Tractors and (upcoming) tariffs?

[kw00]

Huh? Inflation is increases in prices, nothing more, nothing less. Yes, too much gov spending can push prices up, but it's not the only thing. Not by any means.

There seems to be some confusion (at least in the early days of this thread - I only showed up today and haven't read to the end) on the difference between "inflation" and "consumer prices". This confusion has become common, probably due to it's propagation by the government and the media.

"Inflation" has a very specific definition in economics. It is an increase in the money supply. ("Deflation" is of course the opposite.) This phenomenon has no "good" or "bad" inherently associated with it. It is merely a term used to describe the currency control entity in a country injecting new currency into (or retracting existing currency from) public circulation.

Nope. Only .gov creates inflation. Increasing the money supply, via debt spending.

This would be more obviously true in a country where the "revenue and spending" part of the government directly controlled the currency. For the last 100+ years the "independent" Federal Reserve has controlled our currency. But how? 1 - by giving low-interest loans to banks. And 2 - (here it is) by purchasing Federal government debt on the private market. While they don't purchase directly from the Treasury, the increase in demand they create encourages more supply, which our overspending government is happy to oblige.

Consumer prices are influenced by several factors, most notably supply and demand surrounding goods. But supply and demand of money is significant. A small amount of inflation (increase in money supply) is necessary to balance increase in production resources (mostly new people.) Government deficit spending increases the money supply beyond that balance causing consumer prices to increase.

Tariffs are a very unreliable source of revenue. The only functional purposes of tariffs are to punish bad behavior by other countries and to encourage domestic manufacturing. The latter is only effective if combined with a reduction in domestic disincentives like high taxes and regulation. The former is most effective when combined with the latter. The plans I've heard from the incoming administration sound oriented toward these two goals, particularly the strategic negotiation tactic toward Mexico and Canada, which is apparently already moving the policy needle in those countries. I have heard no noises of blanket tariffs toward other countries except possibly China. Some would argue we would be better off with fewer Chinese tractors.

 

[Snobdds]

Consumer prices are influenced by several factors, most notably supply and demand surrounding goods. But supply and demand of money is significant. A small amount of inflation (increase in money supply) is necessary to balance increase in production resources (mostly new people.) Government deficit spending increases the money supply beyond that balance causing consumer prices to increase.

I'll say this again...

Prices can go up, but inflation can be low.
Inflation can go up, but prices can still be low.

Prices are not the same as inflation. Inflation extends to prices in the aggregate. Prices are micro and inflation is macro economics.

Also, currency markets control the price of the dollar. Currency markets follow the bond market to see where government spending occurs. If .gov needs a lot of money and sells t bills to fund it and nobody is buying those T-bills, the dollar weakens. It was only a few months ago our .gov was selling 30yr T-bill and nobody bought them. The fed's lenders of last resort got stuck buying them. That is how the dollar weakens.

 

[bvanek]

f you want to really help America, get rid of the Teamsters union, et al.

Well it's much more than that, but I do understand unions as part of the problem. However, IMO, progressive governments are a major player. As " supply and demand" can be real or manufactured/manipulated.

Union leadership and their lawyers, represent the system as the workers are simply victims of circumstances.(dependent survival) Larger companies have a monopoly on goods and services and can pass all the costs (raises/benefits/etc) to the consumer. No harm to them because, in part, lack of competition for their market share, especially when it comes to essentials.

Of course, the consumer gets whacked more, but never less. Accumulative inflation is a juggernaut and can be a cycle of no return for the middle class. Hence the shrinkage in the middle and the widening between top and bottom. Growth and eliminating deficit spending (and money printing) keeps "built in" inflation in check.

There is this purposeful projection of "acceptance" towards people's hearts and minds as in "a new normal". It does what the name implies; normalize inflation. The buzz word has always been "transitory" but when has inflation gone down?....it's always permanent and progressive.

 

[kw00]

Wow. Restoring American oil independence? The U.S. has never been energy independent.

In 2019, U.S. energy production exceeded consumption for the first time in 62 years

 

[DieselBound]

The actual SOURCE of the "problem" is growth. Whether there's any way around it or not the FACT is that perpetual growth on a finite planet is a bad premise to base everything on: perpetual growth is the strategy of the cancer cell as well as all Ponzi schemes. When totally immersed in this "system" and trained to "manage" it people tend to leap ahead of the premise, they are not "programmed" to see the premise: if you ignore the premise then anything can be made to look viable. ALL wars are about resources: look around at the hot-spots around the globe and underneath you'll find resources [justifications are always cloaked in some sort of superficial reasoning. ALL empires collapse and their collapse occurs when they can no longer sustain growth: farther out from the core of the country the empire pushes the harder to control logistics necessary to "enforce" control of far-away resources; US/West has more or less pushed outward using corporations (such as Blackrock) and bating with "democracy" using NGOs as fronts (in the past it was direct covert government actions; and many years ago it was religion, in essence NGO-like, which was used to convince people to hand over their resources [for "salvation"]- kind of came full circle here). This is what most of the West is facing today: aging demographics, increased competition outside its borders etc.. You can see this and more/worse outside of the US, in other western countries (Germany might be the "best" example- industrial collapse occurring).

