The latest nothing that has our thought leaders in a tizzy: Japan’s trade “deficit” –or is it a surplus?

I noticed a news item that ranks very high on my “So what, who cares?” meter.

Economists, politicians, and media folks, who either don’t understand, or don’t want you to understand economics, are all in a tizzy about this:

Japan has second straight year of red ink on trade last year

TOKYO (AP) — Japan logged a deficit for a second straight year last year as its exports were hurt by a slowdown of demand in China amid a tariff war with the U.S.

Government data released Thursday showed Japan’s exports fell 5.6% in 2019, to 76.9 trillion yen ($701.6 billion), while imports fell 5.0% to 78.6 trillion yen ($710 billion).

That left a deficit of 1.6 trillion yen ($14 billion).

Japan had a trade surplus of 6.6 trillion yen ($60 billion) with the U.S. last year, as exports fell 1.4% from 2018, and imports fell 4.4%.

Shipments of computers, construction and textiles equipment and power generating machines contributed to a 3.7% increase in exports of machinery to the U.S.

Vehicle exports, which account for nearly 40% of Japanese exports to the U.S., declined 5.5%, the data show.

Is all of this bad news or good news for Japan? The use of the words “deficit,” and “red ink,” which has pejorative insinuations, would lead one to believe this is terrible news.

If you are associated with vehicle manufacturing you may believe it’s bad news — unless exports to other nations and local consumption increased enough to offset the decline in shipments to the U.S. — and that is assuming exports of vehicles to the U.S. are profitable.

Or then again, if you’re associated with the manufacture of computers, construction and textiles equipment, and power generating machines, you might feel it’s good news.

But in reality, looked at from the whole Japanese nation’s standpoint, it’s no news at all.

A “trade deficit” merely means that Japan as a nation, sent fewer goods and services to the U.S. than the U.S. sent to Japan, and in return, Japan sent more money to the U.S. than the U.S. sent to Japan.

But is that a trade “deficit” or is it a trade surplus?

Trade is an even exchange. Goods and services sent one way, and an equivalent value in money sent the other way.

Since trade is an even exchange, is Japan better off sending more goods and services overseas or sending more money overseas?

Asked another way, which is more difficult for Japan to obtain, goods and services or money?

Japan is Monetarily Sovereign. It has the unlimited ability to create an infinite amount of Japanese yen, at no cost, and at the touch of a computer button. Money is free and easy for Japan to obtain.

By contrast, Japan is a geographically small, island nation, with limited natural resources. Goods and services are costly and hard-to-get.

So again, is it better to produce and send away something that is costly and hard-to-get and to receive something in return that is free and easy-to-get (aka a “trade surplus”) or is it better to receive costly and hard-to-get goods, and send away something that costs you nothing (aka a trade “deficit.”)?

I, for one, would prefer the so-called trade “deficit.”

But, you may ask this good question, “What about the individual industries, like vehicles, that rely on exports?”

They are in a different category from the Japanese government. While the government is Monetarily Sovereign, the private sector is monetarily non-sovereign. Unlike the government, businesses cannot create yen at the touch of a computer key.

For the private sector, money is hard-to-get. So what’s to be done?

The obvious solution is for the government to fund businesses and their employees. In that way, the private sector would not suffer because of duties and trade deficits.

Yes, I know. International trading pacts frown on government support of business, but these rules are honored mostly in the breach. The vast number of government-owned and government-funded businesses speaks to this.

And yes, this solution would increase a government’s deficit and debt. But, of course, a deficit and debt is meaningless for an entity that can create its own sovereign currency at will.

There was a time when the economically ignorant predicted that if ever the U.S. debt rose to 100% of the U.S. Gross Domestic Product, the stars would fall from the skies, and pestilence would ravage the earth.

Well, here we are:

United States Gross Federal Debt to GDP — **U.S. Debt now at 106% of GDP**

And as for Japan, it’s more than twice as “bad” (good).

Japan General Government Gross Debt to GDP — **Japanese debt now at 238% of GDP**

Not only is central government debt meaningless for a Monetarily Sovereign entity, but so is every fraction that includes central government debt, i.e. the ratio of Debt/GDP. It is much referenced and essentially meaningless.

Japan would not need to export one yen’s worth of goods and services, and it could survive very nicely, thank you, via government deficit spending.

“Looking ahead, we think the recovery in exports will be weaker than many expect. That reflects our view that GDP growth in Japan’s main trading partners will remain subdued this year,” Tom Learmouth of Capital Economics said in a report.

