As European countries, finally, crank up defence spending, International Traffic in Arms Regulations (or “ITAR”) are likely to come up in conversations.
Reflecting on topics such as this got me thinking that so much of the Western supply chain in military kit is controlled by the US. On the positive side, you get economies of scale and all that comes with these kind of forces. For years, Americans have been keen on selling all this funky kit to the likes of Germany, Britain, etc.
The problem is that to follow an independent foreign and military policy in this new era means that chain is breaking. There is talk that the US can operate a “kill switch” so that countries using certain US-made weapons cannot use them in ways that an administration does not like. It reminds me a bit of worries about Chinese electric vehicles being vulnerable to such a “switch”.
This seems in some ways to be a risk management issue. There is a broader Nassim Taleb-style point about making defence and security in the free world less fragile. Think how much of our defence and communications run off a handful of networks and suppliers. There are US satellites, cloud computing services from the likes of AWS, Microsoft, etc; military hardware suppliers in the US such as Lockheed Martin, Raytheon, Pratt & Whitney. And many more. These systems generate great efficiencies and rich export earnings, particularly for the United States.
There’s a problem – a fragility. Europe has become dependent, complacent and comfortable.
As we found out because of the 2008 financial crisis and covid, overconfidence in certain institutions (US government, central banks, medical experts) can lead to dangerous outcomes. There is a sort of moral hazard problem. Just as “too-big-to-fail” bank bailouts create foolish attitudes about risk, a sense that the US military or whoever would ride to the rescue of a country meant too many nations got complacent. In fact, it is possible to see some of what is going on right now in behavioural terms. Incentives matter. Shield people against certain costs, and they become spendthrifts, borrow too much, or assume they can strike attitudes on things and there won’t be bad outcomes.
(See my related post on what countries such as in Europe, parts of Asia etc, do now.)
Does it matter, Poland apart, which countries in Europe (the EU) have the will to defend themselves?
Yes.
Incentives.
Given the recent actions of some European Union and NATO countries such as Romania, in overturning elections and (now) banning candidates, what are these nations defending?
It does not appear to be “freedom and democracy” as they claim – as they all have “Hate Speech” laws (so much for freedom) and they seem to despise democracy – see above.
Vice President Vance now seems vindicated – which will NOT please him, as he sincerely wanted the “allies” to hold to the principles, freedom and democracy, they claimed to believe in.
Of course, it is still possible that the “international community”, as the establishment calls itself, will now clearly CONDEMN what has happened in Romania – first the overturning of an election, and now the banning of the leading candidate (whether this candidate is any good or utterly useless, a waste of space, should be for the VOTERS to decide – I should not have to write that, but it seems I do have to write that), in which case there is still some hope that this alliance is based on principles that are worth defending.
As I have asked before – how can the United States have an alliance with powers that would, if they could, put the President of the United States and the Vice President and-the-people-who-voted-for-them in prison for their opinions?
This is not some small “cultural difference” – this is a divide of fundamental principles.
For all their talk of hating Mr Putin – the international establishment seem to share his version of “Freedom of Speech” – “you are free to agree with me – but NOT to disagree with me”, and his version of “democracy” – “there can be elections – as long as I win”.
Again – this is an empirical matter, it is still possible that the international establishment will condemn, clearly and without reservation condemn, what has happened in Romania.
Mr Ed raised the example of Poland.
Under the Law and Justice Party – the European Union (and the rest of the “international community” – including the American branch of it, the Obama, so called “Biden”, Administration) raised endless complaints about, mythical, “undermining of the rule of law” in Poland – with money being withheld from the government, and money (from both international corporate and government sources) being sent to opposition groups.
But when Mr Tusk (European Union Commissioner) became Prime Minister of Poland and really did start persecuting political opposition – all the “rule of law” concerns suddenly went away – and the money was turned back on again.
The former government of Poland was not “pro Putin”, quite the contrary, the “international community” (government and corporate) just did not like them.
So, again, what is being defended?
Paul, how do you know that JD Vance is sincere? A few years ago he denounced Trump. Nowadays he seems fine with a policy that prefers to be mean to democratic countries and play nice with autocrats (“Vladimir”). That rather undermined the impact of his scolding speech in Munich.
As for the conduct of certain European countries, I wonder which of them could reasonably be relied on the remain NATO members. Right now, Poland has very obvious reasons. As do the Baltics, and countries such as the U.K. in keeping Russians out of our territorial waters and near undersea cables.
I’m aware that Tusk has been a prick. He’s from a political class that, among other factors, explained why I voted for the U.K. to leave the European Union.
Now, let’s get back to the topic of my post. What’s your view on that Paul? Anything?
🥺
Or rather As European countries, finally, talk about cranking up defence spending…
Words are easy, actions delivering over months and years are hard and often diverted by later ‘events’.
They’re defending against Russian subversion, how’s that not obvious? If you think these are normal times, you aren’t paying attention.
DJ,
Have no doubt that it will happen. All the talk is of an increase in spending. Note that is an increase in spending not capability. It warms the cockles of every Keynesian so of course it will happen. Does that mean more troops, actually having aircraft on our aircraft carriers or any form of ABM capability? Of course not!
I’d take it seriously (as would Putin) if we were committing to actually fielding 100-150 Battle Penguins for just one example.
