploughshares. Seventy years of a national security state will be hard to reverse overnight. Like any other advanced economy, the US economy requires a large fiscal component.
@ John
As long as the neoliberal mantra of free markets, free trade, and free capital flows persists, national boundaries and currencies will not be very relevant. That is the point of globalization.
China seems to be backing globalization. Some the West are having second thoughts and they are being criticized for dismantling the international liberal order.
Difficult to foresee how this will play out. But I suspect that neoliberalism's life is nearing expiration date. Nations do still exist and have interests that unfettered globalization challenges. Dialectical logic would predict a reaction.
Cuts to the military would be desirable but ultimately also economically hazardous, unless a plan can be devised to turn swords into ploughshares.
The US economy has become dependent on both military expenditures and welfare transfers. Take those away or reduce them significantly and the edifice collapses if they are not replaced with comparable injection. How would that come about?
Post a Comment