Although export growth and GDP growth in trading partners can be connected, the former is meaningless to Japan, and the latter is meaningful to the trading partners.

He noted that an increase in Japan’s sales tax, to 10% from 8%, as of Oct. 1 has also hurt consumer demand and private investment.

Why would Monetarily Sovereign Japan increase the sales tax its own citizens pay? No good reason at all. It’s foolishness at a high level. Japan has no need or use for tax money.

President Donald Trump has thrown out past trade deals, including that with China, that he said added to the U.S. trade deficit and cost the country manufacturing jobs.

In his typical ignorance, President Donald Trump “solves” the jobs problem by raising tariffs, an act which is guaranteed to cost the U.S. private-sector jobs.

A better approach would be to eliminate business taxes, not raise them, which would increase company competitiveness, sales, and employment.

The best approach would be to institute the Ten Steps to Prosperity, which would narrow the Gap between the rich and the rest, put more money into the private sector, and improve the lives of the people.

That, ultimately, is the purpose of government.

Nearly 50 years have passed since President Richard Nixon removed the handcuffs of a gold standard and freed the U.S. government to be a true Monetary Sovereign.

Yet still, we remain shackled by our own fears and ignorance, leaving us not much better than the euro nations, which gave away their Monetary Sovereignty many years ago.

Too many Americans suffer from inadequate health care, inadequate housing, inadequate nourishment, inadequate education, inadequate financial resources — and it all is so unnecessary.

Ignorance and fear. Ignorance and fear.

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

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The most important problems in economics involve:

Monetary Sovereignty describes money creation and destruction.
Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

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 Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and 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 the rest.

MONETARY SOVEREIGNTY

10 questions about America’s trade deficit. Oh woe, the trade deficit is (too high?, too low?, too just right?)

Oh woe, the trade deficit is (too high?, too low?, too just right?)

Here are excerpts from an article in “the balance.com,” that will help you come to a conclusion.

US Trade Deficit With China and Why It’s So High
The Real Reason American Jobs Are Going to China
BY KIMBERLY AMADEO

The U.S. trade deficit with China was $419 billion in 2018. The trade deficit exists because U.S. exports to China were only $120 billion while imports from China were $540 billion.

The biggest categories of U.S. imports from China were computers and accessories, cell phones, and apparel and footwear.

A lot of these imports are from U.S. manufacturers that send raw materials to China for low-cost assembly. Once shipped back to the United States, they are considered imports.

Let’s say you market cell phones under your brand name.

You buy the phones from a Chinese manufacturer for $200 each. You apply your brand name and wholesale the phones for $300 each, after which they retail for $500 each.

This process involves a $200 per phone, U.S. trade deficit with China

If the phones had been 100% American made, they would have cost you $300, and you would have had to wholesale them in America for $450 each, after which they would have cost American consumers $750 each.

We’ll lead off with the ten questions. At the end of the article, we’ll discuss the answers.

Question #1: Is this trade deficit a good thing or a bad thing for America as a nation and for Americans as consumers?

Here is more from the article:

China’s biggest imports from America are commercial aircraft, soybeans, and autos. In 2018, China canceled its soybean imports after President Trump started a trade war. He imposed tariffs on Chinese steel exports and other goods.

Questions #2 & #3: Who pays for the tariffs on Chinese steel and other goods? Who pays for the cancelation of China’s soybean imports?

Since 2012, the U.S. trade deficit with China has increased. It was $315 billion in 2012, rose to $367.3 billion in 2015, then fell to $346.9 billion in 2015. In just two years, it’s increased to $419.2 billion.

Question #4: Who pays for a trade deficit?

China can produce many consumer goods at lower costs than other countries can. Americans, of course, want these goods for the lowest prices.

How does China keep prices so low? Most economists agree that China’s competitive pricing is a result of two factors:

–A lower standard of living, which allows companies in China to pay lower wages to workers.

–An exchange rate that is partially fixed to the dollar.

Question #5: Who pays for a lower standard of living?

China pegs its currency to the dollar using a modified fixed exchange rate. When the dollar loses value, China buys dollars through U.S. Treasurys to support it.

Question #6: Who pays for a stronger (higher value) dollar?

China must buy so many U.S. Treasury notes that it is the largest lender to the U.S. government. Japan is the second largest.

As of April 2019, the U.S. debt to China was $1.1 trillion. That’s 27% of the total public debt owned by foreign countries.

Question #7: Why does lending to the U.S. strengthen the U.S. dollar?

Many are concerned that this gives China political leverage over U.S. fiscal policy. They worry about what would happen if China started selling its Treasury holdings.

