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Post by nailbender on Aug 29, 2011 23:07:04 GMT -6
Ian Fletcher hits the nail on the head again. How can there be so few with common sense out there in the "Great" USA? I was just thinking about this last night (again) when I posted how it is amazing most people have NO idea we are in a trade war 24/7 and are TERRIFIED that the US gets into a "trade war"... it is a MYTH as large as Smooth Hawley.... ********************************* Avoid trade war? It's too late! www.wnd.com/index.php?fa=PAGE.view&pageId=339097
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Post by jacquelope on Aug 30, 2011 1:31:52 GMT -6
I've begun to wonder as of late. Was it David Ricardo who created the mess we're in, or is it those who (mis)interpreted his work that put us in this mess?
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Post by jacquelope on Aug 30, 2011 1:36:13 GMT -6
Oh and it's a pity that Fletcher's article is on WorldNetDaily. Lots of liberals hate WND (I as a former Republican am a bit leery of them even though I used to be a big fan), and they have good reason to, given its general bias against the working class. Ian Fletcher, however, has always been on the mark every time I've read him.
Krugman and Friedman alike see the scam that is "free trade". We need to unite liberals and conservatives on this issue. Common Dreams and WorldNet Daily ain't gonna be the mediums to unite the masses. Argh.
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Post by unlawflcombatnt on Aug 30, 2011 5:06:36 GMT -6
Excellent article by Fletcher. Here's one key passage: [/i]"[/ul]
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Post by blueneck on Aug 30, 2011 6:26:30 GMT -6
Here is the complete article from Mr Fletcher
"Avoid a Trade War? We're Already in One!"
Whenever protectionists like myself demand that the U.S. government do something to stand up for America in global trade, we are shouted down with the stern admonition, "You'll start a trade war."
I wish.
The reality is that nobody in America is going to start a trade war, for the simple reason that we are already in one. Foreign governments understand, as ours does not, that international trade is an arena of national rivalry, and they play the game in their own national interests. Our government is hostage to an outdated 19th-century economic theory of global harmony, and on this basis conducts our trade relations with blissful naiveté.
Am I saying that our policy is determined by a theory? No. It's quite obviously determined by the campaign contributions of the multinational (aka "who cares about America?") corporations who profit from it. But it is this theory that makes their demands respectable. All the money in the world couldn't bribe Congress to pass a law requiring everyone to roller-skate to work; policy always requires some non-laughable justification.
Thanks for nothing, David Ricardo. You've made a fine mess.
The curious thing about the concept of trade war is that, unlike actual shooting war, it has no historical precedent. In fact, there has never been a significant trade war, "significant" in the sense of having done serious economic damage. All history records are minor skirmishes at best.
Go ahead. Try and name a trade war. The Great Trade War of 1834? Nope. The Great Trade War of 1921? Nope Again. There isn't one.
The standard example free traders give is that America's Smoot-Hawley tariff of 1930 either caused the Great Depression or made it spread around the world. But this canard does not survive serious examination, and has actually been denied by almost every economist who has actually researched the question in depth -- a group ranging from Paul Krugman on the left to Milton Friedman on the right.
The Depression's cause was monetary. The Fed allowed the money supply to balloon during the late 1920s, piling up in the stock market as a bubble. It then panicked, miscalculated, and let it collapse by a third by 1933, depriving the economy of the liquidity it needed to breathe. Trade had nothing to do with it.
As for the charge that Smoot caused the Depression to spread worldwide: it was too small a change to have plausibly so large an effect. For a start, it only applied to about one-third of America's trade: about 1.3 percent of our GDP. Our average tariff on dutiable goods went from 44.6 to 53.2 percent -- not a terribly big jump. Tariffs were higher in almost every year from 1821 to 1914. Our tariff went up in 1861, 1864, 1890, and 1922 without producing global depressions, and the recessions of 1873 and 1893 managed to spread worldwide without tariff increases.
