Pay More and Receive Less
https://twitter.com/realDonaldTrump/status/1138427450927529984
Trump is clearly upset that the US dollar buys too much stuff.
Those on fixed income, those wanting to buy a home, and anyone with an ounce of common sense knows Trump is an economic illiterate fool.
Standards of living rise when people get more for their money. Over time, things that only the wealthy can afford become more affordable when the dollar buys more than it used to.
Trump proposes economic stupidity at its finest.
Since the Fed generally agrees despite the Tweet, it explains the demise of the middle class.
Trump is as at least as economically clueless as the Fed he rails against.
Mike “Mish” Shedlock
Mish, is there a reason that you are constantly calling politicians clueless. Could it be that u r clueless?
Has it ever occurred to u that politicians and the elites personally profit from “nonsensical”
policies? Of course they do, thats why fiat currencies exist in every country. Keynes said so himself. Clueless implies that they don’t know what they are doing. They know exactly what they are doing. They are not concerned with inproving the economy. They are concerned with lining their pockets with real weslth while creating the illusion of a nominal economy.
They are evil. You are clueless.
“I can see Mish really got Trump’s cult members riled up. Logic and reason will never change the mind of a true believer. If Trump told them to run into traffic, there they would be!”
Excellent comments by Esclaro, CarlR, and Webej
How sad the Mish the rational engineer lauds an ad hominem attack.
Trump has launched a dangerous trend, consistently portraying the country that spends more on offense than the rest of the world combined as … The VICTIM.
Europe and Japan have export surpluses with the USA because they pay workers slave wages and give them 4 weeks mandatory vacation leave? China has an export surplus because it devalues its currency by having higher interest rates than does the USA? Europe and Canada keep America out with high tariffs … O wait, the weighted tariff rates are virtually equal and the USA has a surplus on services. Simple solutions are the solution to simple problems, but issues don’t become simple by trotting out simple solutions (bombs, sanctions, threats, tariffs).
For all the simpletons … America is not the victim of the rest of the world.
Europe and Japan pay workers slave wages??? Horse Malarkey. Google it.
As someone planning a vacation to Europe, I want the dollar to become stronger against the euro.
Not that I am selfish in any manner.
All a country can do is try to run it’s economy efficiently, and let the free market do the rest. In that case, the jobs you don’t want (toxic pollution, low economic value) get exported, and the high value jobs (e.g. medical research) get retained. The US does many things well, and thus we have a high standard of living. We also do a few things that make no economic sense.
The first obvious thing that make no economic sense are to continually raise the minimum wage. That makes small businesses non-viable, stagnating the job creation, innovation, and creativity that usually originates in smaller businesses. It also forces businesses to export jobs whose value is below the minimum. In the absence of a minimum, jobs would be retained in the US until demand for workers raised the price of labor higher, and only those jobs which had a value less than the market rate for labor would be exported. Furthermore, if a company in one part of the country could not produce something economically, they might move the production to another part of the country where labor was more readily available. That used to happen all the time, but now there is no reason to do that, because the labor rates are the same, so instead they have no choice but to send the job overseas, or be put out of business.
The second economic insanity is to have a non-integrated welfare system. For whatever reason, the US has an ad hoc welfare system that is cobbled together from countless parts that don’t work together, some at the state level, some at the Federal level, and others at the local level. The result is that Low Income workers often hit welfare cliffs where they have an effective income tax of >100%. If they make more money, they lose more in benefits than they gain in income, and have less spendable income. There are unemployment programs, AFDC, food stamps, housing assistance, Medicaid, energy assistance, childcare assistance, and who knows what other programs, and none of them are connected to any other. Welfare and assistance is a necessary part of an advanced civilization, but there should only be one program, and it should all be tied together uniformly so that it makes economic sense.
If you fixed these two economic insanities, then the free market would be more efficient, and the US would only export jobs we really don’t want. With the insanities, we export far more jobs than we really should. Tariffs and jawboning won’t bring them back, given that we’ve created economic inefficiencies that caused them to be exported in the first place, and especially since we continue to expand the inefficiencies rather than addressing them. For example, given the low level of economic understanding in the US, it is inevitable that we will increase the minimum wage to $15, and the result will be to dramatically increase the exporting of jobs. The same with piling on medicaid expansion without ever considering whether you are creating additional welfare cliffs; it will create additional cliffs, and more people will withdraw either partially or completely from the work force, leaving us with more jobs exported, even as we have people would could do them, but won’t because of economic disincentives.
For some reason free market advocates rarely see scams. Instead of focusing on welfare and minimum wages, you should look at the countless scams in the USA. The biggest are the medical and education racket, the military racket is also a “slightly uneconomical” sinkhole for resources. Then the countless regulations and tax breaks that are giveaways to connected industries/companies. How about the fact that debt/interest (banks) is treated preferentially to equity? As Adam Smith said, it is almost impossible to make a profit in a competitive market. That’s why most of the “free market” base unceasingly works and games the system to abolish everything but the appearance of a free market.
As for your point about minimum wages, these are not what enables outsourcing to foreign countries. Wage arbitration is enabled by cheap shipping (infrastructure) and telecommunications, that’s why it’s a recent trend. Only those jobs are outsourced that can be. Forcing people to compete for wages with countries where people live off $1/day is a fool’s errand when you have to pay American medical bills and rent from Blackrock. Minimum wages are simply a method (perhaps not well chosen) to put a floor to how much exploitation is tolerated. If you cut all welfare and people have to choose between starving and being domestic servants for $10/day while getting screwed from behind as they finish the dishes, you will have less unemployment.
I totally agree that healthcare and education are disasters precisely because the free market is not allowed to affect them. The more a government intervenes into a market, the more inefficient it becomes, and then the solution is always more intervention, which makes it worse in a death spiral.
