In the wake of Mr. Trump’s admonition to Republicans to try out default, please recall:
“trade wars are good, and easy to win” (2018).
In the wake of Mr. Trump’s admonition to Republicans to try out default, please recall:
“trade wars are good, and easy to win” (2018).
Menzie Chinn,
Remember that you’re a pawn.
https://econbrowser.com/archives/2023/05/on-debt-default#comment-298715
Touting your own deranged temper tantrums? Dude – you have serious emotional issues. Do you need us to take out a Go Fund Me page to pay for professional help?
And econned’s professional jealousy continues unabated. Sad for the sorry creature.
Xi would tell us trade wars are easy to win when your opponent is the Trump White House.
https://www.imf.org/en/Publications/WEO/weo-database/2023/April/weo-report?c=924,134,534,158,111,&s=BCA_NGDPD,&sy=2007&ey=2022&ssm=0&scsm=1&scc=0&ssd=1&ssc=0&sic=0&sort=country&ds=.&br=1
April 15, 2023
Current Account Balance as percent of Gross Domestic Product for
China, Germany, India, Japan and United States, 2007-2022
2017
China ( 1.5)
Germany ( 7.8)
India ( – 1.8)
Japan ( 4.1)
United States ( – 1.9)
2018
China ( 0.2)
Germany ( 8.0)
India ( – 2.1)
Japan ( 3.5)
United States ( – 2.1)
2019
China ( 0.7)
Germany ( 8.2)
India ( – 0.9)
Japan ( 3.4)
United States ( – 2.1)
2020
China ( 1.7)
Germany ( 7.1)
India ( 0.9)
Japan ( 2.9)
United States ( – 2.9)
2021
China ( 1.8)
Germany ( 7.7)
India ( – 1.2)
Japan ( 3.9)
United States ( – 3.6)
2022
China ( 2.3)
Germany ( 4.2)
India ( – 2.6)
Japan ( 2.1)
United States ( – 3.6)
“trade wars are good, and easy to win”
I do not care for wars of any sort, and I do not like the idea of trade wars even if trade wars may be easy to win. I know however that the current Administration and Congress are waging a ferocious trade war against a number of countries, but especially against a benign developing country of 1.4 people. The Administration and Congress are trying to stop and undo the development of a country that assists the development of other countries about the world.
You have decided to support Josh Hawley who is openly promoting a new trade war with China.
You have decided to support Josh Hawley…
You have decided to support Josh Hawley…
You have decided to support Josh Hawley…
[ Notice the bizarre falseness, bullying and attempt at intimidation. ]
Now you deny you tried to call me out for criticizing Hawley? I’m sorry but now you are clearly being dishonest.
“trade wars are good, and easy to win”
The current Administration and Congress are waging a ferocious trade war against China. The intent is to undermine and stop the development of China. And because China is contributing to the development of dozens of countries along the Belt and Road, the Administration and Congress are attempting to undermine the development of Belt and Road countries as well.
benign? lol. I’ve heard China called lots of things, but never benign.
Craig
https://www.washingtonpost.com/news/wonk/wp/2018/05/04/trump-is-asking-china-to-redo-just-about-everything-with-its-economy/
May 4, 2018
Trump is asking China to redo just about everything with its economy
By Heather Long – Washington Post
The Trump administration has finally presented the Chinese government with a clear list of trade demands. It’s long and intense (there are eight sections), and President Trump isn’t just asking Chinese President Xi Jinping for a few modifications. He’s asking Xi to completely change his plans to turn the Chinese economy into a tech powerhouse.
Hilarious.
Trump seems to think he can win trade wars and debt limit standoffs which he characterizes as zero-sum games when the data suggests that most turn out to be negative sum games.
Mind you, a default might have a longer-term salutary effect. Fiscal conservatism appears to have gone out of style.
Trump never cared about what others in any game lost as long as he gained something. That is how we must interpret his claim of a zero sum game.