Johnathan Peace – it is indeed clear that Vice President Vance is sincere about the speech he made a couple of weeks ago – these are beliefs he has had since he was very young – a time when he suffered horribly, but found beliefs that gave meaning to his life.
What he doubted, and what I myself doubted about Donald J. Trump (remember I was a cog, a very tiny cog, in the Ted Cruz campaign AGAINST Trump – and said some quite dreadful things about Mr Trump, as he then was, in 2016) is whether Donald J. Trump shared these beliefs.
There has never been any doubt about what Vice President Vance believes – even his worst enemies do not deny that.
What is being defended? Is the “topic of the post” – a real description of what you are defending, how it is the “freedom and democracy” you claim it is. Otherwise further discussion is utterly pointless.
What I find disturbing is neither you, Johnathan Pearce or “Old Jack Tar” or others, seem to be condemning what has happened in Romania (the subversion of democracy – “justified” by patently absurd claims), or Poland (where people, very ANTI Mr Putin people, have had to flee for the “crime” of being out of favour with the new rulers) or anywhere else.
“Russia, Russia, Russia” is not enough – you need to explain what you are defending, how it is the “freedom and democracy” you claim it is.
Where is the Freedom of Speech and the democratic elections to allow the people to change POLICY (including to adopt policies the “international community” does not like – including the branch of the international community in their own countries, such as the unelected judges and the security and intelligence services) that you say you support?
Words are easy, actions delivering over months and years are hard and often diverted by later ‘events’.
You could say the same about most of what Trump does. After all, look at the back-and-forth over tariffs, which is then defended as “4-Day chess”.
Paul:
at I find disturbing is neither you, Johnathan Pearce or “Old Jack Tar” or others, seem to be condemning what has happened in Romania (the subversion of democracy – “justified” by patently absurd claims), or Poland (where people, very ANTI Mr Putin people, have had to flee for the “crime” of being out of favour with the new rulers) or anywhere else.
I am sure it is disturbing. You seem to be doing what you often do, which is not engage with the substance of a post, such as mine, which is about the need to avoid over-reliance on X or Y, and instead talk about how supposedly terrible Europe is. I am sure your points about Romania and Poland are true. That does not alter the substantive issue which is that European countries in general (not Poland, Finland a few others) have become dangerously exposed to reliance on US equipment and systems. That is now changing. I wanted to see what people think about that. So far, hardly anyone does. (Sorry if I sound like an irascible maths teacher where all the kids want to talk about baseball or something.)
You know me well enough Paul to know that I have no illusions about the rancid politics of Europe, including those in the EU. I voted for Brexit, and would do so again.
Look, to take a small example, at the corruption and violence of Malta, which joined the EU in 2003, and where a campaigning journalist called Daphne was blown up by a car bomb. Responsibility for that crime goes all the way to the top. She was murdered in 2017; justice has still not been fully done. Malta, as some readers might know, used to be a major UK and NATO naval and military base. Today, it plays the neutral card, but that might not be possible much longer.
Are these the “democratic countries” who conducted regime change operations in Romania, imprison vast numbers of people for speech, and refuse to cede any real power to political parties with impolite policies like the AFD in Germany no matter how much of the vote they receive in elections? Are these the same “democratic countries” who shut down civil society and implemented martial law over at most “the flu” during COVID? The list goes on and on.
How these “democratic countries” are ruled is nominally through elections but actually through mass media propaganda, weaponized deep state, NGOs, and a vast and oppressive federal bureaucracy completely unaccountable to the people.
And what does it mean “to be mean” exactly?
And what does it mean “to be mean” exactly?
Shlomo, have you been living in a desert island since the start of the year?
Trump’s pummelling of Zelensky, Canada, Mexico, comments that the EU was founded with the purpose of “screwing” the US. The list is getting longer by the day.
One thing I notice with Trump is that there is no positivity in his rhetoric much of the time. For instance, his actions have arguably made it easier for the liberals, led by Mark Carney, to win the elections in Canada. Canada has vast mineral resources; it is an important supplier of energy. Given its proximity to the Artic Circle and so on, it is important for military intelligence sharing to what China and Russia are up to, a fact that the wiser folk at the Pentagon are well aware of. But no, let’s make dipshit comments about Canada being the 51st state, and so on.
That is where Trump’s glowering sense of bullyboy gets you. It gets you into all kinds of problems, even if this oafishness has been useful in waking Europe up. It means those of a conservative political bent will want review how close they want to be seen with the MAGA approach. It is already showing itself to be toxic. That may be one of the biggest impacts of his first few weeks in office.
Oh you are referring to the reciprocal tariffs? So it’s mean when USA does it to other countries, but when other countries do it to USA it’s not mean?
Trump would happily remove all tariffs on any country once that country removes all tariffs and trade restrictions on American products. But that’s not going to happen and the “free trade” crowd loves to heap opprobrium on USA for implementing tariffs but hardly ever raises even a single word of objection when other countries do the same to USA. Many of these tariff regimes against American products have been in place for decades and have done great harm to American manufacturing and industry.
As for Mexico, the flow of fentanyl is a grave and serious issue – one that actually impacts Americans in a very serious way. The fentanyl crisis is what they told us COVID was – something that is killing Americans on a vast scale, crippling our communities, and harming our families. If it were up to me I might have already sent the 101st airborne into Northwestern Mexico to resolve the issue with force so there would be no need for tariffs to address that concern. Trump is playing with kid gloves, as usual.
