[Dwencejed]

I'm sorry but this post is pure garbage.

No, it's really not.

I know that the notion that the New Deal had no effect on the economy and that WWII was the only thing which got us out of the Great Depression has been a common one since the 1980's (when it took root as it appealingly went along with the Reaganite "big government is bad" mindset), but it simply isn't true.

As it was your statement, I should really demand that you defend it before I comment, so I'll just leave this here:

[Zaebal]

0%, 20%, 40%, 60%, 80% & 100% of what?

Monkey crap? Inflation/deflation-indexed monkey crap? 1970-valued real monkey crap? Monkey crap earned per worker weighted by man-hours worked/average affordable lifestyle?

And why not show a graph that actually carries past the end of the war?

[KlaraNovikoffaZ]

Funny how the graph doesn't explain what the % is on the Y axis.

80% of what?

No, it's really not.

I know that the notion that the New Deal had no effect on the economy and that WWII was the only thing which got us out of the Great Depression has been a common one since the 1980's (when it took root as it appealingly went along with the Reaganite "big government is bad" mindset), but it simply isn't true.

As it was your statement, I should really demand that you defend it before I comment, so I'll just leave this here:

[KlaraNovikoffaZ]

Well, forget Mr. Morley's liberal New Deal propagandacrap for a moment...

Trade wars between any two nations have economic impacts, including socialist countries.


Several members of the Communist Party in China are trying to pass a total export ban on all lanthanides (Rare Earth metals), such as ytterbium which is used in computer monitors.

The real reason for banning the export of the raw materials is to force all Western manufacturing to relocate to China that requires the use of these restricted materials to export out of the country.


If those guys actually succeed with their ban, then I don't see why we shouldn't compensate either export ban by imposing an import tariff on all the finished goods that we have to buy from China made with the same raw materials.

At least that way the income potential is neutralized in two ways... consumers curtail their demand and this produces two cash flows that rebalance the trade of the raw material between the two countries; effectively neutralizing their policy and is a deterrent against raw material blackmail since it stops the Chinese from benefiting from a price monopoly [despite what some people fear, there are ore deposits of many of these elements elsewhere].


All the trade ban from China will do is accelerate innovation to get around the ban. For LCD displays which we love to use, this means people will switch to the better OLED displays which don't use any rare earth metals to manufacture.... all the chemicals in an OLED display are organic, plus OLED doesn't use a backlight which can go out, like LCD monitors do. OLED doesn't last as long as LCD, but all the materials in an OLED display can be recycled into biodegradable components.



Our Commerce Department should be sending clear warnings to China if they proceed with these material export bans then we will short-circuit WTO and go straight to tariffing the crap out of the finished goods to get them to stop it.

[everlastinge]

Those are just your constructs Mayfairmeat and Mr Morley does not in any way tailor his own constructs to fit his reality.....

His simpleton chart is supposed to factually represent the Great Depression don't you see...

[everlastinge]

This is an interesting perspective whether one agrees with it or not...



Is Barack Obama really a free-trader? According to much recent commentary, we will find out on September 17, when the US president has to decide whether or not to accept the recommendation of the independent, bipartisan US International Trade Commission to impose tariffs on imports of Chinese tyres.

The orthodox free-trade view of most pundits holds that if Mr Obama accepts the recommendation he will fail the free-trade test. In fact, the truth is just the opposite. Not to accept the tariff recommendation would be a severe blow to open trade and globalisation as well as to America’s future economic health.

The conventional view is based on the notion that free trade is always a win-win proposition and that our trade with China fits the conditions of the traditional free-trade model. These include the assumptions that the markets are perfectly competitive, that exchange rates are not manipulated, that there are no economies of scale, that there is no cross-border investment or cross-border transfers of technology, and that there are no government subsidies or export requirements. If this were a true picture of our trade in tyres with China, then imposing tariffs would truly be harmfully protectionist and not be justified.

