Clarifying Economists' Arguments About International Trade

[@DiogoVKersting]

- If we don't import Japanese cars, the dollar will strengthen, and American wheat will become too expensive. - We actually have a plan for that, we'll subsidize wheat. - You gotta be kidding.

[@acem82]

I'm in! Let's make Rothbardia!

[@AllNighterHeider]

I'm looking forward to coming back to this one after George's live stream in a few min. Thanks Bob!!!

[@cryptoemcee]

Thanks, Bob.

[@T0mkisss]

Great summary. As I see it - the trade deficit wouldn't even exist had the foreigners not wanted US assets (the exchange rate adjustments point) - but they did want them, and not just the treasuries but, in large part - US stocks. And from the perspective of the US Economy one could view US Equities as a 'produce' that is being sold and which will be replaced by the next crop of new home-grown stocks (companies). The primary (or only) problem that is indeed hiding behind the trade deficit is that the net imports have taken the form of non-yielding, depreciating consumables as opposed to capital goods. And if anyone can be blamed for this core issue (over-consumption) within trade deficits it's the Fed (suppressed Fed rate) and the US Government (the illusion of free money for all whims).

[@johncronin6977]

The Japanese don’t have a world class auto industry because of Adam Smith’s “invisible hand“ but because of the very visible hand of government officials and businessmen who created it with government money. The government did the research, engineering, designing and executing and it blocked foreign cars from the Japanese market until the industry has matured. They created (through state intervention) their own comparative advantage

[@DimitrisAndreou]

I'm shocked at the conclusion that less government spending means weaker dollar, because of the lower yields of bonds. It seems like an obvious error to me. Yes, yields will be lower (because of less loans), but all this means is that fewer people are going to be selling present dollars to get future dollars. I.e. present dollars are going to *appreciate*, or strengthen, over future dollars. That's what a lower interest means 🤷🏻‍♂️

[@SteveO21M]

Bob is an absolute legend for making videos like these. Keep them coming.

[@DF-ss5ep]

I think this explains something I hadn't understood, which was that even as the US injected funds into the economy during COVID, other countries complained of difficulty obtaining US dollars. The explanation could be that due to lockdowns, there was a decreased need by the US, or countries holding reserves of US dollars, of buying (importing) oil.

[@jameserenberger3425]

Thanks for making this video, Bob. Would you discuss the Howard Lutnick view of tariffs as either a leveraging tool to reduce foreign tariffs on something like the Marshall Plan? I would prefer tariffs to an income tax, but if the threat of them is enough to get closer to free trade, I see that as a win. Also, the episode with Tom Luongi was great! Make him a regular!

[@classiclibertarian]

Only about halfway through, but I thought the main benefit to tariffs were to correct the resulting patterns of domestic investment as a result of foreign industrial policy (foreign tariffs on US goods or foreign subsidies to their own industries). Think of China massively subsidizing their steel industry, EU having huge tariffs on US manufactured goods. The US, would then logically invest less in steel making capacity and manufacturing capacity, and more in raw commodities to export for those foreign goods. Of course, that would mean overinvesting in us commodities production and under investing in steel production and manufactured goods production. Our market would be distorted by foreign interventions. very bad as under investing over long periods of time least to knowledge and human capital loss in potentially key industries once those foreign industrial policies inevitably fail. goods defecit is really caused by other things and could not be fully corrected by tariffs except to bring foreign trade closer to 0 (minimizing magnitude, but not direction per say)

[@homewall744]

China has nothing to subsidize with. Like all government, they have to take from others to "subsidize." Any subsidy that lowers prices to us is a 'sale'

[@AndreiGrekov-h9s]

I feel like, this is an underrated comment. I came here specifically to hear the answer to this particular question. I wish I could upvote more.

[@classiclibertarian]

@AndreiGrekov-h9s 100% of my arguments with so-called free traders is them addressing arguments and concerns I don't have and ignoring concerns I (and many others) do have. (I am otherwise a major proponent of the austrian school. I am generally libertarian.) One of the value-neutral conditions of austrian analysis is objectively looking at effects of policies. we can do that with free trade. we don't have to always optimize for short term GDP growth. Am I concerned with defecit? yes, but only because it's persistent and the benefits that we should get from that in theory do not materialize for normal people. And moreover, it's not just caused by not having tariffs (its largely a symptom of our monetary regime and foreign policy). am I concerned with jobs? No... but I am concerned with productivity growth. manufacturing jobs have high productivity growth potential based on r&d and capital accumulation creating more output per worker. Services have an upward limit. and not to mention, it's kind of crazy to require a college degree for everything, especially when we know that degrees are largely expensive signals rather than imputing real skills. economies that emphasize services exacerbate that issue. it's bad that we can't manufacture the latest computer chips. it's even worse when you consider that we invented them and lead the industry for 30 years. indicates major policy failure. does that mean I think all or even most manufacturing of Chips should take place here? no. but maybe 20% of it should. we are a large market! plus the native advantages we had in r&d should still exist. instead, we have to beg TSMC for a couple plants and they have to fly in their people to operate and train because we've lost so much expertise over the years (and the incentive to natively train people for those jobs) because our industrial policy was non existent while theirs (East Asia writ large) was expertly primed against US weaknesses.

