China’s Oil Futures Contract Is Beginning to Show Its Teeth

4 hours ago, Epic said:

Can you please explain to me how US corporations were supposed to "compete on the world stage" when they were required to pay 3x the amount in taxes?  "Rewinding the clock" is the only option that Europe's VAT has given to US corporations. 

I am not an accountant so cannot tell you whether its fair or not however lets assume it is unfair to America. So obvious question is why did America strike such a deal? I suggest you need to look at what they got in return. What if part of the deal was to allow American missiles and bases to be put, or remain, in Western Europe or even just keep Europe dependant on the US for trade thus ensuring their support in any wars America feels like starting. You will say America is protecting Europe with their bases however they are actually protecting America as if Western Europe came under Russian influence the front line of any war would then be the Eastern seaboard of America. By making Europe dependant on US trade they get to keep war at arms length plus have some strong allies. Now you may say that Europe would not be so stupid as to deal with Russia but they are already and in a very sensitive area, energy. Gas pipelines that feed much of Europe start in Russia or Russian controlled territory in a cold winter and with a big decision on a defence issue at NATO a sudden closure of the pipeline would cause immense suffering and perhaps focus some minds to reconsider their position. China is also trading with Europe and we get cheap goods from them thus making it more dependant on them. America retrenching to their own borders is all good and well but the consequences will be isolation in a world controlled by Russia and China and will bring threats closer to home. US soft power keeps many countries as its friends removing ties with trading partners will leave America venerable.

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On 7/31/2018 at 5:49 AM, Tom Kirkman said:

the inexorable, incremental, slow-moving financial tsunami that is the PetroYuan.

I think what you are witnessing is simply asian trader hedging. Nothing can replace the USA on the world stage outside a national catastrophe like yellowstone blowing up eliminating the us from the world stage. 

Why, because China's FAKE push to be a WORLD RESERVE currency nation is all fake. If they were sincere they would allow the Yuan to FLOAT!!! Repeat FLOAT!!! and they DO NOT. Why? Because it would SINK like a ROCK.

The Yuan is the main thing you should look at when you see these boutique concepts floated by countries like China Petro Yuan.. LMAO. It's all Great for CNBC talking heads types around the world to market a product, but in the end it matters little.

UNTIL CHINA, has proven itself as a historically verifiable SAFE PLACE for peoples FREEDOMS, LIBERTIES and most of all MONEY.

It's all a laughable kabuki theater orchestrated for the gullible on the world stage.

The USA is the BIG Dog BECAUSE of our 200+ years of LAW regarding property rights and integrity of the court system that protects INDIVIDUAL RIGHTS.

China Has ZERO history in this area and human nature will not flood them with their trusted capital.

You will see small hedges here and there sure with China, but they are such small potatoes because (READ Marcus Aurelius)  their cultural NATURE of Communism command and control will not allow for the masses to go gaga and turn over their capital in trust when there are other markets with a historically more friendly history towards that individuals capital protection.

  

 

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On 8/5/2018 at 6:01 PM, jaycee said:

Yes and as I pointed out it will reduce consumption however we will still need oil products we are in agreement with what I said however the use of electric cars will reduce consumption as oil will not burn in the car. Regards petroleum replacement using coal liquification there will be new products developed as the price of oil rises this is how the world works. Something becomes too expensive replacements are found as there is profit to be had in looking at alternatives. Dont' assume we will never invent anything ever again, look at batteries for battery cars since we are talking about them look how much research has gone into that field a few years ago people said battery cars would never work as battery life was too short now we have battery sports cars with 600 mile range!

That is never the case. Just because something gets too expensive does not mean there will be alternatives. Just look at history for example. In history, when important things became too expensive, people died in large numbers mostly by famine. If there were always sustitute, there would be no famines. You must be remembering Ukraine famine of 1930s or Irish potato famine. This is the reality.

 

On 8/5/2018 at 6:49 PM, mthebold said:

We've hit a point where I think we're just going to disagree.  I think America would be better served by attending to local issues.  In essence, being more like Switzerland.  I also think America's trade will do just fine when we focus on the local.  Possibly better.  You think success depends on trade which depends on... I'm not sure what, exactly, you think it depends on.  You've provided some correlations between trade and wealth, but that's all I'm seeing. 

It doesn't really matter what foreigners think though.  America has voted to take care of its own first, and we'll find out soon enough how that plays. 

USA works because of petrodollar and its consequent economic benefits. The millions of highly talented Asians in USA stay in USA because of the large resource available. If USA ceases international trade, these people will flee. Silicon valley will be the first thing to be hit when this happens. It is likely that this industry will go in ruins when USA cuts off foreign trade. In addition, USA has current account deficit of over $400 billion which is the amount USA gains every year.

If USA leaves the arena, many will be very happy

 

9 hours ago, Epic said:

You are right.  Technology has stagnated since the 90s. 

retro.jpg

I did not say that 1990s technology stagnated. I only said that there has not been any more breakthrough after supercomputing and once supercomputing peaks out, it is over and that is about 2010.