But this is not even close to the reality of our trade with China, which far from embracing orthodox free trade has openly adopted a neo-mercantilist, export-led economic growth strategy. China keeps its renminbi undervalued against the dollar in order indirectly to subsidise its exports. Foreign direct investment in China is often induced by the use of special, targeted tax and financial incentives. Foreign companies investing in China are often required to export the bulk of their production as a condition of being allowed to enter the Chinese market. This is the case with Cooper Tires, which agreed to export 100 per cent of its production in return for being allowed to invest in a Chinese tyre factory. The tyre industry is characterised by enormous economies of scale and imperfectly competitive markets in which a few oligopolistic producers divide the market among themselves. It is Chinese industrial policies and not market forces that are currently determining the trade flows and the location of production and jobs to the detriment of the US tyre industry.

Nor is the detriment only to the US industry. Orthodox unilateral free-traders argue that, even if the US tyre workers lose their jobs, the US economy will enjoy a net benefit from lower consumer prices. But this is true only if the shuttered US factories and laid-off workers quickly shift to some other equally productive and well-paid activity. If, as we know, they cannot, the entire economy will suffer a loss of productivity and wages.

This kind of trade is not win-win. Rather it is a classic zero-sum game. It is well-known to game theorists that in such situations a tit-for-tat response is the optimal strategy. Unilateral acquiescence to the aggressive initiatives of another player (the orthodox unilateral free-trade response) is a sure way to lose.

Continue: FT.com / Comment / Opinion - Obama can help free trade with tariffs

[KlaraNovikoffaZ]

That is VERY odd that the Financial Times (UK) allowed an editorial like that go to print.


ETA: The reason why I am so surprised is because The FT is one of the loudest drumbeats of globalization in the last 25 years.

[Senasivar]

Trade wars are like normal wars in that there are casualties and that both sides benefit if they didn't have to resort to it.

Unfortunately, when one side is the aggressor, something has to be done. Does the US lose out if we fight back? Yes. Do we lose out if we don't? Yes. The trick is to calculate which is the better scenario short term and long term and if we can eventually come out ahead.

The problem is, I don't see the US as being able to necessarily approach this from a position of strength right now.

Personally, I would be in favor of some short term economic pain if the long term result is to positively affect how China plays the economic game. I am just reluctant to believe that would be a result with our current situation.

[KlaraNovikoffaZ]

I'm happy that someone in one of the most major financial newspapers (FT is 2nd to the WSJ) has finally come out and admitted what workers have known all long.

Free trade is not exactly free if you're offshoring work and ramping up imports, but you are NOT balancing the increase in imports with an offset of exports from your own country and the labor market shrinks.


Shrinking labor markets (demand and supply both go down) causes shrinking incomes, shrinking incomes lead to shrinking tax revenues and shrinking consumer demand... these are effects which are trying to counterbalance the loss in household wealth caused by the import drain.


We have papered over these losses with credit but now that the credit-bandage has been so rudely stripped off... we're all staring at a huge infection filled with pus that needs mending and will take a long time to heal.

[KlaraNovikoffaZ]

The problem is, I don't see the US as being able to necessarily approach this from a position of strength right now.

Actually, we might come out ahead or at least stop China from considering that rare-earth metal export ban they've toyed around with.


The situation right now if we implement a huge import tariff on Chinese-made tires [by companies owned in the US], is that tire companies who offshored their work to China just lost their economic incentive to produce in China.

Will they leave China? Only if they sense that the tariff is long term. Then they will probably move the production back to Mexico (where it was before), where they're protected under the NAFTA block which China has to compete with.


Tires are a cyclical consumer good (buying goes up over the summer when more tires burst, and consumers have to keep buying them periodically).

Demand is also quite inelastic relative to price, because you cannot drive without tires.



This means even if tires become expensive, people will continue to buy them because they have no other choice. This is probably the biggest leverage the United States has over China, because in this case, we actually CAN afford to pull tire production out of China by slapping on tariffs.

