Economic MAD approaching its logical conclusion?

[Polish_Silver]

Smoot-Hawley did not cause the crash or depression

The idea that the SH tarrif caused the crash or depression has very little behind it.
See Rober Shiller "Irrational Exuberance"

http://books.google.com/books?id=x1P...page&q&f=false


During the 19th century, the federal government got most of it's revenue from tariffs. This did not prevent economic growth or significant international trade.

Clearly, the Yuan peg gives China a trade advantage, or they would not keep
printing Yuan to buy T-bonds!

[charliebrown]

Re: Economic MAD approaching its logical conclusion?

Its just too expensive to produce anything here, and I really don't know why.
I live in the burbs of chicago, and am an engineer by trade. Lets say I live a suburban austere lifestyle.

house is 200K, that is the oldest smallest house in my neighborhood. 1200sq ft. built in the 50's, finance 80% at 5%
here are my austere costs
mortgage $8000
prop taxes $5000
utilities $2000
maintenance $1000 if your handy
car $1500 if you buy cheap and drive it into the ground
insurance $1000 auto/home
health/med $3500 employer sponsored with 1K in out of pocket expenses.
food $2500 family of 4 eating frugally.
clothing $1000 bargain clothes, resale, etc.
gasoline $1000 one tank a week.

Ok, so we have 30K of expenses. Of course 30K is a big enough income to tax, so throw in payroll, federal, and state income tax and we might be looking at 33K - 35K in gross wages for this minimal existence.
There is no cable, no cell phones, no ipads, no enterainment no meals out, no education expenses only food, clothing, shelter transprotation and medicine. Heaven help you if you get sick and have out of pocket expenses.

Now how many chinese workers will this employ?

This is only the wage side of the equation.
What about my employer's cost of me working?
Insurance, employers portion of health, unemployement payroll taxes etc.
What about their cost of capital, utilities real-estate, cost of machines etc.

At these prices how can we compete?
The cost structure needs a reset.

[FondoFinder]

Re: Smoot-Hawley did not cause the crash or depression

The arguments in the article below make sense until nobody shows up for US treasury auctions. When will that happen, and why? When and if, I want my, I wany my TBT

Does Itulip publish an expected yield curve based on their economic model?

http://www.financialsense.com/contri...ng?q=node/1884

[FRED]

Re: Smoot-Hawley did not cause the crash or depression

The arguments in the article below make sense until nobody shows up for US treasury auctions. When will that happen, and why? When and if, I want my, I wany my TBT

Does Itulip publish an expected yield curve based on their economic model?

http://www.financialsense.com/contri...ng?q=node/1884

Going back how far?

[Chris Coles]

Re: Economic MAD approaching its logical conclusion?

Its just too expensive to produce anything here, and I really don't know why.
I live in the burbs of chicago, and am an engineer by trade. Lets say I live a suburban austere lifestyle.

house is 200K, that is the oldest smallest house in my neighborhood. 1200sq ft. built in the 50's, finance 80% at 5%
here are my austere costs
mortgage $8000
prop taxes $5000
utilities $2000
maintenance $1000 if your handy
car $1500 if you buy cheap and drive it into the ground
insurance $1000 auto/home
health/med $3500 employer sponsored with 1K in out of pocket expenses.
food $2500 family of 4 eating frugally.
clothing $1000 bargain clothes, resale, etc.
gasoline $1000 one tank a week.

Ok, so we have 30K of expenses. Of course 30K is a big enough income to tax, so throw in payroll, federal, and state income tax and we might be looking at 33K - 35K in gross wages for this minimal existence.
There is no cable, no cell phones, no ipads, no enterainment no meals out, no education expenses only food, clothing, shelter transprotation and medicine. Heaven help you if you get sick and have out of pocket expenses.

Now how many chinese workers will this employ?

This is only the wage side of the equation.
What about my employer's cost of me working?
Insurance, employers portion of health, unemployement payroll taxes etc.
What about their cost of capital, utilities real-estate, cost of machines etc.

