Trade War of 1930s, Extended the Great Depression

(edited)

If the US slaps China with $500 Billion in Tariffs, what's to say China won't do the same to US. Could the US Economy suffer as a result, could there be another big stock market reset? https://www.reuters.com/article/us-usa-china-trade-markets-analysis/trumps-500-billion-trade-threat-makes-chinas-already-battered-investors-shiver-idUSKBN1JW1LW

The last time this was done in the 30s, with the Smoot-Hawley Tariff Act the depression got worse worldwide.

From the history books.

Many industries will suffer, due to the Tariffs, since goods being Imported may have higher tariffs on them, such as Steel. Lots of farmers could be in trouble since other countries may impose tariffs on their exports. Oil could go down, since countries could impose Tariffs on US Oil. But companies are already hurting, such as construction, manufactures, ______ , fill in the blanks.

https://www.mercatus.org/bridge/commentary/americans-hurt-trade-restrictions?gclid=CjwKCAjw4avaBRBPEiwA_ZetYkQZM9uwYZnC5lphfiSJpbE5tsGLz_qTmoUTOgykCTPRsQmTaqu6ahoCBf0QAvD_BwE

 

Edited by Top Oil Trader
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IN the 1930's trade was a small, basically insignificant, factor in the US GNP.  Even after WWII, trade accounted for about 9% of US production. today, the numbers have become meaningless because financial transactions are incorporated into US GDP numbers, and financial transactions are on the order of magnitude of 50%.  If you take finance out then the total amount of goods traded is likely around 28%.   Now if you take that as a starting figure, can the US both survive and do nicely with that 28% off the table and a reversion to the US industrial dynamics we saw in 1956?  And the answer is: of course. 

So here is the reality, the raw truth:  the USA can run without any exports or imports, but since the USA is about 25% of world economic activity, everybody else (OK, not Mali or Sri Lanka, but the rest of the planet) needs access to that huge US marketplace.  That is where everybody goes to play.  If you shut that access down, the US can and will reconfigure to develop its own resources and industries, basically rebuilding the industrial base that was shipped overseas, to Mexico, to Taiwan, to China. Will there be short-term pain?  But of course.  Is it doable?  Yup, you bet. 

Now let's look at China, the so-called 800-lb gorilla.  Can China survive without the US marketplace?  Well, sure, it did in the past, but then everyone was a peasant and subsisting on rice, and the rich actually owned a bicycle and a water buffalo. The rest walked and pulled their own plow with human muscle and large families. OK, so China does not want to go back to living in poverty.  The big claim by the talking heads is that China has reached critical mass and now has enough of an internal market for consumer goods that it can expand in internal sales alone.

Not so fast.  The Chinese cannot even house themselves.  Easily 1/4 of the Chinese population lives in one-room shacks.  The govt attempted to deal with this by having their State Banks do massive loans for building apartments, which you can buy in China. The result was an explosion of apartment tower high-rises, and right now there are some 64 million apartments with no buyers. And why is that?  Because the 1/4 Billion Chinese that would go live in those apartments have no money, and cannot buy them, even with zero-interest mortgage loans. 

There are entire cities built by the Communist Central Govt that stand empty.  These are cities designed for 11 million people - bigger than New York.  Empty.  Just standing there.  Now what does this tell you?  China remains an impoverished country, never mind the Western hype, as the citizens cannot afford housing.  And housing is always the first goal of any family, long before consumer goods such as automobiles. 

Those 64 million apartments will clear in the market when the price of an apartment effectively drops to zero. And, that will unleash massive turmoil among the emergent middle class who bought some of them, and will be wiped out. So the apartments remain priced out of reach, cannot be sold, yet remain just sitting there. Vast sums of State capital sucked up into a zero-return result. 

The big fear of the Chinese Govt is that they will be shut down out of the US Market.  If that happens, you will see such unrest in China that Tienanmen Square will be a college fraternity party by comparison.  The civil unrest would spill over to revolution in the far West, on the Tibetan Plateau.  The Communist Govt cannot have that, so they will have to knuckle under to whatever The Donald comes up with as his latest crazy ideas. Anyway, that's my take on it, what do I know, I'm just some guy parked in rural Vermont with a big typewriter. 