Oh you are referring to the reciprocal tariffs? So it’s mean when USA does it to other countries, but when other countries do it to USA it’s not mean?
Canada and Mexico are, or were, in NAFTA, which unless I am mistaken was a free trade pact.
With the EU, I see that Trump objects to Value-Added Tax (VAT), which is a sales tax, not a tariff. He cannot even tell the difference between sales taxes – which are levied on all goods and services, foreign and domestic – and tariffs, which are levied on foreign imports.
The EU has a customs union tariff/non-tariff wall. It’s bad. The UK is, thanks to Brexit, out of that CU. But as I have noted before, even if not everyone plays nice, it is still a self-harming move to impose tariffs. It is also foolish if you turn them on and off like a switch – this volatility is hitting the equity market.
Trump would happily remove all tariffs on any country once that country removes all tariffs and trade restrictions on American products. If Trump has embarked on FTAs with that overt statement of intent, I must have missed it. Instead, he’s made it clear he loves tariffs. He thinks the US should revert to how it was under the late 19th century when the US had tariffs but no federal income tax. However, back then the federal govt. accounted for just 4% of GDP. Today, it is vastly higher. And yet Trump thinks tariffs can make the difference. They cannot without wrecking trade. He has said tariffs are his favourite word.
As for Mexico, the flow of fentanyl is a grave and serious issue – one that actually impacts Americans in a very serious way.
I am sure it is. The flow of illegal firearms to Canada is probably also quite an issue. And so on.
The problem with Trump is that he has different, often mutually contradictory reasons for tariffs, and the justifications shift all the time. One minute it is security; the next it is fairness, or the War on Drugs, or being hard on country X or Y.
“Trump is playing with kid gloves, as usual.”
Well, since the start of 2025, the US S&P 500 Index of equities has fallen about 2 per cent, wiping out the gains since Trump was elected in November last year. Those “kid gloves” need to be put into the laundry.
https://x.com/zerohedge/status/1897298757584388224
“If tariffs are so self-defeating as the “experts” claim, why are all the nations targeted by Trump so quick to retaliate [with tariffs of their own against America]”
https://www.whitehouse.gov/fact-sheets/2025/02/fact-sheet-president-donald-j-trump-announces-fair-and-reciprocal-plan-on-trade/
I am not sure if you realize the extent of the massive tariffs so many countries all around the world have had in place against American products for decades which have done immense harm to American industry and manufacturing.
I am all for free trade, but until we have that I am in favor of reciprocal trade. Just like Trump.
Look, I love Austrian Economics and I understand why you think this matters. I’ve read Mises, Rothbard, Hayek, etc.
I’m not saying it does not matter, but I am saying it is more complicated that you think. Number up is good, but the connection between the health of the stock market and the health of the American People is not super clear-cut to me. I think the primary reason why we have a different opinion on this subject is because I think that while there is some capitalism in America, there is not much and what we primarily have in USA these days is corporatism. Corporatism is not free markets.
Shlomo, the Zerohedge comment says this: “If tariffs are so self-defeating as the “experts” claim, why are all the nations targeted by Trump so quick to retaliate.”
The answer is that countries that retaliate are stupid, because they harm themselves. There is a lot of stupidity on all sides. It would be best if Europe and Canada etc had just not risen to the bait, and said that if America wants to hurt its consumers by hiking prices, so be it, but we won’t.
Yes, I saw the link about how Trump frames the case for “reciprocal” trade. I am sure there are a lot of examples of this or that country behaving badly (India has been an example of protectionism for decades). But again, note the tone of endless grievance, as if everyone is out to “get” the US.
The US has a surplus on services-based earnings with the rest of the world, and a trade deficit on manufactured goods. Funny how the services part tends to not be mentioned by those going on about the unfair treatment of the US in trade. https://www.bea.gov/data/intl-trade-investment/international-trade-goods-and-services
“Corporatism is not free markets”. I never said it was.
I know that the behaviour of stocks is not directly related, on a one-to-one basis, with how Mr Average Joe American is doing. It is a rough and ready yardstick of investor confidence (and there are far more unlisted, privately held small firms than big ones on the NYSE, etc). It is nothing more than a record of where people thought that earnings of US listed businesses were worth at any one point of time. Why does this matter in another way, however? Because if you threaten tariffs, then suspend them, then threaten them again, and so on, it creates “regime uncertainty”. It discourages firms from investing in the US, or wherever this sort of policy chaos appears to hold sway. Policy volatility is itself a cost. In insurance-speak, the premiums for US risk exposure go up.
Back to my OP: I think that the UK and other European nations will and should continue to buy and use US equipment and services; they’d be daft not to do so. What will change will be the amount of diversification and avoidance of concentration risks in the future.
Surely one of the reasons countries retaliate to tariffs with tariffs is because to not do so would lead to accusations of appeasement. Being accused of appeasement and the inevitable comparisons to Neville Chamberlain etc, especially when the the government imposing the initial tariffs is led by a man the press claim is the new Hitler, is not good for political careers.
I don’t think this is a good thing. But it is what it is.
You’re joking, right? Know what the tariff is to sell dairy into Canada?
The list of tariffs charged to US sellers sending product into Canada is long and very very high.
Define “you.” We here are quite happy with his results so far, six weeks into his term. I hear how horrible he is mostly from people outside of my country. That is entirely in keeping with the sentiment that saw him elected.
