"Well, probably he isn’t thinking; it’s all visceral. He wants America to be a winner, which means both attracting lots of foreign capital and running trade surpluses. And if anyone tried to tell him that this is arithmetically impossible, he’d probably denounce them as a deep state Marxist pedophile or something."
I think that Krugman miss states the issue here. He conflates a strong currency with foreign capital inflows.
Can a country run a trade surplus while also experiencing a currency that appreciates in the FX markets?
Yes it can, but I sincerely doubt either Navarro or Trump understand how that goal is accomplished.
This goes to what is called the "Impossible Trinity".
I’d be interested to hear your opinion on the speculative value of Bitcoin. Why are Bitcoins not included in the FX trade? What is their intrinsic value (if any)?
It would be difficult to say, due to deliberately restricted supply and secrecy over investor inputs. I'd say it facilitates money laundering, but that is almost impossible to prove due to secrecy and lack of financial accountability in cryptocurrency systems.
Trump's views on trade explain how he managed to go broke owning a casino.
When you own a casino you should have the odds ever in your favor and the more dollars that are wagered, the more gross profit your casino makes. In trade the more goods that are bought and sold, the more efficient the system is in matching up comparative advantage, the more efficient and productive the economy. Trump couldn't understand casino math so he went broke personally and he wants to enact trade policies that will reduce US wealth because he doesn't understand trade math.
Part of the problem with one of the casinos is that Trump bought the Taj Mahal while it was still under construction, and it was already $900 million in debt.
"But even as his companies did poorly, Mr. Trump did well. He put up little of his own money, shifted personal debts to the casinos and collected millions of dollars in salary, bonuses and other payments. The burden of his failures fell on investors and others who had bet on his business acumen." AGAIN.
I might be wrong about this, but Trump going after Canada in some business fetish type trade war could have major effects on construction costs. To the best of my knowledge, the significant majority of framing lumber used in construction is sourced from Canada, and this is not the type of import that can reasonably be sourced elsewhere or quickly become homegrown.
Thanks for joining Substack! I was a NYT subscriber for many years and your column was my favorite every Tuesday. You have a gift for explaining economics to all of us. I’m so glad to be able to read your column again!
Totally agree...v. nice transition from the ever-tiresome Times to "alternate media"...looking forward to some delicious long-form critiques of the economic horror show about to go curtain-up. Welcome aboard, Dr. K!
I only had two reasons to maintain my subscription with the New York Times. The first was Paul Krugman‘s column and the second is my wife’s Wordle streak. Since Paul is gone the streak is my only reason for a subscription. I noticed that I can subscribe to a games subscription for less than two bucks a week. I would if I knew that my wife’s Wordle streak would stay intact. Hopefully someone will tell me what would happen. I am so glad that the professor is joining my other favorite Substack contributors like HCR and Joyce Vance. Welcome aboard.
FWIW, I think what’s going on is Trump’s obsession with ‘winning’. If we are buying more stuff from a country than they are buying from us, he sees that as losing. Trump must dominate everyone and everything.
Canada could never buy that much from us. Their population is about 35 million vs 350 million for the U.S. they cannot buy more from us than they sell to us.
I just don't understand why he would take the tough guy approach before he has even stepped into office and alienate our close trading partners. It's not like North America is North Korea but he seems to praise N Korea and Russia more than our neighbors to the north and south.
And he actively admires folks like Putin and Kim - they're his peeps and he would like to be them. Since he doesn't care for democracy, here or abroad, he certainly doesn't care about our friends. France and the UK, etc., may share your values and mine - but they definitely don't share Cheeto's.
I'm a lawyer, not an economist. So I will take Our Host at his word on the economics of exorbitant privilege. But it is still politically potent. The US has used dollar hegemony to enforce sanctions worldwide, and create an international anti-money laundering regime that might not have been to all our allies' tastes. (Poooooor Switzerland!)
All of which is well and good. Viva US policy! But I always use a religious metaphor when money is concerned. (Georg Simmel is the name.) If your church is preaching too much hellfire and brimstone, it will eventually lose congregants. The US is getting sloppier with its (political) exercise of exorbitant privilege. Sanctioning Russia is all well and good, but hitting Clearstream up for multizillion dollar garnishments because Iran something something terrorist! might not be the best idea in the world.
I would argue that the sanctions process is actually bad all the way around, for long-term goals. I'm certainly no Russian sympathizer, but it creates this heavy-handed approach where are enemies can call us bullies that won't allow any other nation to step out of line. When we're doing things like propping up the heinous actions of Israel, while simultaneously denouncing Russian in Ukraine, that rings true.