I urge caution when talking about "migrants." During WWII the US had a policy for bringing in farm laborers from Mexico: Bracero program. The current state of affairs was solidified/built-in a long time ago. California farmers are already realizing that things could get really problematic if they lose a lot of migrant farm workers (something like 160k farm workers and about 1/2 "illegal"): increased cost per unit output will result in decreased output which will tend to push up prices (cost per unit of output increases), a reinforcing [downward] spiral. I suspect the path forward, for the US, is to bolster it's temporary worker program (while increasing its regulatory process of vetting people). Note that the "game" has been played by farm corporations and the govt in that "checks" are in process during the harvest seasons and only at the end of the harvest season does the govt really issue notices of non-conformity: work has been done and the workers leave; rack 'em up for the next season.

 

[DieselBound]

In 2019, U.S. energy production exceeded consumption for the first time in 62 years

Strength through exhaustion! Wylie Coyote was also able to fly, for a brief moment.

 

[KofAlberta]

My long-standing view had been that “free trade” works in theory but not practice. Same for protectionism but its failings are obvious. Mixed economies thrive utilizing a bit of both.

Free-trade though is based on the theory of “competitive advantage”. Sacrifice the non-competitive sectors to focus and win profit for the competitive sectors. In practice, gains thus accrue to the successful few and they resist sharing their profits with the displaced. Also what’s competitive in one moment may not be in the next. So massive displacement of losers can occur in just a few short years leaving little practical time for populations move, retrain or otherwise adjust.

Every society and country is also diverse in many ways (skills, ages, mental capacities, access to resources, geography, etc). Not everyone can always only work in the competitive fields. If the competitive advantage is based say on mining, not everyone can live and work in that location and sector.

So temporary and transparent protectionism buys time to adjust. A few protections (tarrifs, subsidies or whatever) may even need to be permanent.

 

[Blue Mule]

The shockwaves (and outright destruction) caused in the economy by the leaders in our government telling folks to stay home and do not go to work are often overlooked. I find it amusing that the cause and effect of all this was OBVIOUS back in 2020/2021, yet the general public still has a million ideas about what caused the economy to become so gravely ill. You cannot tell people not to go to work, not to go to school, not to go to the store, etc. and expect that everything is going to just be OK; that we’ll be able to unclick the pause button when we’re ready and society will just resume. It does not work like that. Our government, and mainly from one particular party, are solely to blame for all of this. Even my 85 year old veteran grandfather says he never once in his life saw consumer prices on everything double in 36 months. It’s just been a pure train wreck.

I believe that the results of the election last month came from the fact that there are still enough people who saw the obvious, which is that the other party works against the people and not for them.

As far as tariffs go, if the threat of tariffs brings jobs and wealth back to the U.S. again like it did from 2016-2020 then I’m all for it. John Deere has been pi$$ing on their customers for years. Don’t know why anybody would buy one of those anyhow.

 

[DieselBound]

KofAlberta, very well stated. I'd add that as long as time exists (the clock ticks) NOTHING is permanent, everything is changing. Anyone purporting to have a "solution" is someone I do not trust as the very word "solution" connotes permanence (which isn't possible as long as the clock is ticking). The true battle is, as it always has been, is entropy, and only constant change and adaptations can mitigate its ravages (keep in mind that energy is the key "weapon" in the fight against entropy).

Always be mindful of not boxing ourselves in. Flexibility and diversity are proven mechanisms that exist in nature.

 

[kw00]

"depends on who is printing the news that day"

Oh boy, is that ever true!!!!

There's a website (adfontesmedia.com) which evaluates news sources for right/neutral/left viewpoints and reliability, as in accurate, editorializes, downright wacko. They make a graph showing this, and it is pretty interesting. It is mostly US sources, but BBC is on it also.

Always a good idea to check sources. Some of it is quite eye-opening. Some sources we might think are wacko may turn out to be surprisingly reliable, and some we think are good turn out to be disinformation.

In the "check sources" category I would advise checking the above mentioned "Media Bias Report", as they are significantly biased themselves. Their ratings consistently ignore the factual errors committed by some of their "reliable" choices as they have been exposed over the years. The reliability and bias ratings are based entirely on the opinions of the chart editors.