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30 minutes ago, Bhimsen Pachawry said:

That is never the case. Just because something gets too expensive does not mean there will be alternatives. Just look at history for example. In history, when important things became too expensive, people died in large numbers mostly by famine. If there were always sustitute, there would be no famines. You must be remembering Ukraine famine of 1930s or Irish potato famine. This is the reality

What is it you are so worried about running out of exactly, apart from oil obviously, there are alternatives already for a lot of oil derived products e.g.

http://www.trendingpackaging.com/the-most-common-eco-friendly-alternatives-for-plastic-packaging/

The world will adapt and manage it wont happen overnight and as oil gets more expensive, or enviromentally unfriendly, substitutes will become more appealling for a variety of reasons.

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On ‎8‎/‎3‎/‎2018 at 2:29 PM, jaycee said:

You are seeing the world from America’s perspective from the world’s perspective America has never fought in a war or supported rebels, sorry freedom fighters, or backed countries against other countries unless it was in their benefit. Nobody is asking America to challenge Iran, who pleaded with America to invade Iraq, who says the Palestinians don’t have a right to live in their country etc America acts as policeman for its own reasons the ordinary American cannot see what these reasons are because they are fed the American government lies that they are upholding fairness etc.. If America was truly keen to uphold fairness etc why were they reluctant to join WW2 Hitler was only rivalled by Stalin as a murderer of innocents but it took Pearl Harbour to get them to join.

I hate to say this but your government sends your troops to die for their own reasons not any other government's.

Sentiments sound a lot like Neville Chamberlain.  Not responding to a threat until the threat is imminent and deadly is foolishness.  If somebody tells you they are going to kill you, listen and act accordingly.  When someone tells your friend/ally they are going to kill them, listen and act accordingly.  Who knows how different WWII might of been in Europe if this philosophy had been applied sooner. 

If your hypothesis is correct, why didn't we stay and occupy all of Europe when WWII was over and extract a little, "repayment" in our own interest.  No, quite the opposite, Japan and Germany are better examples of what we do.  We helped rebuild Germany and Japan and damned if that didn't work out for them and everybody else in terms of their technology and manufacturing prowess.  

You speak of perspectives and mention the Palestinians living in their own country, well, lets just say it appears America isn't the only country whose citizens are being fed a line, by their government or media...………….. I cant find reference to a Palestinian Country/Nation, at least in a historical context prior to very modern history.  The U.S., the U.K. or any other nation; the BBC, CNN, MSNBC, lies and propaganda transcend nations and networks, your government and likely your favorite news source is lying to you, believe that.

We send our troops to make the enemy die.  True enough, our reasons have not always been altruistic.  But I'm damn glad we sent them to Europe when we did, late or not, aren't you?  Otherwise there would be a whole lot more German being spoken, maybe even here in the U.S.  Hopefully, we will stand firm and we wont all be forced to speak Farsi.

TXPower

 

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9 hours ago, jaycee said:

So obvious question is why did America strike such a deal? I suggest you need to look at what they got in return.

^Your statement is highly intelligent and well-stated.  Unfortunately, it misses the point altogether.  If we are looking at tariffs, then yes, you are very much correct...we need to ask why did the US strike such a deal with those tariffs.  Did the US choose to give one nation a particularly good deal on tariffs in exchange for missile defenses or military bases?  If so, then it would go along way to explain why the US has had such bad "tariff deals" with other nations, particularly in Europe...it is likely that the US got some other good deal on something else in return.  

But I wasn't talking about tariffs at all.

I was talking about taxes.  When it comes to taxes, nations do not make deals with other nations because taxation is an internal aspect of government.  Taxation doesn't involve a deal between nations (that's what tariffs are).  Rather, taxation involves a deal between one nation and that same nation's citizens.  But the VAT is different.  It is a tax that also applies to imports.  As a result of this, it effectively allows European governments to tax US citizens (or at least, it taxes the US citizens and shareholders who own US corporations that export to Europe).  Yet, those US citizens receive no voting rights in Europe despite being taxed by European governments.  Fair?  Nope.  Since exporting to Europe now requires double taxation, it creates a virtually impenetrable trade barrier against US goods.  Interestingly enough, this trade barrier ends up not showing up on the books when calculating "tariffs" simply because it isn't a tariff.  It is a tax.  However, it operates as a stealth tariff, and this stealth tariff has allowed Europe to take advantage of US citizens for over twenty years.    

Europe started the trade war with the US the day European nations started enacting VAT taxes.  It just took US citizens this long (and the loss of 50% of US industrial infrastructure) to start waking up to that reality.  

 

 

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3 hours ago, TXPower said:

You speak of perspectives and mention the Palestinians living in their own country, well, lets just say it appears America isn't the only country whose citizens are being fed a line, by their government or media...………….. I cant find reference to a Palestinian Country/Nation, at least in a historical context prior to very modern history.  The U.S., the U.K. or any other nation; the BBC, CNN, MSNBC, lies and propaganda transcend nations and networks, your government and likely your favorite news source is lying to you, believe that.

