…even though Adam Posen wishes otherwise. Economic—like geophysical, biological, archeological, and many other sciences—truth-telling has become a partisan political act in America...
So your theory of mind for Powell is that he thinks that if he avoids criticizing Trump, he'll be left alone to manage inflation as he sees fit? Well maybe he really does think that, but it's not the way I'd bet; I'd be more inclined to say something useful while I still had the freedom of action to do so.
Why doesn't anyone shout from the screen tops about the Census Dept projection of the loss of 100million by 2100 if all foreign born immigration was stopped. I will have grand children alive in that year.
All politics plays to some galley, no matter how big or small. JM Keynes was acutely aware that all economic policies have a political aspect, that reflect your economic assumptions, one of his was that effective demand could settle in at a level of GDP that did not truly reflect the full utilization of available resources. Posen’s reference to ‘fiscal sustainability , does not represent Keynes’s thinking in ‘whatever we can do, we can afford’, Posen aside represents what Joan Robinson called bastard Keynesianism, where fiscal policy is constrained by available funds. Neither Republicans not Carter Democrats fully embrace the freedom that JMK thinking provided, especially since his 1939, where in if we can figure out how to effectively activate available resources, we can afford it. We are not revenue constrained. Republican tax cuts, mainly for 1%, reflect that inchoate ways, but that Democrats may come to fear shortly, when Trump sees that it will play to the MAGA galleries. Will he be efficient & effective in implementation
We needn't use tariffs. Why not just require trade in manufactured goods to be in the currency of the exporter? We can buy Yuan. How can China complain? Though they may spend a fortune devaluing it, and isn't that nice.
"But deep down in places you don't talk about at parties," we want cheap imports, we need cheap imports, and we don't want to spend our time sewing underwear and blue jeans.
If you force purchase of goods and services from China to be in Yuan, then what? Typically currencies used outside of the domicile are converted to local currency by domestic banks, or recycled into foreign assets, like property. Do you want to own property in China? Probably not. So to converty the Yuan to USD which a US bank holds and will be exchanged for USD in the currency markts. I do not see any benefit in your proposal, unless you ban currency exchanges.
I’d call it more of a provocation that a proposal. If a US wholesale purchaser of Chinese goods only buys enough RMB for their import transaction, then they don’t have any extra Chinese currency laying around to buy Chinese real estate and such. More importantly, the Chinese exporter doesn’t have any USD to buy Treasuries and Agencies. Though I’m sure the PBOC would find some work-around, though it would be expensive.
Another idea - give corporate, non-profit, and state/local governments accounts at the Fed to deposit money at the risk free rate + X. The Fed buys Treasuries and Agencies, taking the duration risk. Why? To get more Treasuries and Agencies off the international market.
My more general point is that if we don’t want the burden of a strong dollar and being the reserve currency (Trump says so, once he got over the connotation of the word ‘strong’), then we don’t want 48% of the international trade in USD. We should start by encouraging US international trade in anything other than USD, including the exporter’s currency or baskets of currency. Even crypto, if it were stable, secure, inexpensive and timely (which I don’t think it is).
Wouldn't that undermine the value of the USD as a reserve currency that gives the US huge advantages as other countries want the USD. If trade with China dominates, with the US purchasing RMB to enable purchaes, wouldn't that eventually mean the RMB replaces the USD and all that entails?
However the key problem is that for a US imported to buy Chinese products in MB, the impote needs to buy MB. That means a bank has to buy them from - China - using USD. Doesn't that mean tha China still ends up with the USD the importer could have paid with directly? Wouldn't the US banks make even more money on the exchange rates rather than leaving that cost to the Chinese exporter?
If China allows the RMB to float, with higher demand the RMB should be stronger, causing Chinese goods to be relatively more expensive. And as the Yuan appreciates, then it would become a speculative asset. Of course, the RMB is pegged and would continue to be pegged by the government because a stronger currency would make their goods more expensive, thus reducing their export dominance. Then the policy argument could be over the manipulated currency rate. If instead we pursue tariffs, then China would react by lowering the Yuan value, so why not jump right to the currency issue?
This is all rhetorical. I don't see any chance the US would pursue paying in anything but USD because the lower manufacturing employment for the few is outvoted by the cheap imports for the many.
I admit that China is incredibly competitive in manufacturing. They have scale, clusters of innovation, infrastructure, skilled labor, and effective methods of government subsidy, as SR Waldman discusses towards the end here:
But the rest of the world can’t cede manufacturing to China, due to both national defense and the need to learn by doing. Nor should China want to hoard and hide an infinite amount of the West’s debt. I think floating currencies are a way to gradually reduce the imbalances.