I think this is a very clumsy analysis. I think there is a lot more to this very interesting phenomenon than meets the eye.
You are talking about tariffs and the stock market as if we live in an economy primarily driven by free market capitalism, which is simply false. As a result, much of your analysis misses the bigger picture and overlooks salient factors.
For example when you say that “retaliatory tariffs are stupid” you miss the part where governments these days do not usually make decisions on behalf of the interests of their countries as a whole. Instead, especially these days, they usually make decisions on behalf of certain Special Interests and particular Commercial Interests which benefit not from free market capitalism, but rather from Corporatism which is not free market capitalism.
This is a complex subject. I am all for real free market capitalism and free trade, but that is just not the current system in place. The big money flows based on Corporatism, which is why those retaliatory tariffs are enacted. It’s not stupid if you understand the incentives at play.
In a certain sense, only in free market capitalism does a rising tide lift all ships. We live in a system driven mostly by Corporatism which is why populist movements are not harmed by tariffs as much as they would be in a real free market capitalist system.
If you think of tariffs as tax-collection or financial policy – as econ types seem to do – they’re never going to make sense.
If you think of them as peaceful international conflict, they make more sense.
No one goes to war for the day to day profits. War is a cost, as are tariffs.
They’re never going to make sense? The government does require taxes to operate. What we tax, we get less of. I think vast and powerful tariff regime on almost all foreign products would be very much preferable to the IRS. Much better to tax imports than work. America had a lot more freedom in the Gilded Age when tariffs financed large portions of the federal government before the IRS and Income Tax came into the picture.
Trump is, of course, much too weak to get us there from here, but at least he talks about it and points us in the right direction.
Bobby is of course correct from an US perspective. I think my biggest regret is for a brief moment I saw Trump doing various necessary things in USA as likely to inspire similar movements elsewhere.
But I was quite mistaken. Trump understands America & some of what he is doing will indeed benefit America. But he will also cause sympathetic & vaguely “Trumpist” movements elsewhere to be broadly discredited, which I doubt will cause even a shrug in USA (& why should most Americans care about places they can’t find on a map).
But for me, this is the downside of the abrupt end of Pax Americana, where people who rather cheekily saw the benefits of Uncle Sam’s defence umbrella as safety on the cheap, now see the USA as indifferent at best & possibly even a literal military threat (certainly the view of every single Dane I know, and more than a few Canadians). If China does not make diplomatic & frankly economic hay out of this, they are even more inept that I thought.
This is comically absurd
It is absurd that Danes who hear threats to take Greenland & Canadians who hear remarks about how they should be part of USA feel threatened?
Shlomo: I think vast and powerful tariff regime on almost all foreign products would be very much preferable to the IRS. Much better to tax imports than work. America had a lot more freedom in the Gilded Age when tariffs financed large portions of the federal government before the IRS and Income Tax came into the picture.
“Vast”!
As I said earlier up, the federal government in the Gilded Age levied a pittance in terms of the tax share of total GDP – about 4 % of GDP – and therefore that the tariff at the time did not have to be very high to bring in money. There was no Social Security, Medicare, Medicaid; the Defense Dept, or whatever they called it then, was small. There were few federal agencies; no Dept of Education, or EPA, and no IRS. Regulation was far lower than now. Union disputes could get violent, and what we call labour laws were starting. The US had no Federal Reserve; the dollar was based on gold.
A policy mix like this is not on offer. It is a shame, but there it is. To remove federal income taxes and shift the entire burden to tariffs would crush trade. Many firms that have to import stuff from abroad that cannot be easily made at home would be destroyed. The benefits of a global division of labour, and all that this gives, as Adam Smith explained 250-plus years ago, would go.
I know that Trump wants to go back to the days of President McKinley, but his interpretation of what made the US economy boom back then is mistaken. The US economy grew in spite of tariffs, not because of them.
Bobby B: The list of tariffs charged to US sellers sending product into Canada is long and very very high.
NAFTA eliminates most tariffs, or states that this is the desire. From my understanding, Trump does not want NAFTA to exist, at all.
Yes it is absurd for them to feel the USA is “a literal military threat” as you had said.
Johnathan, I notice that you continue again and again to avoid or dodge the meat of my remarks that were previously posed to you specifically, which is regarding Corporatism.
The subject of tariffs really splits into two subjects.
Low tariffs can function as targeted sales taxes, and can finance some small part of the state.
But tariffs in Trumpworld tend to be the other type – the punitive fight between nations.
We ought not mix them in conversation.
The punitive tariffs can never be considered as revenue devices, simply because – as you say – to tax something is to diminish it, and so punitive tariffs disappear if they work, because imports disappear.
Perhaps you do not realize how cheap production is in places like China and India and Africa? Labor is basically free. Significant tariffs (something like 20% tax on all or most imports) does not mean that imports will disappear or even decline all that much, and it is absurd to say that. It is true that the federal government is much too large to be financed primarily by tariffs at this time, but the idea of funding the federal government primarily using tariffs is sound, as are the ideas of firing at least 1 million federal government workers, abolishing dozens of government agencies post haste, and capping federal government spending. Just because it will not happen in our lifetimes does not mean it’s a bad idea.
