More on tariffs. Moron tariffs Thursday, Dec 13 2018 

We often have written about the giant misunderstandings regarding tariffs.

Many (most?) people believe import tariffs benefit America by:

  1. Protecting Americans’ jobs
  2. Providing the federal government with dollars

This is not even laughably wrong. It is tragically wrong.

To paraphrase the comedian, Henny Youngman, “Take this article, please”:

US reaps more than $1.4 billion from steel and aluminum tariffs, report finds
By Stephanie Dhue, Kayla Tausche, Published Mon, 13 Aug 2018

*Between March 23 and July 16, the U.S. collected $1.4 billion from levies on foreign imports of steel and aluminum.
*That figure could reach $7.5 billion this year, based on last year’s import levels.
*Tariff revenue is impacted by Commerce Department exclusions and President Trump’s change of heart.

In less than five months, the Trump administration has collected more than $1.4 billion in new revenue from steel and aluminum tariffs, according to a recent report prepared for members of Congress.

The Congressional Research Service estimated that, between March 23 and July 16, the U.S. reaped $1.1 billion and $344.2 million from levies on foreign steel and aluminum, respectively.

Those earnings are on the rise as trade negotiations with allies linger on and President Donald Trump moves to hike tariff rates on countries like Turkey.

CRS says the new tariffs could reap the U.S. some $7.5 billion$5.8 billion on steel and $1.7 billion on aluminum– based on last year’s import levels.

Whom do you think will pay that $7.5 billion? Not Turkey. Not Canada. Not China. Not any foreign nation.

The answer: You, the American consumer, will see $7.5 billion taken out of your pockets, and transferred to the U.S. government, where all $7.5 billion will be destroyed.

That’s right, destroyed. As soon as those dollars hit the Treasury, they no longer will exist as part of any money-measure. The government doesn’t need or use those dollars.

To pay creditors, the government creates brand new dollars, ad hoc. Paying creditors is the only method by which the government creates U.S. dollars. 

Those federal tariffs constitute a $7.5 billion tax on the American economy, a net loss for the private sector and a net gain for no one.

Just as a tax cut is stimulative, a tariff not only is recessive, but it also is inflationary, as it increases prices.

Trump has suggested the tariffs – originally unveiled as a national security provision – could have the added benefit of reducing the federal deficit, which rose to $77 billion in July, wider than the July 2017 budget deficit of $43 billion.

And the Treasury’s borrowing to fund government operations is set to top $1 trillion this year for the first time ever.

There are only two ways to reduce the deficit: Increase federal taxes and/or cut federal spending. Both are recessionary. They reduce the number of growth dollars coming into the economy.

A growing economy requires a growing supply of money. Reducing the deficit is the worst possible act if one wishes the economy to grow. 

Red line shows changes in federal debt. Reductions in debt growth lead to recessions (vertical gray bars) by taking dollars from the economy. Increases in federal debt growth cure recessions by adding dollars to the economy.

Because of Tariffs we will be able to start paying down large amounts of the $21 Trillion in debt that has been accumulated,” Trump tweeted on Aug. 5. “At minimum, we will make much better Trade Deals for our country!”

As usual with Trump pronouncements, this is false. Tariffs do not in any way help pay down the federal debt.

The debt is paid down by returning the dollars that already exist in Treasury security accounts. No taxes are used for this.

And in any event, paying down debt causes depressions.

1804-1812: U. S. Federal Debt reduced 48%. Depression began 1807.
1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819.
1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837.
1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857.
1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873.
1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893.
1920-1930: U. S. Federal Debt reduced 36%. Depression began 1929.
1997-2001: U. S. Federal Debt reduced 15%. Recession began 2001.

In short, while tariffs may protect a relatively few jobs in a chosen industry, they cost jobs overall by being recessive and inflationary. 

Taking $7.5 billion from the economy in an attempt to save jobs is moronic.

Rather than destroying $7.5 billion, the government could, if it wished, support those chosen industries by:

  1. Reducing their taxes
  2. And/or buying from them
  3. And/or giving them money

Though we have come to expect moronic ideas from Trump, we also receive the same moronic ideas from “respected” sources. For instance:

What to learn from Trump’s accidental tariff success 
THE WEEK, Ryan Cooper

President Trump’s economic choices over the last two years have been terrible. When he wasn’t busy shoveling vast piles of cash into the suppurating maw of the top 1 percent, he busied himself starting a flailing trade war with China and Europe.

