Tags
BBC, China, Forbes.com, Gordon G. Chang, Making News, Trade, Trump
I’m pleased to announce that the link to my interview with the BBC yesterday is now on-line. Click here for a preview of some of this week’s biggest business news. My segment starts at about the 11:40 mark. And yes – I was mis-identified! Hopefully that won’t happen again.
Also, Gordon G. Chang, who co-hosts most of the John Batchelor radio show segments on which I appear, cited my views on President Trump’s China trade deal in his latest column for Forbes.com. Here’s the link.
And keep checking in with RealityChek for news of upcoming media appearances and other developments.
Alan T:
I have been posting about this study from the Federal Reserve:
https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr541.pdf
The short story is nations that run large trade deficits have exploding house prices. This is one the “free traders” (actually, those in favor of the status quo) cannot dodge, so they go mute.
The free traders have been saying we trade assets for imports, thus no worries, Except house prices explode. Yes, increased demand for real estate, except real estate is tightly zoned.
Here is a letter I wrote to Robert Murphy that I hope gives to you a grim chuckle.
“Okay, you asked me a few days back should orthodox macroeconomists mention property zoning more often. Yes, it should be a very prominent topic, as prominent as free trade or the minimum wage.
My guess is that presently property zoning is a larger structural impediment than wiggles in trade laws or fidgets in the minimum wage.
And yes, there is the serious problem that developed nations (with good property rights) running large chronic trade deficits will see exploding house prices, and perhaps see the middle-class boxed out of home ownership. This has happened already in Great Britain, while a house in Sydney is now $1 million. The West Coast of the United States? Boston?
So, orthodox macroeconomists who defend large chronic trade deficits need to be honest and say, “Due to property zoning, large trade deficits lead to higher house prices, and a lot higher in some cases. You have restricted supply, but increased demand.”
In addition, there is a troubling idea also that a globalized economy leads to globalized wages. This in a world where many nations are in “the middle income trap.” So, U.S. wages will have to sink down to global levels, in free markets.
Okay, so we have exploding house prices and lower wages in the U.S. as we practice “free trade.” In fact, Tyler Cowen has been linking to articles that young men in the U.S. have wages 31% less than in 1969!
Lastly, the US spends $1 trillion a year on national security (DoD, DHS, VA, black budget and debt service). It is common to hear that “with a globalized economy, we need a global military.”
Certainly, preventing foreign occupation of U.S. soil is not what today’s military is about. Our military more resembles a guard service for multinationals or Mideast royalty.
That being the case, should not multinationals pay for the U.S. military?
Would it make sense to raise $1 trillion a year in tariffs to fund the U.S. multinational guard service? We could cut payroll taxes by $1 trillion, and nearly eliminate FICA taxes. That would reduce the cost of labor in the U.S by about 15%.
Yes, some of my ideas seem crazy. But is embracing a “free trade” that results in lower wages, higher house prices and $1 trillion a year in military outlays…not crazy?”
Benjamin – I’ve seen that NY Fed report but have not had time to read it. Thanks so much for reminding me it’s out there. But you’ve raised an even more important point about the policies that keep housing supply tight even as it supercharges demand. Are you familiar with the Henry George School of Social Science? It’s an economics education non-profit on whose board I serve, and it’s got a great interest overall in how real estate and other land use-related policies (especially on the tax front) undermine the economy’s productive sectors. Would you mind if I shared this with some of my colleagues? FYI, the School’s website – which is still a work in progress – is at hgsss.org.
Alan: I will certainly look again at Henry George. George is an interesting thinker, always in the background in economic thought, never quite disappearing. Of course, share all you want.
Strange times—the form of modern American orthodox macroeconomics seems to have ossified into uselessness, or worse.
Tight money, and trade deficits, open borders and global military outlays. Property zoning rarely discussed. How about push-cart vending? Never a topic.
BTW, I admire immigrants and hate no one. One has to ask what open borders mean for First World employees Working, after all, is still the way the vast bulk of people make a living and contribute to society.
Interestingly, George was a strong supporter of standard free trade. But no one’s perfect! I’ll definitely share your thoughts and thanks for the approval! Strange times indeed.
Alan: I think in theory, in a perfect world, free trade probably makes sense.
In a perfect world we would have no police or military either, or even a judicial system I suppose.
The real world today for the American employee and middle-class is not a theory. We know real wages are falling and that house prices are exploding. We know we pay heavy taxes for a global military presence.
I confess, I do wonder if even in theory, if “free trade” always works. If one slavishly follows free trade, then no community, no nation, no ethnicity or culture is worth preserving. All must succumb to globalism when needed.
I absolutely do not mean this to be racist. For example, if Ghana strikes big oil the globalists would say open borders are best and several tens of millions of people should move to Ghana. If the oil strike is large enough, Ghana is no longer Ghana. Their culture would get swamped. If the immigrants gain voting rights, then the Ghanians would lose control of their political system.
People have criticized Japan for not accepting immigrants. So, there should be 5 million Muslim immigrants living in Tokyo? What would that mean for Japanese society and culture? Is it for Westerners to decree the Japanese have nothing to protect?
I like everybody, and prefer not to judge any book by its cover. Hate is not on the agenda.
But globalism insists no culture or group or language is worthy, if it stands in the way of multi-nationals.