Arabs lived in what is now Israel before the Jews arrived after WW2 that's a fact and all I am going to say on that subject.

As to me believing the UK government please read the thread I am sure I said I don’t believe any government and I am certain I said the UK media has a left wing bias. I am the most unbaised person you will meet I have travelled and worked round the world and because I live in London my friends range from Maori to South Koreans to Spanish and Americans I see many perspectives. One thing I have learnt there are always two sides to an argument so I debate online trying to hear others. So I am afraid you are creating a strawman trying to say I believe the UK government nothing I have said would have said that I am certain.

I cannot be bothered re reading the whole thread I have about 9 replies to answer on this and another thread so am saving time.

3 hours ago, TXPower said:

We send our troops to make the enemy die.  True enough, our reasons have not always been altruistic.  But I'm damn glad we sent them to Europe when we did, late or not, aren't you?  Otherwise there would be a whole lot more German being spoken, maybe even here in the U.S.  Hopefully, we will stand firm and we wont all be forced to speak Farsi.

America joined WW2 because Japan attacked them and they were allies with Germany. If America had genuinely cared about Europe it would have joined in 1940 when the UK was the last country fighting the Germans in Europe and were about to be invaded instead it was 1941 and only after Japan attacked that the US committed. They did not do it to help the UK they did it because they were attacked. Which is perfectly all right I see their point not their war etc but it was not done to save Europe that was a by product.

Regards Farsi I agree I have no desire to become a Muslin always seem to argue with them if I meet a very religious one and would fight to avoid that. Not many causes I would do that for I can assure you. I do have a conspiracy theory on where the sudden rise of Islam came from mind you and it is based on their main leader being trained in America and whose body was thrown out of a helicopter mysteriously with  some odd events in between but I digress.

As for speaking German you don’t know my family history but I can tell you I would not have been speaking German :).

Edited by jaycee

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3 hours ago, TXPower said:

If your hypothesis is correct, why didn't we stay and occupy all of Europe when WWII was over and extract a little, "repayment" in our own interest.  No, quite the opposite, Japan and Germany are better examples of what we do.  We helped rebuild Germany and Japan and damned if that didn't work out for them and everybody else in terms of their technology and manufacturing prowess.  

Sorry did not reply to that bit very busy but like to answer all points.

The lesson learnt of WW1 was do not let the defeated countries suffer too much with reparations otherwise you get WW2. So Germany was helped to rebuild off course since it was now the front line state in the cold war with the USSR they were never going to let it fail. So the generosity you perceive perhaps is more self interest.

Regards Japan America wanted to eliminate the militaristic nature of Japan and remove the Emperor and the ruling system he represented to make sure Japan never rose again to be a threat so a new ruling system had to be put in place and a society to work in it otherwise they would just go back to the old ways again and potentially want revenge on the US the confusion between generosity and self interest I suggest may again apply here.

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2 hours ago, Epic said:

Europe started the trade war with the US the day European nations started enacting VAT taxes.  It just took US citizens this long (and the loss of 50% of US industrial infrastructure) to start waking up to that reality.  

So let me get this straight you believe the EU invented VAT to penalise the US? Really? And if it took the US this long to work out it was paying VAT I would get a new accountant.

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1 hour ago, jaycee said:

Sorry did not reply to that bit very busy but like to answer all points.

The lesson learnt of WW1 was do not let the defeated countries suffer too much with reparations otherwise you get WW2. So Germany was helped to rebuild off course since it was now the front line state in the cold war with the USSR they were never going to let it fail. So the generosity you perceive perhaps is more self interest.

Regards Japan America wanted to eliminate the militaristic nature of Japan and remove the Emperor and the ruling system he represented to make sure Japan never rose again to be a threat so a new ruling system had to be put in place and a society to work in it otherwise they would just go back to the old ways again and potentially want revenge on the US the confusion between generosity and self interest I suggest may again apply here.

I agree with your statement that the lessons of Post WWI and the rise of Hitler's Germany were instructive as to what the international community ought not do. 

Your last two posts both suggest I said anything about or believe our motivations were generosity, or even, that I think our more recent decisions as to when, where or how we operate are not selfish.  I believe I stipulated pretty clearly when I made the statement earlier that our decisions, especially militarily, aren't always altruistic.  I stand by that.  As you pointed out, I don't know your family history but based on how things were going in Europe, Africa and Asia, had we not entered WWII, there is still a damn good chance plenty of the world would have been speaking German or Japanese perhaps.  

But still, this discussion isn't complete without pointing out, that we could have dealt with Japan the way we did singularly at Hiroshima/Nagasaki or could have added Germany to that attack plan, effectively ending it.  I am not advocating that and am glad we didn't.  But it bears pointing out, entering WWII sure cost a lot of American blood and treasure we didn't have to spend.   

