Trump's Trade Wars - another disaster
POSTED BY: captaincrunch
UPDATED: Tuesday, July 7, 2020 08:51
VIEWED: 14929
PAGE 13 of 17
Trump’s China Shock
What the heck is going on?
www.nytimes.com/2019/08/05/opinion/trumps-china-shock.html
I should try to explain (a) what I think is happening (b) why the markets are going so nuts. By the way, given Mnuchin’s declaration that China is a currency manipulator, today’s market action should be … interesting.
So here’s the thing: neither Trump’s tariff announcement last week nor, especially, the depreciation of China’s currency today should objectively be that big a deal. Trump slapped 10 percent tariffs on $200 billion of Chinese exports, which is a tax hike of 0.1 percent of US GDP and 0.15 percent of Chinese GDP.
In response, China let its currency drop by about 2 percent. For comparison, the British pound has dropped around 9 percent since May, when it became clear that a no-deal Brexit was likely.
So why are these smallish numbers such a big deal? Mostly because we’ve learned things about the protagonists in this trade conflict, things that make a bigger, longer trade war seem a lot more likely than it did even a few days ago.
First, Trump really is a Tariff Man. Some naïve souls may still have been hoping that he would learn something from the failure of his trade policy so far. More sensible people hoped that he might do what he did with NAFTA: reach a new deal basically the same as the old deal, proclaim that it was totally different, and claim a great victory.
But no: it’s pretty clear now that he refuses to give up on his belief that trade wars are good, and easy to win; his plan is to continue the beatings until morale improves. What may have looked like temporary tariffs designed to win concessions now look like permanent features of the world economy, with the level of tariffs and the range of countries facing them likely to expand over time.
Second, China is clearly signaling that it’s not Canada or Mexico: it’s too big and too proud to submit to what it considers bullying.
Not so incidental — while there are many valid reasons to criticize Chinese policy, currency manipulation isn’t one of them. China was a major currency manipulator 7 or 8 years ago, but these days if anything it’s supporting its currency above the level it would be at if it were freely floating.
And think for a minute about what would happen to a country with an unmanipulated currency, if one of its major export markets suddenly slapped major tariffs on many of its goods. You’d surely expect to see that country’s currency depreciate, just as Britain’s has with the prospect of lost market access due to Brexit.
In other words, the Trump administration in its wisdom has managed to accuse the Chinese of the one economic crime of which they happen to be innocent. Oh, and what are we going to do to punish them for this crime? Put tariffs on their exports? Um, we’ve already done that.
So how does this all end? I have no idea. More important, neither does anyone else. It looks to me as if both Trump and Xi have now staked their reputations on hanging tough. And the thing is, it’s hard to see what would make either side give in (or even to know what giving in might mean.)
At this rate, we may have to wait for a new president to clean up this mess, if she can.
The Joss Whedon script for Serenity, where Wash lives, is Serenity-190pages.pdf at www.mediafire.com/folder/1uwh75oa407q8/Firefly
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One reason that it fell, that nobody seems to be talking about anywhere, is that the numbers were hyper-inflated speculation bullshit that isn't backed by anything such as good jobs and a higher quality of life for anybody.
Of course it was going to fall.
Maybe it goes back up again for a while? Then all of you who started posting like mad about the economy in the last few days will stop again and JSF will update the Dow Jump thread every single day with new numbers that top yesterday's numbers.
But eventually, we're going to see a MASSIVE crash again. Only this time it will be the likes that we've never seen because of how far it has to fall.
14,164.53 down to 6,547.05 for a 54%+ drop in 2008-2009?
That's 7,657. Points.
54% of 27,359? That's almost 15,000 points at only 12,585 points.
Twice as fucking big.
Look around you everybody. The DOW was doing twice as good as its 2008 peak up until last week. Are you doing twice as good as 2008? Is anybody you know doing twice as good as 2008?
Is anybody even close?
Do Right, Be Right. :)
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Quote:Warren Buffett is accumulating cash to invest when the market does crash. He will buy after the crash at a low price and resell in ten years at a high price.
Originally posted by 6IXSTRINGJACK:
One reason that it fell, that nobody seems to be talking about anywhere, is that the numbers were hyper-inflated speculation bullshit that isn't backed by anything such as good jobs and a higher quality of life for anybody.
Of course it was going to fall.
www.fool.com/investing/2019/08/07/warren-buffetts-silent-warning-to-in
vestors.aspx
Buffett explains how crashes work:
www.fool.com/slideshow/warren-buffetts-advice-stock-market-crash/
Buffett has said, "Investing is not a game where the guy with the 160 IQ beats the guy with the 130 IQ. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing."
While there's no guarantee investors will be able to resist irrational and emotional urges that could lead to bad decisions during a downturn, there's one way that makes poor judgment a near certainty when things go awry: trade on margin. Debt distorts all decision making in investing -- especially during a stock market crash.
Buffett explained this in his most recent shareholder letter:
"Even if your borrowings are small and your positions aren't immediately threatened by the plunging market, your mind may well become rattled by scary headlines and breathless commentary. And an unsettled mind will not make good decisions"
The Joss Whedon script for Serenity, where Wash lives, is Serenity-190pages.pdf at www.mediafire.com/folder/1uwh75oa407q8/Firefly
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Why Trade War Scares Away Business Investment
www.nytimes.com/2019/08/07/opinion/tariff-tantrums-and-recession-risks
.html
Tariff uncertainty caused by Trump can have serious adverse effects, especially on investment.
