Saturday, September 12, 2009

Obama: Shrink U.S. productive capacity, then impose tariffs on imports. Unreal!!

July's bigger than expected increase in the U.S. trade deficit was due to a sharp rise in imported autos. That's because the Obama Administration had been hard at work earlier in the year shrinking our domestic automotive production capacity. (Remember how he forced GM and Chrysler into bankruptcy.)

Back in March I talked about how the move to make the U.S. auto sector "lean and mean" would simply result in a shrinkage of capacity and down the road, we'd end up having to import more vehicles or face shortages. Now this is happening.

As if the damage the Administration has wrought was not enough, they are now putting tariffs on other necessary goods, like automobile tires.

Who changes their tires?

Mainly, people who own used cars and have to hold on to them for extended periods. Maybe because they can't afford a new car. Maybe because they don't have a job! (And maybe they need tires to go look for a job!)

So once again, here is an Administration that is putting in place one policy initiative after another that causes incomes and benefits to flow to the top, while those in the middle or at the bottom suffer.

It is truly outrageous.


googleheim said...



Mike Norman said...

Yeah, right!

Mike Norman said...

He must be "purging."

Mike Norman said...

What Shishkabob and others like him don't realize is that for every debit there is a credit; for every liability there is an asset and for every borrower there is a saver.

It's called double-entry accounting and it's the system the world went on 500 years ago because it was far superior to single-entry accounting, which kept most of the human race in poverty or enslaved in one form or another for 5000 years.

He and others like him still think we are on that old system or worse, they endeavor to put us back on that because of their own "guilt trips." They hate to see people comfortable and living nice lives. It is some Puritanical thing within them that wants anyone who is modestly happy and living a decent life to be punished. They believe it is all sin and we must atone for our sins by punishment or as he called it, being "purged."

He should live with the fanatical muslims who deny themselves any form of pleasure and wish harm to anyone who does not subscribe to their extreme views of how people should live.

Yeah, where are you, Shishkabob?

Brantley said...

MIKE....I'm not sticking up for the shishkabob's ....OK, but let me see if I've got this right!

Last year I had an asset valued at $400,000 with a liability (debt) of $400,000 (a house @zero down). So you say nothing made & nothing lost - I'm even Steven here, correct? Actually I'm better off because I've got this nice house to live in. BUT I do owe interest on that liability. Double accounting here. But now my ARM went up & I didn't get the raise it expected so I can't make the full payment, but wait, I'll REFI. Oops, now the dickheads are telling me that my castle is only worth $300,000 even thought I got an asset on books at $400,000 & still $400,000 debt (interest only)......NO REFI for me - - and good bye asset and beautiful life and hello fees, debts, and poverty.

That is sort-of how the real life for many folks is panning out.

I really don't understand how just because we have double accounting all fiscal discipline is left behind and only a world of bliss is here to stay.

And for every borrower in this country their is a saver... probably in China and not really on our balance sheet. That's why foreigner hold so much of our debt and now they are taking or interest payments and purchasing many of the worlds true oil fields and other commodities that we'll be paying them for too.

Gotta love big screen TVs and 5 tennis racquets and two sets of golf clubs and a kick@$$ 50th birthday party hangovers.....

Matt Franko said...

If you live in the house as your residence (this could be verified), then Fannie or Freddie (now 79.9% Govt owned and probably "on the hook" anyway for the $100k loss if it goes to foreclosure) makes the $400k loan at say 3.5-4% 30 yr fixed. Done. US Treasury backs up Freddie & Fannie.

Brantley said...

Matt.... I didn't know that FNM would give me a REFI loan with nothing down, $100,000 above appraised value and an impaired credit report @ 3.5 - 4% for 30yr.

I think I'm starting to get it, I just love America.

The example was a hypothetical though.

Matt Franko said...

I was pointing out what they COULD do, they obviously are not doing such a thing...and this is because the treasury would have to send (more) capital to Fannie and freddie to fund this program, this $$ would have to come from a new congessional appropriation (oh no, "TAXPAYER ON THE HOOK!") and the politicians do not want to be criticized for it (instead of explaining it as we are trying to do for them here) so nothing gets done....

Brantley said...


"I was pointing out what they COULD do, they OBVIOUSLY ARE NOT DOING SUCH A THING...."

So, what they COULD and what they REALLY ARE doing is finally expressed and that's where all this debate on Mike’s site gets its fire.

There is a big difference in a school answer and the real operating world and things are the way they are because there are two sides to every transaction, both having vested interest in a favorable outcome for their side.

It would be great if USA could run deficit spending to no limit, with absolutely no consequence, stop taxing the population and .....

Here is another thought I just had. Why doesn't the US government just go and buy up all the natural resources and companies in industries all around the world and then we would control everything. Just credit the appropriate accounts (no trees to be cut) to allow our bankers to take (buy) everything out and viola. Done!.......I guess,……… because it can’t happen.

Matt, I know the last comment just stirs the pot, which is not my intent. I just think both sides have conviction and wonder if one side is more of a utopian desire.

STF said...


The reason you think one view is a "utopian" one is because you still don't understand it, as your comments make clear. The fact is, the view espoused by Mike is applicable to a currency issuing govt under flexible exchange rates, and your isn't.

The "why doesn't the fed govt just buy everything in the world" questions, even if rhetorical, shows this lack of understanding.

First, note that "why not" in your question can have two different meanings. Politically, the "why not" is because it obviously isn't politically acceptable domestically or internationally.

But operationally (since the focus on this site is getting the operational aspects right), it's certainly possible for the govt to create enough money to buy everything. However, that would be creating a deficit that is "too big" from the operational perspective, since inflation would obviously rise beyond anyone's definition of a reasonable level as a result of such massive deficit spending (and not to mention the probable decline in the dollar's exchange value that would bring still more inflation). So, from the perspective here, that's "why not" as an answer to your question.

The view here, if you were paying attention, is that the deficit should fill any gaps in capacity utilization, since that isn't inflationary. Your hypothetical goes way beyond that.

But, since you thought the govt somehow couldn't create the money to do that in the first place (which was your "why not"), as I noted you demonstrated that you haven't understood the arguments put forth here in the first place.

It's worth noting that even mainstream economists, if they understand their own theories, would agree with the view expressed here that currency issuing governments aren't constrained by revenues or borrowing. It's in every graduate textbook and is not even debated.

bubbleRefuge said...

Scott, nice response. Your getting really really good at this.

Mike Norman said...

Scott's the man! And Matt is too! Let me just say that I am really, really proud to see the quality of some of the contributions to this site. We should all be, at least anyone who is thoughtful about these issues.

Now, if I could add, or expound upon, Scott's response to Brantley about why don't we just buy everything, and it's something I've been saying for a long time...there is a limit to what our productive capital--both physical and human--can process and produce.

THAT is the determining factor in how big our deficit can be, etc. NOT some arbitrary nominal level.