 

TXPower

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9 hours ago, Cowpoke said:

I think what you are witnessing is simply asian trader hedging. Nothing can replace the USA on the world stage outside a national catastrophe like yellowstone blowing up eliminating the us from the world stage. 

I'm very much pro-American ideals.  But all empires eventually collapse.

The USA empire will eventually collapse.  Meantime, the U.S. PetroDollar needs some competition from the China PetroYuan.  Healthy competition should actually increase the lifespan of the U.S. empire. 

The EU is not exactly healthy competition, as they are systematically dismantling their own cultures and economic systems.  The EURO currency had its chance and failed miserably. 

China has a long term plan to increase the scope of their economic clout on the world stage. 

So I'm hoping the gradual rise of a competing PetroYuan will offset the much abused monopoly of the PetroDollar.  

Competition is good.  Monopolies, not so much.

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5 hours ago, Epic said:

Europe started the trade war with the US the day European nations started enacting VAT taxes.  It just took US citizens this long (and the loss of 50% of US industrial infrastructure) to start waking up to that reality.  

 

 

There is a logic to VAT, missing in sales tax. The US could have embraced VAT. I'd rather have VAT than sales tax myself, sales tax being regressive and punishing those who barely get by and have to spend every dime. Europe is not a basic economic threat. China is a threat for what they are willing to do, their ability to lobby, and the nature of multinational corporations who have managed to get laws and trade and tax policies that reward going offshore. For now China and US have each other by the short hairs and want to pull. Tariffs are not the answer, but the status quo was a slow death, so if this wakes us up before we lurch into a depression, great. But neither China or the US can thrive without the other. China's bigger problem is the residual of one child policies. The pyramid schemes don't work with a shrinking base.  

And for those that think the USA beat Hitler, the USA was the mop up operation. Stalin, Russian winters, the siege of Stalingrad, 20 million Soviets were the critical piece. Russia was a huge Hitler overreach. The Allies deliberately didn't target Hitler towards the end because he was his own worst enemy. I'm a vet, student of military history, and enjoyed my military time, being a soldier is perhaps the most honorable thing there is. But if you think the US won WW2, nah. We shortened it, and did beat the Japanese. 

But the miracle of WW2 was winning the peace. We have forgotten that.

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1 hour ago, Tom Kirkman said:

  Competition is good.  Monopolies, not so much.

Interestingly, that is debatable to this day in regards to the breakup of Standard Oil. Monopolies in theory have 2 general births, coercive and efficiency (innovative). At Standards peak in monopoly the price for their product was the cheapest through efficiency.

The problem with China is that it's economy is top down command and control not ground up like the more free western capitalist markets are.

China is a "coercive" type of monopoly. Just look at the capital flight alone out of China to the western nations shows what types of monopolies people would rather not risk their savings/wealth under:

 https://www.forbes.com/sites/insideasia/2017/02/22/china-capital-flight-migration/#68e134234a37

Now when you add in, Human rights, Property rights, and all other individual rights associated with the west it's hard to see China overtaking the USA and the Empire of the day anytime soon.

Lastly, I think the "petro yuan" is much ado about nothing as the "petro dollar"is.

https://www.forbes.com/sites/douglasbulloch/2018/04/26/the-petro-dollar-is-a-myth-the-petro-yuan-mere-fantasy/#5eaca3b46a14

 

Edited by Cowpoke
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4 hours ago, John Foote said:

There is a logic to VAT, missing in sales tax. The US could have embraced VAT. I'd rather have VAT than sales tax myself, sales tax being regressive and punishing those who barely get by and have to spend every dime. Europe is not a basic economic threat. China is a threat for what they are willing to do, their ability to lobby, and the nature of multinational corporations who have managed to get laws and trade and tax policies that reward going offshore. For now China and US have each other by the short hairs and want to pull. Tariffs are not the answer, but the status quo was a slow death, so if this wakes us up before we lurch into a depression, great. But neither China or the US can thrive without the other. China's bigger problem is the residual of one child policies. The pyramid schemes don't work with a shrinking base.  

And for those that think the USA beat Hitler, the USA was the mop up operation. Stalin, Russian winters, the siege of Stalingrad, 20 million Soviets were the critical piece. Russia was a huge Hitler overreach. The Allies deliberately didn't target Hitler towards the end because he was his own worst enemy. I'm a vet, student of military history, and enjoyed my military time, being a soldier is perhaps the most honorable thing there is. But if you think the US won WW2, nah. We shortened it, and did beat the Japanese. 

But the miracle of WW2 was winning the peace. We have forgotten that.

Some points on China's one child policy: The era after the cultural revolution (ugh) and opening to the rest of the world was an incredible time in China.  It still is in many many respects.  The people all across China were once again allowed to blossom, the horizon was wildly open to achievers and the government was once again promoting thought (think about that for a moment).  People who worked hard could quickly rise up in government and industry and, from what I saw, most took advantage of it like they might lose this opportunity and China might close up again, sooner rather than later.  Now or never was the attitude of the day.  It could be argued that this attitude still prevails today.