Will that mean China retaliates? Probably. But we have other commodities China requires to survive that we can place export taxes on... like scrap metal and soy.



We have tried for 2 decades now to get China to release their currency so that the balance of trade flows with China is more fair so Chinese prices don't subsidize exporting for the sake of exporting, but that's not how they roll.

We've already seen how incredibly hard it is for non-Chinese firms to market goods directly to Chinese consumers and how incredibly selective they are in who they allow to serve the Chinese market.


We can't keep going on this export imbalance forever. Something has got to give. Might as well stick some pressure on China now while we have some leverage left.

[Senasivar]

Actually, we might come out ahead or at least stop China from considering that rare-earth metal export ban they've toyed around with.


The situation right now if we implement a huge import tariff on Chinese-made tires [by companies owned in the US], is that tire companies who offshored their work to China just lost their economic incentive to produce in China.

Will they leave China? Only if they sense that the tariff is long term. Then they will probably move the production back to Mexico (where it was before), where they're protected under the NAFTA block which China has to compete with.


Tires are a cyclical consumer good (buying goes up over the summer when more tires burst, and consumers have to keep buying them periodically).

Demand is also quite inelastic relative to price, because you cannot drive without tires.



This means even if tires become expensive, people will continue to buy them because they have no other choice. This is probably the biggest leverage the United States has over China, because in this case, we actually CAN afford to pull tire production out of China by slapping on tariffs.

Will that mean China retaliates? Probably. But we have other commodities China requires to survive that we can place export taxes on... like scrap metal and soy.



We have tried for 2 decades now to get China to release their currency so that the balance of trade flows with China is more fair so Chinese prices don't subsidize exporting for the sake of exporting, but that's not how they roll.

We've already seen how incredibly hard it is for non-Chinese firms to market goods directly to Chinese consumers and how incredibly selective they are in who they allow to serve the Chinese market.


We can't keep going on this export imbalance forever. Something has got to give. Might as well stick some pressure on China now while we have some leverage left.

But you are ignoring the possibility of brinksmanship. Say we do the tire tariff. It works assuming China doesn't retaliate on something else. Will this be a trade border skirmish or full out war? That is what has to be looked at when making the decision.

[everlastinge]

So which is it...tires or tyres? Kidding

Both of you make good points...however if this situation manifests itself further there is a real possibility that a mutually recriminatory trade war ensues between the two major economies that will attract opportunistic trade realignments among the traditional allies of the US. US multinational corporations, unable to steer US domestic politics, will increasingly trade with China through their foreign subsidiaries, leaving the US economy with even less jobs, and a condition that will further exacerbate anti-China popular sentiments that translate into more anti-free-trade policies generally and anti-China policies specifically.

A global economic depression from a trade war between the world’s two largest economies is not out of the realm of possibility either and could heighten further mutual recriminations.

For instance curbs on Chinese export trade will accelerate a redirection of Chinese growth momentum inwards as it is already trying to do so. It could also increase Chinese power, including military power, while further encouraging anti-US sentiment in Chinese policy circles. This in turn will validate US apprehension of a China threat, increasing the prospect for an eventual hot conflict as the tit for tat snowballs. It's easy to start something...much harder to contain or end it.

A war between the US and China can have no winners, particularly on the political front. Let's hope this situation doesn't snowball...I don't think it is prudent given the weaker position we are in to instigate China. It seems we're going to have a duel between two of the biggest state capitalist economies going forward.

[KlaraNovikoffaZ]

Well, it's not like none of that is already happening with the constant harping that China wants to dump the Dollar and both Russia and China are whining that there needs to be a new reserve currency [they hope it's theirs].

I don't think it's a coinkidink that UNECOSOC comes out last week saying that we need a world currency [fat chance].



By the way, we still hold the KILL switch. If a trade war does develop, we always have the option of devaluating our currency in a massive move that will destroy creditors to the benefit of debtors. This would decimate a lot of Chinese wealth since a lot of it is tied up in sovereign obligation.