Free trade definitely benefits the global economy. The benefits work out as an averaging global benefit, I think. At some certain point (say, with China-US trade), there is an average global benefit, but it does not benefit the US so much as it benefits China, and the things that it costs us land directly on us.
Trump is not a globalist, and seems to care not that the average world citizen benefits from international trade when that trade might actually be hurting the average US citizen.
I have relatives in dairy, who would love to export product to Canada. (They essentially live on its border.) But, dairy tariffs approach 300% for that trade. So, they cannot.
There are many other areas in which Canada carved out some staggering exceptions within NAFTA. Dairy is the one with which I am most familiar.
So when Trump says “one way or the other, we’re going to get Greenland”… any Dane thinking that was a threat is being absurd?
So, as you seem to know what Trump actually means, please translate for all those Danes out there less steeped in Trumpisms.
In the US, and many other countries, we have an aging populace. I’m in my eighties, and would have a hard time making it without Medicare or Social Security. I may have earned my living when younger, but I’d have a hard time getting a job now, and an even harder time keeping it. I saved up for retirement, and still have much of that – but without Medicare, I’d be living a much poorer, financially reduced life, if any life at all. The surgeries and medicines would have gobbled up a lot of my savings. I might have made it this far without Social Security – who knows – but again, I’d be poorer.
Tens, maybe hundreds of millions of citizens depend upon Medicare and Social Security. Imagine what would happen if they went away. ALL the rules would change. Yet we have more old people these days needing them, and fewer working-age people to tax for it. This cannot continue.
Tariffs? Everybody buys things, young, middle-age or old. If there’s a tariff, the money goes to the government. The income tax is less needed. Consumption is being taxed for all, rather like a sales tax. But tariffs are paid by the shipload, while sales taxes are paid by the purchase.Less paperwork for tariffs.
(Not that I’d expect a government to trim its income, though Trump will try. Might even be enough to slow the taxes down a bit. A bear can hope.)
Shlomo:
I know we have a mixed economy in much of the world; but that does not mean that making it even worse, via punitive tariffs, is a good idea. It is like saying that the world is imperfect, so let’s make it fair, but still imperfect.
I am sure that many politicians are as you say. But I am not missing this point when I note that retaliatory tariffs are stupid, because all this does is ratchet up the damage on the wider public, and this is often led by rent-seekers who make the most noise in Congress, Parliament, etc.
See my response in the first sentence above.
Well, there has never been a model of pure laissez-faire, but if you look at say, West Germany vs E. Germany, there was some corporatism in WG, and Communism in the East, and living standards of ordinary Germans skyrocketed in the West, and stagnated in the East. The pattern can be seen everywhere. It is all relative.
The best bit about Trump is his claim to be for deregulation. Let’s hope he delivers, and does push back against what Ayn Rand called the “politics of pull”, and that includes those businesses linked to the military.
Most all of the proposals I’ve seen – even the drastic ones – are going to work prospectively. If you’re in, you’re in. They will end the income cap on contributions (which is a huge step numbers-wise), raise the age to start, and begin transitioning current workers to qualified accounts.
I’ve not seen a scenario in which retirees start losing benefits. They’ll wait for us to die before they wipe it all out.
You might want to pay a smidgin more attention, then. Canada’s general elections aren’t coming around until the latter half of the year (unless they call them early.) The Liberal government never fell; Trudeau resigned. Carney won the votes of the Liberal Party to head up their government. That is, the only party that could win that election was the Liberals because being a member was a prerequisite to stand.
You’re doubtless familiar with the concept; Carney isn’t even an MP, which means he arguably has less of a democratic mandate than Rishi Sunak did.
Thank you Johnathan for responding to my points.
1. I’m talking about USA, not the world
2. I’d estimate that 80% of the capital flows and transactions in USA are based on Corporatism or Socialism. 20% are Free Market Capitalism. You can say it’s a mixed economy and you are right, but every economy everywhere in history has been a mixed economy. The problem is what the mix is – in USA we have 80% toxic sludge and 20% refreshing water
3. In the 1950s men used to be able to work in meatpacking or at an auto assembly plant or for the Postal Service as a delivery man and have a stay at home wife, own a house, raise two children, pay for college for the kids, and have enough money left over for vacations and retirement. There are many reasons why that has changed, the reasons are complex, and tariffs by themselves certainly will not bring back those days
4. You say that tariffs cause harm, but harm to who? Again, you are looking at the aggregate. GDP number go up is good, but lets not pretend like private equity firms and auto plant workers are impacted by tariffs in the same way. Yes tariffs will increase prices and prices disproportionately harm the poor and working class, but there are pros and cons to everything and tariffs will also hurt Wall Street firms and private equity firms in ways that plumbers and skilled assembly line workers will not be hurt. WE NEED JOBS. Not small increases, we need to fundamentally transform the economy in major ways. We need to gut the economy like a pig and totally change it because what we have right now is not working
5. We live in an economy that is so uncompetitive that major corporations can implement policies whereby they hire incompetent people (DEI) to important positions and spend capital in completely inefficient ways (DEI and climate change prevention) because there is so little real capitalism in this country and the corporations are completely shielded from real competition and free markets
6. The legal privileges of corporations, the tax code (full of corrupt loopholes and exemptions), the regulatory capture of the lobbyists in DC, the de facto subsidies for mega corporations, the legal rights of hedge funds, and so much more have all combined to create a toxic mixture that has mostly removed real free markets from America. These and many other policies and laws must be reversed or fundamentally changed, even though doing so will temporarily cause the GDP number to go down or at least not grow as quickly
7. The central banking system is completely corrupt and gives first mover advantages and cheap credit to major corporations while sucking the wealth out of ordinary Americans by inflating away the value of the money due to the money printing and artificially low interest rates. Again this must be reversed or changed even though it will hurt GDP
I will provide a more full response later tonight (I’m in USA) or tomorrow. For now let me just provide this important link.
