A lesson in trade theory

“Every economic answer is a political question.”

Here then is a question for all you experts on international trade, taken directly from my Free Market Economics [pp. 248-249]. Picture two countries, A and C.

Suppose in Country A, in one hour it can produce either one car or 1000 shirts. [It’s also the same answer if Country A can produce ten cars and 10,000 shirts per hour!]

Meanwhile in Country C, in two hours it can produce either one car or 500 shirts.

According to the economic theory of comparative advantage, how many cars will Country A produce? OK, once you’ve worked that out, now tell me if you get the same answer using common sense. As chrisl said, “economic theory is all right in theory”. Personally, I’m not even sure of that, but you get the idea.

So here’s the thing. It is entirely possible that the US is tired of carrying most of the burden for the defence of the West and would like a bit of sharing the burden. It might also find some respite for itself in strengthening those parts of its economy which are more closely associated with its defence industries. And it might even wish for some kind of gratitude from others, supposedly on the same side, in trying to assist the US in resurrecting its strength. And then there are the straightforward economic issues, which are not the same as the political. So let us go to these.

And of course the issue economically is comparative advantage, and not pure let the most efficient producer produce each product. With comparative advantage, it is not always the most efficient low-cost producers who produce. If you don’t even understand that, you should keep right out of this debate.

Why encourage free trade:

  • competition is what drives improvement and growth – without competition most businesses would just coast along to the fullest extent they could
  • innovation is driven by competition – the way to take on an established business is to find a better way to do something
  • all other things being equal, free trade is best

Why “free trade” is not working for the US:

  • cheating is rife – try to sell an American car in Japan – not possible for all kinds of products in all kinds of countries
  • many countries subsidise exports while imposing non-tariff barriers to trade on imports along with tariffs themselves
  • currency manipulation – artificially holding exchange rate lower to discourage imports and encourage exports is not unknown
  • $US is world reserve currency it is unable to adjust to repair a balance of payments deficit
  • there are many forms of approved trade restrictions everywhere you look – the EU for example – such as:

Trading blocs

A regional trading bloc is a group of countries within a geographical region that protect themselves from imports from non-members. Trading blocs are a form of economic integration, and increasingly shape the pattern of world trade. There are several types of trading bloc:

Preferential Trade Area

Preferential Trade Areas (PTAs) exist when countries within a geographical region agree to reduce or eliminate tariff barriers on selected goods imported from other members of the area. This is often the first small step towards the creation of a trading bloc.

Free Trade Area

Free Trade Areas (FTAs) are created when two or more countries in a region agree to reduce or eliminate barriers to trade on all goods coming from other members.

Customs Union

A customs union involves the removal of tariff barriers between members, plus the acceptance of a common (unified) external tariff against non-members. This means that members may negotiate as a single bloc with 3rd parties, such as with other trading blocs, or with the WTO.

World Trade Organisation

There are then the WTO rules of trade engagement which are not designed to create a world where free trade is on the only answer. The rules were devised when the US economy was a lot more robust than it now is, and when the US was both willing and able to make sacrifices of all kinds to help others withstand the spread of communism. None of this is applicable today. The US is therefore no longer willing to watch others cheat their way into a stronger trade position, at the cost of its own national security, economic strength and domestic employment. Here is part of what the WTO is up to.

WTO Rules

1. Most-favoured-nation (MFN): treating other people equally Under the WTO agreements, countries cannot normally discriminate between their trading partners. Grant someone a special favour (such as a lower customs duty rate for one of their products) and you have to do the same for all other WTO members.

2. National treatment: Treating foreigners and locals equally Imported and locally-produced goods should be treated equally — at least after the foreign goods have entered the market. The same should apply to foreign and domestic services, and to foreign and local trademarks, copyrights and patents.

3. Developing countries have transition periods to adjust to the more unfamiliar and, perhaps, difficult WTO provisions — particularly so for the poorest, “least-developed” countries – so these basket case economies are allowed to whittle away at the economic strength of the developed world.

Meanwhile, economic ministers around the world increase unproductive public spending every chance they get, add new regulations on top of old, and increase business taxes at every turn, and then job on their chairs screaming, “Eek, a tariff!’

The quote at the top, by the way, is from Joan Robinson, who has quite a lot to say about free trade that ought to be read by the economic illiterates who populate the world, who are now found speaking on behalf of the status quo, as harmful as the status quo is to most of the lower half of the income distribution. Robinson was not just a Keynesian but also a big supporter of Mao, so I’d be very careful, but the above quote seems as accurate as anything else you are likely to hear about economics.