As the economic historian (and free trader!) William Bernstein puts it in his book A Splendid Exchange: How Trade Shaped the World,
Between 1929 and 1932, real GDP fell 17 percent worldwide, and by 26 percent in the United States, but most economic historians now believe that only a miniscule part of that huge loss of both world GDP and the United States' GDP can be ascribed to the tariff wars. .. At the time of Smoot-Hawley's passage, trade volume accounted for only about 9 percent of world economic output. Had all international trade been eliminated, and had no domestic use for the previously exported goods been found, world GDP would have fallen by the same amount -- 9 percent. Between 1930 and 1933, worldwide trade volume fell off by one-third to one-half. Depending on how the falloff is measured, this computes to 3 to 5 percent of world GDP, and these losses were partially made up by more expensive domestic goods. Thus, the damage done could not possibly have exceeded 1 or 2 percent of world GDP -- nowhere near the 17 percent falloff seen during the Great Depression... The inescapable conclusion: contrary to public perception, Smoot-Hawley did not cause, or even significantly deepen, the Great Depression.
The oft-bandied idea that Smoot-Hawley started a global trade war of endless cycles of tit-for-tat retaliation is also mythical. According to the official State Department report on this very question in 1931:
With the exception of discriminations in France, the extent of discrimination against American commerce is very slight...By far the largest number of countries do not discriminate against the commerce of the United States in any way.
That is to say, foreign nations did indeed raise their tariffs after the passage of Smoot, but this was a broad-brush response to the Depression itself, aimed at all other foreign nations without distinction, not a retaliation against the U.S. for its own tariff. The doom-loop of spiraling tit-for-tat retaliation between trading partners that paralyzes free traders with fear today simply did not happen.
"Notorious" Smoot-Hawley is a deliberately fabricated myth, plain and simple. We should not allow this myth to paralyze our policy-making in the present day.
There is a basic unresolved paradox at the bottom of the very concept of trade war. If, as free traders insist, free trade is beneficial whether or not one's trading partners reciprocate, then why would any rational nation start one, no matter how provoked? The only way to explain this is to assume that major national governments like the Chinese and the U.S. -- governments which, whatever bad things they may have done, have managed to hold nuclear weapons for decades without nuking each other over trivial spats -- are not players of realpolitik, but schoolchildren.
When the moneymen in Beijing, Tokyo, Berlin, and the other nations currently running trade surpluses against the U.S. start to ponder the financial realpolitik of exaggerated retaliation against the U.S. for any measures we may employ to bring our trade back into balance, they will discover the advantage is with us, not them. Because they are the ones with trade surpluses to lose, not us.
So our present position of weakness is, paradoxically, actually a position of strength.
Likewise, China can supposedly suddenly stop buying our Treasury Debt if we rock the boat. But this would immediately reduce the value of the trillion or so they already hold -- not to mention destroying, by making their hostility overt, the fragile (and desperately-tended) delusion in the U.S. that America and China are still benign economic "partners" in a win-win economic relationship.
At the end of the day, China cannot force us to do anything economically that we don't choose to. America is still a nuclear power. We can -- an irresponsible but not impossible scenario--
repudiate our debt to them (or stop paying the interest) as the ultimate counter-move to anything they might contemplate. More plausibly, we might simply restore the tax on the interest on foreign-held bonds that was repealed in 1984 thanks to Treasury Secretary Donald Regan.
Thus a certain amount of back-and-forth token retaliation (and loud squealing) is indeed likely if America starts defending its interests in trade as diligently as our trading partners have been defending theirs, but that's it. The rest of the world engages in these struggles all the time without doing much harm; it will be no different if we join the party.
Until we do, America's trade pacifism will simply continue to invite foreign economic aggression.
Mr Fletcher affirms many of the things we have been talking about here for years.
I would like to add something that is so obvious but often overlooked was the role of the great depression and trade. Free trade mythologists make the mistake of flipping the cause and effect or a Post hoc ergo propter hoc argument. The global depression had a more profound effect on trade rather than the other way around as it it portrayed in the Smoot Hawley mythology. The tensions leading up to the second world war must certainly have had some effect on trade was well.