[everlastinge]

By the way, we still hold the KILL switch. If a trade war does develop, we always have the option of devaluating our currency in a massive move that will destroy creditors to the benefit of debtors. This would decimate a lot of Chinese wealth since a lot of it is tied up in sovereign obligation.

This sounds like something Bismarck would say..

"Committing suicide out of fear of death."

I'm not so sure we hold the winning hand in this global poker game....

[economex]

Both of you make good points...however if this situation manifests itself further there is a real possibility that a mutually recriminatory trade war ensues between the two major economies that will attract opportunistic trade realignments among the traditional allies of the US. US multinational corporations, unable to steer US domestic politics, will increasingly trade with China through their foreign subsidiaries, leaving the US economy with even less jobs, and a condition that will further exacerbate anti-China popular sentiments that translate into more anti-free-trade policies generally and anti-China policies specifically.

A global economic depression from a trade war between the world’s two largest economies is not out of the realm of possibility either and could heighten further mutual recriminations.

For instance curbs on Chinese export trade will accelerate a redirection of Chinese growth momentum inwards as it is already trying to do so. It could also increase Chinese power, including military power, while further encouraging anti-US sentiment in Chinese policy circles. This in turn will validate US apprehension of a China threat, increasing the prospect for an eventual hot conflict as the tit for tat snowballs. It's easy to start something...much harder to contain or end it.

A war between the US and China can have no winners, particularly on the political front. Let's hope this situation doesn't snowball...I don't think it is prudent given the weaker position we are in to instigate China. It seems we're going to have a duel between two of the biggest state capitalist economies going forward.

This sounds like something Bismarck would say..

"Committing suicide out of fear of death."

I'm not so sure we hold the winning hand in this global poker game....

Those.

There is no winning with this.

[Flatlytaize]

We win any trade war hands down, we are the creditor nation, we already spent their money. They funded rebuilding most of the United States in the last 7 yrs, they funded two wars et al, that money is spent already-we already received the utiltity from it. They are the ones holding IOUS and praying. They are the ones with the excess capacity and nowhere to sell it to.

I posted this example in the other thread who would you rather be the pawn broker or the guy borrowing the money?

imagine going to a pawn broker, borrowing money,
having the control to make the money worth less then going back and paying the interest. How long would pawn broker put up with that game? How long would he put up with it if he talked to other pawn broker who says the same thing and that you borrowed from him to pay the interest to the other guy? One big difference here is that China needs us to consume their output, so what would pawn broker say about the whole game-if you were also the guy who bought 70% of the stuff in his store and 70% of the stuff in all the other pawn brokers stores? Another big difference is pawn broker can become a cell phone store, China is not becoming anything beyond what it is for a long time.

I pick the guy who has the whole pawn industry wrapped around his finger.



As I posted in the other forum. Tires are a strategic good like domestic oil production is not something to be left up to imports for supply, this move is understandable, they should not have let speciality chemicals go and as the other guy posted rare earths.


But ultimately the chinese are just going to sell the tires somewhere else cheaper which makes our competitive disadvantage worse.

[everlastinge]

Heating up like a tire thread..oh..pardon...I mean tyre....

A full-blown trade row erupted on Sunday night between the US and China after Beijing accused Washington of “rampant protectionism” for imposing heavy duties on imported Chinese tyres and threatened action against imports of US poultry and vehicles.

Trade relations between two of the world’s biggest economies deteriorated after Barack Obama, US president, signed an order late on Friday to impose a new duty of 35 per cent on Chinese tyre imports on top of an existing 4 per cent tariff.

In his first big test on world trade since taking office in January, Mr Obama sided with America’s trade unions, which have complained that a “surge” in imports of Chinese-made tyres had caused 7,000 job losses among US factory workers.

Chen Deming, China’s minister of commerce, condemned the decision, saying that it “sends the wrong signal to the world” at a time when Washington and Beijing should be co-operating to deal with the worst economic and financial crisis in decades.