At these prices how can we compete?
The cost structure needs a reset.

At these cost structures the US, indeed the entire Western economy competed very well indeed until the idea fell about that the way to make money was not to employ Western savings invested into Western manufacturing companies; but instead, that more money was to be made by the INVESTING INSTITUTIONS by taking those savings and investing them into OTHER nations economies.

Everyone with a mindset to believe "we are stuffed" forgets that in every nation, everything has to be replaced with new. The Western economy has an enormous market potential; internally, within it's own borders. The problem is one of lost prosperity to pay for all those replacements from Western manufacturing companies.

We always were that far out of line with the Asian economic model. Wages always were that far out of kilter. It always did cost that much more to manufacture in the US or Europe. What went wrong is simply that most of us stopped buying our own products.

He who pays the piper calls the tune.

We need to drum into everyone's heads they simply have to save and invest back into their own local community so that local companies owned by the local population supply your LOCAL needs.

You do not believe me? Try looking at Germany. They are not in the same trouble; why? Because they buy their own products from their own producers.

"The existence of highly dynamic and successful small and medium-sized enterprises (SMEs) is one of the characteristic features of the German economy. The German economy is characterised in particular by approximately 3.3 million small and mid-size enterprises and self-employed persons in handicrafts, commerce, tourism, services and the liberal professions. SMEs represent 99.3 % of all German businesses subject to turnover tax, effect 44.8 % of all taxable sales, account for 57 % of total gross value added in industry, place 46 % of gross investments, create 69.3 % of jobs and offer 80 % of training places.^{1 "}

^{http://www2.gtz.de/wbf/4tDx9kw63gma/SMEPromotion_Germany.pdf}

^{The problem is simply that, as of today, ALL of the hidden prosperity; the savings sitting waiting to be invested back into the local economy, has instead been drawn into the FIRE economy and is not being re-invested back into the Western economy.}

[FondoFinder]

Re: Smoot-Hawley did not cause the crash or depression

Hola,

Would an expected yield curve going Back to the Future 30 years from now be asking too much?

You guys have a car like that, right?

The current yield curve is what it is:

http://www.bloomberg.com/markets/rat...ment-bonds/us/

but what would it look like based on Poom?

[FRED]

Re: Smoot-Hawley did not cause the crash or depression

Hola,

Would an expected yield curve going Back to the Future 30 years from now be asking too much?

You guys have a car like that, right?

The current yield curve is what it is:

http://www.bloomberg.com/markets/rat...ment-bonds/us/

but what would it look like based on Poom?

[jk]

Re: Smoot-Hawley did not cause the crash or depression

your yield curve implies that the discount rate is going to go up over 1000bps within the next 12 mos. exciting times? seems to me this can't happen without the dxy going to about 50 or lower, again within the next 12 mos. gasoline at $6-7/gallon. you really expect things to happen that fast? this process has heretofore unfolded at a stately pace. what's going to accelerate it so sharply?

[Brooks Gracie]

Re: Economic MAD approaching its logical conclusion?

This analysis is simply wrong. The US suffered from Smoot-Hawley because it was the world's largest net exporter at the time. That situation is turned on its head now. The only things we export are now food and weapons. Tariffs are inapplicable to these goods. China wants to starve its people in exchange for being able to export plastic toys profitably?

[astonas]

Re: Economic MAD approaching its logical conclusion?

This analysis is simply wrong. The US suffered from Smoot-Hawley because it was the world's largest net exporter at the time. That situation is turned on its head now. The only things we export are now food and weapons. Tariffs are inapplicable to these goods. China wants to starve its people in exchange for being able to export plastic toys profitably?

I'm intrigued by your thesis. What percentages of the U.S.'s exports do you believe is immune to the effects of a trade war? And could you also flesh out the idea that net importers do not suffer, but benefit, from a trade war? These assertions are not obvious to me.