MaxedOutMama

Mom EVERY major policy decision made by our Government for the last 7 plus years has been wrong,or the implementation has been so screwed up that it was effectively the wrong decision.This takes a kind of Genius.Just based on the Law of Averages it is probably time to do things right,but I will bet on Genius.If we had only had Republicans in charge we could have avoided wild foreign adventures,deficit spending and the obscene bloating of our government.
 

BTW this has been a Bi_Partisan effort,and if you claim BUSHCO are republicans,I suggest you read Barry Goldwater's Autobiography.
 

MoM,

Once again you have a finger on the pulse - four words - trade war with China.

If they get pissed off enough to hurt themselves badly, they can probably hurt us worse given their dollar and treasury holdings...
 

Yes, it has been a bipartisan effort.

Obviously the carbon tax bit is more broadly based than the US, so you have to look across national lines if you want to blame political parties. There are a lot of them involved in the individual countries. It is interesting how very liberal parties and quite conservative parties in the West seem to be pushing this carbon thing in tandem. I think closet protectionism is the guiding force behind a lot of the political move towards carbon regulation.

I don't agree that every policy decision made has been wrong, nor do I think it's fair to say that the Bush administration isn't Republican.

Aside from the obvious fact that he represented the choice of the party when he was nominated twice, what about all the Republicans in Congress? Are you going to claim that they aren't Republican either? Presidents don't pass laws by fiat. As you point out, Dems contributed to many of the recent policy decisions.

Maybe you mean "conservative" instead of Republican?

In any case, Dems are pushing the carbon taxation thing pretty strongly. I wish there was a party that was truly against it.

I think you are substituting assessment by "desired result" for assessment by "policy plus possibility". The success or failure of any particular government policy must be judged against the underlying background. Your mistake is to assume that any government can somehow escape the accumulated effects of past policies.

We are in a demographic transition of no mean proportions. Blame the Pill if you wish, but the reality is that Europe and Japan really aren't sustaining their native populations by breeding. The US is slightly better, but still needs immigration. All these nations (and China) face increasing problems related to handling retirees.

Regardless of party, the US faces a future with higher taxation, lower growth, higher public debt, and a lower percentage of the population working.

Anyone who believes the fundamental situation can be changed by electing a person of a different party is a dingbat. Any party has to deal with the realities of the present. We are not going to throw the old folks into the streets to starve. We are not going to ban them from the hospitals. We probably will ration government-
paid medical care by age somewhat, but that's about all. Medicare and Medicaid are now so big that they are the CAUSE of escalating private medical costs and lower rates of insurance among the population. Neither program pays the true reimbursement cost for medical care, so the cost is shifted to the non-governmental paid portion of the population.

Among the proposals that I consider rational are the expansion of prescription benefits (limited and targeted towards assets). It is far cheaper to defer many medical problems to later rather than have people moving in and out of hospitals. Many of the medications we have now extend people's active lifespans. Extending the period of pretty good health of our retired population is key to managing the transition.

It is not true that the grandpas and grandmas have no economic function. Many of them are helping with childcare or working. A great many of them do volunteer work. The transition of women into the workforce has left a societal gap which younger retirees often fill.

Many of the people screaming about either party are essentially demanding impossible results from our politicians. They are not gods, they cannot change reality, and the reality is that the US has failed to save for the future needs of the population and now must pay for it.

Every attempt to change that reality is just making things worse. You can't bubble your way out of it, you can't shrink SS benefits to very small levels without taking a severe consumer spending hit, and you can't monetize work that used to be done for free and change the fundamental wealth and savings pattern of the population. You can't import cheap labor without depressing wages for a portion of the population and sharply boosting public spending for that cheap labor.

Politicians of both parties are engaged in a giant shell game.

I believe that Bush has been one of the more responsible politicians of his time. However every time he tried to discuss fundamental social issues, he got lambasted for it. A delusional electorate will get the outcome it deserves rather than the outcome it demands. The pity of it is that any politician who tries to speak honestly on the underlying unaddressed problems gets attacked by other politicians and demagogues.
 

Energecon, THAT's it exactly.

You can address this from a moral POV - what right do we have to proclaim our unbelievably wonderful and humanitarian principles when we are really looking after our own pocketbook and are playing with policies that appear likely to starve people to death? Or you can address this from a pragmatic POV. Why does anyone in the west believe that China won't look after its own interests if we impose tariffs? And won't following purported environmental policies that amount to a trade war which grievously depresses economic conditions globally lay the foundations for another world war?

