The Top of the market is Looming?

[Value Collector]

I have a little different take on the tariffs.
Firstly, it is not a tax on China it is a tax to be paid by US consumers at the higher product prices.

Yes the higher prices will give more incentive for local manufacturers. However, most of those production facilities are no more, some having been located to other countries, some closed permanently or some lying around in disrepair. Consequently, it could take some years to gear up industry for domestic production. In the meantime the higher prices which need to be paid for those products will add to inflation and increase the cost of living problem.

When you think about it though, you are incentivising the movement of labour and capital away from new and developing industries where they can supply your nation with higher level services and industries where you have natural advantages, and into industries where you don’t have natural advantages, and that are worse jobs in some cases.

For example if you put a Tariff on imported TV’s, and raise their price by $200, you might create more jobs producing TV’s in the USA, but you also might give family’s who buy the TV $200 less to spend on hair dressing, so Donna who loves being a hair dressers needs to become a worker in a TV factory, and Mum doesn’t get to colour her hair.

 

[Smurf1976]

For example if you put a Tariff on imported TV’s, and raise their price by $200, you might create more jobs producing TV’s in the USA, but you also might give family’s who buy the TV $200 less to spend on hair dressing, so Donna who loves being a hair dressers needs to become a worker in a TV factory, and Mum doesn’t get to colour her hair.

But......

The TV production keeps money in the country that would otherwise be sent offshore.

The hairdressing is just money circulating among locals.

Now I'll put this scenario forward to illustrate:

Let's suppose that everyone who lives in a small town all decides they can fix the town's unemployment problem by creating service industries which result in each adult resident of the town all employing one other adult and paying them $100k a year.

Sounds good doesn't it? The town's GDP has gone right up and now everyone's got a $100k job.

So what's the problem? Well it becomes a huge problem when people start trying to spend that money on anything not produced completely within the town. Because with no money coming back in, whilst the individuals all have an income the town as a whole is earning precisely zero, and any spending on goods and services from outside simply runs down capital.

To work it needs the town to have an income from external sources, people living in it need be selling something to others not just themselves in order to bring money in.

Hence why ghost towns exist. Once the external source of income dries up, once the mine or whatever sustained the town shuts, the rest falls apart real fast. Come back even after just a few years and you find that most of the homes are either abandoned or have been physically removed or demolished and the town's population has collapsed. Because without that external source of income it just doesn't work.

Now that same concept does apply at a larger scale. A country that imports without exporting is ultimately going to end up poor. The TV factory avoids the imports, and may even export, but there's no national income to be had from cutting hair or delivering food to locals.

 

[qldfrog]

I have had a similar argument with VC in the past:
most economic criterias do not seem to reflect the critical difference between actual production and shuffling around money;
SO what do we actually do which add value into Australia? This is the ONLY support for wealth:
We have mining and agriculture, tourism, some rogue education scams (which are a disguised $ for residency schemes)
and very few adding value transformation: raw ore to semi processed refined products, a couple of niche manufacturers or software producers, and maybe if any left a few financial services (aka MQG).
That's basically all..our economy of barista, tradies ,public servants and health professionals are supporting, not creating and basically parasitic of the few left sectors generating real wealth.
Without the narrow critical sector, the whole economy collapse..or is sustained thru debt

 

[Value Hunter]

I have had a similar argument with VC in the past:
most economic criterias do not seem to reflect the critical difference between actual production and shuffling around money;
SO what do we actually do which add value into Australia? This is the ONLY support for wealth:
We have mining and agriculture, tourism, some rogue education scams (which are a disguised $ for residency schemes)
and very few adding value transformation: raw ore to semi processed refined products, a couple of niche manufacturers or software producers, and maybe if any left a few financial services (aka MQG).
That's basically all..our economy of barista, tradies ,public servants and health professionals are supporting, not creating and basically parasitic of the few left sectors generating real wealth.
Without the narrow critical sector, the whole economy collapse..or is sustained thru debt

I understand your argument but to be fair people only need so much stuff. As any economy becomes more developed/mature over time services will make up a higher and rising percentage of income. There is a limit to how many fridges, TVs and cars, etc people need and for every country that is a net exporter by definition there must be a country that is a net importer to balance the scales.