It would also be disastrous if China merely cut back on its Treasury purchases.

Why are they so worried? By buying Treasurys, China helped keep U.S. interest rates low. If China were to stop buying Treasurys, interest rates would rise.

That could throw the United States into a recession. But this wouldn’t be in China’s best interests, as U.S. shoppers would buy fewer Chinese exports. In fact, China is buying almost as many Treasurys as ever.

Question #8: Why does China’s purchase of Treasury securities reduce interest rates?

U.S. companies that can’t compete with cheap Chinese goods must either lower their costs or go out of business.

Many businesses reduce their costs by outsourcing jobs to China or India. Outsourcing adds to U.S. unemployment. Other industries have just dried up.

U.S. manufacturing, as measured by the number of jobs, declined 34% between 1998 and 2010. As these industries declined, so has U.S. competitiveness in the global marketplace.

Question #9: Why is a decline in manufacturing a concern?

President Trump promised to lower the trade deficit with China.

On March 1, 2018, he announced he would impose a 25% tariff on steel imports and a 10% tariff on aluminum. On July 6, 2018, Trump’s tariffs went into effect for $34 billion of Chinese imports. China canceled all import contracts for soybeans.

Trump’s tariffs have raised the costs of imported steel, most of which is from China. Trump’s move comes a month after he imposed tariffs and quotas on imported solar panels and washing machines.

China has become a global leader in solar panel production. The tariffs depressed the stock market when they were announced.

Trump also asked China to do more to raise its currency. He claims that China artificially undervalues the yuan by 15% to 40%.

That was true in 2000. But former Treasury Secretary Hank Paulson initiated the U.S.-China Strategic Economic Dialogue in 2006. He convinced the People’s Bank of China to strengthen the yuan’s value against the dollar.

It increased by 2% to 3% annually between 2000 and 2013. Former U.S. Treasury Secretary Jack Lew continued the dialogue during the Obama administration. The Trump administration continued the talks until they stalled in July 2017.

The dollar strengthened 25% between 2013 and 2015. It took the Chinese yuan up with it. China had to lower costs even more to compete with Southeast Asian companies.

The PBOC tried unpegging the yuan from the dollar in 2015. The yuan immediately plummeted. That indicated that the yuan was overvalued. If the yuan were undervalued, as Trump claims, it would have risen instead.

Question #10: Is Donald Trump clueless about international trade?

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Question #1: Is this trade deficit beneficial or detrimental for America as a nation and for Americans as consumers?

Our “trade deficit,” as the term is used, means that America sends more dollars to foreign countries than they send to us.

One of life’s enduring mysteries is why this even exchange is known as a “deficit.” It just as well could be called a “surplus” because the foreign countries send us more goods and services than we send them.

The United States is Monetarily Sovereign. It creates dollars at will.

Fed Chairman 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.”

Fed Chairman Alan Greenspan: “Central banks can issue currency, a non-interest-bearing claim on the government, effectively without limit. A government cannot become insolvent with respect to obligations in its own currency.”

St. Louis Federal Reserve: “As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e.,unable to pay its bills. In this sense, the government is not dependent on credit markets to remain operational.

But the United States has only a limited supply of goods and services.

Something you can create at will and at no cost (dollars) is not as valuable as something that is in limited supply (goods and services). To America, dollars are much less valuable than are goods and services.

Therefore, from the standpoint of America as a nation, the so-called trade “deficit” actually is a trade “surplus,” and is beneficial for America.

From the standpoint of American consumers, the trade “deficit” means Americans have money, and are able to use that money to obtain desired goods and services from other nations. This is a good thing.

Every time you walk into a store and buy something, you run what the economists might call a “trade deficit” with the store. Yet no one suggests that running a “deficit” with a store is detrimental to a consumer.

Questions #2 & #3: Who pays for the tariffs on Chinese steel and other goods? Who pays for the cancelation of China’s soybean imports?

Tariffs are taxes levied on the buyers. The tariffs on Chines steel and other goods are paid by U.S. consumers, and these tariff dollars are sent to the U.S. Treasury, where they are destroyed. (“Does the U.S. Treasury really destroy your tax dollars?“)

Like all U.S. taxes, U.S. tariffs take growth dollars out of the American economy and therefore are recessionary. Trump’s tariffs take money from your pockets.

And China’s cancellation of soybean imports hurts American soybean farmers.

Question #4: Who pays for a trade deficit?