For you political junkies:
I would like to suggest that CNN set up Trump honeypot style and he walked right into it. Trump brought his own shovel to politically bury himself.
My intuition is based on the following. American are sharply polarized on many issues. Less so on forceful sexual advances. I reckon the E. Jean Carroll civil suit did his reputation enormous damage. It was an opportunity to remind the American people including MAGA Republicans of his attitude towards women and sexual advances. The pile of anecdotal evidence is overwhelming.
Moreover, his righteous ranting and easy magic wand waving solutions will spur Democrats to mobilize and get the vote out. Some Republican operatives know this and some will work hard to make sure he fails to get the party’s nomination.
It is over for Trump.
All true but CNN made a mistake letting the audience to be almost 100% MAGA nut cases.
An even bigger mistake was to not have a microphone switch that could cut Trump off when it was not his turn. With a bully like Trump you just cannot allow talking over other people. The technical solution is simple – let the moderator control when a microphone is on or not.
@Ivan: It was proof in the pudding display of his bad behaviour. Very effective.
You can not trust the GOP with money or governance. Apparently – we now need to invest like MGT, Lauren Boebert and George Santos https://www.bloomberg.com/news/articles/2023-05-12/podcast-how-to-profit-from-the-debt-ceiling-standoff (Also I’m not going to link to articles about these GOP dingbats and frauds – too numerous.)
Menzie – remember when “conservative” GOP were complaining that Obama Admin was creating “uncertainty” with regulations? I did not understand what they were talking about – now I understand that the GOP donor class wanted not only less regulation – so they can pollute our water/air but also exploit child labor and create chaos in our financial system for profit/gain.
The Orange idiot says words – most often words that neither makes sense nor are connected to reality – but they sounds good to his minions and other idiots. His latest performance clearly show a man with advanced dementia, probably Alzheimers.
“The Orange idiot says words – most often words that neither makes sense nor are connected to reality – but they sounds good to his minions and other idiots.”
I did not watch this farce live but I have seen clips. What struck me is how Trump is constantly waving his hands around as if we were supposed to pay attention to that as he babbles one lie after another. For his next appearance – I want someone to tie his stupid hands behind his back and let’s see if he changes in the way he speaks.
https://www.finance.senate.gov/hearings/cross-border-rx-pharmaceutical-manufacturers-and-us-international-tax-policy
Macroduck noted that there would be a Senate hearing on how Big Pharma evades taxes. It was held yesterday. Check it out!
The testimony of PwC’s William Morris and of Daniel Bunn (Tax Foundation) were both the speakers bragging about how they are big shot international tax lawyers and had nothing to do with the profit shifting by Big Pharma. In other words, not worth your time. Why the Senate committee put up with these two bloviating clowns is beyond me.
Then again – I predicted a few days ago that they would do this.
I decided to read Wyden’s and Crapo’s statements last. Crapo was trying to defend the 2017 tax law change but alas his statements were your usual misleading GOP crap-o. Wyden’s statement dovetails what Brad Setser noted. My favorite part?
The numbers are astonishing. Republicans delivered Big Pharma a tax cut of more than 40 percent. From 2014 to 2016, the industry paid 19.6 percent on average. In 2019 and 2020, it paid 11.6 percent. Pharma got a substantially lower tax rate than most other industries specifically because the 2017 Republican law essentially gave a green light for the kind of tax gaming that the biggest drug companies engage in so relentlessly. They stash intellectual property in other countries. They stick manufacturing offshore. They use accounting tricks to shift money to foreign subsidiaries. Republicans could have put a stop to these tax games. They did not.
BINGO!
Over at Wolf Street, it has been asserted that the real fed funds rate is negative::
https://wolfstreet.com/2023/05/11/the-feds-interest-rates-are-still-fueling-inflation-rather-than-dousing-it-and-people-getting-used-to-this-inflation/
A commenter here was ignorant enough to fall for Wolf’s silly claim. Here are a trio of real effective funds rate calculations, based on inflation measures other than core CPI:
https://fred.stlouisfed.org/graph/?g=13szi
Wolf cherry-picked the inflation series he used to adjust the funds rate. He also ignored the drawdown of Fed assets. He also made no reference to the Taylor rule.