[@AustrianDuration]

The US produces dollars, foreigners produce toys. We trade, we are good. That's all

[@JohnBack-v6i]

I'm retired at 27, This video here reminds me of my transformation from a nobody to having over 65,000 biweekly profit, a honest partner and a good daughter full of love ❤

[@TylerEric-n2z]

I can still remember the exact feeling on my biggest payday in the market. Imagine taking home $407k just from 12k initial deposit. For the newbies I'll encourage anyone to embrace copytrade as the best approach especially when you're a newbie

[@QueenZambia]

🙏 *12k to 407k is significant increase. My first copytrade wasn't profitable. Please share who you copy trade*

[@TylerEric-n2z]

I only copytrade one manager

[@TylerEric-n2z]

Coashjanice...that's it💯.

[@TylerEric-n2z]

That's her handle on telgam app

[@mfromaustralia1]

The US pressures its client states (allies) to buy overpriced and underperforming US made weapons. But apart from weapons, what does the US have anymore to export at competitive prices ?

[@porcudracului]

Propaganda. Always the best and almost free

[@williamchurch711]

One of the arguments this video doesn't address is the comparison between the Value-Added Tax (VAT) and Tariffs. It's my understanding that the US does not currently charge VAT on imports however most countries assess these taxes. So wouldn't a VAT be another form of a tariff?

[@MrGunderfly]

tariffs are useful temporary tools for corrections towards self sufficiency for a nation,. they are, and should be considered as corrective mechanisms. they are not permanent, they are as transient as any current policy may dictate. if the policy is to enact a correction to a perceived domestic issue of self reliance, sovereignty, productivity, and innovation, then they are a most welcome tool to that end. the us needs to internalize many of its critical security infrastructure. it needs to correct for the loss of local sustainability due to the outsourcing of important manufacturing industries. once corrected, and on a better footing, the us will revisit its tariffs, and return to a more nominal trade relationship with competitors.

[@classiclibertarian]

no country can be full self sufficient with modern standards of living. the USA is the only country that could come close (and perhaps Russia) but living standards would almost neccesarilly go down without some degree of trade. some basic examples are lanthide refining (basically too dirty to do here unless we want vast acerage turned into toxic slurry), avocados, rubber, and other materials that can't be grown or mined locally. low productivity manufacturing is also much more challenging in the usa because our labor pool is highly skilled. not everything can be automated sufficiently. but take a country like Germany? or China? or India? let alone countries like Spain (who tried for decades unsuccessfully to become autarkic). mises warned about this tendency. what you want is stuff to be made where it makes sense to make it (eg. steel in great lakes because of cheap transport, local availability of abundant amounts of raw resources required to make it, and labor availability. or manufacturing near large ports in order to take advantage of other synergies. high skilled work near where universities are in large cities. etc.)

[@jgrif7891]

​@@classiclibertarian you're kind of strawmanning him. I didn't read his statement as the US needed to be 100% self sufficient. He was just saying we shouldn't rely on the rest of the world for critical infrastructure/goods.

[@classiclibertarian]

@@jgrif7891 self sufficiency isn't a valid goal. It's like saying the goal of the economy is to create "jobs" or we should move in a direction to "create jobs". Economies create value/are where value is created. We want an optimality between self-sufficiency and specialization. Most people are very skilled at 1 or 2 things which they exchange for value via holding down a job applying said skill(s). However, that doesn't mean every aspect of a person's life should be outsourced (eg. maybe being able to cook most of your own meals vs. eating out or buying frozen meals is a good idea for most people). But some of it should be depending on what your skills or interests are (eg. re-roofing your house or growing your own food for most people.) There's no reason a nation ought to be more or less self sufficient unless there are clear net benefits for doing so. small Island nations should probably be more specialized than continental nations, for instance (ease of trade and lack of local resources for islands, harder to trade and more local resources for continents). My point was that tariffs should not be used in one direction (self sufficiency) but as a way to counter foreign industrial policy and emulate patterns of investment that would occur in a free market (eg. China subsidizes steel so less is made in USA, despite the fact that if there were no steel subsidies more would be made in USA. Tariffs can counter China's industrial policy and result in a pattern of investment in the USA that would better reflect what the free market would pick. Even if it means slightly lower overall GDP than if the US were to just import all cheap Chinese steel.) Sometimes that looks like more self sufficiency, sometimes it doesn't. (eg. USA should end ag subsidies that result in over-investment in agriculture.)

[@jgrif7891]

@classiclibertarian why isn't self-sufficiency a valid goal for the US?

[@PeterQuentercrimsonbamboo]

How can we get more people knowledgeable in Austrian Economics and proper true libertarian principles and ethics into positions of gvmt that actually have decision-making influence !? The Pauls and Massie are not enough, the couple of people in the AfD in Germany are not enough, one or two in Austria are not enough, and Maxime Bernier here in Canada with his Peoples Party of Canada are not enough, either - at least we need the Bib Murphys, Tom Woods, Thomas DiLorenzos, Huelsmanns, Hans Hermann Hoppes … … of the world to be advisers and people who state agents consult for decisionmaking advice -

[@CODsauceify]

Breakaway civilization.