A trade “deficit” reflects an even exchange between dollars vs. goods and services. As discussed in #1, the so-called trade-deficit actually is a trade surplus, that is beneficial to America.

Question #5: Who pays for a lower standard of living?

The poor. No matter how low a nation’s standard of living may be, the rich always have a high standard of living.

If, to achieve a trade “surplus,” a nation cuts wages, the working poor and the average standard of living will suffer.

Question #6: Who pays for a stronger (higher value) dollar?

Americans, who buy foreign goods, benefit from a higher value dollar. To some degree, every American buys foreign goods, much of which are part of the contents of the goods we buy.

Thus, despite the stock market’s immediate negative reaction to higher interest rates, higher rates strengthen the dollar and fight inflation by making imports cheaper in dollars.

Higher interest rates also are beneficial also because they force the federal government to pay more growth dollars into the economy, when paying interest on Treasury securities.

On balance, higher interest rates benefit the economy and consumers.

Question #8: Why does China’s purchase of Treasury securities reduce interest rates?

The common belief is that the U.S. must sell a certain amount of T-securities, and if China didn’t buy, then the government would have to raise rates in order to entice other people to buy.

In fact, being Monetarily Sovereign, the federal government has absolute control over everything related to the dollar, including interest rates.

Further, it is not forced to sell any amount of T-securities. If the government wished, it could stop accepting deposits into T-security accounts at any time.

Thus, it would not “be disastrous if China merely cut back on its Treasury purchases,” as the article’s author claimed.

Dollars were a creation of the U.S. government laws. The U.S. government is not permanently bound by the laws it alone creates.

Interest rates are what the government wishes them to be, as the Fed demonstrates every day.

Question #9: Why is a decline in manufacturing a concern?

It is a concern only to those who hold the outdated belief that the American economy relies on manufacturing.

While manufacturing employment has declined, employment in non-manufacturing industries has grown.

Today, unemployment is at historic lows, demonstrating the declining importance of the manufacturing sector.

Question #10: Is Donald Trump clueless about international trade?

Without a doubt. His pressure on the Federal Reserve to lower interest rates, and his trade wars, are ample proof of his ineptness.

He continually needs someone to blame for something — anything — to deflect any blame from himself, so he wrongly blames the Fed for less than impressive economic growth.

Business hates uncertainty.

The rapid turnover in Trump’s administration, plus his erratic flip-flopping on issues, plus his character attacks, plus his trade wars, plus his sudden and arbitrary withdrawals from international agreements, plus his nativist bigotry, all contribute to an adverse business climate.

Answer to the big question: The so-called “trade deficit” is a benefit to the United States.

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell
Search #monetarysovereigntyFacebook: Rodger Malcolm Mitchell

The most important problems in economics involve the excessive income/wealth/power Gaps between the richer and the poorer.

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.

MONETARY SOVEREIGNTY

That horrible, terrible, frightening trade deficit

It takes only two things to keep people in chains:

The ignorance of the oppressed
And the treachery of their leaders

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Ooooh, that horrible, terrible, frightening monster trade deficit; it scares everyone, especially our President. Image result for scary monster

Here are excerpts from a recent article in Forbes Magazine:

Total debt for the five largest U.S. banks have grown by 4.3% over the last twelve months – above the industry-wide growth figure of under 4%.

This is a large increase by these banking giants, given their massive debt base which averaged more than $5.3 trillion in Q3 2017.

This represents a share of more than 40% of the $13.2 trillion U.S. debt market, and this figure is likely to trend even higher.

Sounds frightening, doesn’t it? Our largest banks have gone into debt by an additional 4.3%. Time to pull your money out?

Well, I didn’t lie, but I misled. The actual article read:

Total deposits for the five largest U.S. banks have grown by 4.3% over the last twelve months – above the industry-wide growth figure of under 4%.

This is a commendable feat by these banking giants, given their massive deposit base which averaged more than $5.3 trillion in Q3 2017.

This represents a share of more than 40% of the $13.2 trillion U.S. deposit market, and this figure is likely to trend even higher as the largest banks continue to outperform the overall industry.

In the banking world, deposits are bank debt. And though you never hear any bank boasting about the size of its debt, banks often boast about the size of their deposits.

I told you this little story to demonstrate how deceptive the word “debt” can be, depending on circumstances.

Well, there is another word that can be equally deceptive and that is the word “deficit,” especially when used in the phrase “trade deficit.”