This creates a global animosity against a method of "might makes right." There are better systems of geopolitical influence, especially with how interconnected everything is. Of course, that would require us to stop exploiting the global south and refusing to lend the aid for climate change that we've promised, so I don't see that happening no matter who's in charge.
Trump is so woefully (and willfully!) ignorant that it’s impossible to overstate what a danger he is. He doesn’t know what he doesn’t know, and doesn’t care to learn from anyone who has expertise. And this time around he’s not even surrounded by career civil servants or corporate titans, some of whom tried to keep him in check but eventually threw up their hands in frustration. No, we are about to see what a government made up entirely of his sycophants and puppeteers will bring us. And none of it will be good. 😕
But it doesn't matter, because his audience is primarily MAGA World, which is all about the gut, not the intellect. Yes, we're about to see government-by-barstool-expert. Should be interesting.
Good to see you with the gloves off Paul. It must have been stressful getting pieces past the NYT editors.
"And if anyone tried to tell him that this is arithmetically impossible, he’d probably denounce them as a deep-state Marxist pedophile or something."
Thanks for the laugh, even a nervous one.
We were both struck by that sentence. How true it is.
Actually laughed out loud at that one
"Well, probably he isn’t thinking; it’s all visceral. He wants America to be a winner, which means both attracting lots of foreign capital and running trade surpluses. And if anyone tried to tell him that this is arithmetically impossible, he’d probably denounce them as a deep state Marxist pedophile or something."
I think that Krugman miss states the issue here. He conflates a strong currency with foreign capital inflows.
Can a country run a trade surplus while also experiencing a currency that appreciates in the FX markets?
Yes it can, but I sincerely doubt either Navarro or Trump understand how that goal is accomplished.
This goes to what is called the "Impossible Trinity".
https://en.wikipedia.org/wiki/Impossible_trinity
The "Impossible" is quite possible with the right policy framework.
I’d be interested to hear your opinion on the speculative value of Bitcoin. Why are Bitcoins not included in the FX trade? What is their intrinsic value (if any)?
It would be difficult to say, due to deliberately restricted supply and secrecy over investor inputs. I'd say it facilitates money laundering, but that is almost impossible to prove due to secrecy and lack of financial accountability in cryptocurrency systems.
Trump's views on trade explain how he managed to go broke owning a casino.
When you own a casino you should have the odds ever in your favor and the more dollars that are wagered, the more gross profit your casino makes. In trade the more goods that are bought and sold, the more efficient the system is in matching up comparative advantage, the more efficient and productive the economy. Trump couldn't understand casino math so he went broke personally and he wants to enact trade policies that will reduce US wealth because he doesn't understand trade math.
Trump couldn't run a whorehouse on an army base.
He started a mortgage company in 2007, right before the housing crash. Talk about bad instincts.
😂
Part of the problem with one of the casinos is that Trump bought the Taj Mahal while it was still under construction, and it was already $900 million in debt.
"But even as his companies did poorly, Mr. Trump did well. He put up little of his own money, shifted personal debts to the casinos and collected millions of dollars in salary, bonuses and other payments. The burden of his failures fell on investors and others who had bet on his business acumen." AGAIN.
https://www.congress.gov/116/meeting/house/111078/documents/HMKP-116-JU00-20200929-SD002.pdf
I might be wrong about this, but Trump going after Canada in some business fetish type trade war could have major effects on construction costs. To the best of my knowledge, the significant majority of framing lumber used in construction is sourced from Canada, and this is not the type of import that can reasonably be sourced elsewhere or quickly become homegrown.
Ha - I'm planning a decking project next year and was about to head down to the lumberyard to secure what I need now with that exact thought in mind.
That lumber is already tariffed and the US has been collecting a lot of Ls in trade arbitration, yet here we are...
Thanks for joining Substack! I was a NYT subscriber for many years and your column was my favorite every Tuesday. You have a gift for explaining economics to all of us. I’m so glad to be able to read your column again!
Totally agree...v. nice transition from the ever-tiresome Times to "alternate media"...looking forward to some delicious long-form critiques of the economic horror show about to go curtain-up. Welcome aboard, Dr. K!
Paul was one of the reasons I was reluctant to cancel my subscription. Jamelle Bouie is another.
Love his newsletters, and "Recipe of the week".
Same here. I thought I lost him and then stumbled onto this today
Me too.