[@constablekohler]

Not gonna happen. Libertarians or more advanced thinkers do not support government. Once you're in a gov position your job is on the line. People will tend to bend their beliefs or their informed philosophy to allow for the continuation of their income. You aren't becoming a mayor or senator to defund yourself and eliminate your own job

[@bane3991]

Anarcho capitalism is out of reach for a lot of people because it would mean having at least an intermediate understanding of economics.

[@PeterQuentercrimsonbamboo]

@@constablekohler - ha ! .. yes - funny you say that… it has long been my proposal that if I were to become president of a country I’d make it part of the plan to abolish the role of president ! … well, along with plenty other roles, of course, too - At least we can watch J Milei doing some of that in Argentina currently - one may be encouraged to have a bit of hope… after all, the pendulum can only swing so far to one side of the options..

[@AllNighterHeider]

I just have random conversations with people and see who's responsive. I have been extremely surprised by who knew things compared to their appearance.

[@anonymousAJ]

My apartment has a huge trade deficit People here are constantly importing steak and eggs but export almost nothing (just some secondhand goods now and then) It's going to be wild when we install a factory in my living room so that our long-run exports can catch up

[@classiclibertarian]

don't they run a trade surplus with their employers?

[@anonymousAJ]

@@classiclibertarian Not in my apartment For another example: Hawaii imports way more than it exports, unless you count happy memories as an export

[@classiclibertarian]

@@anonymousAJ no, Hawaii roughly breaks even with USA after accounting for tourism dollars and welfare payments from fedgov. your apartment complex runs a surplus with the employers of the tenants of the apartment complex (or they run a defecit if there are a lot of retirees living on savings). the apartment owners make a surplus with the tenants after netting out what they owe banks and operational expenses.

[@anonymousAJ]

@@classiclibertarian tourism dollars and welfare? What did they export to get those?

[@classiclibertarian]

@@anonymousAJ welfare payments don't require exports to pay for them, just other states with a gun to their head. Otherwise, agricultural goods and tourism, often. Did you not know that tourism is considered an export?

[@BinditDD]

If the unit of time is always infinite what good is any of these equations? There can be no Murphy-land because there can be no day zero. We have massive government exactly because of this term evasion imposed by election. A 4 year term equals any and every claim on infinity.

[@homewall744]

Typically, a person doesn't die with any real amount of money to give to their children And if given to their children, it's because they expect the children will spend it.

[@sangeetasharma5435]

What this debate is ignoring is the fact of welfare. Practically speaking person who got unemployed would not go into labour market but on welfare which increases taxation requirementson already established industries, secondly his chances of getting addicted and become a petty criminal also increases which causes social problems and decrease standard of living. Also people on welfare will vote for more welfare which is a big threat to democracy. Also if we depend on international trade for our goods, the justification for foreign wars increases because we cannot allow disruption of supply lines. So tariffs should be seen as a welfare scheme or self sufficiency of local govt, then it makes sense. Edit: just listened to full podcast. USA right now is not investing in capital goods but consumption so trade deficits are bad. If Rob's argument that deficits can cause future growth were actually happening, american manufacturing would be booming. The only reason international investors are investing in USA is that most of them have a short term or medium term vision. They neither have desire nor incentive to make long term planning because they are competing with each other and short term gains make for great advertisement. And like any bubble they will make a great living right till the end of dollar bubble. Also trade non competitiveness is a symptom of broader economic, social and cultural decline of a society which is not addressed till a stress reached the elites of society. The level of economic competitiveness with other country is not a sure shot thing or a fixed thing. Also the argument that Japanese wont have dollar to buy wheat if they sell less cars is a little weak because the very presence of trade surplus means japanese have dollars

[@classiclibertarian]

a lot of good points but some I disagree with. labor is heterogenous. often, people laid off go on welfare not because they're super lazy, but because there are not enough opportunities to use their skill sets nearby (eg. think of a machinist at an auto plant that automated or moved all jobs 4 states over and it was the only one of its kind in the town.) they could move but that comes with greet expense and often wages that aren't neccesarilly large enough to overcome it. they could try to retrain but that's often foolhardy as a machinist can't neccesarilly program even if they go to school for it. it's also expensive and they may have to move anyway. in other words, I think welfare is poor for long term human capital development, but it doesn't create labor shortages per say. just slows the amount of labor dynamicism in the long term. your other points are more or less correct. id modify the comment on capital goods investment. it is occurring actually and us manufacturing output has increased steadily year over year, just not at the rate of other sectors. it has nothing to do with investors having short or medium run time horizons. this occurs due to an understanding of long term time horizons. in a world where there will be dollar sinks outside of the usa (eg. petrodollar, high instability of all dollar alternatives, black market treatment of cash as king, USA having the strongest military, and the USA having the largest and most open domestic market to fuel export leas growth in other countries), goods produced in usa will always be less competitive due to the dollar's strength.