But China’s policies aren’t adapting. They rely even more on exports as their other sectors shrink. It should be obvious that 340 million Americans cannot absorb the exports of 300 million migrant workers who are now moderately productive. Defensively, the West will shut China out of the higher value added export goods. India will compete on the lower value added. We will all be poorer and the economic cost of war will be much lower.
Many Americans believe that someone finally stood up to the Chinese, through tariffs, and won. This isn't just in the Fox News sphere. The Dem's need ammo to fight back, and it can't be abstract.
The concrete results of the washing machine tariff is a good example. There are papers written on it, but I don't think they're well suited for the layman.
Trump fought and lost: consumers paid much more for washers and dryers; profits increased for American manufacturers but didn't lead to more jobs; farm exports became a bargaining chip; China re-labeled manufactured goods through Vietnam. Tariffs can effectively be used as a scalpel, but Trump would use them like a sword, starting a global trade war that he can't end.
Also in the light of the likely political sympathies of the readers of the Grasping Reality Newsletter, it is unlikely that they need convincing that the politico-economic agenda of a Trump administration, in particular, tariffs and deportations, would be an economic disaster.
Would not it be more interesting to read an assessment of the economic agenda of the Harris administration, in particular, the anti-price-gouging plan and the overall fiscal arithmetics? Or should the readers expect the unredeemable partisanship of the economic debate to apply also to Grasping Reality and rely on the Grumpy Economist for an assessment of the Harris administration economic agenda? To be fair, ‘s co-host Noah Smith is on record for stating that the anti-price-gouging plan is a terrible idea. I guess however readers may be interested to know the views of the other co-host.
A friend of mine who earns his living by providing economic insights to financial
Institutions just told me that he initially thought that Harris’ economic ideas were just playing for the gallery but now he begins to suspect that she may actually believe in them.
If I understand 2025 Alito's Opinion in Bald Faced Liars v US, accurately describing Conservative positions is actionable under the Treason clause:
"Treason against the United States, shall consist only in levying War against them, or in adhering to
their Enemies, giving them Aid and Comfort. No Person shall be convicted of Treason unless on the Testimony of two Witnesses to the same overt Act, or on Confession in open Court."
since any criticism of a President acting in an official capacity (as defined in each case by the Supreme Court) "gives aid and comfort to the nation's enemies"
So your theory of mind for Powell is that he thinks that if he avoids criticizing Trump, he'll be left alone to manage inflation as he sees fit? Well maybe he really does think that, but it's not the way I'd bet; I'd be more inclined to say something useful while I still had the freedom of action to do so.
Re: Mass Deportation
Why doesn't anyone shout from the screen tops about the Census Dept projection of the loss of 100million by 2100 if all foreign born immigration was stopped. I will have grand children alive in that year.
All politics plays to some galley, no matter how big or small. JM Keynes was acutely aware that all economic policies have a political aspect, that reflect your economic assumptions, one of his was that effective demand could settle in at a level of GDP that did not truly reflect the full utilization of available resources. Posen’s reference to ‘fiscal sustainability , does not represent Keynes’s thinking in ‘whatever we can do, we can afford’, Posen aside represents what Joan Robinson called bastard Keynesianism, where fiscal policy is constrained by available funds. Neither Republicans not Carter Democrats fully embrace the freedom that JMK thinking provided, especially since his 1939, where in if we can figure out how to effectively activate available resources, we can afford it. We are not revenue constrained. Republican tax cuts, mainly for 1%, reflect that inchoate ways, but that Democrats may come to fear shortly, when Trump sees that it will play to the MAGA galleries. Will he be efficient & effective in implementation
We needn't use tariffs. Why not just require trade in manufactured goods to be in the currency of the exporter? We can buy Yuan. How can China complain? Though they may spend a fortune devaluing it, and isn't that nice.
"But deep down in places you don't talk about at parties," we want cheap imports, we need cheap imports, and we don't want to spend our time sewing underwear and blue jeans.
If you force purchase of goods and services from China to be in Yuan, then what? Typically currencies used outside of the domicile are converted to local currency by domestic banks, or recycled into foreign assets, like property. Do you want to own property in China? Probably not. So to converty the Yuan to USD which a US bank holds and will be exchanged for USD in the currency markts. I do not see any benefit in your proposal, unless you ban currency exchanges.
I’d call it more of a provocation that a proposal. If a US wholesale purchaser of Chinese goods only buys enough RMB for their import transaction, then they don’t have any extra Chinese currency laying around to buy Chinese real estate and such. More importantly, the Chinese exporter doesn’t have any USD to buy Treasuries and Agencies. Though I’m sure the PBOC would find some work-around, though it would be expensive.
Another idea - give corporate, non-profit, and state/local governments accounts at the Fed to deposit money at the risk free rate + X. The Fed buys Treasuries and Agencies, taking the duration risk. Why? To get more Treasuries and Agencies off the international market.