Relying Wolf Street is a little like relying on Tyler Durden. The issue raised may be worth a bit of research, but the conclusions drawn are meant to be sensational, without regard to the truth. It for rubes and suckers.
“Core CPI, on a month-to-month basis (+0.4%) has been in the same range for the fifth month in a row. On an unrounded basis, April was a little hotter than in March. Year-over-year, core CPI (+5.5%)”
Year over year? Only a moron like JohnH would take this seriously. Core CPI last month rose by about the same amount as the headline rate.
Brad Setser’s testimony was very informative:
https://www.finance.senate.gov/imo/media/doc/Setser%20Senate%20Finance%20Testimony.pdf
Republicans promised that their 2017 tax cut for the rich would reduce the incentives to shift profits to tax havens. I predicted back then that such profit shifting would continue. Brad notes that the problem has actually gotten worse.
Before the 2017 tax cut we imported a lot of our drugs which were often produced abroad. Brad notes this has gotten much worse.
Yea – Trump sucked at tax policy and transfer pricing. But hey – he sucked at everything.
Brad Setser mentioned Gilead Sciences as being one of the few Big Pharma multinationals that is not blatantly shifting income to tax havens. I just checked its 10-K filing. Effective tax rate for 2022 = 21.5% with over 76% of its worldwide income being sourced in the US.
Ukraine to invade Russia?
https://www.msn.com/en-us/news/world/ukraine-to-launch-massive-strike-deep-in-russia-military-officer-warns/ar-AA1b4pgm?ocid=msedgdhp&pc=U531&cvid=4bf3b62750b24c2a84d8aba038312486&ei=14
Mikhail Khodaryonok, a former Russian air defense commander and a Russian state TV commentator, predicted that Ukraine will use high-precision weaponry to carry out an expected counteroffensive by first launching a “massive strike” within Russia. He made his predictions while assessing the heavy weaponry in Ukraine’s possession during a Russian state TV segment posted Thursday with English subtitles by BBC Monitoring reporter Francis Scarr. Ukraine has reportedly been preparing for a spring counteroffensive to take back its territories occupied by Russia since the war began with the February 2022 invasion. The country’s military capabilities have been bolstered by Western aid in recent months, including advanced military equipment, tanks and artillery.
I hope this happens as it would put tremendous pressure on the war criminal Putin. The only was to end this carnage is to bring Putin to his knees.
I doubt that Ukraine will be permitted to use long range western missiles to attack within Russia. But some Russian hawks are defining “Russia” as including Crimea and the 4 oblasts occupied in 2014 and later.
An actual attack on Russia itself would serve Putin more than Ukraine. He has desperately been trying to motivate his people and soldiers by making this invasion into an attack on Russia. The Kremlin stunt a week ago suggests that he actually would like an attack on Moscow as an excuse for further escalation and to motivate the Russian people to get more supportive.
Off topic – drug prices and market power –
Matt Stoller has published a piece on the role of pharmacy benefit managers (PBMs) in the drug industry:
https://mattstoller.substack.com/p/the-red-wedding-for-rural-pharmacies
The bad news is that PBMs are the worst sort of rent seeking goons, powerful and benefiting from special exemptions under law. The good news is that the Senate is considering legislation to rein them in:
https://www.congress.gov/bill/118th-congress/senate-bill/127
There actually is an effort to reduce anti-trust and market-rigging activity since the 2020 election. Didn’t think I’d ever see it.
‘The original idea behind PBMs is they would be able to get enough bargaining power by representing multiple insurance companies that they could negotiate to bring down drug prices. And accumulate bargaining power they did, merging until three PBMs control 80% of the insurance market. They are also vertically integrated with insurance companies and drug store chains. The top three PBMs are owned by CVS, United Health, and Cigna.’