So far, so good, but why is that trade war failing? Because all trade wars fail.

However, there have been some accidental side benefits. The tax cuts provided a bit of badly needed fiscal stimulus that jolted the economy half-awake (despite being otherwise monstrous policy).

Right. The tax cuts are stimulative, because they add dollars to the economy. Unfortunately, the primary benefits of Trump’s tax cuts went to Trump and his rich pals.

And, as an Economic Policy Institute report details, his tariffs on aluminum have restored some employment and production in that sector.

Whereas nearly the entire American aluminum industry had vanished between 2010 and 2017, after tariffs went up in March of this year, production is up 67 percent, three smelters have been reopened, and one has been expanded, resulting in 1,000 new jobs and $100 million in new investment.

Taking billions from the economy does not create “new” jobs. It shuffles jobs from one industry to another, while costing the economy money and inflating the price of all things made with aluminum.

Not that tariffs are always and everywhere good, but they can be an important tool for managing trade and the economy.

Tariffs are taxes. Taxes are not a tool for managing the economy; they are a tool for shrinking the economy.

Sure, some tariffs have been pretty lousy or misguided. For instance, the Smoot-Hawley tariffs of 1930 at a minimum utterly failed to cure the Great Depression — and quite possibly enabled a protectionist race to the bottom that ultimately worsened the situation.

Tariffs, being taxes, cannot cure anything. As you have seen from the above data, recessions are caused by reduced money growth, and are cured by increased money growth. Taxes (tariffs) take dollars from the economy.

But, free trade (especially of capital) under a fiat currency regime can fuel devastating financial crises just as it did in the 1920s.

The depression of 1929 was caused by ten years of federal surpluses (taxes exceeding spending).

What the world and America need is a global trade regime that allows poorer nations to get started on the development ladder, but without creating (politically disastrous) severe trade imbalances, or requiring the United States to run a gigantic trade deficit until the end of time so nations can settle their international accounts.

Utter nonsense. “Trade imbalances” (i.e. more money leaving a country than entering it) are no problem for a Monetarily Sovereign government. Such a government creates its own sovereign currency at will, and at no cost.

The U.S. consistently runs trade deficits, which actually are beneficial. Trade deficits allow the federal government to obtain valuable goods and services in exchange for dollars they produce at the touch of a computer key.

Past Federal Reserve Chairman Ben Bernanke: “The U.S. government has a technology that allows it to produce as many U.S. dollars as it wishes at essentially no cost.”

This is discussed further at: Questions about the trade deficit illusion. Do we even have a trade deficit?  Monday, Dec 10 2018

A world trade system like Bretton Woods (but better) would be best — but tariffs can absolutely be part of such an effort in the meantime.

Bretton Woods was the last of a series of gold standards which inevitably fail because they tie money creation to the availability of a physical chemical. Nations that are short of gold cannot grow, just as nations that are short of money cannot grow.

For the author, Mr. Cooper, to mention Bretton Woods favorably, demonstrates an abject ignorance of economics.

Trump’s tariffs show they do pretty much exactly what they say on the tin: change the price structure to make domestic production more feasible.

No, tariffs cost both people and nations money, and have zero positive value.

It’s long since time China (and Germany, for that matter) rebalanced its economy to be less export dependent.

Cooper does not even understand that Germany is monetarily non-sovereign. It cannot create its own sovereign currency at will, as it does not have a sovereign currency. So Germany, and all euro nations, must be net exporters (i.e import money) to survive.

The U.S., by contrast, does not need exports in order to import money. It can create its money at will.

As John Maynard Keynes suggested, a trade system favoring neither surpluses nor deficits is a much more sensible way to structure the global economy.

“A trade system favoring neither surpluses nor deficits” would be a zero growth trade system.

Bottom line: A Monetarily Sovereign nation should not levy tariffs, ever. It can encourage any of its industries and their jobs, if it wishes, simply by supporting those industries financially.

A tariff is a tax. Just as a tax cut is stimulative, a tariff not only is recessive because it takes dollars from the private sector, but it also is inflationary because it increases prices.

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell


The single most important problems in economics involve the excessive income/wealth/power Gaps between the have-mores and the have-less.

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.