Let me offer a hypothetical example. Suppose there are two companies, Cronycorp and Globalshmobal, that would be affected in opposite ways if Trump imposes a new set of tariffs. Cronycorp would like to sell stuff we’re currently importing, and would build a new factory to make that stuff if assured that it would be protected by high tariffs. Globalshmobal has already been considering whether to build a new factory, but it relies heavily on imported inputs, and wouldn’t build that factory if those imports will face high tariffs.
Suppose Trump went ahead and did the deed, imposing high tariffs and making them permanent. In that case Cronycorp would go ahead, while Globalshmobal would call off its investment. The overall effect on spending would be more or less a wash.
On the other hand, suppose that Trump were to announce that we’ve reached a trade deal: all tariffs on China are called off, permanently, in return for Beijing’s purchase of 100 million memberships at Mar-a-Lago. In that case Cronycorp will cancel its investment plans, but Globalshmobal will go ahead. Again, the overall effect on spending is a wash.
But now introduce a third possibility, in which nobody knows what Trump will do — probably not even Trump himself, since it will depend on what he sees on Fox News on any given night. In that case both Cronycorp and Globalshmobal will put their investments on hold: Cronycorp because it’s not sure that Trump will make good on his tariff threats, Globalshmobal because it’s not sure that he won’t.
Technically speaking, both companies will see an option value to delaying their investments until the situation is clearer. That option value is basically a cost to investment, and the more unpredictable Trump’s policy, the higher that cost. And that’s why trade tantrums are exerting a depressing effect on demand.
Furthermore, it’s hard to see what can reduce this uncertainty. U.S. trade law gives the president huge discretionary authority to impose tariffs; the law was never designed to deal with a chief executive who has poor impulse control. A couple of years ago many analysts expected Trump to be restrained by his advisers, but he’s driven many of the cooler heads out, many of those who remain are idiots, and in any case he’s reportedly paying ever less attention to other people’s advice.
The Joss Whedon script for Serenity, where Wash lives, is Serenity-190pages.pdf at www.mediafire.com/folder/1uwh75oa407q8/Firefly
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Quote:Not related to trade, but very related to "good jobs": Nobody who knows how to run a business runs their business less and less efficiently in order to create jobs. An example of that: Permian fracking activity sets new records with fewer people
Originally posted by 6IXSTRINGJACK:
One reason that it fell, that nobody seems to be talking about anywhere, is that the numbers were hyper-inflated speculation bullshit that isn't backed by anything such as good jobs and a higher quality of life for anybody.
www.houstonchronicle.com/business/article/Permian-fracking-activity-se
ts-new-records-with-14288756.php
Oilfield services firms fracked 18 Permian wells a day in June for a monthly total of about 550 wells, easily surpassing the August 2018 record of about 520 wells, according to the research firm Rystad Energy. They did it with 20 percent fewer fracking crews, according to a separate report from another research firm, Kayrros. A fracking crew typically comprises about 30 workers.
Want to know what happened to the 20% fewer crews? They were fired. They will stay fired. They need to find another way to make a living.
The Joss Whedon script for Serenity, where Wash lives, is Serenity-190pages.pdf at www.mediafire.com/folder/1uwh75oa407q8/Firefly
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Quote:
Originally posted by second:Quote:Not related to trade, but very related to "good jobs": Nobody who knows how to run a business runs their business less and less efficiently in order to create jobs. An example of that: Permian fracking activity sets new records with fewer people
Originally posted by 6IXSTRINGJACK:
One reason that it fell, that nobody seems to be talking about anywhere, is that the numbers were hyper-inflated speculation bullshit that isn't backed by anything such as good jobs and a higher quality of life for anybody.
www.houstonchronicle.com/business/article/Permian-fracking-activity-se
ts-new-records-with-14288756.php
Oilfield services firms fracked 18 Permian wells a day in June for a monthly total of about 550 wells, easily surpassing the August 2018 record of about 520 wells, according to the research firm Rystad Energy. They did it with 20 percent fewer fracking crews, according to a separate report from another research firm, Kayrros. A fracking crew typically comprises about 30 workers.
Want to know what happened to the 20% fewer crews? They were fired. They will stay fired. They need to find another way to make a living.
The Joss Whedon script for Serenity, where Wash lives, is Serenity-190pages.pdf at www.mediafire.com/folder/1uwh75oa407q8/Firefly
Are you trying to explain this to the guy who talks non-stop about automation and Six Sigma? I know how it works.
Do Right, Be Right. :)
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Pity would be no more,
If we did not MAKE men poor - William Blake
"The messy American environment, where most people don't agree, is perfect for people like me. I CAN DO AS I PLEASE." - SECOND
America is an oligarchy http://www.fireflyfans.net/mthread.aspx?tid=57876 .
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US removes some items from China tariff list, delaying tariffs for others, including cell phones
https://www.msn.com/en-us/money/markets/us-removes-some-items-from-chi
na-tariff-list-delaying-tariffs-for-others-including-cell-phones/ar-AAFKuvW?ocid=spartandhp
And again Trump blinks. The great negotiator my ass. A dumb ass, absolutely.
T 
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Trump Tariffs to Hurt U.S. Farmers More Than China Counterparts
https://www.msn.com/en-us/money/markets/trump-tariffs-to-hurt-us-farme
rs-more-than-china-counterparts/ar-AAFMLZB?ocid=spartandhp
T
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Americans overwhelmingly support free trade as concern grows about Trump's economy: NBC/WSJ poll
https://www.msn.com/en-us/money/markets/americans-overwhelmingly-suppo
rt-free-trade-as-concern-grows-about-trumps-economy-nbc-wsj-poll/ar-AAFYsl3?ocid=spartandhp
T
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