Paul Krugman's takedown of Trump's economic blatherings.

[playwrite]

(05-18-2016, 02:22 PM)Cynic Hero Wrote:

(05-18-2016, 04:44 AM)Kinser79 Wrote:

(05-17-2016, 09:18 PM)playwrite Wrote: Really?  When an Chinese-manufactured iPhone sells anywhere in the world, how much of the revenue goes to China v. US?

Even if most of the profit is repatriated to the US for ishits, do you honestly think the Chinese couldn't introduce knockoff ishits on a moment's notice?  How many different products do the Chinese copy directly?  Quite a lot.  Everything from handbags to watches, a cell phone wouldn't be a huge leap for them.

Quote:And again, the U.S. is much more a self-contained economy.  China is trying to emulate us.

I'm going to require evidence for this because every time I go to Wally World I see made in China (or somewhere that isn't the US or even North America) on most things that aren't in the grocery department.  Here's the truth that everyone else can see.  The US exports raw materials and imports finished goods.  The very sort of thing that third world countries do.  I highly doubt China is trying to emulate that...the CPC understands wealth is made by doing the opposite:  Importing raw materials and exporting finished goods.

Yes, Kinser is right here, china is doing the smart thing and creating wealth by exporting real industrial products and importing raw materials. It is we who are being stupid by being a primarily consumer economy.

Gad, you two make a pair!   

I think I've asked you before, Cynic, when a govt employee comes into your business, can you tell the difference between his dollars and that of an employee of a private entity?  Likewise, can you tell the difference between the money you get from someone employed in the service sector from another employed at a manufacturing plant?  Do you report your income taxes on two or more forms to show all the "real income" and the "fake income?"  Would you be willing to send your "fake income" to me (I can provide a PO Box)?

And for you Kinser, here's a pretty good graphic that explains much but not all -

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Be sure to check the story at the link - 

http://www.merics.org/programme/wirtscha...ystem.html

- to get the basic story of why China wants a distribution of their economy to look more like ours.

However, you will need to dig a little farther to get to these even more interesting aspects -

- Too much of that "investment" in China has gone into creating their "net exports" - the return on that has plummeted and they are losing market share, due to their own rising labor cost, to others (e.g. Vietnam, Indonesia, Mynamar).   

- The other problem is their "household sector" has not been ready to take on that portion of their investment sector dedicated to domestic consumption - not only empty factories but "ghost cities."   

- Some of those mistakes have been glossed over because of the reality that the Chinese central government, a monetary sovereign, is the actual debtor of last resort.  However, they have gone out of their way to make it look like private sector investment (i.e., banks, developers) and it has created a lot of bullshXt in the entire market - take a t-baggers' worst myth of Freddie Mac and Fannie Mae and stuff it with powerful steroids - oh, and this time, the story is real, just a lot bigger.

But hey, Rome wasn't built in a day.  And besides, it's their problem (well, not really but let's pretend anyway because Trump says so.)

Let's look at the US picture.  Notice the  negative 3.5% of trade's contribution to our GDP - that's our trade deficit.  Kind of puny compared to the other sectors, no?  That's also actually down to around -2.5% today, representing the difference between about 12.5% in imports and 10% in exports.  

Now, from a jobs perspective, one could say that those two numbers should actually be added together to reflect all that economic activity of us importing as well as exporting - go ask a longshoremen how long his job would last if he just handled the exports.  

Now if you did add the 10% and 12.5% together, you would have to re-normalize all the numbers so that they add up to 100% accounting.  When you do that, you get around 15%.  What that means is 85% of our economy is "closed"  - has nothing much to do with the rest of world.  That's not completely true because some of the investment sector results in products for exports - but the reality is the big market for nearly all our investment is domestic so investment solely for supporting exports is basically a rounding error.

Now here's the thing about Trump (and to a somewhat lesser extent, Sanders) trade proposals.  First, any trade proposal, even those of NAFTA or TPP are going to be a small part of overall trade which is already a small part of the overall economy.  And even within the trade that a specific trade agreement deals with, it is working at the margins for the goods and services and labor involved.  And perhaps most important, it's likely that if you behave as an a-hole and put trade barriers up, you're trading partners are going to act like a-holes too and do the same thing - you're combined economy activity is likely to decline significantly.

Bottom line and psssss, its a secret, if you're looking for big impacts on employment and wages, and you are looking at trade, you are looking in the wrong place.  You might as well be looking for one of these -
  

On the other hand, increase your investment sector expenditures on expanding out our domestic road, electric and Internet grids for e-powered, driverless transportation that includes cars, trucks and high speed trains for use by the household sector.... watch your economy boom.