Warren Buffett's concept to significantly reduce USA's trade deficit

[Widdekind]

Widdekind, regarding your response #212 entitled "wholesale" vs. "retail" price-levels”

Since 1980, due to the "Great Moderation" (largely due to OPEC reducing oil prices), price-levels for business and trade have hardly inflated; whereas public price-levels, for consumers & government costs, have doubled. For lack of better words, "globalizing business" faces price-levels allot lower, today, than the domestic public, paying for consumer goods, and government budgets. Today, a dollar goes farther in construction & machine manufacturing (I), as well as international trade (NX); than do dollars at grocery-stores & car-lots (C), and public schools, officials, and war-ship-yards (G). The difference, about a third, is about the same, as the overall total tax rate (T/GDP ~ 1/3). Perhaps "globalizing business wholesale prices" side-step taxes? If so, then a major factor, in price inflation, is ever-increasing taxation.

 

[Supposn]

What's at stake is jobs and the median wage's purchasing power.

I’ll state it again; the purpose of this trade proposal is to increase our GDP in a manner that will increase our nation’s numbers of jobs created and the purchasing power, (rather than only the amount) of the USA’s median wage. It’s convenient to express statistics in dollars for comparison purposes but the proposal’s all about jobs and wages. This trade proposal would accomplish its purpose because it’s unilateral. It is relatively immune to the U.S. dollar’s foreign exchange rate or any mischief created by foreign or domestic enemies of the USA’s economy.

Regarding the characterization of labor unions as contrary to nations’ economy; wherever unions thrive, their nations’ economies were better for it. Wherever unions were suppressed and/or were in decline, their nation’s median wage and the proportion of middle income earners’ segment of their nations’ populations similarly declined; those nations were poorer for it. Totalitarian governments that cannot control their nations’ labor unions find it necessary to destroy those unions. Uncontrolled organized labor is a serious threat to a non-democratic government.

Respectfully, Supposn

 

[EdwardBaiamonte]

wherever unions thrive, their nations’ economies were better for it.

too stupid!!! how can nation be better off with high priced union junk made by violent folks who seek to get ahead with violence rather than by being worth more in the market place?? Is that a model for helping a nation???

How can a nation be better off when one group of workers (unions) makes a deal with the government for higher wages that are paid for in higher prices by another group of workers who don't have a deal with the corrupt liberal government!!.

 

[Toddsterpatriot]

What's at stake is jobs and the median wage's purchasing power.

I’ll state it again; the purpose of this trade proposal is to increase our GDP in a manner that will increase our nation’s numbers of jobs created and the purchasing power, (rather than only the amount) of the USA’s median wage. It’s convenient to express statistics in dollars for comparison purposes but the proposal’s all about jobs and wages. This trade proposal would accomplish its purpose because it’s unilateral. It is relatively immune to the U.S. dollar’s foreign exchange rate or any mischief created by foreign or domestic enemies of the USA’s economy.

Regarding the characterization of labor unions as contrary to nations’ economy; wherever unions thrive, their nations’ economies were better for it. Wherever unions were suppressed and/or were in decline, their nation’s median wage and the proportion of middle income earners’ segment of their nations’ populations similarly declined; those nations were poorer for it. Totalitarian governments that cannot control their nations’ labor unions find it necessary to destroy those unions. Uncontrolled organized labor is a serious threat to a non-democratic government.

Respectfully, Supposn

Regarding the characterization of labor unions as contrary to nations’ economy; wherever unions thrive, their nations’ economies were better for it.

How'd those thriving steel workers unions help our economy?
Didn't the autoworkers union nearly kill our domestic automakers?

 

[EdwardBaiamonte]

Americans buy 14 million cars per year... And the rest of the world is glad to sell their stuff in America. .

too stupid!! China buys 18 million and is growing 5 times faster than we are with a population 4 times bigger!!

 

[Rshermr]

Americans buy 14 million cars per year... And the rest of the world is glad to sell their stuff in America. .

too stupid!! China buys 18 million and is growing 5 times faster than we are with a population 4 times bigger!!

What you conveniently forget, ed, is that car ownership in China is very low, Was even lower. And that growth in auto purchasing is slowing. Get a clue, ed.
By the way, China subsidises purchases of electric and other alternative fuel autos. Since you are so high on China, maybe we should follow suite.