U.S. trade deficit falls in April, but still up for year
The U.S. trade deficit with China grew 8.1 percent in April, though it fell slightly overall. (Julie Jacobson/AP ) By Paul Wiseman Associated Press

WASHINGTON — Record exports shaved the U.S. trade deficit in April for the second straight month. But so far this year, the deficit is up 11.5 percent from a year ago despite President Donald Trump’s vow to close the gap through new tariffs on imports and renegotiated trade deals.

The president has proposed tariffs on up to $150 billion in Chinese imports. The Chinese have targeted $50 billion in U.S. products in retaliation.

Talks to head off a trade war between the world’s two largest economies have so far failed to produce a resolution even though China has offered to step up purchases of U.S. farm and energy products.

Trump is also trying to renegotiate the North American Free Trade Agreement with Canada and Mexico. The administration is also taxing imports of steel and aluminum.

The president views trade deficits as a sign of economic weakness that can be brought down by more aggressive trade policies.

What exactly is a trade “deficit” and why does President Trump worry about it?

You should know the answer. Every time you go to your local store, or buy something online, you run a “trade deficit,” which is nothing more than buying more than you sell.

Running a trade deficit is no problem for you, so long as you have sufficient income to pay for what you buy.

And running a trade deficit is no problem for the U.S. Because it is Monetarily Sovereign, it has the unlimited ability to pay for goods and services. The U.S. government never can run short of dollars.

Blue line is Gross Domestic Product. Red line is the amount of the trade deficit. Not only is the trade deficit a *tiny fraction of GDP*, but we have one almost *every year*, with no measurable negative effect on GDP growth.

Most economists say trade deficits are caused by bigger economic forces, mainly the fact that the United States consistently spends more than it produces.

The trade gap has continued to rise since Trump entered the White House partly because the U.S. economy is strong and American consumers have an appetite for imported products and the confidence and financial wherewithal to buy them.

The whole concept of a trade deficit is silly at best and deceptive in reality:

If you and another person exchanged items of equal value, which of you has run a trade “deficit”? Or said another way: If you give someone a dollar, and he gives you something worth a dollar, which of you has run a deficit?

Take it a step further: Imagine you own a machine that can print infinite dollars and you grab a big boxful of those dollars and exchange them with a foreigner for a car.

The foreigner gives you a car — something that cost him time, labor, and valuable materials to produce — and you give the foreigner some dollars, of which you have an infinite supply and which cost you nothing to produce.

Who received the better deal, you or the foreigner? Would you look up that exchange as a “deficit”?

I have just described the U.S. trade “deficit.” Dollars are free to the U.S. government, and in exchange for those free dollars, we receive valuable assets. Yet Trump and many others fret about the U.S. trade “deficits.”

If Illinois runs a trade deficit, that might worrisome. Illinois does not own that money-printing machine. It cannot create infinite income the way the federal government can. It must rely on other income sources, notably taxes. The same is true for Cook County and for Chicago.

And you, too. You must have sufficient income, either from earnings, gifts, or borrowing, to pay for goods and services. But the federal government needs none of these.

Being Monetarily Sovereign it merely creates dollars by pressing computer keys.

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.”

St. Louis Federal Reserve: “As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e., unable to pay its bills.”

So tell me, again, Mr. President, since “trade deficit” means the U.S. exchanges dollars it produces at no cost, for valuable goods and services, why are you concerned? Isn’t a trade deficit the greatest benefit imaginable?

Getting much more value than we give — that’s not a deficit. If anything, it’s a surplus.

What traditionally has been misnamed a “trade deficit,” more properly should be called a “trade surplus,” when referring to the Monetarily Sovereign U.S. government.

Then, everyone could stop wringing their hands in worry.

“Debt” and “deficit” are the most misused and misunderstood words in all of economics, when applied to our Monetarily Sovereign government.

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

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

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.
2. FEDERALLY FUNDED MEDICARE — PARTS A, B & D, PLUS LONG TERM CARE — FOR EVERYONE (H.R. 676, Medicare for All )
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.
5. SALARY FOR ATTENDING SCHOOL
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.
6. ELIMINATE FEDERAL TAXES ON BUSINESS
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.
8. TAX THE VERY RICH (THE “.1%) MORE, WITH HIGHER PROGRESSIVE TAX RATES ON ALL FORMS OF INCOME. (TROPHIC CASCADE)
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.

MONETARY SOVEREIGNTY

Are you paying for Trump’s tariffs?

It takes only two things to keep people in chains:

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:

Are you actually paying for Trump’s tariffs?
Do tariffs help domestic industries grow?
Is the U.S. losing many billions of dollars on trade?
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.

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.

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

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

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

MONETARY SOVEREIGNTY

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