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64 Mill apartments no buyers. With 1.4 Billion people there, they should be able to fill those apartments up in like 5 seconds.

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2 hours ago, Jan van Eck said:

Anyway, that's my take on it, what do I know, I'm just some guy parked in rural Vermont with a big typewriter. 

Heck, I'm just some guy in tropical Malaysia with an ancient Samsung Note 3 (hey, it's got a pretty big screen for a phone) and I enjoy reading what comes out of your big typewriter.

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Interesting take, Jan.  I like the optimism and believe it is true.  Americans, I think, are ready for a reset and also believe they can go it alone if necessary, hence their hopes for the Donald's "plans".

I will reserve my comments about the China portion of your submittal for a later time, just let me say that the Chinese could put down ANY internal uprising no matter how many casualties would be necessary, close their borders, sacrifice for 100 years, and come back on their own terms once again at a later date.  One other little thing: I think by and large people go for the cars before they go for upgraded housing.  Car/trucks make money and show your "wealth" on a mobile basis while a house does not necessarily do either (remember I live in Asia).

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(edited)

I doubt that any recessions or depressions were directly about international trade. If there was magically a 'Mexican wall' around every country in the world, I expect that each country would survive. Some populations would have to do a lot more 'work' such as farming, fishing and mining and less white collar BS. Other countries might be better off on average, without dodgy loans and 'international interventions'.

Sent from my 6-year-old MacBook Pro that keeps behaving strangely... But marches on...

Edited by Jason Lavis
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(edited)

3 hours ago, Jason Lavis said:

I doubt that any recessions or depressions were directly about international trade. If there was magically a 'Mexican wall' around every country in the world, I expect that each country would survive. Some populations would have to do a lot more 'work' such as farming, fishing and mining and less white collar BS. Other countries might be better off on average, without dodgy loans and 'international interventions'.

Sent from my 6-year-old MacBook Pro that keeps behaving strangely... But marches on...

Unfortunately, there are "countries" that would not survive in any cognizable sense.  Take for example Puerto Rico, seized by the US after the Spanish-American War  (1898?) and partly absorbed into the USA but without actual status.  Along comes another hurricane and wipes out the power grid and pretty much everything else,and hurricanes are a chronic occurrence in the Caribbean. Now PR in effect survives on tourism and internal "trade" with the mainland USA.  That gets cut off (as it did with the discontinuation of the pharmaceutical tax exemptions in the mainland for PR production) and the place starts to sink.  Wreck everything with a storm and there is no recovery.  It is well over one year later and large sections of PR still have no electricity. And the govt is totally insolvent.  Islands like that are past the tipping point, and cannot even make the transition to a peasant economy. 

Go a step up the development ladder and take a look at Canada.  It survives mostly on selling its products to the USA, its largest trading partner by far.  Canada also buys US machinery and services, and refined oils.  Canada's big earners are the gigantic aluminum operations, but that is way too large for the domestic market of 30 million.  Could you have a Rio Tinto in Canada and no export?  Nope, not possible.  You could in theory have a steel industry in Canada designed for domestic consumption, but then it would be only one plant, the Dofasco operation.  All the other plants, Algoma Steel, Stelco Hamilton, the pipe steel plant in Edmonton, all operate as exporters, they would be gone. And Canada cannot operate its forest products industry without trade, specifically exports to the USA.  I am not even convinced that the lobster industry would survive in any real form without the volume sold to Americans.  So Canada collapses as to its standard of living, and its retained (albeit artificial) wealth in real estate evaporates, impoverishing the city populations that have purchased pricey housing  (a typical house in Toronto sells for $1.1 million; in Vancouver, $1.6 million).  What does the country do with a vast pool of collapsed pricey mortgage loans?  And at this point the population is way too large to go back to a farming economy, cannot be done. 

So you see the problems.  These countries are locked into trade patterns and cannot escape trading with the USA, which is and will remain the linchpin for the planet. 

Edited by Jan van Eck

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9 hours ago, Top Oil Trader said:

64 Mill apartments no buyers. With 1.4 Billion people there, they should be able to fill those apartments up in like 5 seconds.