https://x.com/JayFivekiller/status/1886137510289404315
Part of what I’m saying is we need an economy based around jobs, jobs, jobs, JOBS and work, work, WORK. Right now we have an economy based around capital and gdp number go up. It’s not working for most ordinary people because we have Corporatism. The way to rebalance the economy away from Corporatism and back towards Free Market Capitalism is actually by taking power away from the Corporations and Hedge Funds and Private Equity Firms who benefit from Corporatism and giving more power to the workers. Tariffs is one small step in the direction of doing that. Yes the GDP number will be hurt by this for a period of time, but it is absolutely necessary. Think of it like surgery, you do something very painful to rearrange the bones so long term the economy can grow in a more healthy, constructive way.
And when I say workers, I am talking about American Citizens, by the way.
Sure, I am happy to provide this translation service. 🙂
The translation is: “Both Canada and Denmark must remove all tariffs and restrictions on American products and pay for their own National Defense and Military. Now.”
I know that if Denmark and Canada publicly announced that they would pay for their own national defense and remove all tariffs and restrictions on American imports, Trump would stop his fun banter against those two countries and also end any current or impending tariffs against imports from those two countries as well.
Everything Trump says is part of the big picture negotiation. Also one purpose of his words is often entertainment as well. 🙂
Trump could “get” Greenland if he wanted. He’d just have to say that Greenlanders would get the same deal Alaskans do where the Federal Government pays them for being there, and then to sweeten it he’d just say that the day Greenlanders vote for independence and annexation to the US he will pay every Greenlander $500,000. There are so few of them that that would be $25 billion which, as these things go, is very cheap. Just include it in the defense budget. It is less than the cost of a new military base, and he’d get a hundred times that from the natural resources he’d acquire.
Greenlanders are poor, though I’m sure many of them would want to resist, but a large majority would jump at that chance.
Now, don’t get me wrong, I’m not at all saying he SHOULD do that or that he could make it happen legislatively. But certainly he could have Greenland if it wants it and is willing to make it happen.
It seems he has already largely wrapped up the Panama canal by getting the two ends owned by BlackRock. Again, I think BlackRock is a loathsome company, but it is American and subject to American law. This is once again an example of Trump getting what he wants even if not exactly the way he said he’d get it. I think I mentioned earlier, on the southern border he built a wall and Mexico is paying for it. It is not built out of brick or steel but out of the Mexican army, but it has the same ultimate effect.
And can we just talk about Elon Musk. He has put his whole business life on the line and is under unbelievable threat because he believes in the need to get government spending under control. I believe Perry called him “dismal”. Me? I think he is an all American hero.
This administration is like nothing I have ever seen. I know a lot of you hate it for his policy on Ukraine. But as for the rest, it is jaw dropping what they are doing.
Since I am fan-boying the new administration, let me tell you one thing that I think is a sleeper. I don’t know if Trump can get it through the legislature, but this Gold card idea is one of the most innovative ideas in government I have heard. Trump says he can sell about ten million of them. He is probably overplaying it, though over a ten year period, maybe not (especially as companies are trying to buy AI talent from every corner of the globe). But consider that if he is right, that is more than enough to entirely pay off the national debt with cash to spare. If that is combined with Elon’s efforts to balance the budget, (which is a lot easier if you aren’t paying a trillion dollars in interest every year) we are looking at a completely different situation in the United States. A debt free America, with a balanced budget. OMFG! Who would have thought that was possible, even in our wildest imaginations?
He is probably exaggerating, but who would have ever thought in America we’d see streams of civil servants being kicked out of their make work, make trouble for others, jobs. Or seen the mass cancelation of fraudulent contracts. Or see a politician promising to cut “waste, fraud and abuse” and actually do it. And doing all these things while seemingly to manage his popularity for the mid term elections.
Like I say, I find the whole thing surreal. And he hasn’t even hit 100 days yet.
Not a fan of some of his ideas, but he has earned a lot of slack, in my opinion.
Johnathan I did see a reply to my comment from you about three hours ago in this thread but it has vanished!! Before it disappeared I did skim it and it looked like a very well thought out reply, even including a reference to the Cantillon Effect. Please bring it back!! Haha 🙂
These are the kinds of thoughts and comments I hear from about 75% of my friends/acquaintances who voted for Trump in 2024. So yes I do agree with Johnathan that MAGA has turned into something of a Trump cult.
Daily deportations were higher under Biden and Obama than under Trump thus far. The federal government is going to spend way more money this fiscal year than last fiscal year. And not a single person has been imprisoned or even prosecuted for 2020 election theft, Russia Collusion Hoax, Hunter Biden laptop coverup, January 6 false flag, illegal Mar-a-Lago raid, or the crimes against humanity committed during COVID. Where are the mass layoffs of government workers? USAID and Department of Education are not even abolished, for Christs sake. There should be 50 federal agencies abolished already and he has not abolished a single one.