Obamacare on the whole was a good idea but in this regard it fell short. We were putting forth excellent ideas such as the public option but having a government run insurance compete in the market place I guess was too much for some people.
I love this:
https://apnews.com/article/trump-criminal-hush-money-video-hearing-03930ae00505487803f8338fe8840ba7
Trump to get schooled on rules after district attorney worries he’ll use evidence to slam witnesses
Donald Trump was ordered Thursday to appear by video at a May 23 hearing in his Manhattan criminal case after a judge this week set rules barring him from using evidence in the case to attack witnesses. Judge Juan Manuel Merchan scheduled the hybrid hearing — the former president on a TV screen, his lawyers and prosecutors in court — to go over the restrictions with Trump and to make clear that he risks being held in contempt if he violates them.
GNP would grow 3,4 or 5 percent
The Orange Abomination says he would “stop the deaths” in Ukraine. That’s trumpian code for “I would take Putin’s side and pressure Ukraine to forfeit their land”.
Only folks as dumb as commenter “Econned” buy such rosy and fraudulent answers. “I’d stop the deaths”. Gee, Why didn’t the rest of us think of that?? The Orange Abomination is the one who STARTED the deaths by signaling to Putin that Ukraine meant so little to the USA, that donald trump would use American supply of weapons to Ukraine as extortion to pry out lies.
You’ll recall that Ukraine forfeiting their sovereignty and land to Putin for pennies on the dollar was also Steven Kopits’ brilliant “solution”.
Diane M. Ring Boston College Law School noted Amgen who happens to be going to trial with the IRS over its aggressive transfer pricing:
The Senate Finance Committee’s ongoing investigation in Amgen Inc.’s tax practices reveal similar patterns: per the corporation’s 2021 10-K, it reported effective tax rates on book income consistently below the U.S. statutory rate (ETRs of 12.1 % in 2018, 14.2 % in 2019, 10.7% in 2020, and 12.1% in 2021), despite having most of its customer base in the United States. For example, during 2021, 70% of Amgen book sales revenue derived from the U.S., while the corporation reported only 28% of its pre-tax book income in the United States. As the Senate Finance Committee letter to Amgen observed, by placing 70% of corporate profits and pre-tax book income outside the U.S. (a substantial portion of which were generated by U.S.sales), Amgen would have achieved the goal of having what in reality were profits from U.S. customers escape
the U.S. statutory corporate rate of 21% and face only GILTI regime 10.5% or perhaps exemption.
Now it is true that Amgen’s sources 70% of its profits to low tax areas like Puerto Rico which allows it to have a low effective tax rate. But this notion that location of sales drives profit allocation under the arm’s length standard. Yes a distributor deserves a small portion of the profits. And maybe the distributor owns marketing intangibles but not in Amgen’s case.
Production is occurring overseas but come on – the profits for a biopharma contract manufacturer is not that high.
No – Amgen is driving a huge amount of profits from its product intangibles. Then again all of the R&D was done in California and not Puerto Rico.
With that said sales based allocation of profits is just stupid but vaunted law professors still go there.
Yawn.
Why not look at Econbrowser predictions? James Hamilton with his long history of peak-oil-lite writings, culminating in a “hundred dollars for oil here to stay” piece in 2014. Soon after prices dropped/ And not from recession/demand but from supply (shale increases, along with Saudis deciding to stop cutting supply for OPEC cheaters).
Or Menzie Chin with the early 2021 posts that the monthly inflation numbers were anomalies. In fact, we had two years of 7% inflation after that. Including a solid year before the Ukraine invasion and oil price runup.