 

[Widdekind]

What's at stake is jobs and the median wage's purchasing power.

I’ll state it again; the purpose of this trade proposal is to increase our GDP in a manner that will increase our nation’s numbers of jobs created and the purchasing power, (rather than only the amount) of the USA’s median wage.

inflation-adjusted real wages per worker (W/P/N) are higher than ever:

The US has a trade deficit, because US products are pricier, than foreign substitutes; you are suggesting imposing on foreign imports; i advocate stimulating domestic exports, by cutting costs, including working for lower wages, to slash prices, of exportable domestic products.

In partial parallel, passage of the Smoot-Hawley Tariff, in mid 1930, dropped the DOW by about a quarter (a nominal loss-on-paper of about $30B, worth 10x as much today). That tariff did not help the US economy recover, from the GD, then; trade restrictions would not plausibly help the US economy recover, now, either. To recover from a recession, the US needs to do more business, with anybody, not less. In the short-term, cheap foreign imports only help US consumers & producers reduce their expenses & cut their costs. In the long-term, the US needs to be economically competitive, without relying on "protectionist" price supports to prop them up, in isolation (retaliatory trade wars), in an increasingly global marketplace.

Lowering your own prices, rather than raising others' prices, is more economically competitive; and more long-term sustainable. Better to "face the music", competitively, than "complain to government", for protectionism.

 

[expat_panama]

...If government can break up "business cartels" (e.g. "bust the trusts", Microsoft), then government cannot be prevented from breaking up "labor cartels" (unions)...

Huh, that's a pretty good comparison, though imho a good argument against 'trust-busting' witch hunts.

..So sayeth said statistics, "deindustrialization" is bogus. Huge US trade deficits, in consumer goods, require US "trade" surpluses in other sectors...

Thanks for for the headsup, looking into it I compared yr/yr changes in industrial production to yr/yr changes in the trade deficit, and it turns out that---

--our industrial production soars when we get a increase in the trade deficit!

 

[Widdekind]

...If government can break up "business cartels" (e.g. "bust the trusts", Microsoft), then government cannot be prevented from breaking up "labor cartels" (unions)...

Huh, that's a pretty good comparison, though imho a good argument against 'trust-busting' witch hunts

Workers voluntarily joining Unions can be likened to "a bunch of guys who get together for a barbecue", and who chose (privately) to act together, because they share (private) opinions. Bosses forming cartels can be likened to "a bunch of guys who get together for golf". People acting purely privately, without invoking Government Force, are not really doing anything different than they otherwise would have, anyway. The private sector does not need to be micro-managed. Laws ("you have to join a Union", "businesses cannot share resources", minimum-wage laws) are what impose upon free markets, not private agreements

our industrial production soars when we get a increase in the trade deficit!

cheap imports cut costs, all along the production stream, all the way from raw materials, to final products; it all adds up

 

[Supposn]

.......................cheap imports cut costs, all along the production stream, all the way from raw materials, to final products; it all adds up

Widdekind, we agree upon the point that “it all adds up”.
That’s integral to the definition and formulas calculating GDPs. These are the conventional formulas and definitions accepted by economists and statistician communities throughout our globe.

The ENTIRE production supporting goods and service products along the ENTIRE production stream contribute ENTIRELY to the producing nation’s gross domestic product.

Trade deficits are ALWAYS detrimental and trade surpluses ALWAYS contribute to their nations’ GDPs.

Respectfully, Supposn

 

[Widdekind]

.......................cheap imports cut costs, all along the production stream, all the way from raw materials, to final products; it all adds up

Widdekind, we agree upon the point that “it all adds up”.
That’s integral to the definition and formulas calculating GDPs. These are the conventional formulas and definitions accepted by economists and statistician communities throughout our globe.

The ENTIRE production supporting goods and service products along the ENTIRE production stream contribute ENTIRELY to the producing nation’s gross domestic product.

Trade deficits are ALWAYS detrimental and trade surpluses ALWAYS contribute to their nations’ GDPs.

