Quote:
Originally Posted by nerv14
lol if you read my post you would see that I am starting to agree with you that a tariff would not work on low cost products that don't require much education or capital investments. Good explanation of the benefits of a general tariff, I was trying to figure out how much money would be saved in the economy but I had no idea.
I just saw in national geographic that it takes the average Chinese industrial worker 6 months to get enough money to buy a Thomas the Tankengine set, so we aren't able to compete in that, so I have basically given up on the benefits of a general tariff. Now I am thinking about a sellective tariff to start getting a niche in the global market.
That is just a thought, if a tariff and an export substidy was used in an industry like airplanes, than we could export more and get a more positive trade balance.
Since you have a degree in economics could you answer this question: If the dollar declines in value to a point when there is no trade defecit would the cost of those products be the same if a general tariff was enacted to when there would be no trade defecit. I have asked this question and no one has given me an answer, it seems that the problems with a tariff will happen regardless if we want it or not. The money gained from a tariff could than be used to substidy exports.
There is obviously other effects that will cause even more inflation than a weakened dollar but I am just saying that a weakened dollar would contribute to inflation. I just saw a new thread about how China is dumping our currency because it is losing lots of its value and that is causing inflation. Are you saying that there will not be inflation if the dollar loses its value compared to other currencies?
Well for starters the definition of inflation is pretty much the reduction in value of 1 unit of currency.
I was thinking that there would not be that inflation, Americans could travel, and we could focus on certain industries if we used a sellective tariff and substidy instead of just allowing the dollar to lose its value.
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It's a little more complicated than that. If you look at the inflation we are experiencing now, most of it is strictly due to the cost of oil and the pressure it is putting on businesses to raise their prices. It's resource based inflation. Now part of this inflation is due to a lack of confidence in our market because people are spending more than they are producing (making in money).
"I just saw a new thread about how China is dumping our currency because it is losing lots of its value and that is causing inflation. Are you saying that there will not be inflation if the dollar loses its value compared to other currencies?"
When money is dumped into an economy it will decrease the value of currency. Money is simply a representation of the goods and services we produce. You can look at it this way.
Let's say a country's GDP is 1 million, and they have 1 million pieces of currency. 1 piece of currency represents 1 piece of GDP. Now let's say that government prints 1 million more pieces of currency that instant with a GDP of 1 million. Now each piece is 1/2 of GDP and the purchasing power of each is half of what it was before. Since our market is shaky now you have people cashing in and flooding the market with dollars. Likewise even with no additional increase in currency, if GDP falls or the confidence in growth falls then you will see a drop in value of the currency as well, which is also what we are seeing.
Well we do subsidize the production of airplanes just like Europe does with airbus. We also export products that are capital intensive. The main issue with our economy isn't that we don't have a broader range of production, it's that we have a credit craze and other countries are typically the producers. If we were to produce locally the same issues would occur if people overstepped their budget.