To be clear, I did not mean that minimum wages enables outsourcing. I agree that lower shipping costs, travel costs, and telecommunication costs are what enable outsourcing. What I meant is that minimum wages necessitate outsourcing, or other shifts. For example, we know that if the minimum wage goes to $15, we will see a lot of jobs in fast food vanish, replaced by automation. We know that it will benefit the big operators, such as McDonalds, which can afford automation, and will crush tiny one-off restraunts that can’t afford to automate.
All that avoids my main point, though. In an efficient market, you keep as many jobs as you need, and export the ones you don’t want. If you don’t want toxic jobs such as rare earths, or leather tanning, you tax and regulate them, and they move overseas. When you add in arbitrary high minimum wages, you force other jobs overseas, and then not everyone can have a job. It is ridiculous for us, as a country, to implement policy that causes jobs to move overseas, and then to turn around and blame the other countries for the trade surpluses our own policies caused.
I guess where where I differ from a lot of people is this: I would rather if everyone can have a job, whether it be fast food or domestic servant or manufacturing, and the wage should be whatever the market will bear, however low that is. I believe even a person only capable of producing $1 an hour of work should still be able to have a job, and earn that $1. To what they earn, I would then have a uniform system of supplementation that raised their income to a level at which they could live, but a unified system that always provided them an incentive to try to improve, and to try to earn more. By contrast, a lot of people opt for a simpler system. If people can’t produce $15/hour of work, they should just be permanently unemployed, and we should give them welfare. That solution appalls me because it robs them of the dignity and sense of self worth that comes with a job alongside the paychecks.
Where I live (socialist paradise The Netherlands, or so Americans like to think), minimum youth wage (15 years old) is €2.80/hour. Retail, restaurant and hospitality are basically the domain of youth and students. Lots of kids I know that have tried to collect some benefits made the mistake of moving in with their parents for the summer or some period, only to be roused from their bed at 6 am by eager municipal officials who have found them a job in a warehouse or in a greenhouse for a couple of days. Officially you are supposed to be offered work or being trained to if you are on benefits. That is the only way to rally solidarity for the system. The notion that everybody has to work has always been part and parcel of democratic socialist parties here.
Unfortunately, the whole system breaks down in urban areas, particularly for all the ethnics enriching society by being dependant, but you are not allowed to say so, and even collecting statistics on disparities in crime rates, etc. is virtually illegal.
Thanks for the replies, and courteous discussion. Very interesting, on the lower minimum wage for kids, and on the required work. That only goes to show that all countries that don’t collapse have some policies that make sense, and some that don’t. Those are policies that make sense, and no doubt offset some others that don’t, just as in the US, we have some reasonable policies to go along with our idiotic ones.
I can see Mish really got Trump’s cult members riled up. Logic and reason will never change the mind of a true believer. If Trump told them to run into traffic there they would be!
Edge of the double sword.
“Standards of living rise when people get more for their money. “
The standard of living has been declining. An unemployment check does not pay as well as a factory job that disappeared when it moved to China.
And a higher dollar makes US exports noncompetitive.
And one of Trump’s goals is to bring back manufacturing (and the decent jobs in that sector) back to America.
So stop with the name calling.
And PS.
Those “those wanting to buy a home” were absolutely destroyed by obama’s QE and ZIRP and the asset bubbles that went along with it. Funny, I don’t remember you calling obama clueless.
And this is where you show your ignorance.
“Standards of living rise when people get more for their money.”
No – standards of living rise when a country/population can CREATE wealth. As in more mining, farming, manufacturing, R/D, utilities, productive infrastructure, etc.
Shuffling papers, taking out home equity loans (due to asset bubbles), buying Chinese crap and using slave labor of other countries to make things does not raise standards of living.
Hard work, sacrifice, creating wealth, savings and a government not bent on socialism raises the standard of living for it’s non 1% citizens.
Minimum wage is a curse upon the unskilled and inexperienced unemployed poor. Tariff inflation is the cure for the minimum wage curse. Wealth is created when every person contributes whatever he can to productive endeavor.
Slave labor would make things even cheaper! Let’s outsource to a country that permits slavery instead of one where they put nets outside the windows to prevent suicide and let factories pollute in ways they never could in the West.
Outsourcing destroyed our economy and helped China build aircraft carriers. Stupid move on our part.
Trump is clueless, but no more than most politicians. And no more than 90% of the country.
We have been running no tariffs on imports while others tariff our exports. Drive around the country and see how that has worked out! Rural communities destroyed. Cities with tremendous homelessness. Low workforce participation and increasing drug use.
I still believe that free trade is the best solution but that would mean all directions and with similar regulatory and environmental rules. This is not the case.
Look at China “rare earth”. They have 80% of the market because they don’t care about worker health and creating an environmental disaster. Their manufacturing sector runs in the same manner.
Those that support buying from them (they are the cheapest) have a moral compass that is fixed to out of sight out of mind.
The cheapest source (great for US consumers) is virtually slave wages, oppressive governments with no regard for individuals and the creation of environmental hell holes.
Those knowingly buying should be ashamed.
“We have been running no tariffs on imports”
Hmm … the Official Harmonized Tariff Schedule 2019 begs to differ.
The welfare dollar buys too much for moochers who are not worth minimum wage. Taxpayers pay too much to support moochers. Tariff inflation fixes that. Moochers become worth minimum wage and stop sucking the taxpayer tit. Some coercion required.
Screw the moochers, what about the taxpayers you ‘tard? You truly bring the level down here.
You use the word ‘tard and then accuse someone else of bringing the level down?
I believe i lost a few brain cells after reading this comment