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Rolling The Dice
Donald Trump says sweeping tariffs and draconian immigration curbs wouldn't rekindle inflation across the US economy. I almost -- almost -- believe him. Not because he has a plausible explanation for why textbook economics is wrong about his policies (he doesn't), but rather because I distrust textbook economics.
To be clear, huge levies on imports are a de facto consumption tax and if you close the doors to cheap labor and deport the cheap labor that's already here, you shouldn't be surprised
The mass deportation of somewhere around 20 million people is an incredibly impactful economic event. Not only do you create a cheap labor shortage but you also reduce the number of consumers impacting overall demand. That would probably create a deflationary effect early which of course Trump will brag about and use to troll anyone who opposed this plan. However the deflationary impact would eventually crush small business reducing competition across markets. That reduction in competitors compounded with offshore tariffs would then bullwhip inflation much higher, now crushing medium sized businesses dependent on now more expensive supply chains. Unemployment skyrockets as firms close, demand further drops due to lack of economic mobility for lower and middle classes and by the time the man dies, so too has the peak of American economic superiority.
But hey, at least we got rid of a bunch of brown skinned people and women’s rights, right?
“Republican” voters having selective memories and their leaders leaving huge messes for Democrats to clean up, are the hallmarks of our time.
Yes ‘facism’ is risky. the article discusses that nobody knows the et of tariffs. That’s only partially true. It really depends on the “incidence” of the tariffs. Trump’s proposal is broad based. Items we manufacture here as well as import face one outcome. Items we only import and don’t make face a different outcome. But to a greater or lesser degree prices will go up. Exporters to the US will absorb some of the increase depending on this fact and how elastic demand is for the particular good. The result will almost surely be higher prices and lower investors in the US. Someone somewhere will pay and some of it will surely be US consumers.
Trump inherited a solid economy from Obama and juiced it with tax cuts and $7 trillion in deficit spending. Works every time.
I’d be curious to hear your perspective on what happens if Trump installs puppets at the Fed to force rates down? I know it’s all speculation at this point and Erdogan is an example albeit a poor one since Turkey obviously doesn’t issue the world’s reserve currency.
Well, remember, his Judy Shelton and Stephen Moore idea(s) failed miserably.
Trump was still running for re-election that time. Wait until his supporters personally blame Jerome Powell and the rest of the Federal Reserve for being the reason they can’t afford houses, and being reminded that if Trump himself controlled interest rates they could get 2% mortgages, and maybe it’s time to take up arms against the elitists on the Fed board…
Surely Trump would never agitate his supporters to do anything violent in the service of his personal goals, right? And surely Congress would stand up to him again and not let him instill his puppets on the board, right? Ha, Ha!