And the news is that this is not news

I’m with marcus on taking a hard approach to dealing with the left. I just came across this, which is a report in an obscure journal about a statement made by the President of the United States, via twitter, that no one else seems to have mentioned, so far as I can tell: Obama’s work to discredit the Trump campaign was ‘bigger than Watergate,’ Trump tweets. This is literally true, and where is anyone else to make this into a story?

Why did the Obama Administration start an investigation into the Trump Campaign (with zero proof of wrongdoing) long before the Election in November? Wanted to discredit so Crooked H would win. Unprecedented. Bigger than Watergate! Plus, Obama did NOTHING about Russian meddling.

That the story is also anti-Trump in tone and content is almost by the way. Meanwhile those who should bless the day he became president agonise over putting tariffs on steel and aluminium.

Protection for Republican majorities in the House and Senate

I am a free trader by nature but not a big fan of economic forms of self-harm. And I am certainly for Trump basing his decisions on political calculation, since I am also against political forms of self harm. PDT is shifting towards a slight increase in protection for American products, as summed up in this article from The Wall Street Journal: ‘Every day is a new adventure’: Trump upends Washington and Wall Street with shifts on trade, guns. Pulling the various bits from the article, there are two sides to it, always bearing in mind that if it’s in the WSJ the story will be shaped by a free-trade ethos. So why, according to the story, would protection levels be increased. This is part of the Trump calculation:

  • foreign countries are stealing American jobs with cheap imports – tariffs are one of the only ways to punish other countries for practices that disadvantage U.S. manufacturers
  • impose tariffs on steel and aluminum in the name of national security – large amounts of cheap steel and aluminum posed a national security risk for the United States
  • Trump has also been keeping a close eye on the special election this month for a U.S. House seat in western Pennsylvania. Voters in places such as Pennsylvania’s 18th District are looking for more to be done by the administration. The president has noted that the Republican in the race is struggling in a district where he won by a large margin.

And why leave things alone. Again from the WSJ and part of the White House debate:

  • tariffs could spark a trade war – other countries would retaliate, imposing tariffs on U.S. exports, damaging an economy that Trump was trying to build up through his tax cuts
  • the stock market was doing well [as is the economy as a whole].

This is hardly a return to Smoot-Hawley, and if it protects Republican majorities in the House and Senate, the small ripple effects on the American and world economies will be worth the extra few cents Americans pay for the goods and services they buy. Meanwhile, this is the stated threat from Europe:

“We will put tariffs on Harley-Davidson, on bourbon and on blue jeans – Levi’s,” European Commission President Jean-Claude Juncker told German television.

Meanwhile public spending rises another trillion and no one says a word.

Socialists at heart

Coming from the area of the social sciences that had made its name on its one key insight, that individual private-sector decision-making is the key to wealth, growth, employment and prosperity, but now to find that virtually the entire profession believes that wealth, growth, employment and prosperity are driven by demand, and particularly government spending, none of this comes as a surprise: According to a survey of members of the American Political Science Association, Donald Trump is the worst president in American history. Meanwhile his predecessor – a man of no known accomplishments (or at least good ones) – is ranked eighth. It’s a clown’s world out there.

This is discussed at Powerline: Is Trump the worst president ever? The final words:

Academia has pretty much abandoned America, and vice versa. There simply is no credibility left in soft fields like “political science.”

As for the economists of the world, I imagine you would get the same ranking in an American Economics Association survey, although they might make Herbert Hoover even lower since he was also a Republican. FDR would, however, rank first even though he prolonged the Great Depression in the US by around eight years. Everyone else was in recovery by 1932-33. In the US it took until around 1940-41. They are all socialists at heart, which is where the social sciences now largely are.

Jordan Peterson on Donald Trump

This is the only thing I can find. The jerks asking the questions are supposedly on the conservative side but are clearly open-ended critics of Trump. Peterson was much more careful and if he was critical, it was only about Trump’s timing in what he said and not what he said. The bozos interviewing cannot see the point. This is Peterson in my own rough but reasonably accurate transcription (from around 2:00 in):

“Truth is a tricky thing because you have to take the temporal context into account. There are white lies and black truths. Black truth is when you use the truth in a way that isn’t truthful. . . just like a white lie is a lie that isn’t harmful…

“What Trump did wrong … was he failed to specify the time and the space of the utterance. Because what he should have come out and done is said that I unequivocally denounce the white supremacist racism that emerged in Charlottesville, and then he should have shut up. And then two weeks later he could have said, well when we look at the political landscape as a whole that it’s pretty obvious there are reprehensible individuals acting out on both ends of the extreme. The Charlottesville week was not the week to make that point.”

And this is Peterson’s views on Trump’s intelligence.

He gets it, even if he is cautious about saying it.