The one child policy was mandated by Deng Xiaoping (Google both if you care to learn more. Fascinating.) to curb a population that Deng knew all too well they were not capable of even feeding properly if something drastic was not done.  Some may find this statement difficult to swallow, but the fact was China, in Deng's lifetime, had experienced devastating famine and he was a man that pushed visionary changes through the Chinese government against many odds.  Not all changes were good (when and where are they ever?), but I would say that Deng Xiaoping was one of the greatest leaders China had during a time of tremendous change.  In my mind, Deng also felt the now or never emotions of the time and set about trying to get China into a position where his people would never have to suffer so much again.  But I digress.

Now, going from that rather upbeat story line, what the one child policy produced as a side effect was a generation of very spoiled kids (give me a chance to explain).  The Chinese family unit under the one child policy was, in most cases: 1 child, 2 parents and 2 sets of grandparents, all living in close proximity, revolving around and doting on the 1 child.  Also at that time there were very limited personal activities available.  Not many people travelled, even within China, let alone to the outside world.  Travel came later (the annual cross country masses of people going home for Chinese New Year is a spectacle to witness!) and we are all familiar with the stories of Chinese tourists acting, shall we say, rather uncaring of their hosts and, in many well publicized cases, like spoiled brats.  Anyway, with limited options available and nowhere to go, the parents and grandparents gave the 1 child their all.  No one can blame them.  No one.  The era the parents and grandparents came from was brutal and suffocating, and most people did not even want to bring children into the world during many of those years.  Many of these parents and grandparents could still vividly recall the little red guard days and how many of them, with no choice and with a firm belief they were doing Mao's work, actually subjected their own parents to great suffering and in some cases death (Google little red guards for more).  Again, no one can blame them for spoiling the 1 child.

This is not to say that all of these only children were simply spoiled.  Vast numbers (you have to say that when you talk about China!) of parents and grandparents made it their mission to prepare these children to go out and make a difference.  China first, and the rest of world as well, but second.  I don't think anyone that loves their own country has any problem understanding that concept, but very few of us have much comprehension of the Chinese people's history that shaped who they are, personally (wonderful people!) and professionally (do not underestimate them, even on their worst day).  I am still waiting and watching to see if the spoiled side or the driven side will prevail as they reach to the outside world to assert themselves.  Personally, although I may speak frankly about some of the wrongs they are committing with regards to trade, I think they will adjust their path and their policies and approaches, and the world will be better for it.  It may take time, but the Chinese people are very capable and worthy partners and/or adversaries.  It will indeed be interesting to watch it play out. 

What I mean to bring to light is that these "only children" are now running industry and the country.  One should not forget the above facts when dealing with them.

Sorry for the long post.  I hope some of you may have found it interesting.

A last point, this about John Foote's further thoughts about Germany and WW2: I think your summary in the second paragraph is accurate, and well said.  Thanks for the opportunity to respond.

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3 hours ago, Cowpoke said:
4 hours ago, Tom Kirkman said:

  Competition is good.  Monopolies, not so much.

Interestingly, that is debatable to this day in regards to the breakup of Standard Oil. Monopolies in theory have 2 general births, coercive and efficiency (innovative).

Monopolies are always the most efficient and lowest cost form of organization...until you add humans.  This is because monopolies also allow humans to work less while earning more.  Once those humans realize they have an unfair advantage over their peers, it usually does not take them very long before they decide to capitalize on that advantage.  Competition is good.  Monopolies, not so much.

4 hours ago, John Foote said:

There is a logic to VAT, missing in sales tax. The US could have embraced VAT. I'd rather have VAT than sales tax myself, sales tax being regressive and punishing those who barely get by and have to spend every dime. Europe is not a basic economic threat.

Had the US embraced the VAT when the rest of Europe did, then all would have been well.  But the US didn't, and that was primarily because US law and the VAT are incompatible (as I will explain below).  The US tried to address this issue back in 2001, but then Khalid happened, followed by Saddam's petro-euro...and then Obama happened, and so now here we are, finally dealing with this after 17 years of delays, and after half of our infrastructure has fallen into China and Europe's hands.

 

5 hours ago, Tom Kirkman said:

The EU is not exactly healthy competition, as they are systematically dismantling their own cultures and economic systems.  The EURO currency had its chance and failed miserably. 

China has a long term plan to increase the scope of their economic clout on the world stage. 

So I'm hoping the gradual rise of a competing PetroYuan will offset the much abused monopoly of the PetroDollar. 

^Interesting viewpoint.  I do not have a strong enough understanding of the complex macro-economic factors surrounding this topic to know whether your idea is a great one or a terrible one; although, I am pretty sure it is one or the other.  ;)

 

7 hours ago, jaycee said:

So let me get this straight you believe the EU invented VAT to penalise the US? Really? And if it took the US this long to work out it was paying VAT I would get a new accountant.

As to why it took so long, I mentioned Khalid, petro-euro, Obama, etc...  As to why the EU uses the VAT to penalize the US...umm, the answer is 'kind of yes' and 'kind of no'.  Let my try to explain. 

