What do you think about the trade war raised by Mr. Trump?
Right now it’s tit for tat: we lay a $50M tariff on China; China lays a $50M tariff on the US. Rinse. Cycle. Repeat.I haven’t yet heard any of the talking heads commenting that China is the third biggest buyer (after the US and Japan) of US Bonds that the US issues every year to finance our budget deficits.On November 7, 2016, the US had a combined total gross national debt of $19.8 trillion (about 6% higher than the previous year.)As of December 2017, $6.3 trillion or approximately 45% of the debt held by the public was owned by foreign investors, the largest of which were Japan (about $1.06 trillion) and China (about $1.18 trillion).[NOTE: the two above cited amounts and distribution of the national debt don’t jibe—blame WIKI.]Putting aside the inconsistencies above, what do you suppose will happen if the Chinese don’t show up at the next US Bond auction or, worse, start cashing in debt they already own ? Blow a hole in the budget, maybe? The US will either have to radically cut programs—bye, bye SSI, Medicare; medicaid; hello, Ayn Rand—and have to print more money and buy even more of its own debt [See “biggest buyer (after the US and Japan) of US Bonds” above.] Printing money willy nilly is not a good idea. And the US already prints and borrows too much money.For the full fiscal year, Treasury now projects the annual deficit will near $833 billion, and then $984 billion in fiscal 2019. [US monthly deficit largest in 6 years] If China doesn’t buy our debt, those numbers only get worse.Stop worrying about higher prices for electronics, steel, aluminum, et al. Doomsday scenario? hyperinflation, recession, falling value of the US dollar making our balance of trade even worse, and devaluing US Bonds already held by other entities resulting in further diplomatic fallout with China and with all the other buyers of US debt. All of it making things even harder to finance our deficits. A vicious cycle.We need someone with serious economics chops to fill this out; I can’t go any further using what I know (or lack thereof.) It’s not pretty.
What do you think about WTO??
IMHO, i think that WTO is just one of the factors which help make the global economy more viable. Fundamentally, they aim to eliminate trade barriers across the world to facilitate international trade. Currently, I think that this applies more to the developed countries. DCs are currently using protectionistic barriers to trade so as to gain short-term benefits. With the aid of WTO, trade liberalization will lead to long-term gains from trade, such as increased world output, according to the theory of comparative advantage. With respect to the LDCs, there's the IMF and World Bank which loans funds to aid their economic and social development . In their case, I think that not only do they have to get out of national debt and set up the infrastructure; individual economies and banking systems have to undergo major restructuring before they are able to benefit from free trade in the long-term.