“Donald Trump is delivering on economic leadership, that’s for sure”

It’s from Miranda Devine’s radio show but I picked it up at Breitbart: Aussie PM Applauds Trump Leadership, Says Economic Reforms Benefiting the World.

U.S. President Donald Trump’s sweeping tax cuts combined with reforms in corporate regulation are benefiting the global economy, Australian Prime Minister Malcolm Turnbull said.

Mr. Turnbull pointed to the International Monetary Fund’s strong predictions of global economic growth in the wake of the Trump tax cuts as testament to his economic drive.

Speaking during a radio interview, Mr. Turnbull happily declared: “Donald Trump is delivering on economic leadership, that’s for sure” before outlining his own close personal relationship with the president.

“You’ve only got to look at the IMF to see they regard the American tax cuts as being very pro-growth,” he said. “And, of course, because the US is such a big part of the global economy, that has lifted global growth forecasts as well.

He then added something that must have included a bit of personal reflection as well.

“You get plenty of criticism in public life. You’ve got to expect it. I’m sure he expects it,” he said.

Well, at least Malcolm has now come over from the Dark Side or so he says. If only his policies were more like Trump’s it would be even better.

“Thank you Mr President for your inspiring speech”

Trump declares the U.S. is ‘open for business’ in Davos, as he tells global bigwigs ‘America First does not mean America alone. Speeches on the vid begin around 4:45 in. PDT at around 8:30.

  • President Donald Trump defended his aggressive trade posture before world leaders and business moguls in Davos
  •  He declared the U.S. ‘open for business’
  •  Trump also tried to explain how he would cooperate with other nations
  • Trump has said he’ll withdraw from global climate pacts and trade deals 
  • ‘I will always put America First. Just like the leaders of other countries should put their countries first also’
  • Pitches investment in the USA 
  • ‘America is roaring back and now is the time to invest in the future of America’
  • Says he’ll ‘denuke the Korean peninsula’ 
  • Hails retaking ISIS territory ‘once held by these killers in Iraq and Syria’

The words in the heading are from the President of the World Economic Forum.

UPDATE: The text of Remarks by President Trump to the World Economic Forum.

The best first year ever!

This is a government with a policy matrix from the days of my youth those many years ago. Socialist rot has overtaken even the American Republic, but you are seeing policy that is once again dependent on individuals taking their own lives into their own hands and getting on with it. There are still enough socialists around, and in some very influential places, to cloud the issues, but the message is getting through. The desperation Democrats must feel seeing just how well social policies based on free markets and strong borders work is evident at every turn. Their only hope is that these policies fail, but so far there is no evidence that they have. PDT will still need his share of good luck, but the evidence of the dividends from good policy are visible at every turn.

So to help you keep in mind how well things are going, which you will never hear from the mainstream media and the left, this is a reminder from Gateway Pundit: HERE IT IS=> Complete List of President Trump’s Historic Accomplishments His First Year in Office!.

President Donald J. Trump had arguably the best first year for any President in US history since Washington – in spite of massive headwinds from the actions of the corrupt and criminal prior administration, the Democrat Party and their MSM! Below is a list of his major accomplishments.

President Trump was inaugurated on January 20th, 2017, one year ago.  Since then his accomplishments are nothing short of miraculous.  In spite of massive attacks from the MSM, an investigation created through the efforts of the prior corrupt administration, and a Democrat Party that does all they can to derail him, the President kept his promises and did all he could to Make America Great Again.  The results speak for themselves.

The Economy –

The US stock market is a barometer of economic activity and since President Trump was elected President it has skyrocketed.

The stock market on Wednesday, January 17th, 2018, this past week, says it all. On that day the Dow broke 26,000 points for the first time in its history.  As a result the Dow broke the record for the fastest 500, 1,000, 2,000, 3,000, 4,000, 5,000, 6,000 and 7,000 point increases between major milestones in the history of the Dow. All of these increases occurred since Donald Trump was elected President.

The Dow today stands at 26,071.7.  It is up 42% since the 2016 election and 31% since last year’s inauguration.  The Dow had more all-time closing highs in 2017 than any year in history.  President Trump enjoys 95 all-time highs since his election and 78 since his inauguration.  The Dow is up an amazing 7,739 points since the election.

Americans of all walks of life are seeing their 401k’s explode because of President Trump.

Today there are more people working than at any time in US history. More than 2 million new jobs were created in 2017 under President Trump and as a result more than 160 million people are working in the US today.

President Trump increased the GDP growth rate to above 3% in the 2nd and 3rd Quarters and the 4th Quarter was sizzling.  President Trump could reach a 3% GDP growth rate his first year in office, an annual GDP that the US hasn’t seen in a decade.  At the end of the 3rd Quarter the national GDP reached $19.5 trillion for the highest recorded GDP in US history.