In may last post, I was not intending for it to be a political statement.  Rather, I was simply trying to make clear a very complex and confusing issue, one that is so complex and so confusing that I have witnessed on more than one occasion professors of Economics getting it wrong.  So, let me try to clear things up a bit...

At its core, the VAT does not function as a trade barrier any more than does a sales tax or income tax, or any other tax.  In fact, a sales tax and the VAT have the exact same end results (the mechanics of how they get to that end result are very different, but the end results are the same).  As such, both are "trade neutral," as many anti-Trump economists will quickly point out.  

But things change dramatically once you include an income tax into the mix.  Under certain situations, such as when an income tax and the VAT are both being employed, then a trade barrier can be created.  This happens when one country has a high income tax but a low sales/VAT, while the other country has the opposite.  Under this particular circumstance, a trade barrier is created.  When we look at the EU/US taxes, we see that the US has a high income tax but no VAT, but EU nations tend to have high a VAT and lower income taxes.  As a result, a trade barrier is created by the EU against the US.  No, the EU didn't enact the VAT to penalize the US, they enacted it and then it just so happened to penalize the US.  But it does not just penalize the US.  It penalizes all exporting countries that have low a VAT and high income taxes.  

Because of the harsh trade barriers that VAT applies to these countries, it was quickly adapted by many nations to allow them to avoid those harsh trade barriers.  As a result, since the first VAT was enacted in France after WW2, it has quickly spread to over 150 countries around the world.  Only the following countries do not have a VAT (or equivalent): Qatar, Oman, Malaysia, Libya, Kuwait, Hong Kong, Greenland, Gibraltar, Cayman Islands, Bermuda, Angola, Bahrain, Guernsey, and of course, the USofA. 
After looking at that list, can you pick the odd one out?

So why doesn't the US just enact a VAT and be done with it?  After all, that would fix everything, right?  Yes, adding a VAT would eliminate the trade barriers, but the reality is that the VAT is a terrible way to tax people.  It hurts poor people since a larger portion of their income is required to go toward consumption, it destroys savings (that is to say: the money they previously earned had been taxed through income, thereby reducing it, but the income tax allowed them to purchase cheaper goods; however, if this changes, now the price of goods goes up by a % equal to the VAT...thus destroying an equal % of purchasing power from those savings), it is overly costly for businesses to maintain the additional required accounting records, it operates as a hidden tax since the tax value wouldn't show up on the sales receipt, causing many consumers to incorrectly blame the retailer for the high prices rather than the politicians, and it is practically impossible to enact in large nations made up of independent states who tax their residents independently of the federal level (aka: the US).  This last one is the real kicker.  Even if the US decides that they want to enact the VAT, due to the legal structure of the USA, most corporations are registered at the state-level, but a VAT would require that every single one of them also must register at the federal level.  Having one set of government paws messing around in your business is enough: having to deal with two separate government entities is more of a headache most US business owners would probably allow.  Although these added costs can be distributed among larger corporations, the added accounting costs for small business owners would likely cause them to riot in the streets.  Well, maybe 'riot' is too harsh of a word.  At a minimum it would cause the US politicians who enacted the VAT to be kicked out of office in the next election, and for a US politician, that is worse any any number of riots in the streets.

So, if the VAT is such a terrible tax, then why is it so popular?  That is simple: it gives you a huge trade advantage against any nation that doesn't enact it.  After all, 150 nations have enacted a terrible tax because the trade advantages dramatically outweigh all of the costs.       

Since the US does not have a VAT, it puts them at a huge trade disadvantage.  Therefore, they need to deal with this situation or eventually go bankrupt.  Currently the US has only two options to deal with the VAT that the rest of the world is using against it: 

1.  Enact their own VAT (or sales tax).  The easiest way for this to happen would be for the United States government be abolished and rebuilt form the ground up as a single nation (without states) and with the VAT at the core of this rebuilding so as to make the VAT efficient enough for US citizens to use.

2. Destroy the Federal government and replace it with the Articles of Confederation 2.0 (because that worked so well in 1781), and then have all 50 states enact their own VAT.

3.  Realize the the VAT is a terrible idea for the US citizens, and counter the trade imbalance it creates by imposing tariffs.  

Since option #1 and #2 are basically not real options, that leaves us with option #3.  But you see, as soon as option #3 was attempted by placing a 25% tax on steel and 10% tax on aluminum, the entire world (basically everyone with a VAT) was in an uproar and blaming Trump for starting a trade war.  But he didn't start a trade war, the VAT started the war. 

The reality, in fact, is that Trump did not enact enough tariffs to effectively counter the VAT.  The average world VAT is around 20%, give or take.  Trump's tariffs have only been applied to steel and aluminum, where as the VAT is applies to EVERY SINGLE PRODUCT AND SERVICE produced.  As a result, Trump should not have placed his tariff on steel and aluminum, but rather, he ought to have enacted a 20% tariffs on ALL IMPORTS. 