But no one should ignore the underlying REALITY in favor of swimming around in a sea of temporarily enjoyable and profitable DELUSION. This is the western tendency that SW was trying to address, because it isn't functional. I believe however that it exists across political lines.

One of my brothers claims that the problem with our politics is an electorate that believes what it wants to believe and will not support politicians who are honest. I tend to think that the average voter will, but that our journalism has gotten so bad that the average voter rarely hears about the fundamentals, and thus is subject to all sorts of political spin.
 

I've long suspected that the subversion of free trade by Asian mercantilism would eventually lead to reincarnation of Smoot-Hawley.

Note that it is ludicrous to characterize the status quo in international trade as "free trade".

China's exchange rate peg is equivalent to a tariff greater than 60%, and Japan's manipulation of its exchange rate through support of the yen carry trade has had the same effect as a 30% tariff.

"Mises projected that without a market economy there would be no functional price system, which he held essential for achieving rational allocation of capital goods to their most productive uses. Socialism would fail as demand cannot be known without prices, according to Von Mises." Wikipedia

And so too will fail the current mercantilist trade regime in which prices are falsified by exchange rate manipulation.

It continually amazes me that any economist who considers himself/herself a champion of free trade will express anything but outrage with respect to this state of affairs.

The theory of comparative advantage implicitly assumes that the inputs used to produce traded goods are properly valued by the price system.

When prices are falsified, markets cannot optimally allocate. Efficient and competent producers are put out of business by inferior competitors.

If energy-inefficient Chinese manufacturers were not subsidized by the exchange rate peg, a significant fraction of them would not be in business -- or the higher prices of their products would reduce consumption of them both at whom and abroad -- and carbon emissions would be reduced.

Falsification of prices through exchange rate manipulation is a heinous and unnatural act. It should not be surprising that eventually one consequence of it should a countervailing heinous and unnatural act.

Smoot-Hawley II, here we come!
 

Note also that the obsessive focus on CO2 tends to undercut environmental concerns. If China improves its coal-burning power plants by adding better particulate filters, the emissions will be less noxious and less harmful to the health of everyone living downwind. But the CO2 emissions will be the same, so many "environmentalists" would not regard this as a meaningful improvement--even though it save lives and health *now*, rather than in a theoretical future.
 

...so many "environmentalists" would not regard this as a meaningful improvement...

Since anyone can call themselves an "environmentalist", and those who do may number in the millions -- and "many" can easily mean "a few dozen", and one can easily find a few dozen twits in any group of a million -- your statement is undoubtedly "true".

But I have no doubt that 98+% of those calling themselves "environmentalists" would regard such measures as very meaningful improvements.
 

jm...but what is being discussed here is specifically a *carbon* tariff. Any Chinese actions to reduce particulates would give them no relief under such a tariff.

A couple of years ago, it probably would have been easy to drum up support for a tariff scheme under which China would have gotten a big break for goods that were made or transported using ethanol-derived energy...
 

So imagine what the Chinese response, short and long term, will be to a carbon-tax version of Smoot-Hawley:

Short term, look for turmoil in the financial markets as the Chinese react to the carbon tarriff in ways we'll find unpleasant. Dumping dollars for euros, for instance, would hurt both Europe and the US.

Long term, suppose the tarriff were to have the "desired" effect and China moves off coal plants to, say, nuclear plants. Picture if you will hundreds of nuclear plants built and operated by the same merchantilist interests who make lead-painted toys and poisonous pet food ...
 

I'm still stuck on the possibility of world war. Screw with the basics of life for oh, about a billion people, and you'll create the fuel for it.

The trade imbalance is already correcting. From here on out the efficiency of US manufacturers (provided they are allowed to be efficient) will win back business. China's peg to our currency will now generate a wave of destructive inflation it cannot weather.

So instituting a carbon tariff is not a very good idea at this time.

Also, I don't think Americans can afford another Great Depression. I especially don't like the idea of the violent outcome in which our soldiers would be involved.
 

MoM, on my bad days I think we're playing out 1929-1937 and 1938-1945 simultaneously ... with this year as the 1929/1938 analogs.

If a carbon tarriff goes into effect on top of a 50% increase in rice prices (which comes after a roughly 20% increase in food prices inside China last year), the Chinese government is going to react sharply. They understand very well that economic distress will cause severe internal unrest and they will do their best to focus it outward on someone else, lest they lose (in the Chinese turn of phrase) the "Mandate of Heaven".
 

John, economic warfare under the cover of environmentalism would make anybody mad.