But yes in general I agree with what you are saying that Australia has too many unproductive industries. Selling education to foreigners which is a back door residency scheme, a bloated government sector, a bloated financial services sector (i.e. asset shuffling), etc.

Also thanks to our ponzi immigration scheme real wages are in the toilet while house prices have been going through the roof.

 

[Value Collector]

But......

The TV production keeps money in the country that would otherwise be sent offshore.

The hairdressing is just money circulating among locals.

Now I'll put this scenario forward to illustrate:

Let's suppose that everyone who lives in a small town all decides they can fix the town's unemployment problem by creating service industries which result in each adult resident of the town all employing one other adult and paying them $100k a year.

Sounds good doesn't it? The town's GDP has gone right up and now everyone's got a $100k job.

So what's the problem? Well it becomes a huge problem when people start trying to spend that money on anything not produced completely within the town. Because with no money coming back in, whilst the individuals all have an income the town as a whole is earning precisely zero, and any spending on goods and services from outside simply runs down capital.

To work it needs the town to have an income from external sources, people living in it need be selling something to others not just themselves in order to bring money in.

Hence why ghost towns exist. Once the external source of income dries up, once the mine or whatever sustained the town shuts, the rest falls apart real fast. Come back even after just a few years and you find that most of the homes are either abandoned or have been physically removed or demolished and the town's population has collapsed. Because without that external source of income it just doesn't work.

Now that same concept does apply at a larger scale. A country that imports without exporting is ultimately going to end up poor. The TV factory avoids the imports, and may even export, but there's no national income to be had from cutting hair or delivering food to locals.

The USA is a huge exporter, it not only exports goods, but it’s the worlds largest destination for tourism, it exports media (movies, music, google, YouTube videos etc etc) and financial services and business systems (think franchising of McDonald’s, kfc etc etc)

So it’s not like a small town trying to rely on servicing itself, but tariffs will cause it to deform itself into producing things that it probably shouldn’t and avoid producing things it should.

 

[Value Collector]

I have had a similar argument with VC in the past:
most economic criterias do not seem to reflect the critical difference between actual production and shuffling around money;
SO what do we actually do which add value into Australia? This is the ONLY support for wealth:
We have mining and agriculture, tourism, some rogue education scams (which are a disguised $ for residency schemes)
and very few adding value transformation: raw ore to semi processed refined products, a couple of niche manufacturers or software producers, and maybe if any left a few financial services (aka MQG).
That's basically all..our economy of barista, tradies ,public servants and health professionals are supporting, not creating and basically parasitic of the few left sectors generating real wealth.
Without the narrow critical sector, the whole economy collapse..or is sustained thru debt

Think about it though, putting a 25% tariff on TV’s probably would make Australia make TV’s here it would just make TV’s more expensive, and create more tax dollars, and mean we have less baristas making your coffee and more Government employees making red tape for you.

And if it did create a tv factory here, again you will still be paying more for the TV, and have less money for coffee, and your barista will be working in the TV factory, and your tv will be worse.

 

[Dona Ferentes]

is sea bourne the brother of Jason

 

[Bourseboy]

Let's assume the lesser evil, Trump becomes POTUS. In 4 years from now he (and his party) will be disliked, so probably Democrat POTUS next. Probably a whole new set of rules. What incentive for anyone/organisation to invest in factories etc? Plus Trump is fickle.
How long to see what 'rules' Trump makes, time to see how things fall, time to decide whether, how and where to invest, time to get approvals, time to build. US industry captains will have some hard decisions to make. Tulsi Gabbard the solution?

 

[divs4ever]

Let's assume the lesser evil, Trump becomes POTUS. In 4 years from now he (and his party) will be disliked, so probably Democrat POTUS next. Probably a whole new set of rules. What incentive for anyone/organisation to invest in factories etc? Plus Trump is fickle.
How long to see what 'rules' Trump makes, time to see how things fall, time to decide whether, how and where to invest, time to get approvals, time to build. US industry captains will have some hard decisions to make. Tulsi Gabbard the solution?

now i saw a report that Ron Paul ( father of Rand Paul ) had been invited to seek a place in the Trump administration , now this was probably a troll ( designed to trigger certain anti-Trumpers )

but then Trump is making friends who are middle-roaders that care about the US

i think the current hole is too deep even for help with a l-o-n-g rope

but watching might be educational ( for an Australian recovery )