Anonymous: Don’t know about “Chin”, but Menzie Chinn wrote the following posts during the first third of 2021. I see a lot of quotes about market expectations, surveys, and actual inflation. I don’t see where I derided (as you have asserted in other comments) the possibility of inflation in the first four months of 2021 (see links below). Now, maybe you have a more expansive definition of early 2021.
https://econbrowser.com/archives/2021/02/rising-expected-inflation-to-about-2
https://econbrowser.com/archives/2021/02/globalization-and-inflation-risks
https://econbrowser.com/archives/2021/03/are-market-expectations-of-inflation-rising
https://econbrowser.com/archives/2021/03/inflation-expectations-post-american-rescue-plan
https://econbrowser.com/archives/2021/03/strange-things-about-inflation-expectations
https://econbrowser.com/archives/2021/04/the-markets-expectations-of-inflation-over-the-next-five-years
https://econbrowser.com/archives/2021/04/company-price-change-announcements
https://econbrowser.com/archives/2021/04/five-year-inflation-breakevens
https://econbrowser.com/archives/2021/04/nowcasts-economic-indicators-expectations
I don’t see any comments by you during this period (at all). Some comments about wildfires in July. And an anti-anti-log comment early this year (which is how I know you don’t have training in economics, where I’ve never seen log base 10 used).
Menzie:
My bad on misspelling your last name.
1. I notice you didn’t push me to back myself up on the oil comment! It would be very easy to pull out quotes from that 2014 blog post and then the EIA yearly oil price statistics. And there’s more…like Jim telling people they shouldn’t sell oil for 65, when he thought it was worth 85 (late 2014ish). Sort of strange comment from an economist. Rather than just looking at the market oil price and seeing it as information that maybe he was wrong…seemed defensive of his initial position. And I don’t remember him making a futures market bet to show he really believed in a reversion to $85. And holding physical oil in DEC14, waiting for 85 would have been a very long/expensive wait.
2. On the inflation, here’s an example:
https://econbrowser.com/archives/2021/05/a-graphical-framework-for-thinking-about-anticipated-inflation
“While inflation has been high in the past few months, at least compared to its level since the Great Recession that began in 2008, several factors suggest that we should not be concerned about sustained and accelerating inflation – at least not yet.”
“So far, the actual growth in the price level has been temporary. Expectations of inflation remain muted because either the anticipated output gap or the responsiveness of inflation to the output gap are thought to be small, inflation expectations remain well-anchored, or all three.
Interestingly, both sentences were revised in the DEC2021 update to the Econfact article. Nothing duplicitous, just…very necessary.
FWIW, I actually LIKE the idea of using market indicators as our best Bayesian bet. Bond spreads or whatever (I’m not an expert on the details, but think I get the general concept). All that said, Mr. Market was…wrong.
[Segue, not even part of our kerfuffle] Perhaps there needs to be some “funnel chart” like with the STEO for these expectations. I’m not an sharpie “trading vol”, so I don’t know quite how to express this precisely or even if it’s already published (or easily constructed). But, I have this basic concept, that there’s probably a lot of uncertainty around the mean.
And also wrong so were the surveys of economists.
https://econbrowser.com/archives/2021/02/rising-expected-inflation-to-about-2
Yes. Even with their wonderful error rate (plotted as a time series in Fig 2).
Hmm. I hope Mr. Market wasn’t too much influenced by those (ended up being wrong) economists. I expect better from Mr. Market. 😉 The surge of inflation happened well before the war, also. Maybe those warning about fiscal policy and stimulus packages were right to be concerned. And Mr. Market and the “have econ degree and plot semi-log” economists were wrong.
BTW, I do give you partial credit for updating the commentary on survey error rates:
https://econbrowser.com/archives/2022/06/about-40-years-of-inflation-expectations-errors
Only partial, since you made the point that the survey got worse during the pandemic in the JUN2022 article. And the pandemic had already raged for a year when you referred to the great error rates of the survey types in FEB2021. Also, note the difference in FEB2021 having yearly data and the updated one having monthly. Perhaps if you had looked at that up to date picture instead of TTM, in FEB2021, the survey economists would not look so great. Of course, the survey economists also messed up in 2008. Which pretty much to me shows that when things are quiescent, they look OK. But so what…economy periodically has gyrations. So, I don’t see them as that super prescient. Nothing against them…but who is. There’s a reason why they are teaching and opining, rather than running hedge funds. And I have my doubts about the hedgies as well…EMH is strong…look at LTCM.