There are lots of buyers, but the buyers cannot pay the price.  If you assume 4 people to the family unit, then those 64 million apartments would house 250 million people, or 1/5 of the entire Chinese population.  The Chinese communist command economy can produce housing, that is clear.  It cannot produce housing at a price that the public is able to pay.  Now, what is the "clearing price" of those apartments?  I would suggest the market clearing price would be one dollar  (basically, zero).  That is what you end up with in a country where nobody except a top skimming has any money.  And therein lies China's big problem: its command economy, of which 25% or more of its internal GNP is infrastructure building, has an impoverished population. 

And that population is rapidly urbanizing.  It is no longer even possible to revert to a rural peasant subsistence economy. Can China's farmers even generate enough foodstuffs to feed the population?  Probably not, not with half the population or more living in cities.  Those farm skills are now gone. China has to import vast amounts of food, so China has to trade with the outside. Unless, of course, you are prepared to starve a few hundred million to regain agricultural balance. I don't see that as a winning solution for the Communist Government; it would lead to revolution and overthrow.  Communist governments are not omnipotent. 

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3 minutes ago, Jan van Eck said:

There are lots of buyers, but the buyers cannot pay the price.  If you assume 4 people to the family unit, then those 64 million apartments would house 250 million people, or 1/5 of the entire Chinese population.  The Chinese communist command economy can produce housing, that is clear.  It cannot produce housing at a price that the public is able to pay.  Now, what is the "clearing price" of those apartments?  I would suggest the market clearing price would be one dollar  (basically, zero).  That is what you end up with in a country where nobody except a top skimming has any money.  And therein lies China's big problem: its command economy, of which 25% or more of its internal GNP is infrastructure building, has an impoverished population. 

And that population is rapidly urbanizing.  It is no longer even possible to revert to a rural peasant subsistence economy. Can China's farmers even generate enough foodstuffs to feed the population?  Probably not, not with half the population or more living in cities.  Those farm skills are now gone. China has to import vast amounts of food, so China has to trade with the outside. Unless, of course, you are prepared to starve a few hundred million to regain agricultural balance. I don't see that as a winning solution for the Communist Government; it would lead to revolution and overthrow.  Communist governments are not omnipotent. 

FWIW, I'm going to state the obvious: given that the subject apartments, indeed the cities, that have been built were not built to support a working population, there are no customers!  The idea that it is but a small % of the Chinese population and therefore should not be hard to fill up is exactly the type of western thinking that go oh so many western companies in trouble investing in China to date.

Jan, I believe, is talking about any number of ghost cities that have in fact been built in China for no other reason than because the State Banks would loan massive amounts of money to build them, and the people taking advantage of these policies knew that by and large no one at the lower levels would be held accountable (or could easily get out and hide in other countries).  

Having said all that, the Chinese government will try, I said try, to build industries nearby to help alleviate the problem, but the problem is far past this type of band-aid fix.  Most of them will have to be torn down in the end, in my opinion.

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Well Jv, lots of economists back then would have differed with your opinion. I know without the shadow of a doubt that the trade wars will soon hit the fans. I usually don't delve on news, but this is like saying the obvious.Give what argument you will, all are definitely very fancy, and I can tell you know a lot, companies in US have already gone bankrupt, and the games haven't even begun. I understand what Trump want to do, (maga) but soon certain high flying stocks, will have their wings clipped.

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(edited)

On 7/17/2018 at 12:20 AM, Jan van Eck said:

Unfortunately, there are "countries" that would not survive in any cognizable sense.  Take for example Puerto Rico, seized by the US after the Spanish-American War  (1898?) and partly absorbed into the USA but without actual status. 

Go a step up the development ladder and take a look at Canada.  It survives mostly on selling its products to the USA, its largest trading partner by far... So Canada collapses as to its standard of living, and its retained (albeit artificial) wealth in real estate evaporates, impoverishing the city populations that have purchased pricey housing  (a typical house in Toronto sells for $1.1 million; in Vancouver, $1.6 million).  What does the country do with a vast pool of collapsed pricey mortgage loans?  And at this point the population is way too large to go back to a farming economy, cannot be done. 