The President’s tax plan passed in late December and is already benefiting Americans and American companies. Employees will see increases in their pay next month due to the lower Federal taxes.  Millions of Americans have received bonuses due to the tax cuts and major companies have announced plans to move capital and operations to the US due to these cuts.  The benefits of these cuts haven’t even transpired yet but the excitement amongst workers and companies is electric.  2018 is poised to have one of the greatest economies in US history!

Foreign Policy

President Trump vowed to destroy ISIS. Despite President Obama saying that ISIS will be around for a generation, these murderers and terrorists in the Middle East were decimated over the past year.  Both Syria and Iraq have declared victory over ISIS and due to President Trump’s resolve, less than 1,000 ISIS fighters are estimated remaining.

President Trump met with the Pope, leaders of 50 Muslim countries and Israeli and European leaders in his first trip abroad. He demanded that the Muslim leaders remove radicals from their countries.

The President refused sending Pakistan security assistance in the millions due to the Pakistani’s harboring terrorists.  He stopped an Obama last minute $221 million transfer to Palestine and cut aid to Palestinians in half.  He showed that the US is unwilling to work with Muslim entities that support radical Islam.

On President Trump’s successful trip to Asia he bundled an estimated $300 billion in deals for the US. He met with Asian leaders and was the first US President and foreign leader to dine in China’s Forbidden City since the founding of modern China.

US Policy

The President named and successfully put in place a new Supreme Court Justice, Neil Gorsuch He signed more than 90 executive actions in his first 100 days alone.  The actions included –

* Dismantling Obama’s climate change initiatives.
* Travel bans for individuals from a select number of countries embroiled in terrorist atrocities.
* Enforcing regulatory reform.
* Protecting Law enforcement.
* Mandating for every new regulation to eliminate two.
* Defeating ISIS.
* Rebuilding the military.
* Building a border wall.
* Cutting funding for sanctuary cities.
* Approving Keystone and Dakota pipelines.
* Reducing regulations on manufacturers.
* Placing a hiring freeze on federal employees.
* Exiting the US from the TPP.

The list of POTUS 45’s successes goes on and on.

Undoubtedly there is more to do. The wall is not yet in place and Democrats are willing to shut down the government and stop providing money to our troops so that illegals are given citizenship.  The FBI and DOJ are headed by Obama leftovers who are involved in corrupt and criminal activities.  A bogus investigation was created by these scoundrels and the current AG who recused himself from anything Russia appears to be inept and sleeping.  But based on President Trump’s performance to date, he will address these issues successfully in due time as well.

Overall President Trump’s first year in office was outstanding. He was attacked from all sides at times and stood tall and to his principles.  America is stronger and greater than ever before.  The economy is growing and the world is safer.  2017 was certainly one of the greatest years in US history.  President Trump kept his promises and has truly Made America Great Again!

Donald Trump is a genius

Donald Trump is a genius in exactly the same way his enemies are morons. I don’t say these people can’t tie their shoelaces or cross the streets by themselves. What I do say is that when it comes to political judgement and ethical behaviour, they are so far below an acceptable norm as to place them beyond any need to pay the slightest attention to what they say or what they want because of how politically stupid they really are. This is what PDT said:

“Now that Russian collusion, after one year of intense study, has proven to be a total hoax on the American public, the Democrats and their lapdogs, the Fake News Mainstream Media, are taking out the old Ronald Reagan playbook and screaming mental stability and intelligence,” he wrote at 7:19 a.m.

“Actually, throughout my life, my two greatest assets have been mental stability and being, like, really smart,” he continued. “Crooked Hillary Clinton also played these cards very hard and, as everyone knows, went down in flames.”

“I went from VERY successful businessman, to top T.V. Star . . . to President of the United States (on my first try). I think that would qualify as not smart, but genius . . . and a very stable genius at that!” he finished at 7:30 a.m.

This is from Wikipedia.

exceptional intellectual or creative power or other natural ability.
“she was a teacher of genius”
synonyms: brilliance, great intelligence, great intellect, great ability, cleverness, brains, eruditionwisdomsagacity, fine mind, witartistryflair, creative power, precocity, precociousness More

an exceptionally intelligent person or one with exceptional skill in a particular area of activity.
“a mathematical genius”
synonyms: brilliant person, mental giant, mastermind, Einstein, intellectualintellectbrainhighbrowexpertmasterartistpolymathMore

If you cannot recognise genius when you see it – someone with an exceptional skill in a particular area of activity, political leadership for example – then maybe you are just too stupid to be able to tell.