That would have fixed everything.  

He still might, though, after China has been dealt with, and I hope he does.  After all, fair is fair.

Sorry for the long reply, but you did ask for it.  In conclusion, yes and no.  No the EU did not invent the VAT to attack the US, but yes the reality remains that the VAT is an attack on US citizens due to the VAT's inherent inconsistencies with US law.  

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14 minutes ago, Epic said:

The reality, in fact, is that Trump did not enact enough tariffs to effectively counter the VAT.  The average world VAT is around 20%, give or take.  Trump's tariffs have only been applied to steel and aluminum, where as the VAT is applies to EVERY SINGLE PRODUCT AND SERVICE produced.  As a result, Trump should not have placed his tariff on steel and aluminum, but rather, he ought to have enacted a 20% tariffs on ALL IMPORTS. 

That would have fixed everything.

Very enlightening.  Thank you.  And I hope The Donald is actually aware of this as well.  Is that crickets I hear coming from Europe?  Hmm.

As an American I never gave much thought to VAT, until now, and of course I pay it in my travels.  I would imagine that very few people, very few, are even aware of its existence back home.  

Obviously, many of the countries I go to that have VAT, also have a counter at the airports where you can get a VAT refund of some sort.  Being the generous (read foolish) sort I am, I always thought I would let them keep their tax as it didn't have much impact on me.  Your comments make me realize I need to reevaluate my position in this regards.  Can you, or anyone else, tell me how seriously I should pay attention to the VAT refund?  I mean, if I'm going to be collecting stacks of receipts to get back 20 bucks on a trip, I might still not be interested.  But if it is more significant than that I will certainly want to do so.  Thanks!

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(edited)

23 hours ago, jaycee said:

I am not an accountant so cannot tell you whether its fair or not however lets assume it is unfair to America. So obvious question is why did America strike such a deal? I suggest you need to look at what they got in return. What if part of the deal was to allow American missiles and bases to be put, or remain, in Western Europe or even just keep Europe dependant on the US for trade thus ensuring their support in any wars America feels like starting. You will say America is protecting Europe with their bases however they are actually protecting America as if Western Europe came under Russian influence the front line of any war would then be the Eastern seaboard of America. By making Europe dependant on US trade they get to keep war at arms length plus have some strong allies. Now you may say that Europe would not be so stupid as to deal with Russia but they are already and in a very sensitive area, energy. Gas pipelines that feed much of Europe start in Russia or Russian controlled territory in a cold winter and with a big decision on a defence issue at NATO a sudden closure of the pipeline would cause immense suffering and perhaps focus some minds to reconsider their position. China is also trading with Europe and we get cheap goods from them thus making it more dependant on them. America retrenching to their own borders is all good and well but the consequences will be isolation in a world controlled by Russia and China and will bring threats closer to home. US soft power keeps many countries as its friends removing ties with trading partners will leave America venerable.

I finally get to quote without being off topic.  Some similar questions below, for consideration.

https://8ch.net/patriotsfight/res/62.html#123

a7e6fcff53e0145b2706101209f9f5f1e8be5f21d41064f1a4dde8d0e0f3a119.png

"Ask yourself, if the U.S. GDP is greater than the total of all others combined (G7), which allows us to negotiate from a position of strength, why would previous President's 'knowingly' [unequally] distribute America's wealth away by making unbalanced trade deals?

Why was America's wealth being distributed WW?  (World Wide)

Why was the American taxpayer essentially subsidizing the the rest of the world?"

Edited by Qanoil

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Shanghai Oil future Sept Contract today was up to trading limit, first time since launching . It's said the short side is facing difficult to deliver. China cuts its imports from the U.S, the market is tightening; the supply sources are too concentrated. First test of market power. Interesting but exciting.

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12 hours ago, Tom Kirkman said:

The EU is not exactly healthy competition, as they are systematically dismantling their own cultures and economic systems.  The EURO currency had its chance and failed miserably. 

China has a long term plan to increase the scope of their economic clout on the world stage. 

So I'm hoping the gradual rise of a competing PetroYuan will offset the much abused monopoly of the PetroDollar.  

 

5 hours ago, Epic said:

^ Interesting viewpoint.  I do not have a strong enough understanding of the complex macro-economic factors surrounding this topic to know whether your idea is a great one or a terrible one; although, I am pretty sure it is one or the other.  ;)

Epic, in defense of my comment about the EURO currency having its chance and failing:

Are we seeing the twilight of the euro?

... A quagmire of financial irresponsibility

Now that we are entering the euro’s third decade, it is worth noting that Portugal, Spain, and Greece are all governed by radical socialists who have abandoned the concept of fiscal responsibility, which they call “austerity policy.” Worse still, Italy’s establishment parties have all been swept away. The country’s new populist government – comprising the Five Star Movement and Lega Nord – intends to increase the country’s debt substantially to pay for its proposed tax cuts and guaranteed-income scheme; and it might threaten to abandon the euro altogether if the EU refuses to play along.