So you see the problems.  These countries are locked into trade patterns and cannot escape trading with the USA, which is and will remain the linchpin for the planet. 

1

Hi Jan, I deleted parts of your quote for brevity, I hope you don't mind.

My comment was based on an overall view of world history and homo sapiens. Right now, even with gifts such as: 'free trade', 'humanitarian interventions' 'foreign aid' 'globalisation', 'the spread of democracy', 'the spread of 'Christian values' (or 'Islamic values' - depending on your point of view)...

... We have massive differences in wealth, equality and well-being across the world. I find the view of countries not surviving without the US quite bizarre. Is it the perpetual trade deficits and mass consumption funded by 20 trillion in debt? That doesn't seem to be a long-term foundation for prosperity.

My point is, that after the great depression, there was the same number of people, houses, fields, mines, and fish in the sea. Before European settlers came to the USA, Australia or anywhere else, these countries functioned and human beings lived their lives. We're they happier or less happy? What were the suicide rates per 1000?

I just think that the ideas of countries not surviving without the USA to be an exaggeration. I don't believe the hype.

BTW I appreciate your comments here on Oil price Jan, I've learned a lot from you. I just wonder if you have a blind spot here, and think that America is already great again? 

Regards,

Jason

Edited by Jason Lavis

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On 7/15/2018 at 9:33 PM, Top Oil Trader said:

If the US slaps China with $500 Billion in Tariffs, what's to say China won't do the same to US. Could the US Economy suffer as a result, could there be another big stock market reset?

The last time this was done in the 30s

First of all, it is impossible for China to slap that many tariffs onto the US.  China does not purchase enough US goods to do that.  There is some math behind it, but the idea is that once tariffs become so high, people stop purchasing the goods because there are cheaper goods elsewhere or they run out of money.  If China tried to put $500 billion on US goods, they would effectively not purchase any US goods.  Trade could come to a standstill.  Since the Chinese needs to import US food products, then China has one of two options: Either not impose any more tariffs than they already have, or else or starve their people.  

This rule does not apply to the US.  Since the US buys so many more goods from China than China buys from the US, it is possible for the US to put $500 billion on Chinese imports.  Or in other words: it is mathematically impossible for the US to lose a trade war with China.  

Will the trade war hurt the economy?  As Jan stated in an earlier post: if by "economy" you mean the world economy, then yes, it will hurt the world economy since the world needs the US market.  If by "economy" you mean the US economy, then that answer is a bit more complicated.

I know you are worried about the 30's and the Smoot-Hawley Tariff, because back then the US economy was going through a rough patch, and the increased tariffs acted like increased taxes...which only service to slow down a country's economy.  However, the US economy is much different today than it was in the 30s.  Remember, tariffs are simply taxes. 

Let me say that again because it is so important to understand: tariffs are just taxes.

In the end, there is no real difference between the two.  Both of them limit the economy by taking money out of the economy that could have been used to buy and develop goods, and instead it is used by governments to produce public goods that would have otherwise not been produced by private companies.  In theory, these public goods are needed and will result in a boost to the economy, but historically speaking, the money used by governments tends to be wasted on goods that are not necessarily in the best interest (read: 'most efficient use') of the people.   

Once you understand that tariffs are just another form of taxation, it will help you to think more clearly about their function in the economy.  For instance, if you think that tariffs will hurt the US economy, then you also must believe that taxes will hurt the US economy.  Yet, the ironic thing is that when the US passed their tax cuts back in December, many people were claiming how this was a terrible thing, and yet, those same people are now claiming that the tariffs are a terrible thing.  Do you see the irony?  If tariffs are just a form of taxation, then how is it possible that cutting taxes is bad if raising tariffs is also bad????  Since these are opposites, then obviously, if one is bad, the other must be good.  Yet, these people instead claimed that cutting taxes and adding tariffs were both bad!!!  How?!?!?  Since these are opposite things, if one is bad the other must be good.  The real problem was that these people hate both Trump and the United States more than they like thinking, and it shows in how they use logic (or their lack thereof).  

