Pragmatic Capitalism

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trade deficit

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We don’t have equal trade with several countries which is becoming a big political issue. If we import a trillion dollars of goods from China, and they don’t buy American goods in return, they buy government bonds instead, is this a bad thing?

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Posted by laskerfan12
Posted on 07/27/2016 2:37 PM
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The anti trade argument is a very anti capitalism argument and I don’t know why Conservatives are getting behind it. The reason we don’t have equal trade is because US corporations choose to make a lot of our goods overseas. This means that we build stuff in China at a sharply reduced cost, earn a higher profit AND consume more goods and services at that lower price. This is nothing more than corporations leveraging their ability to benefit from the globalization of the world economy. This isn’t a bad thing! It’s a good thing. Putting up trade barriers only deters corporations from doing this which forces them to make their goods and services domestically which drives up prices and drives down profits. In the end we consume less because it costs most and we’re worth less because we earn a lower profit in the aggregate. Why would anyone want that?

Now, this obviously chews up some jobs. We lose lots of manufacturing jobs to overseas workers. So it takes time to replace these lost jobs in other sources. The problem with today’s economy is not that we’re losing too many jobs overseas. It’s that we’re not seeing the demand to replace the pace of lost jobs. Automation is exacerbating all of this. So, our job issue is more about a temporal displacement of current jobs vs demand. In other words, the world is changing so fast these days that people literally can’t innovate fast enough to replace those changes.

On the other hand, there are some logical arguments for trade intervention. For instance, when countries are blatantly manipulating their currency. But on the whole the globalization of the economy is not a bad thing for US consumers. It’s a good thing.

But the key point is, most of the fear mongering about trade coming from people like Sanders and Trump is just hot air. Those jobs are gone. They ain’t coming back no matter how much Trump taxes those companies…Unless Donald plans to tax them and hire more govt workers….

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Cullen Roche Posted by Cullen Roche
Answered on 07/28/2016 1:22 PM
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    I don’t know if I would ascribe conservatives getting behind it. They are the 50% that dislike or hate Trump. The ones for it are the new populist lemming voters Trump is attracting.

    One thing that has to be understood is that unions and trade barriers maintain living standards in selected groups that would otherwise continue to suffer living standard decreases via offshoring and automation; populist voters recognize this intinctively and are all for it even if it negative hit to the aggregate in the long run. The assumption that comparative advantage works “efficiently” in favor of the one with the “advantage” is silly considering the widespread shitty quality of Chinese made goods or India for customer support/programming services compared to before 1994 when China first pegged its currency to the USD. A fine example is Intuit’s offshoring of its Quicken software which has turned into a truly infamous piece of shit that gets worse and worse each and every year. Nor do we have microwaves or freezers that last 20-years anymore, etc. Consumers do not have enough collective bargaining power to force corporations offshoring en masse to pay attention to long term, high quality again rather than short term, high profits…. all exacerbated by the overpaid idiots on Wall Street.

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    Posted by MachineGhost
    Answered on 07/29/2016 9:26 PM