In view of these facts, even the most committed euro enthusiast cannot honestly say that the single currency has been a success. Europe has quite plainly overextended itself. Unfortunately, the great sociologist Ralf Dahrendorf was right to conclude that, “The currency union is a grave error, a quixotic, reckless, and misguided goal, that will not unite but break up Europe.”

It is hard to see a clear path forward. Some argue for still more debt socialization and risk sharing at the European level. Others warn that this would push Europe into an even deeper quagmire of financial irresponsibility. The attendant capital-market distortion would cause severe economic damage, which Europe can scarcely afford, given its difficult global competitive position vis-à-vis an emerging China and an increasingly aggressive Russia and America. One way or another, the euro’s third decade will decide its fate.

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10 hours ago, Epic said:

In conclusion, yes and no.  No the EU did not invent the VAT to attack the US, but yes the reality remains that the VAT is an attack on US citizens due to the VAT's inherent inconsistencies with US law.  

A very detailed reply I wish I could give one back but my only one is a bit trite. If all the major trading nations use VAT surely the US should have noticed this problem when signing a trade agreement? I really cannot see how they missed that therefore I have to assume it was in the calculations from the start hence trying to change the rules now is actually unfair and if you go breaking agreements when no material facts change then how can anyone ever trust the US to sign any agreement every again? Lot of trust going out the window with Trump's confrontational tactics.

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(edited)

7 hours ago, Tom Kirkman said:

It is hard to see a clear path forward. Some argue for still more debt socialization and risk sharing at the European level. Others warn that this would push Europe into an even deeper quagmire of financial irresponsibility. The attendant capital-market distortion would cause severe economic damage, which Europe can scarcely afford, given its difficult global competitive position vis-à-vis an emerging China and an increasingly aggressive Russia and America. One way or another, the euro’s third decade will decide its fate.

To me the euro is doomed the PIGS can see the slaughterman and they are not that stupid.

The euro is good for Germany and other well off Euro nations as it allows them a weaker currency to export goods than they would otherwise have due to the PIGS having high debt levels. The PIGS also supply cheap labour for German industry, sounds a bit like the slavs role in Mein Kampf. The PIGS usual method of operation was to run up debts then devalue the currency, run up large debts, devalue the currency rinse repeat but they decided to join the Euro as they realised they would then get to share the German credit rating and get more debt but at lower rates. Off course rather than use the windfall to revamp their economies they squandered it like they usually did buy votes,  bit like giving an alcholic $100 and telling him to get a new set of clothes and clean up so he can get a job he justs buys more drink. Some like the Greeks have now successfully past the limit of debt they can even just pay the interest on at low interest rates and the Germans had to show the whip and they are now suffering austerity as only a German tax collecter can inflict. On one hand I feel sorry for the Greeks as they are truly suffering but on the other they elected many socialist governments with absolutely no fiscal responsibility and lived well above their means for many years so in the end somebody has to pay. Portugal, Spain and Italy, especially the latter, are now getting a little sick of austerity and want a better solution. The Italians are planning to just go ahead and break spending limits and give big tax cuts etc to reinvigorate the economy, I don’t see that working to be fair but it got 5 Star and La Liga elected and will probably get them in again, they also hinted at leaving the Euro but have still to find the balls to actually start to try however they are leading the way for the PIGS and I sense this is the start of the rebellion. I voted BREXIT as I have worked all over Euro and have seen this at first hand. Without the Germans agreeing to financial reform the Euro is doomed but they cannot see that all they see is lazy PIGS. The binding of so many differnt cultures into one currency will never work as it needs a common belief in the sytem. Here we have the prudent Germans who believe strongly in paying all taxes bound in fiscal union with the Italians whose national pastime is avoiding taxes. The UK leaving is a huge loss to them financially though they wont admit it and I suspect will be the catalyst for further earthquakes.

Edited by jaycee
typo
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3 hours ago, jaycee said:

To me the euro is doomed the PIGS can see the slaughterman and they are not that stupid.

Side note for lurkers...

"PIIGS is an acronym for five of the most economically weak eurozone nations during the European debt crisis that started in 2008-2009: Portugal, Italy, Ireland, Greece and Spain. At the time, the acronym's five countries drew attention due to their weakened economic output and financial instability, which heightened doubts about the nations' abilities to pay back bondholders and spurred fears that the nations would default on their debts."

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12 hours ago, Tom Kirkman said:

it is worth noting that Portugal, Spain, and Greece are all governed by radical socialists who have abandoned the concept of fiscal responsibility

Fiscal responsibility? As has Trump and the modern Republican have any at all. Piss on who goes to what bathroom, I don't care, the culture war stuff is silly ignorance. Reagan turned us the US into a debtor nation, Bush43 accelerated it, and Trump has put it the race to bankruptcy on steroids. It's not hopeless yet, but it is if the same policies stay in play another 6 years. Fortunately China's money supply is unique, Europe, you've touched on. Folks with assets struggle with places to put money. Hence asset inflation. And silly stock values for the earnings.

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