To put it more simply: because of the December tax cuts, adding these tariffs will not harm the US economy in the short run since the tax cuts should balance out the new tariffs.  Moreover, in the long run, the tariffs are almost guaranteed to give the US economy a huge production boost.  Had the tax cuts not been first implemented, then yes, the tariffs would be very dangerous for both the US and the world, and we might have another Smoot-Hawley situation on our hands.  However, since the tax cuts were also implemented, the US will be fine. 

Not so for other countries.  One problem for China, the EU, Canada and Mexico (the main opponents in the trade war) is they they did not cut their taxes, and so the trade war is going to Smoot-Hawley their economy.  A second (and probably more vital) problem for these countries is that they each run a trade surplus with the US, which means that for every dollar of tariff they impose, the US can hit back with $10 in tariffs (which is why Trump is considering $500 in tariffs vs. the $50 that China imposed).  

 

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6 hours ago, Jason Lavis said:

Hi Jan, I deleted parts of your quote for brevity, I hope you don't mind.

 

Jason, I no longer post on Oilprice and you have my blessings to delete or circumscribe any post of mine as you choose or find proper, in your sole determination. Time for me to  move on. 

As to the balance of your commentary, you are quite correct that countries can survive without the USA  (assuming they do not continue to go to war with each other, as the USA is the default world policeman at this point, nobody else much wanting the job). The real question is: can those countries survive with their industrial and consumer production as currently structured without selling into the US market?  That latter question is emphatically NO.  And there are tons of examples:  BMW cannot survive without selling into the USA, for example.  Now, can Germany survive without BMW?  Of course it can.  However, the products of BMW are then off the shelf, and the Germans will have to drop back to driving Skodas. I think you can see where this is going. 

Remember that the world is urbanizing at a dramatic pace; even India is rapidly urbanizing.  Concurrently, food production in much of the world is dropping off as the peasants urbanize.  Example:  Venezuela cannot feed itself and is utterly reliant on food imports.  Like it or not, world food production is largely controlled by a handful of countries:  Australia, Canada, USA, Argentina, Ukraine. The USA remains the default swing and infill producer, being to grains and cattle what Saudi Arabia is to oil.  As a practical matter, Chine either buys from the USA or it dramatically reduces the calorie intake of its population.  Do they really want to do that?  China is not North Korea, and Xi is not Mr. Kim (who is quite prepared to starve his population). So the real answer is: no. 

Despite all the saber-rattling, China needs the US marketplace and access to that US marketplace, and Chine needs to be able to buy US foodstuffs. In the short term you can substitute winter wheat from Canada for US corn, but that only goes so far when you have 1.3 billion mouths to feed.  Trump intuitively understands this, not consciously, but in a gut way, and he plays on that strength. China also has taken over vast amounts of US manufacturing, and having busted the US plants, now fills that gap from their own production, thus maintaining domestic stability in employment.  When the US tariffs bite, the US will re-establish those gone plants with new, re-hire American workers, and China will suffer a net decline in their standard of living.  The US will suffer nothing. Do US  made goods come at increased costs and thus remove overall purchasing power from Americans?  The jury is out on that one.  There are shipping and distribution costs, and better US production including the introduction of CAD-CAM machines and differentiated production that have lowered the labor content into products, to the point where the Chinese advantages now rest more on manipulated exchange rates than wage differentials.  For example, the labor content of an auto assembly plant is roughly 4% of the sales sticker price. You can see where this is going. 

As to "America great again," no, it is my vbiew that the USA went downhill with the Vietnam War, and Lyndon Johnson was such a total disaster that the US is profoundly a different nation than it was under Eisenhower, and that era and mindset is not going to be recaptured again. So the USA is fundamentally altered, very much for the worse, and it gets worse and worse as vast computing power is created and govt. bureaucrats and very malicious people working there get their hands on it. The US is rapidly sliding into a fascist State controlled by dangerous people, and short of breaking up into say five regional countries, I see no possibility of reversing that fascist trend.  Ultimately, the US will become a Putinesque State, run by an autocrat.  That will not be Trump;  it might be Pence. It has also become apparent that Mr. Trump has some form of mental disconnect, it is bizarre and undiagnosed, but seems to inhibit rational thinking.  It might be some disease such as incipient Alzheimers. Hard to say.  Either way, the US is not "great again," but it remains dominant by virtue of the Rust Principle.  Trust this explains. 