What a fucking joke.
Don’t get me wrong. I support about 80% of what Trump has done, but almost everything he has done has been NOT NEARLY STRONG OR EXTREME ENOUGH. Just weak, pathetic, meek actions from Trump. But NYT and CNN cry tears and scream about “the end of democracy” and as a result MAGA voters think we are winning.
It’s all so tiresome.
An economy based around… jobs? Only way to do that is government mandated jobs. Or force people to use smaller shovels so you need more jobs in which people use shovels.
Like most statists, you fail to understand jobs are a cost, a consequence of the need to do productive work, not an objective in and of themselves.
Shlomo, I cannot restore the comment and don’t know why it got zapped. Maybe by a MAGA hacking op.
The Cantillon Effect is something that explains a good deal of why there is this entirely unhealthy relationship between modern finance, and central banking.
Edward Chancellor’s The Price Of Time, published a few years ago, is also a brilliant summation of why political interference with interest rates is bad, such as encouraging zombie corporations, which in turn reduces productivity growth, healthy disruptive competition, and hampers growth in real income.
I mentioned A Theory of Money and Credit by Ludwig von Mises. A tough read, but worth it.
Perry is correct that jobs are a cost, not the point, of business. As he said, on this jobs idea, we might as well hoe fields by hand and send messages by carrier pigeon.(Imagine running Samizdata that way. Imagine the pigeon shit.)
The US has a slight overall surplus with the EU on services, and as I said, this fact tends to be overlooked. That is another case of how we seem to be hardwired not to “see” wealth unless you can hit it with a hammer or eat it. Marx’s central economic notion, the labour theory of value, is based on this fundamental mistake.
I also remember making the point that the Federal US govt. spending as share/GDP is far higher than in Trump’s favoured era after the Civil War, when it was 4%. Tariffs were more or less tolerable then, if not great. Now, given all the spending, they’d be murderously “vast” (god help us). Even if Musk can sack a lot of people (we will see how that works), it is not enough. Entitlement programmes aren’t on the table – yet. And the ex-Democrats who switched to the GOP may have something to say about that.
Anyway, markets continue to drop in the US. Gold is up 35% over the latest 12-month period. Better than bitcoin, in my view, if you want a safe haven from all this.
You are correct that daily deportations were in fact far higher under Obama and Biden, which is why one needs to cut through tribal loyalties to see what a government actually does. With Mr Trump, avoid the circus, and see the data. Another example is how, under the late Jimmy Carter, several sectors such as airlines and trucking got deregulated, and JC put Paul Volcker in the Fed with the goal of killing inflation.
I am going to leave this thread now.
Week 7: Failed presidency!
In another view, a job is someone selling their own product – maybe labor – to a willing buyer.
Which wouldn’t seem to differ much from someone higher on the chain selling their idea to a willing buyer.
Every sale represents someone’s cost.
Well, I am talking about the stupidity of tariffs more broadly. Trump wants to increase them and add them, and other countries are dumb enough to reciprocate. So it is a world problem. The global trading pie gets smaller, and most of us lose.
Whatever that mix is, imposing tariffs only makes the mix even worse. Corporatism gets worse, because tariffs reinforce lobbying power, and all the rent-seekers of Washington, Brussels and so on get more chance to strut their stuff.
The last sentence is correct. I am not sure we want to over-romanticise the 50s, however. College tuition, to take one example, was relatively inexpensive, as was childcare. The US had that big post-war jobs and growth expansion. Life was good: provided you weren’t in the South, with all the various problems of the time.
Those forced to pay more than they otherwise would for, say, steel. Intermediate manufacturers‘ input costs go up. Taxes are a cost, so raising costs will have an impact. The economy adjusts, with more focus on producing things other than what would have been done before. The global specialisation that has been a big driver of wealth growth since the end of the Berlin Wall begins to reverse or slow down.
So don’t impose tariffs and create even more mollycoddled firms, then. Also, and this is a point that Paul Marks repeatedly, and rightly, makes: don’t allow the “zombie” corporations to stagger on thanks to a diet of ultra-cheap money created by central banks. Higher interest rates will discourage the temptation to engage in financial engineering, and instead have to focus on building profitable services and products, or go bust. What Schumpeter called the “creative destruction” of capitalism needs to let rip.
In many ways, a large challenge for many countries – as this excellent book outlines – is how to retain the beneficial effects of the “creative destruction” of capitalism without surrendering to those who want to stop it, for reasons of vested interest. That’s why some form of public safety net is important; it is why the focus should be on competition, innovation, ease of doing business, and the like.
You are talking about the “Cantillon Effect”. I am familiar with this; it is indeed a major problem.
You mentioned Austrian economics a bit earlier. Ludwig von Mises’s “A Theory of Money and Credit” is a book I recommend, although not an easy read. Detlev Schlichter’s Paper Money Collapse is also very good and a bit more accessible.
On your point about Denmark, bear in mind that Denmark is part of the EU. According to data from the EU, when goods and services are taken into account, the EU has a small surplus with the US of €48 billion; this is the equivalent of just 3% of total EU-US trade (€1.6 trillion).
Denmark spends about 2% of GDP on defence; it should do more, but that seems a bit of a thin basis to demand a drastic increase on pain of a self-destructive tariff.
As I have noted before, Trump’s behaviour on tariffs is causing great commotion in the global economy, and it is starting to really hurt the US economy. Markets are down again today.