Respectfully, Supposn

Up front, imports (M) siphon money abroad, reducing domestic income. But, behind the scenes, "in the back behind the cash register", imports are also the inputs to domestic production. Imports are more than "cheap electronics at Walmart". Imports are also raw materials, and other intermediate products, that US producers need, to make their products. ExpatPanama showed, that US industry surges, whenever imports increase. Note, too, that US industrial employment surges (red line), whenever imports surge (blue line) -- the ratio averages about several to one, whenever foreign imports surge several percent, domestic industry employment surges a percent, or by a million more jobs. Foreign imports correlate to jobs at home -- approximately, every $100K of imports to 1 job in industry.

 

[editec]

.......................cheap imports cut costs, all along the production stream, all the way from raw materials, to final products; it all adds up

Widdekind, we agree upon the point that “it all adds up”.
That’s integral to the definition and formulas calculating GDPs. These are the conventional formulas and definitions accepted by economists and statistician communities throughout our globe.

The ENTIRE production supporting goods and service products along the ENTIRE production stream contribute ENTIRELY to the producing nation’s gross domestic product.

Trade deficits are ALWAYS detrimental and trade surpluses ALWAYS contribute to their nations’ GDPs.

Respectfully, Supposn

Up front, imports (M) siphon money abroad, reducing domestic income. But, behind the scenes, "in the back behind the cash register", imports are also the inputs to domestic production. Imports are more than "cheap electronics at Walmart". Imports are also raw materials, and other intermediate products, that US producers need, to make their products. ExpatPanama showed, that US industry surges, whenever imports increase. Note, too, that US industrial employment surges (red line), whenever imports surge (blue line) -- the ratio averages about 1:1, whenever foreign imports surge several percent, domestic industry employment surges several percent, or by several million more jobs. Foreign imports generates jobs at home -- approximately, every $100K of imports generates 1 job in industry.

​

Imports surge when domestic manufacturing surges of course.

When the economy is healthier demand for both imported goods AND domestic goods increase.

Some of you appear to be trying to make the case that the increased imports are CAUSING the increase in domestic production.

Correlation does not imply causation

Likewise when the economy is in the crapper so too do imports AND domestic goods sales go down./

duh!

Once again

Correlation STILL does not imply causation​

 

[Widdekind]

correlation does not prove causation. However, the data could have shown the opposite, that increasing foreign imports correlate to decreasing domestic industry production. If the data had shown such, then foreign imports would be competing against US industry, as substitutes. But, that is not the case. Instead, the data show, that foreign imports compliment. domestic industry. Looking at those data, would you advocate restricting imports? Staring everybody in the face, the data imply, that restricting imports would restrict domestic industry -- choking the one would strangle the other, they go hand in hand. Domestic industry cannot expand (and hire), without foreign imports.

 

[Widdekind]

both imports and exports surge during expansions. US exports have been growing almost as fast as imports. If people are willing to pay more (taxing imports), why not pay for an export subsidy, instead ? Amidst a recession, with the economy slumping, why "get in the way" of business even more? Why not promote business, with an export subsidy. More trade volume is more jobs for dock-workers & longshoremen; more jobs for industry. Tax dollars currently going for welfare & UE, could basically be diverted, to job-creating export subsidies

 

[expat_panama]

Or, another way to say it, increasing imports comes with higher employment and more production.



Trade Deficit is a crock.

 

[expat_panama]

Imports surge when domestic manufacturing surges of course. When the economy is healthier demand for both imported goods AND domestic goods increase. Some of you appear to be trying to make the case that the increased imports are CAUSING the increase in domestic production...

Good to know we all agree that increasing imports comes with more industrial production and that imports sure as hell don't hurt production.

How about we all first consider the possibility that import tax-cuts on raw materials lowers production costs and causes increased production --even as it increases imports. Next, lets consider the fact that opening up new open trade markets for finished products likewise increases both production and imports. Whether or not imports cause production doesn't matter if we adopt policies of import tax-cuts plus open markets --both of which will increase imports and production.

 

[Toddsterpatriot]

.......................cheap imports cut costs, all along the production stream, all the way from raw materials, to final products; it all adds up

Widdekind, we agree upon the point that “it all adds up”.
That’s integral to the definition and formulas calculating GDPs. These are the conventional formulas and definitions accepted by economists and statistician communities throughout our globe.

The ENTIRE production supporting goods and service products along the ENTIRE production stream contribute ENTIRELY to the producing nation’s gross domestic product.

Trade deficits are ALWAYS detrimental and trade surpluses ALWAYS contribute to their nations’ GDPs.