Signing off,

Jan van Eck

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Jan, I think you are being too sensitive to comments that may oppose or challenge your narrative.  A number of members have tried to talk you into continuing on in the forum, and we are genuinely hopeful that you do.  However, you are taking the position of taking your ball and going home because someone, anyone, had the nerve to challenge what you have to say.  Of course this is your decision and you are free to make it but, from what I've seen in your writing and ideas expressed therein, you possess a wonderful creative intellect and maturity that is on another level (higher) and it would seem to be an overreaction to just quit the forum and go away.  I have not seen one example where the people questioning any or your positions or theories has shown you to be any sort of fool.  Quite the opposite, in fact.  Try to keep in mind that this form of communication makes it very hard to "hear" the implied tone of the commenter, and therefore one should give them the benefit of the doubt where possible.  Just my humble opinion.  I hope you will reconsider and stay with the forum.

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I agree with Dan, 

Jan's response to what I thought was going to be an interesting conversation seemed to start with a huge misunderstanding:

"you have my blessings to delete or circumscribe any post of mine as you choose or find proper, in your sole determination". 

As my badge says 'Newbie' I have zero ability to edit anyone's content apart from my own. When I hit the 'Quote' button, I deleted around half of the sentences that weren't related to the comments I was about to make and left the rest in without any changes at all. (I bought 20 sentences down to 10 to focus on what I wanted to expand on).

It's quite normal when quoting someone, to only use sections of the original text - in fact this is the norm. There were no changes at all in the remaining 3 paragraphs, and there was no change in the meaning of what had been said.

Anyone interested (including Jan) can simply scroll up this page and see this to be true.

Good luck Jan and I hope to see you again here on the forum.

Regards,

Jason 

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According to Kyle Bass, who made billions off the 2008 mortgage debacle and has been shorting the yuan, China is our of money. The value of the yuan is adjusted daily, the "Daily Fix." Of its own accord, however, it has dropped 6% in the last four months. It is estimated that an 8% drop would counterbalance the damage of the tariffs. It is true that China exports about $550 billion worth of goods to the US and we export only about $125 billion to them, so they can't hurt us too much with tariffs--certainly not in a "tit for tat" manner. However, if President Xi is pressured enough, he always has the "nuclear option," which is to start dumping US bonds, of which China is by far the greatest holder in the world. This would obviously create global financial panic and chaos, but it would also trigger some immediate responses: including outrage to end the tariffs, bringing governments to the table to negotiate a quick agreement that would work. Why would he do this? Because as a child, when his father was purged from the Communist government after serving as Mao Zedong's propaganda minister, Xi and his brother and sister were bullied and tortured, openly and in front of his family (his mom had to clap and holler disparaging remarks as Xi, her son, was humiliated). His sister committed suicide from it all. His father perished in prison. The end result is that Xi is not some weakling; he has endured hard times and has fought back, and he will not fold easily. He is also "president for life," because the people trust him and believe in his leadership. I am an American, so am not pulling for the "nuclear option," but I am also a pragmatist and believe that he will: 1) Join the TransPacific Trade Agreement Pact in our place, 2) Build out the new Silk Road, to our exclusion (60% of world trade will go through it), 3) If pushed, and the above doesn't work, stop buying US bonds, 4) devalue the yuan dramatically--remember it is set daily by a central committee which is under Xi's rule, 5) as a last resort, begin the "nuclear option." If we get to #5, it will be wise to own as much gold as one can afford, to have cash on hand, and to hunker down for a worldwide recession that will make 2008 look like a hiccough. In short, it is absolutely silly to think that China has no weapons with which to fight a trade war. I strongly suspect that their citizens are more willing than ours to endure pain and suffering: their leader has experienced it and they know that. But then again, I'm just an old guy wondering why we're doing this. They say it's all about China stealing intellectual property. From whom? Well, duh, Apple, who made zillions by using cheap labor at Foxcomm, where Chinese kids who were assembling Apple iPhones but couldn't afford one began jumping out of windows, so they made them suicide proof. Apple has done pretty well, so if stealing intellectual property is all that bad, perhaps more companies should try for it. 

