Tariffs and sky high audio prices.

nonoise sez ...

@millercarbon,

• "In all seriousness, are you on a Kool-Aid IV drip that you pull around on rollers?"

I suspect, nonoise, that when it comes to economic theory, you are a fellow traveler of Robert Reich. *lol*

Here, have a look:

https://www.youtube.com/watch?v=O_LkMWP2Q2A

PS: Millercarbon ... that was a good five-cent cigar. I know, because I got sick on a few as a kid. They were called Roi-Tan cigars at the time. Here’s a Roi-Tan commercial:

https://www.youtube.com/watch?v=Q0C3Q0XfCYs

Frank

Good one, Frank!

Another clue to what is really causing all this inflation- fiat currency -

Prior to 1964, back when you could buy a gallon of gas for a dime or so, that dime was minted out of silver. Not pure silver, but still. Flash forward to today, gallon of gas more like $3 or 30 times as much. But you can still buy it with a dime. It just has to be one of those pre-1964 dimes. Because of the silver in the dime it has pretty much retained its purchasing power.

I can even recall driving by a gas station advertising ten cents a gallon, and a restaurant selling cheeseburgers for a quarter- in both cases when paid for with pre-1964 coin.

Here’s a nifty quote for anyone still thinks Krugman has a clue:

By 2005 or so it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s.
- Paul Krugman

As Bugs Bunny used to say, what a maroon!

Two characters come to mind from Through the Looking Glass,
Tweedle Dee and Tweedle Dumb.

millercarbon ...

Here’s a little personal info: My mother worked for the Federal Reserve Bank in downtown L.A. for over 30 years. She was the first woman to make it into management.

Sometimes on Friday, I would take the bus or streetcar to the bank and she and I would go to lunch. I was only nine years old, or thereabouts. And yes, it was perfectly safe for a child to travel alone at the time. I did it all the time.

My Mom got paid on Fridays so she always had her pay envelope with cash in it. One time, we were sitting at the lunch table and she pulled out a twenty dollar bill. She pointed out the writing on the top and said, Frank, do you see what it says on the top? It says "Silver Certificate." She went on to say that she could take that twenty dollar bill into any Federal Reserve bank and demand twenty dollars in silver in exchange for the twenty dollar bill and the teller had to give it to her. She told me that, that was what made the country great. She said, that if that ever changed, the country would be in trouble. Of course, I didn’t understand what she meant at the time, but I sure do now.

The national debt is over 22 trillion now. Hey, we can even fund wars with counterfeit money and pay the piper down the road ... or at least our grandchildren and great-grandchildren can. This debt represents labor not yet expended and production not yet produced.

I actually took a tour of the inside of the Federal Reserve bank with my Mom and an escort. We went down into the vault, which as I remember, was several stories underground, and saw money stacked from the floor to the ceiling. One of the workers handed me a brown-wrapped package to hold, then told me that I was holding a million dollars. Wow! A thrill for a nine-year-old kid. Then, they showed me the blast furnace where they burned the old money. Geeze, they were shoveling cash into the furnace! Now, they just tax it away.

By the way, another thing people should ponder is the fact that when our money is borrowed into existence, they never loan the interest. Maybe as a point of interest, you could comment on that little tidbit. :-)

Frank

@millercarbon @nonoise 

Many thanks to both of you for posting salient points. @inna , salient means “really bitchin”. The real problem, of course, is that there is no way to know absolutely for certain because there are so many forces at play. Some food for thought...

As we all know, the old saying goes “those who ignore history are doomed to repeat it” and “its different this time”. Those two statements have cost alot of smart people alot of money over the centuries. I would also submit that to assume that past tariff actions and outcomes are applicable today is dangerous. The good news/bad news at least is the current tariff decision maker doesn’t read history so we will have a few random decisions and data points to analyze in the centuries to come.

I would submit that tariff policies prior to 1929 should be evaluated individually and there was typically a strong player being punitive with another strong player. In modern history, there was alot of back and forth between the USA and Great Britain. There are certainly other examples but that is the relationship most often examined. They/we were the only world powers at the time with momentum.

Now fast forward...there are plenty of choices of trading partners today that simply were not factors prior to the early twentieth century. The largest democracy on earth today (India) was enslaved at the time by Great Britain. Same goes (for all practical purposes) for China. Between the UK and Japan, China has been exploited for much of modern history and every european country seemed to have “claimed/colonized” every square inch of South America, Central America and let’s not forget the African continent and the middle east. Again, colonies all.

Prior to the second world war, oil was controlled by the US and the UK and it was traded in British pounds. Tariffs end up being either protectionist or punitive. In today’s integrated, global economy where information, shipping, fund flows, data flows and communication is virtually instantaneous its naive to believe a punitive tariff will change the behavior of countries with a choice. Mexico doesn’t have a choice...that’s like beating up the gentle little kid next door. Sure, you can win but what do you win?

Now let’s look at China. They are 20 years from not giving a darn what Washington does because they have wisely invested and diversified. They have almost reached economic parity with the USA in a little more than 1 generation. The present tariff policy in Washington amounts to kicking a lion cub....try that when they finish growing. And China is growing and is unstoppable. The EU, South America and Africa will buy their steel. Australia has become an economic colony of China. I don’t lament any of this as its the natural progression of things. Countries rise and fall throughout history. The silk road predated the USA and China isn’t just a flash in the pan, its real and has critical economic mass without the constraints of those pesky issues like an opposition to pay to play (read:bribery) cultures, etc.

So, since no one has a perfect crystal ball, all we can do is guess. My guess though is our present tariff strategy will hasten the development of a world economy dominated by the Chinese first, then the USA/Britain will be fighting it out to stay ahead of the EU but when the former Soviet block aligns (and I include Russia) with the EU they will lap the USA/Britain without the anglo influenced mitigator. So, there we have it...or not. I could be completely off base and China may run home at the idea they might see a mean tweet, get their feelings hurt and capitulate. What do you think they will do? They already build a better Tesla than Tesla AND have these really cool pods scattered everywhere that you can pull your electric car into and in 5 minutes you drive out with a freshly charged battery pack swap!!! For half price. They have another strategic advantage over the west that they haven’t had to use. I hate to say it but they can press their populace into instant austerity at the stroke of a pen. Its not morally something we believe palatable but they are not going to blink guys, they don’t have to have us. Oh, and if you don’t think the North Korea/US “conversations” aren’t a Chinese test marketing of how to negotiate with the USA well.....

Their final ace up their sleeve, they can begin to sell the huge cache of US treasuries they own to fund any trade issues for the near to medium term. What will that do to the yields the USA would have to provide to future purchasers of treasuries. In the past, someone would just start a war and take what wasn’t rightfully theirs. That’s impossible in the information age with a militarily powerful country in the nuclear age.

Who is betting against China?  That would be like betting on your local high school againt the New England Patriots. Its really sweet sentimentally.  We need them to need us but we can’t force that as in decades past.