Respectfully, Supposn

Trade deficits are ALWAYS detrimental and trade surpluses ALWAYS contribute to their nations’ GDPs.

If that were true, you could eliminate all oil imports and our GDP would increase. Ridiculous.

 

[Widdekind]

The following figure plots price-levels, for:

• overall economy (GDP, dotted red line)
• private 'investment' (I, solid red line)
• imports (M, thick green line)
• producer price index (thick black line)
• industry price index (thick gray line)

Since 1980, cheap foreign imports have helped pull down price levels, for US domestic "investment" (houses, buildings) and industry. And, conversely, when import prices rose in the 2000s (oil?), they pushed up price levels, for US industry & construction. Cheap foreign imports kept US industry price-levels low, compared to the overall consumer economy (until 2008). The price levels "dance together", moving in unison, both up or both down:

Choking business (import restrictions) is not good for business. There "has" to be a way to fight trade deficits, by boosting exports (subsidies?); not by strangling imports, that are the inputs (raw materials, intermediate products), for US industry.

 

[Supposn]

Imports surge when domestic manufacturing surges of course. When the economy is healthier demand for both imported goods AND domestic goods increase. Some of you appear to be trying to make the case that the increased imports are CAUSING the increase in domestic production...

Good to know we all agree that increasing imports comes with more industrial production and that imports sure as hell don't hurt production.

How about we all first consider the possibility that import tax-cuts on raw materials lowers production costs and causes increased production --even as it increases imports. Next, lets consider the fact that opening up new open trade markets for finished products likewise increases both production and imports. Whether or not imports cause production doesn't matter if we adopt policies of import tax-cuts plus open markets --both of which will increase imports and production.

Widdekind, as your message implies but does not explicitly state, trade deficits are immediately detrimental to their nations’ GDP.

If (as I believe you are), contending USA’s trade deficit is a net contributor to our GDP), you’re contention’s incorrect. On the contrary, because product prices only includes the costs to producers, trade deficits’ detriment to their nations’ GDPs are understated; (i.e. our trade deficits’ detriment to USA’s GDP far exceeds the amounts of the deficits themselves.)

For further explanation refer to the first message of the topic “Trade deficits are ALWAYS detrimental to their nations’ GDPs”.

[You’ve never responded to the concept that the although the best interests of individual persons, families, enterprises, industries and our nation’s economy are generally more or less similar, there are identifiable business practices where they diverge. There are instances of our drafted laws and regulations prohibiting such practices and contracts.]
Trade deficits are certainly are detrimental to their nations’ GDP. Due to USA’s trade deficits our numbers and the purchasing powers of jobs are less than otherwise.

Your reference to needed imported raw materials and components are “red herrings” you’re disingenuously inserting into this discussion. The trade proposal explicitly excludes the values of specifically listed mineral materials integral to the valuation assessment of any goods.
A USA producer having a need for an imported component would obtain it. That component, similar to any other component will add to the price of finished product’s price and would be passed onto the final purchasers; it does put the U.S. producers to competitive disadvantage to any other of our producers who make competitive quality product at lesser cost and the trade proposal would be of net advantage to any U.S. enterprise competing against any foreign product.

ExPat Panama, you and Widdekind, rather than WE believe “increasing imports comes with more industrial production and that imports sure as hell don't hurt production”. You guys do not share my position in this matter.

For further explanation refer to the second message of the topic “Trade deficits are ALWAYS detrimental to their nations’ GDPs”.

Respectfully, Supposn

 

[Supposn]

Trade deficits are ALWAYS detrimental and trade surpluses ALWAYS contribute to their nations’ GDPs.

If that were true, you could eliminate all oil imports and our GDP would increase. Ridiculous.

ToddsterPatriot & Widdekind, you guys criticize without reading?

The market driven trade proposal would be an indirect but very effective subsidy of USA exported goods. The proposal is of no net expenditure to the federal budget. All net expenditures are borne by USA purchasers of foreign goods. They are the cause and should fund the remedy for USA's trade deficit of goods.

Respectfully, Supposn

Excerpted from message #239:

Our reference to needed imported raw materials and components are “red herrings” you’re disingenuously inserting into this discussion. The trade proposal explicitly excludes the values of specifically listed scarce or precious mineral materials integral to the valuation assessment of any goods.