I only had two reasons to maintain my subscription with the New York Times. The first was Paul Krugman‘s column and the second is my wife’s Wordle streak. Since Paul is gone the streak is my only reason for a subscription. I noticed that I can subscribe to a games subscription for less than two bucks a week. I would if I knew that my wife’s Wordle streak would stay intact. Hopefully someone will tell me what would happen. I am so glad that the professor is joining my other favorite Substack contributors like HCR and Joyce Vance. Welcome aboard.
What's her streak at?
Her streak is at 228. I finally switched my subscription from News to Games when it was 224. It had no effect on the streak. Big relief for me.
FWIW, I think what’s going on is Trump’s obsession with ‘winning’. If we are buying more stuff from a country than they are buying from us, he sees that as losing. Trump must dominate everyone and everything.
I’m stuck on Discard Distain.
Canada could never buy that much from us. Their population is about 35 million vs 350 million for the U.S. they cannot buy more from us than they sell to us.
Oh, that!! (Details, details…)
Absolutely correct
Facts just make people angry.
Facts just make *stupid* people angry.
We are so lucky you’ve come to a place where you can say exactly what you want to say, we are the beneficiaries of your ‘retirement.’ Many thanks.
Thank you Paul for this lesson in trade balance. Let's hope we can get through this to the other side.
"And I have no idea what comes next."
Sadly, this is where we are now that the incredibly ignorant and narcissistic orange fascist will be President.
I just don't understand why he would take the tough guy approach before he has even stepped into office and alienate our close trading partners. It's not like North America is North Korea but he seems to praise N Korea and Russia more than our neighbors to the north and south.
Why? Because he is a moron. To use his prefered descriptor of people who he doesn’t like - low IQ. Plus narcissism.
And he actively admires folks like Putin and Kim - they're his peeps and he would like to be them. Since he doesn't care for democracy, here or abroad, he certainly doesn't care about our friends. France and the UK, etc., may share your values and mine - but they definitely don't share Cheeto's.
You read my mind.
Perhaps he thinks "tough guy" bluster is a good opening bluff in some kind of deal negotiation. Or maybe he's playing to his ignorant base.
His base is only marginally more ignorant than he is..
“A deep state Marxist pedophile or something”.
This may soon be a required inscription on the headstones of anyone who voted “improperly”.
I'm a lawyer, not an economist. So I will take Our Host at his word on the economics of exorbitant privilege. But it is still politically potent. The US has used dollar hegemony to enforce sanctions worldwide, and create an international anti-money laundering regime that might not have been to all our allies' tastes. (Poooooor Switzerland!)
All of which is well and good. Viva US policy! But I always use a religious metaphor when money is concerned. (Georg Simmel is the name.) If your church is preaching too much hellfire and brimstone, it will eventually lose congregants. The US is getting sloppier with its (political) exercise of exorbitant privilege. Sanctioning Russia is all well and good, but hitting Clearstream up for multizillion dollar garnishments because Iran something something terrorist! might not be the best idea in the world.
I would argue that the sanctions process is actually bad all the way around, for long-term goals. I'm certainly no Russian sympathizer, but it creates this heavy-handed approach where are enemies can call us bullies that won't allow any other nation to step out of line. When we're doing things like propping up the heinous actions of Israel, while simultaneously denouncing Russian in Ukraine, that rings true.
This creates a global animosity against a method of "might makes right." There are better systems of geopolitical influence, especially with how interconnected everything is. Of course, that would require us to stop exploiting the global south and refusing to lend the aid for climate change that we've promised, so I don't see that happening no matter who's in charge.
Trump is so woefully (and willfully!) ignorant that it’s impossible to overstate what a danger he is. He doesn’t know what he doesn’t know, and doesn’t care to learn from anyone who has expertise. And this time around he’s not even surrounded by career civil servants or corporate titans, some of whom tried to keep him in check but eventually threw up their hands in frustration. No, we are about to see what a government made up entirely of his sycophants and puppeteers will bring us. And none of it will be good. 😕
But it doesn't matter, because his audience is primarily MAGA World, which is all about the gut, not the intellect. Yes, we're about to see government-by-barstool-expert. Should be interesting.
“Discard Disdain” made me lol!
Paul, you are my hero.
Unleashed Paul is even better than NYT Paul!
Oh, trumpy is such a confident buffoon.
Keep us informed, dear Paul!
Trump is confident because of all the spineless sycophants telling him what he wants to hear.
Welcome to Substack. It seems your analytic clarity and ability to provide clear explanations has not changed. Bravo.
Congrats at leaving the crossword puzzle of record!