Senator Hawley actually proposed a new trade with China bringing back Trump’s 25% tariffs. Now I am glad that ltr says this is a bad idea given the fact that she was mad at me for calling out Hawley’s 1/6/2021 cowardice. But no never mind.
How much did that tariff raise the last time we used it?
https://fred.stlouisfed.org/series/B235RC1Q027SBEA#:~:text=U.S.%20Bureau%20of%20Economic%20Analysis%2C%20Federal%20government%20current,Bank%20of%20St.%20Louis%3B%20https%3A%2F%2Ffred.stlouisfed.org%2Fseries%2FB235RC1Q027SBEA%2C%20May%204%2C%202023.
Federal government current tax receipts: Taxes on production and imports: Customs duties
Oh gee – customs duties went up by only $70 billion per year. A drop in the bucket compared to the deficit. And maybe someone should remind Hawley that the Chinese producers did not bear this tax – American consumers did. MAGA!
Debt ceiling discussions are becoming more serious. An actual GOP wish list has been offered:
“Rep. Garret Graves (R-La.), a deputy to Speaker Kevin McCarthy (R-Calif.) who was central to outlining the House GOP debt limit bill, told reporters in a lengthy pen-and-pad discussion Thursday that the lowest-hanging fruits for agreement with Democrats are permitting reform, work requirements for public assistance programs, spending caps and rescinding unspent COVID-19 funds.”
https://thehill.com/homenews/house/4000974-here-are-the-top-four-areas-of-debt-ceiling-compromise-the-gop-is-eyeing/
The White House hasn’t offered its own list. Republicans are complaining about that, but that’s tactical; Biden wants to debate the principle of threatening default, while Republican leaders want to avoid debating principle and engage in horse trading. The GOP answer to Biden’s principled stance is to claim Biden is the one threatening to crash the economy.
But I digress. There is progress. That’s kind of a big deal, because negotiations of this sort show progress in fits and starts, not as a smooth progression. Staff negotiations and a pared-down list of GOP demands are both good news. No guarantee of success, though.
follow Clinton’s advice. don’t sign an agreement, and simply make the treasury pay, out claiming to be following the constitution. make them take you to court. and you can dare the republicans and Supreme Court to CHOOSE to make the usa default on its debt. if this is going to play out, politically, then that is the path to take. every step of the way you can make the claim that republicans are CHOOSING to default. and if they choose not to take it to court, then you have your answer for the long run.
I admit sometimes I’m slow to catch on sometimes or “miss things”. My latest mild bewilderment is why oil and gasoline prices have remained relatively steady (if not lower a little) while all the Canadian land connected to oil supplies was on fire. Anyone know the deal there??
Also, I’m curious if anyone agrees with me, this would be a good time for the Biden administration to “restock” or “rebuild” emergency oil reserves when the price seems relatively reasonable?? I assume they would do it “in secret” or “on the lowdown” to keep prices low, but wouldn’t this be about the right time?? Sort of like when Warren Buffett purchases his latest sweetheart stock. he likes the price but doesn’t want to notify everyone and their brother he is accumulating??
Purchasing oil for the SPR adds to the deficit. Since the debt ceiling was hit, any expense which can be delayed has been delayed.
Once the debt ceiling is delayed/suspended/abolished, we may see SPR buying. Or not. I don’t have a clue as to the thinking on this one.
That (the debt ceiling) is a facet/hard reality I had not thought of, which I probably should have. Thanks for solving that riddle for me.
Maybe you are just as bewildered as me on the Canadian fires lack of effect on oil prices??
@Mozes,
A couple of days late….
The wildfires in Alberta have likely had little effect on oil prices because oil and natural gas infrastructure is mostly fire-proofed and any shutdowns were short-lived.