My more general point is that if we don’t want the burden of a strong dollar and being the reserve currency (Trump says so, once he got over the connotation of the word ‘strong’), then we don’t want 48% of the international trade in USD. We should start by encouraging US international trade in anything other than USD, including the exporter’s currency or baskets of currency. Even crypto, if it were stable, secure, inexpensive and timely (which I don’t think it is).
Wouldn't that undermine the value of the USD as a reserve currency that gives the US huge advantages as other countries want the USD. If trade with China dominates, with the US purchasing RMB to enable purchaes, wouldn't that eventually mean the RMB replaces the USD and all that entails?
However the key problem is that for a US imported to buy Chinese products in MB, the impote needs to buy MB. That means a bank has to buy them from - China - using USD. Doesn't that mean tha China still ends up with the USD the importer could have paid with directly? Wouldn't the US banks make even more money on the exchange rates rather than leaving that cost to the Chinese exporter?
If China allows the RMB to float, with higher demand the RMB should be stronger, causing Chinese goods to be relatively more expensive. And as the Yuan appreciates, then it would become a speculative asset. Of course, the RMB is pegged and would continue to be pegged by the government because a stronger currency would make their goods more expensive, thus reducing their export dominance. Then the policy argument could be over the manipulated currency rate. If instead we pursue tariffs, then China would react by lowering the Yuan value, so why not jump right to the currency issue?
This is all rhetorical. I don't see any chance the US would pursue paying in anything but USD because the lower manufacturing employment for the few is outvoted by the cheap imports for the many.
Good point. So you are sayin a manipulated RMB is the problem and that ths needs a solution? If so, I agree.
I admit that China is incredibly competitive in manufacturing. They have scale, clusters of innovation, infrastructure, skilled labor, and effective methods of government subsidy, as SR Waldman discusses towards the end here:
https://drafts.interfluidity.com/2024/08/24/competition-and-the-form-of-the-subsidy/index.html
But the rest of the world can’t cede manufacturing to China, due to both national defense and the need to learn by doing. Nor should China want to hoard and hide an infinite amount of the West’s debt. I think floating currencies are a way to gradually reduce the imbalances.
But China’s policies aren’t adapting. They rely even more on exports as their other sectors shrink. It should be obvious that 340 million Americans cannot absorb the exports of 300 million migrant workers who are now moderately productive. Defensively, the West will shut China out of the higher value added export goods. India will compete on the lower value added. We will all be poorer and the economic cost of war will be much lower.
Some people still do sewing as a hobby, and other sewing businesses like tailors.
I have a pattern for underwear, but have not tried it out yet.
Blue jeans can be made on a heavy duty sewing machine, but I buy factory made most of the time.
Some people sew, or have someone sew for them if they have fitting problems. I am so tired of choking necklines on my shirts.
Many Americans believe that someone finally stood up to the Chinese, through tariffs, and won. This isn't just in the Fox News sphere. The Dem's need ammo to fight back, and it can't be abstract.
The concrete results of the washing machine tariff is a good example. There are papers written on it, but I don't think they're well suited for the layman.
Trump fought and lost: consumers paid much more for washers and dryers; profits increased for American manufacturers but didn't lead to more jobs; farm exports became a bargaining chip; China re-labeled manufactured goods through Vietnam. Tariffs can effectively be used as a scalpel, but Trump would use them like a sword, starting a global trade war that he can't end.
Also in the light of the likely political sympathies of the readers of the Grasping Reality Newsletter, it is unlikely that they need convincing that the politico-economic agenda of a Trump administration, in particular, tariffs and deportations, would be an economic disaster.
Would not it be more interesting to read an assessment of the economic agenda of the Harris administration, in particular, the anti-price-gouging plan and the overall fiscal arithmetics? Or should the readers expect the unredeemable partisanship of the economic debate to apply also to Grasping Reality and rely on the Grumpy Economist for an assessment of the Harris administration economic agenda? To be fair, ‘s co-host Noah Smith is on record for stating that the anti-price-gouging plan is a terrible idea. I guess however readers may be interested to know the views of the other co-host.
A friend of mine who earns his living by providing economic insights to financial
Institutions just told me that he initially thought that Harris’ economic ideas were just playing for the gallery but now he begins to suspect that she may actually believe in them.
If I understand 2025 Alito's Opinion in Bald Faced Liars v US, accurately describing Conservative positions is actionable under the Treason clause:
"Treason against the United States, shall consist only in levying War against them, or in adhering to
their Enemies, giving them Aid and Comfort. No Person shall be convicted of Treason unless on the Testimony of two Witnesses to the same overt Act, or on Confession in open Court."
since any criticism of a President acting in an official capacity (as defined in each case by the Supreme Court) "gives aid and comfort to the nation's enemies"
</snark>