Implementation of The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:
1. Eliminate FICA

2. Federally funded medicare — parts a, b & d, plus long-term care — for everyone

3. Provide a monthly economic bonus to every man, woman and child in America (similar to social security for all)

4. Free education (including post-grad) for everyone

5. Salary for attending school

6. Eliminate federal taxes on business

7. Increase the standard income tax deduction, annually. 

8. Tax the very rich (the “.1%) more, with higher progressive tax rates on all forms of income.

9. Federal ownership of all banks

10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.


Are you paying for Trump’s tariffs? Saturday, Jun 2 2018 

It takes only two things to keep people in chains:Image result for treachery

The ignorance of the oppressed
And the treachery of their leaders


A May 31, 2018, CNN headline began: Trump hits allies with metal tariffs.

Why should you care? Aside from the fact that the headline claims we are hitting our own allies, with Trump as president, we really don’t have allies anymore, do we?

And the rest of the headline is: “Mexico, EU, and Canada vow to retaliate.” Well, that “retaliate”  word doesn’t sound very good. It sounds like war.

But Trump has assured you that, “When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win.

Thus, you are faced with four questions:

  1. Are you actually paying for Trump’s tariffs?
  2. Do tariffs help domestic industries grow?
  3. Is the U.S. losing many billions of dollars on trade?
  4. Are trade wars good and easy to win?

The CNN article tells us:

President Trump is imposing steep tariffs on steel and aluminum from three of America’s biggest trading partners — Canada, Mexico and the European Union.

The trade penalties, 25% on imported steel and 10% on imported aluminum, take effect at midnight, Commerce Secretary Wilbur Ross told reporters Thursday.

Who will pay for those tariffs? It’s a trade war,  and in any war, you assume your government is shooting at the enemy.

In this case, the “enemy” is Canada, Mexico, and the European Union.

Image result for backwards shooting gun

Shoot at your own people

So you may assume that Canada, Mexico, and the EU will pay those tariffs, right? Wrong.

  1. Are you actually paying for Trump’s tariffs?
    A trade war is not like any war you ever have known.

    In a trade war, your government shoots at you, because it is you who pays the tariffs. Canada, Mexico, and the EU will not pay one cent.

When the imported products arrive in America, they arrive with their usual price.

Then the U.S. government adds a tariff to that price, and that increased price is what you pay.

Steel and aluminum are used widely: Cars, planes, appliances of every type. Are you thinking of buying a car, house, a refrigerator, a TV, a computer, a phone, any canned good?

Even your gas and oil will cost more because the oil industry and energy utilities use steel and aluminum extensively.

Steel and aluminum prices affect almost every product and service you buy, so prepare to pay more here, more there, more everywhere.

2. Do tariffs help domestic industries?
Existing American factories cannot supply U.S. needs. So new factories would have to be built and/or old factories be re-opened.

But consider the realities. Trump changes his mind, minute-by-minute. Would you invest millions or billions of dollars, and years of effort, to build a new factory, or to re-open old ones, when tomorrow Trump might decide that, “No, there won’t be tariff increases”?

At best, current factories might be able to ramp up production somewhat, which will increase profits but have a negligible effect on employment. More likely, they simply will raise prices, because they won’t have to compete with foreigners.

Meanwhile, U.S. manufacturers who use aluminum and steel will have to keep importing and paying the duties. That will require them to cut profits or raise prices, both of which will negatively affect Americans.

Even if an American manufacturer buys from domestic steel mills or aluminum smelters, those companies would raise their prices because they wouldn’t have to worry about competition from low-priced imports.

Under any circumstances, you would pay more, while the federal government takes dollars out of the private sector. No matter what happens, there would be scant benefit from a trade war and substantial punishment to the American economy.

3. Is the U.S. losing many billions of dollars on trade?
When Trump says “the U.S. is losing many billions of dollars on trade,” he means the U.S. is running a “trade deficit.” But a trade deficit is not the same as “losing” dollars.

Related image

The man receives money; the woman receives food. The woman is running a “trade deficit,” but neither one is “losing.”

When you shop at your local grocery store, you give them dollars and they give you goods and services.

In reality, you run a trade deficit with that store, but do you consider that to be “losing money”?

When you buy shoes that were made China, you run a trade deficit with China, but are you “losing money”?

Would you prefer not to run a trade deficit with your grocery store, and instead grow or manufacture all your groceries, yourself?

The vast majority of Americans would answer “No,” to both questions. We buy from foreign nations because the things we buy there either are better or cheaper, or both.