I don’t see this as entertainment. Trump is president of the US. If he wants to be entertaining, he can always go back to fronting those wrestling matches, the Apprentice, or whatever other gaudy stuff takes his fancy.
There’s a saying: Politics is showbiz for ugly people. Truer words never said.
I’ll simply note that, after Trump imposed the 25% tariff, and Canada reciprocated with the tariff on electricity to (among other places) my home state of Minnesota, Trump immediately raised his tariffs on Canada, and . . .
Canada blinked, and dropped its new tariffs. Our representatives got together, and it sounds like everything is ironed out.
Once again, Trump’s tariff warfare worked.
Is that a good thing, Fraser? Or at least, something worthy of celebration?
I mean, we’re talking about real people here who are losing their means of survival.
It’s just…I dunno, it just doesn’t strike me as something to be cheering on. On an abstract level (and I’m not a libertarian of the silly-arse “NiGhtWaTcHmAn state” type, I’m a full-blown anarchist), I sort of get it, but…are the people cheering this on making provisions for those people? Are they helping them cope with a sudden loss of livelihood when more-or-less everything else that prevents them from starting up again is still in place, or are they just…I dunno, supposed to starve?
Like, there’s a reason why there’s a distinct order in which we undo the state, and it doesn’t start with putting people out of jobs without a safety net, it starts with undoing the things that stop people from surviving on their own merit (land back etc)
@neonsnake
Is that a good thing, Fraser? Or at least, something worthy of celebration? I mean, we’re talking about real people here who are losing their means of survival.
Yes, it is. The government is full of people either doing very little, or doing things that are quite harmful. So, they have to go one way or another. It means that these people for whom you express concern (and I thing anybody losing their job deserves compassion), can go do work that is actually positive, and makes other people’s lives better. And the government has been ridiculously generous in their severance packages. Most people get a couple of weeks, these people are getting in some cases ten months.
People who don’t contribute anything useful need to be let go. It is part of the process of any industry. The government is not a society for the employment of the useless, or the oppressive. I have fired lots of people from my companies for far less cause. I have also faced the economic reality of “reduction in force”. None of them died. Those that kept in touch went on to find more suitable employment.
Will the big scythe take out some of the actually useful people. Most likely, but we are so far beyond the surgical scalpel that we really have no choice if we wish our government to survive.
What I celebrate is not that Sally or Jimmy lost their job. What I celebrate is the reduction in the capacity of the oppressive state to oppress. What I celebrate is the reduction in the cost of government to the tax payer. What I celebrate is a step, however small, toward a balanced budget. These are worthy of a big cake and a piñata.
Yes.
For decades people in the private sector have lost their jobs for all kinds of reasons – employer struggling financially, economic downturn, bad work performance, restructuring, industry changes, etc. Private sector workers get fired all the time and have to find a new job. Meanwhile, the bloated federal bureaucracy never fires anybody decade after decade after decade. Bureaucrats have cushy jobs that are hardly productive at all, in most cases contribute very little value to the economy, and barely ever lose their jobs no matter how terrible their performance is.
What disappoints me is that Trump is not firing en masse. Just these small targeted firings, not large scale layoffs which is what SHOULD be happening in order to lower spending, reduce bureaucracy, lower regulatory burden on private industry, make government smaller, and eliminate unconstitutional functions of the federal government.
Neonsnake: No, it’s not a good thing.
But it’s no worse than wiping out the coal miners, or career soldiers, or conservative teachers and professors, or any other group who has suffered through creative destruction with a political bent.
And there’s enough of a revenge feeling going on here such that I cannot get overly concerned. And I have a cousin I like who is at the Dept of Ed.
Well, WAS at the Dept of Ed.
Did all those bureaucrats care about all the people whose livelihoods were destroyed by the covid lockdowns and vaccine requirements? Did they fight tooth and nail to prevent those things, or did they cheerlead for them and happily implement and enforce them?
Bob – yeah, I get that, brother. Those were “first order” government decisions, that destroyed the abilities of groups to provide for themselves, and I 100% agree that they should be called out (and you in particular know why I think this, and it’s causes, and how ferociously I attack this).
I guess I’m just worried about the “revenge” side of it – I mean, I don’t believe that Fraser himself is celebrating James or Jimmy or Jane or Sally losing their jobs, and going through an awful time – and anyone who has lost their job at any point knows what’s that like – but there is an element on here right now of “you know what, FUCK ’em” – like, as if the people working for, say, NOAA had any meaningful weight in lockdown discussions (lmao etc it was Trump who was in charge at the time, obvs, and Republican states locked down just as hard, if not harder and this is factually true than Dems, if you wanna go Party Line on this one).
Fraser mentions removal of the “oppresive state” – something I’m very much in agreement with – but so far, I’m not seeing removal of the oppressive branch of the State, I’m seeing removal of the “second order” part of the state – the part that has been fought for by “subjects” to keep the State in line.
I dunno, it’s a bit like Milei – I’m not sure if he’s bought and paid for, or just stupid (the two aren’t mutually exclusive, obviously), but his reforms are totally backwards-arse, he’s removing safety nets before removing the privileges that prevent/block people from creating their own businesses. So far, I’m not seeing anything different under Musk’s so-called “efficiencies”, most of which have been fact-checked so hard that he’s had to withdraw them.