Another glaringly obvious ommission by the free marketeers is one we've discussed before as well. When the commodities bubble burst in 1929 farmers were wiped out. To cut costs and salvage something from their crops farmers resorted to unsustainable practices, prolonged sever drought in the plains and upper midwest exacerbated this. Since ag products was a chief export, again this had a far more prodound effect on US trade than any so called "protectionist" legislation. It was in fact the reliance on the "free" market that not onluy caused the unsustainable practices but also promulgated it
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Post by nailbender on Aug 30, 2011 17:03:24 GMT -6
The unquestioned misrepresentations of Ricardo and Keynes are all one needs to understand to get a grasp on how deep the roots of corruption run and how powerful the propaganda machine is.
I've never read Ricardo's work, but do not believe he envisioned or supported the idea that a nation can economically compete against it's own Capital, such as wealth (investement), IP, tooling, and I don't even know what to call the education and training of cheaper foreign labor whose sole purpose is to REPLACE the US employees training them and handing off their state of the art techniques, processes, and developed knowledge base. That is the last cycle US employees will participate in, the entire evolution of the next generation of state of the art will be held by foreign nations.
Our corporate masters have given it away and our children will pay dearly for their treasonist acts.
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Post by unlawflcombatnt on Aug 30, 2011 22:31:51 GMT -6
The unquestioned misrepresentations of Ricardo and Keynes are all one needs to understand to get a grasp on how deep the roots of corruption run and how powerful the propaganda machine is. Well said, and a very good overview. Ricardo made the particular point that the factors of production (i.e., capital) could not cross international borders if his "Comparative Advantage" doctrine was to apply. Since capital clearly IS crossing international borders when it goes to China, it invalidates the application of the doctrine by Ricardo's own definition. It's kind of funny that the free-traitor blowhards who were espousing Comparative Advantage as the justification for outsourcing during the mid 2000's have suddenly gone mute. I haven't heard or read passages from anyone trying to justify US trade policy via "Comparative Advantage" since 2005-2006. Apparently the phoniness and inapplicability of the doctrine has become apparent to almost all—including the most malignantly psychotic of the free-traitor crowd. The underlying idea was that certain nations were relatively better at producing some goods, while others were relatively better at producing other goods. Thus comparative advantage's benefit was that the country that was relatively better at producing one good concentrated on that production, while its trading partner—that was relatively better at producing a different good—concentrated on producing that good. The fly in the ointment is that comparative advantage—or relative advantage—was replaced by absolute advantage. And since places like China have an absolute advantage in producing all goods due to semi-slave labor conditions and low wages—all production is more profitable if shifted to China. As such, every good and component part production that could be outsourced to China was outsourced to China. This might seem to work well for multinational super-capitalists over the short-term. But in the long-run it is an "absolute" disaster. The very people who buy most of the goods so produced are deprived of their needed spendable income—either through outright loss of their job to cheap foreign workers, or to wage suppression from perpetually reduced domestic labor demand caused by foreign outsourcing. Thus the bastardized version of Ricardo's Comparative Advantage Doctrine—"Absolute" Advantage—has resulted in the decimation of the consumer base that is required for foreign trade (and especially Comparative Advantage) to work at all. The required spending needed to maintain this perverted system came from the vastly expanded borrowing ability of American consumers, which offset the stagnant individual wages and aggregate wage income of American consumers. Thus the doctrine of Absolute Advantage seemed to work—for awhile. But once the excessively easy credit and borrowing ability that made this house of cards possible collapsed, the fictitiousness of Absolute Advantage's "advantages" became apparent. And thus the economy collapsed. There is no hope whatsoever of recovery until the unsustainability of the previous trade model is exposed, rejected, and reversed.