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The tariffs are just going to hurt the U.S. consumer in the end. You can't have both tariffs and income tax. You have to cut gov't spending. Period.

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1 hour ago, Gerry Maddoux said:

 But then again, I'm just an old guy wondering why we're doing this. They say it's all about China stealing intellectual property. From whom? Well, duh, Apple, who made zillions by using cheap labor at Foxcomm, where Chinese kids who were assembling Apple iPhones but couldn't afford one began jumping out of windows, so they made them suicide proof. Apple has done pretty well, so if stealing intellectual property is all that bad, perhaps more companies should try for it. 

Apple wouldn't be Apple without China. And then they repatriate all of that money (over $200 billion) and all they do is offer stock buybacks and dividends to their shareholders. Basically, China really helped Apple become very rich, and the U.S. allowed that, and now Apple has the largest cash hoard of any company ever. 

And Trump wouldn't need a trade war if he started an actual war with Iran. In a nutshell, he doesn't know what he is doing.

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2 hours ago, Gerry Maddoux said:

. However, if President Xi is pressured enough, he always has the "nuclear option," which is to start dumping US bonds, of which China is by far the greatest holder in the world. This would obviously create global financial panic and chaos,

Not really, there are many false assumption about how the bond market works, and a big one such as above is simply incorrect.

If China were to sell their US treasuries, all that would happen is that someone else would own them. If china can exchange those pieces of paper (that are producing income via interest) for something more desirable then let them, so what.  in a low or moderately high inflation environment there will be demand for government bonds because they’re the equivalent of cash in the long-run plus an interest payment. 

 

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Peter Navarro - How Trump Will Win Against China on Trade

Peter Navarro, Director of the White House National Trade Council does a pretty decent job of outlining China's shortcomings here in this recent presentation at the Hudson Institute. I would encourage anyone that has about 20 min to spare, to watch it. He starts around the 4:40 mark to save you some time:

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14 hours ago, Jason Lavis said:

I agree with Dan, 

Jan's response to what I thought was going to be an interesting conversation seemed to start with a huge misunderstanding:

"you have my blessings to delete or circumscribe any post of mine as you choose or find proper, in your sole determination". 

As my badge says 'Newbie' I have zero ability to edit anyone's content apart from my own. When I hit the 'Quote' button, I deleted around half of the sentences that weren't related to the comments I was about to make and left the rest in without any changes at all. (I bought 20 sentences down to 10 to focus on what I wanted to expand on).

It's quite normal when quoting someone, to only use sections of the original text - in fact this is the norm. There were no changes at all in the remaining 3 paragraphs, and there was no change in the meaning of what had been said.

Anyone interested (including Jan) can simply scroll up this page and see this to be true.

Good luck Jan and I hope to see you again here on the forum.

Regards,

Jason 

I remain baffled why you would post this. You are entirely free to delete sections in order to focus on what you wish to focus on. Why would anybody care?   I am baffled.  Oh, well.

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FDR extended the depression by artificially prohibiting deflation. Historically, financial panics had occurred before and when the government stayed out were over in 2 to 3 years. FDR's meddling and keeping up prices artificially high by destroying inventories and creating government jobs reduced deflation and extended the depression until the advent of WWII. The tariffs added to the artificial maintenance of prices, but were a minor part of the overall policies that prevented free market capitalism from solving the problem.

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13 hours ago, Jan van Eck said:

I think that is being rude.

Actually, I wasn't being rude at all. It's just a miscommunication is all. No worries. I guess it isn't you.

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According to the great champion free-market economist, Milton Friedman, "The great depression was severe and extended due to the Federal Reserve’s failure to carry out its assigned role as the lender of last resort. Rather than providing liquidity through loans, the Fed just watched as banks dropped like flies, seemingly oblivious to the effect this would have on the money supply. The Fed could have offset the decrease in money supply created by bank failures by engaging in bond purchases, but it did not." As Milton and Rose Friedman wrote in Free to Choose.

 

Trade Wars had nothing to do with the deepening of the Great Depression contrary to the popular misconceptions and beliefs.

 

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