If one turned this around and considered it as if we were an EM country, I think one can understand how inevitable the repercussions will be.
 

www.abs-cbnnews.com/storypage.aspx?StoryId=112655

US waging economic war against China


Outside the Box
By JOHN MANGUN




Why have the prices of commodities like oil and gold risen so dramatically in the last year? Why has the dollar fallen so much? Normal business cycle? Bad management from the world’s financial institutions? And why hasn’t the world’s largest and strongest economy, backed by the most powerful government, been able to change the course of the situation?
Perhaps the larger picture is that the United States is waging an economic war against China.




The New York stock market rallied some 400 points Tuesday night, prompting an increase in prices across Asia. Even the Philippines participated a little. US stock prices reacted favorably to the news that the Federal Reserve lowered interest rates. Bloomberg: “The Fed has cut the benchmark lending rate by 2 percentage points this year, the most aggressive easing since the federal funds rate became an explicit target of policy in the late 1980s.”

But don’t get too excited because you must look not just at the “big” picture, but the “whole” picture.

Conventional and common wisdom talks about the recession facing the United States and the potential that an economic slowdown is confronting the globe. There is little indication that a “normal” economic slowdown is happening; normal meaning that production is dropping. It is not so much that production is going down but that the end-result of production, buying, is dropping. If you look around the world at virtually every country in every economic and wealth group, people are wealthier today on the average than at any other time in history. But if people are wealthier, why aren’t they purchasing? One word: inflation.

Prices are going through the roof around the world. Well, that is obviously the fault of high oil prices, right? For example, Kuwait reports that inflation is at a 15-year high. China is very worried and the United States is ignoring the issue in favor of trying to keep the financial system sound.

World inflation has been in a downtrend since 1990, but prices are expected to show heavy increases in 2008, potentially reversing a 15-year movement. Traditionally, high interest rates were a strong indication of inflation trends. In the last 20 years, inflation was best illustrated by a weak dollar and strong gold and commodity prices. And we now have the dollar at historic lows and gold at historic highs, with both of these trends showing little likelihood of changing.

Then we must ask, why is this happening? Why have the prices of commodities like oil and gold risen so dramatically in the last year? Why has the dollar fallen so much? Normal business cycle? Bad management from the world’s financial institutions? And why hasn’t the world’s largest and strongest economy, backed by the most powerful government, been able to change the course of the situation?

Perhaps the larger picture is that the United States is waging an economic war against China.

The United States could strengthen the value of the dollar. It has not. China is hurt because now Chinese products are very expensive in the United States, and this will reduce the US trade deficit with China. China must import huge amounts of oil and strategic metals which are very much more expensive now. China holds hundreds of millions of physical dollars, the value of which is now much less.

China has refused to revalue its currency to a realistic level to improve its trade position with the United States. China has used its huge dollar reserves as a sword against the United States by threatening to sell those dollars, and thereby causing the dollar to drop in value. In effect, the United States is using China’s strength against China.

In order for China to maintain the levels of its trade with the United States, it will be forced to lower the value of its currency. However, if it does that, it faces two major problems. Foreign direct investment (FDI) into China would become less expensive, and China is worried that more and cheaper FDI would spur China’s inflation. Further, a devalued currency would reduce the profit to China for its exported goods.

If China keeps it currency at its present levels, the United States will buy less. The United States wanted a stronger yuan to reduce trade, which China was unwilling to do. That objective is now achieved by a weaker dollar.

China’s dollar holdings are worth much less when buying goods like oil and metals that China depends on for its development and growth. Further, China has been talking and trying for some time to diversify its foreign-reserve holdings form dollars to other currencies and gold. Now, their dollars are worth much less when buying gold, yen and euros.

The current crisis hitting the financial institutions looks to me like a normal business-cycle shakeout not unlike the dot-com IPO fiasco of the 1990s, the savings-and-loan and foreign-country debt crisis of the 1980s and the personal credit crisis of the 1970s.

Back then, the US government bailed out Wall Street, Mexico and the banks, among others, without receiving much in return. This time, the “crisis” is being used to further the US economic position, long-term position, particularly with regard to China. From Sun Tzu: “All warfare is based on deception.” -- Business Mirror
 