“This is a grave act of trade protectionism,” Mr Chen said in a statement. “Not only does it violate WTO rules, it contravenes commitments the United States government made at the [April] G20 financial summit.”

China said it would now investigate imports of US poultry and vehicles, responding to complaints from domestic companies.

The US warned Beijing against taking retaliatory action. “Retaliation would be inappropriate, as the United States acted entirely within the bounds of trade laws and within the safeguard provision that China itself agreed to upon accession to the World Trade Organisation,” said an official from the Office of the United States Trade Representative.

The official said that enforcing trade agreements and laws was “critical” to maintaining free markets. Another official said the US had “negotiated to the end with the Chinese to come up with something we could all agree to”.

FT.com / China - US tyre duties spark clash

[everlastinge]

Some more. I suppose Frank Purdue and Henry Ford will be rolling in their graves

Sept. 14 (Bloomberg) -- China announced a probe into the alleged dumping of American auto and chicken products, two days after U.S. President Barack Obama imposed tariffs on imports of tires from the Asian nation.

Chinese industries have complained that they’re being hurt by “unfair trade practices,” the nation’s Ministry of Commerce said on its Web site yesterday. The Beijing-based ministry is also looking into subsidies for the products, it said. It didn’t specify the imports’ value.

The European Central Bank said last week that rising protectionism may hamper world trade and undermine the global economy’s recovery from recession. The U.S. placed tariffs starting at 35 percent on $1.8 billion of tire imports from China, backing a United Steelworkers union complaint against the second-largest U.S. trading partner.

“While there’s friction, I suspect that the two nations will keep any disputes under control,” said David Cohen, an economist at Action Economics in Singapore. “They understand that they’re increasingly dependent as trading partners.”

Dumping is selling goods for less than the cost of producing them.

China’s commerce ministry said Sept. 12 that it “strongly opposes” the U.S. decision on tires and may refer the case to the World Trade Organization

China to Probe Alleged ?Dumping? of U.S. Products (Update1) - Bloomberg.com

[Senasivar]

We win any trade war hands down, we are the creditor nation, we already spent their money. They funded rebuilding most of the United States in the last 7 yrs, they funded two wars et al, that money is spent already-we already received the utiltity from it. They are the ones holding IOUS and praying. They are the ones with the excess capacity and nowhere to sell it to.

I posted this example in the other thread who would you rather be the pawn broker or the guy borrowing the money?

imagine going to a pawn broker, borrowing money,
having the control to make the money worth less then going back and paying the interest. How long would pawn broker put up with that game? How long would he put up with it if he talked to other pawn broker who says the same thing and that you borrowed from him to pay the interest to the other guy? One big difference here is that China needs us to consume their output, so what would pawn broker say about the whole game-if you were also the guy who bought 70% of the stuff in his store and 70% of the stuff in all the other pawn brokers stores? Another big difference is pawn broker can become a cell phone store, China is not becoming anything beyond what it is for a long time.

I pick the guy who has the whole pawn industry wrapped around his finger.



As I posted in the other forum. Tires are a strategic good like domestic oil production is not something to be left up to imports for supply, this move is understandable, they should not have let speciality chemicals go and as the other guy posted rare earths.


But ultimately the chinese are just going to sell the tires somewhere else cheaper which makes our competitive disadvantage worse.

First, we are not a creditor nation with China.

Second, the current administration is looking to borrow more money. We can't throw "the kill switch" and devalue our currency to kill the loaners if we are still looking to take out loans.

[Flatlytaize]

YEs we are the debtor nation, I obviuosly made a typo given the content of the rest of the post.

But thx for pointing that out.


We have done nothing but devalue our currency since they started funding us. IT is a great game with rates near 0% it sure doesn't take a lot to devalue the interest right out of the equation.

The best this morning-they are floating the concept of a jobless recoverly on NPR.