It benefits us to buy better and cheaper goods and services.

Further, when dollars flow out of the U.S., this is no problem for our Monetarily Sovereign government, which has the unlimited ability to create dollars.

Ben Bernanke: “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.”

Sending dollars to Canada, Mexico, the EU, China, et al, does not make the U.S. even one cent poorer. It merely strengthens the dollar’s position as the world’s go-to currency.

That is why, for many years, the U.S. has been able to run billions of dollars in trade deficits, with no adverse effect on our economy. In fact, our economy has grown massively.

Being Monetarily Sovereign, we can continue to run trade deficits forever, and the only result will be that we will receive better, and/or less expensive, products and services than we can produce domestically.

4. Are trade wars good and easy to win?
For the U.S., a trade war is stupid. There is no better way to say it. Stupid.

The Democrats know it. The Republicans know it. Our foreign friends know it. Our foreign enemies know it. The vast majority of economists knows it. Only Trump seems not to know it.

He likes conflict, especially when he can bully others, so he has begun an “I-can-cut-off-America’s-nose-faster-than-you-can” trade war.

Contrary to Trump’s statement, trade wars are not good, and no one wins.

Imagine, for instance, that Trump “triumphs” over China, and China agrees to reduce its deficit with the U.S. It can accomplish this in two ways: It can sell less to us and/or it can buy more from us.

If it sells less to us, we either will have to buy elsewhere (which makes no change in our trade deficit) or we can make the goods ourselves. But if we were able to make those goods better, or at a better price, we already would be doing so.

We either will have to settle for higher prices or for lower quality.

If China buys more from us, that means China will send us more dollars than it previously had.

But the U.S. does not need more dollars from China. Being Monetarily Sovereign, we already can create unlimited dollars.

The irony is that the GOP wants China to send us more dollars by purchasing goods and services, but does not want China to send us more dollars by “lending dollars” to us.

The GOP worries about the federal “debt” to China, which is nothing more than China converting yuan to dollars, then depositing those dollars into U.S. Treasury-security accounts.

If China were to increase its purchases from us, that would increase the U.S. dollar supply in the same way that federal deficit spending does. But the GOP worries (wrongly, as it turns out) about increases in the U.S. dollar supply causing inflation.

So, in actual effect, the Trump/GOP debt hawks support the same thing they oppose: An increase in the U.S. money supply.

In summary:

1. Trump’s tariffs will cost you money.
2. Trump’s tariffs will not help domestic employment or businesses.
3. The U.S. is running a trade deficit, but it is not “losing many billions of dollars on trade.”
4. Trade wars not good and not easy to win. No one wins a trade war.
5. In the unlikely event a trade war is “successful,” i.e. adds dollars to the U.S. economy, it does nothing the federal government can’t do without costing Americans higher prices and a poorer selection of products.

After failing to destroy health care for the poor and middle income groups, and failing to make Mexico pay for his wall, Trump is desperate to claim an accomplishment that people care about.

Unfortunately, all he will accomplish is inflation, a poorer availability of products, and job loss.

Now you understand why American banks no longer will deal with Donald Trump, and before he became president, he and his family were forced to go overseas for business funds. He is not trusted by anyone.

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell


The single most important problems in economics involve the excessive income/wealth/power Gaps between the have-mores and the have-less.

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.

Implementation of The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:
1. ELIMINATE FICA (Ten Reasons to Eliminate FICA )
Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:
*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and
*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.
This article addresses the questions:
*Does the economy benefit when the rich can afford better health care than can the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”
3. PROVIDE A MONTHLY ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA (similar to Social Security for All) (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB (Guaranteed Income)) Or institute a reverse income tax.
This article is the fifth in a series about direct financial assistance to Americans:

Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012
MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012
Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012
“You can’t fire me. I’m on JG” Saturday, Jun 2 2012

Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.
4. FREE EDUCATION (INCLUDING POST-GRAD) FOR EVERYONE Five reasons why we should eliminate school loans
Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.
Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.
An educated populace benefits a nation, and benefitting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.
If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.
Businesses are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the federal government (the later having no use for those dollars). Any tax on businesses reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all business taxes reduce your personal income.
7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.) Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.
Cutting FICA and business taxes would be a good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.
There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.
But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.
9. FEDERAL OWNERSHIP OF ALL BANKS (Click The end of private banking and How should America decide “who-gets-money”?)
Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.
Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.
10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.
Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.

The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.


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