You are right on the money! The Carbon Tariffs are exactly the same thing as the Tarffs that tipped the balance and caused the great depression after 1929. The road to hell is once again lined with green intentions. Fortunately we have a bit of good in the history of the great depression. Whereas unemployment rates can be 60 and 80 percent in south and central America, the highest rate of unemployement was 20 percentish in the US durring the depression years. The thing that would be different now under an Obama or McCain carbon cap program is that durring the great depression gasoline and petroleum was the vibrant part of the economy. Whole skyscrapers were torn down in us cities to make way for lucrative parking lots! I know my history pretty well and I especially fear Obama and party not just given their rhetoric but given their actual record of bad legislation. I think the federal reserve has been fixed to prevent something as bad as the great depression but one has to wonder. right now we have both a LOW dollar and very low interest rates at the same time. That is actually a positive sign for the economy and not a negative. Right now energy markets are orderly and the rationing is automatic by market price constraints and not by bureucratic jimmy carterites which is also a big plus. The market is signaling oil companies to make more and more oil now but the politicians in washington are scraring the companies to death. The oil companies rememeber too well their consolidation after the collapse of the 1970s oil bubble and the biggest one, EXXON is resisting the calls to go hog wild with major cap reinvestments or to dump money in wind farms that eventually will prove to have no exonomic feasibility after a collapse in prices. The carbon cap nonsense is nothing more than a tarrif in disguise but it not just one on foreign producers but on domestic ones as well. In the interconnected web of the world free trade economy it is a disasterous proposal, Shutting down China's industrial machine is going to be like chopping off our right arm. I know the harvard evnironmental wackos have it all wrong and are enjoying the mess they are mainly responsible for creating having set back nuclear power by 30 years, shut down the country to new oil and gas exploration, limited access to coal, gave us the stupidty of ethanol and are dismantling the great hydro electric dams and putting ugly solar and wind farms that either fry birds or cuisinart them. We are loosing more birds now to wind farms than we ever gained with the idiotic wetland legislation of the former Bush president. Stupid is as stupid does. The biggest problem of all is that there is no problem. I attempted to reproduce the original green house gas experiments adding a few necessary controls and found the original to be nothing less than a slight of hand trick. you see the greenhouse gases are contained in physical greenhouses not free to expand and contract as the entire earth atmosphere does day and night. So by bottling up the heavier so called green house gases they are effectivly pressurize. if you know your highschool chemistry gas laws you know that a gas under pressure warms up faster than one tha is not. That is the trick and it turns out to be very bad science. I re read the greenhouse gas abstracts in the science literature and they profess that the effect is nothing but an analogy. you try the experiment yourself at home and paint the inside of the greenhouse black, pump out all the gas and it retains the heat even better than the one with the carbon dioxide made captive. Anyone that has seen a hot air balloon rise in the air burning propane knows its full of hot carbon dioxide. With out the balloon to contain it, the gas expands and diffuses in the open atmosphere so there is no net heat gain because of it. All of this nonsense is just one more big lie like the spotted owl hoax was but this one could shut down the world economy with horendous consquences. Before McCain or Obama go into office and take this sort of drastic action they should try the experiments at home that I did to see that there is no such thing as a green house gas. The analogy of Planet Venus being a planet with a thick greenhouse atmosphere is also wrong. The reason why is that it's atmpsphere is a lot soupier and it happens to have I think the figure is 90 times the atmospheric pressure of the eath. There is no evidence that the earth's atmosphere's pressure is increasing due to co2 or methane emissions. The more sciencetific study you do the less you need to join the popular algorian hysteria. If you are worried about running out of gasoline and think cars have to disappear because environmental kooks make gasoline or diesel illegal beware_--I did the figures and found out that a 20 gallon tank of gas weighs about 125 lbs at 70 degrees temperature. If you switched out your gasoline engine and installed a pellet stove and a steam power piston engine to run the motor you would only need $270 lbs of stove pellets to get the same number of BTUs that the gasoline gets. 40 lbs of the pellets is only around $4.50 on the market now so it would cost me $7 for the equivalent energy as 20 gallons of gas to run my car for about the same number of miles as gasoline. The difference in weight is only 145 lbs which is that of just one more passenger going for the ride! because the pellets are wood chips and not fossil fuel they should be keep our cars around for ever. Its already economically feasible to use pellet stove technology but the environmental wackos don't like cars so they probably will put a carbon cap on those too? I thought wood chips were organic?

Again a tariff is a tariff and the author is correct in calling the carbon tariff what it really is and that is the next smoot hawley economic catastrophy.

I just want the accademic scumbags pumping out the algorian hysteria to know that they should be held responsible for all the damage caused. They ought to recheck their science before its too late. Loss of tenure is just the start when it comes to the punishment that should be metted out once it becomes clear that their data is 100% fudged or pure fantasy. There is no such thing as a greenhouse gas but there is such a thing as a green house or the green house effect and it's a lot less hazardous than their big propaganda campaign is saying it is.