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Post by nailbender on Aug 31, 2011 20:43:49 GMT -6
Thanks for the confirmation on what I thought Ricardo was implying and further nicely explaining the differences in "Comparative Advantage" and "Absolute Advantage" or slave labor arbitrage coupled with the benefits of producing without environmental regs or worries.
I am in total agreement that not only the US but the rest of the developed world is FUBAR until the current trade policies are corrected and rewritten.
The term "outsourcing" has to become synonymous with "treason", this much I understand.
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Post by unlawflcombatnt on Aug 31, 2011 21:50:38 GMT -6
I certainly DO consider outsourcing as treason--at least from an economic standpoint. We lose almost $2 trillion dollar/year in domestic demand (and job creation) from imports. $360 billion of that is to China. Over $382 billion is to Europe. Over $506 billion is to the combined total of Mexico and Canada. None of these imports are oil. Which means ALL of them can be blocked. Today. Right now. If we could just cut the above listed imports in half this would instantaneously created almost +$600 billion in domestic production demand--the equivalent of over 7 million jobs at $80K/job. This is the kind of jobs plan Obama should be announcing.
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Post by jacquelope on Sept 1, 2011 8:37:40 GMT -6
I certainly DO consider outsourcing as treason--at least from an economic standpoint. We lose almost $2 trillion dollar/year in domestic demand (and job creation) from imports. $360 billion of that is to China. Over $382 billion is to Europe. Over $506 billion is to the combined total of Mexico and Canada. None of these imports are oil. Which means ALL of them can be blocked. Today. Right now. If we could just cut the above listed imports in half this would instantaneously created almost +$600 billion in domestic production demand--the equivalent of over 7 million jobs at $80K/job. This is the kind of jobs plan Obama should be announcing. Hey ULC can you help me interpret the census.gov link? When I bring up that link I need to explain to the idiots how that translates into lost domestic demand/jobs.
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Post by unlawflcombatnt on Sept 1, 2011 11:43:13 GMT -6
I certainly DO consider outsourcing as treason--at least from an economic standpoint. We lose almost $2 trillion dollar/year in domestic demand (and job creation) from imports. $360 billion of that is to China. Over $382 billion is to Europe. Over $506 billion is to the combined total of Mexico and Canada. None of these imports are oil. Which means ALL of them can be blocked. Today. Right now. If we could just cut the above listed imports in half this would instantaneously created almost +$600 billion in domestic production demand--the equivalent of over 7 million jobs at $80K/job. This is the kind of jobs plan Obama should be announcing. Hey ULC can you help me interpret the census.gov link? When I bring up that link I need to explain to the idiots how that translates into lost domestic demand/jobs. I'm not sure I understand what you're asking. If you're asking about how $ of demand translate to jobs, there are a couple of places where that formula has been stated. One of them gives a formula and graphic that states 20K jobs per $1 billion in trade deficit. (I've posted that graphic somewhere on this forum). That comes out to $50K/job. Since this was from around 2005, I assume the $-value of 1 job has increased from inflation. Statistics given from the Economic Policy Institute in some of their recent publications tend to support numbers in the ballpark of $80K/job, but with considerable variation. As such, when I state a relationship between jobs and $$, I just try to state the dollar amount that I'm basing it on (i.e., X number of jobs @ $80K/job, for example) But again, I'm not sure if this is the question you're asking or not. If it is, I'll research it further. Here is a link to my post that gives several references to how the $$/job is calculated: link
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Post by jacquelope on Sept 1, 2011 15:35:32 GMT -6
I'm not sure I understand what you're asking. If you're asking about how $ of demand translate to jobs, there are a couple of places where that formula has been stated. One of them gives a formula and graphic that states 20K jobs per $1 billion in trade deficit. (I've posted that graphic somewhere on this forum). That comes out to $50K/job. Since this was from around 2005, I assume the $-value of 1 job has increased from inflation. Actually, this was what I was looking for. I am trying to translate this stuff to everyday man-speak.
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Post by unlawflcombatnt on Sept 2, 2011 9:19:01 GMT -6
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