Narcissism is a disease. Megalomania is an English word.
To me, the US is going the way of fascism. When it comes to its interest it does not act capitalistic. Does anyone think that the US is selfless? It is the most selfish country in the world now. Why did it abolish Gold standard? I found it cannot pay. Why it objects all efforts to replace its currency as a reserve? Why it owns all nuclear weapons and prohibits others?
It is the only country that used them. It practices More doctrine and prevents China from doing it. It wants other countries to buy its goods and services at its bloated prices while they are available much cheaply nearby.
In China, things were easier as there was centralized control. This resulted in massive growth in the economy. China became a big economic power in the world. It was then, the US realized its folly. It saw China and India growing at more than 7% in GDP and overtaking the US in every field. Then, President Trump hit upon a crazy idea of slowing down these economies by imposing tariffs on all commodities imported from them.
He found an excuse. China has a massive trade gap of $400 billion. India has a trade gap of $16 billion.
But, he fails to understand that the US is buying goods and services on credit and not paying for them in cash. The goods and services bought on credit are sold in the US for cash there. This cash reaches the FED through banks to pay the exporters. But, FED never pays the cash. It uses the cash to bridge its deficit and pays the people for goods and services rendered there.
Look at India. It now threatens the US with retaliatory tactics. We charge 300% on many imports from the US. Buy as much from other countries and give them bonds. Print dollars and pay the US public for the deficit. These dollars will come back as a payback to imports. Use it again and again. Inflation will not go up. A bond is a credit note. If the china asks for dollars, print them and give. They will never ask. They get interests in bonds. In this way, the deficit will go up, But there is nothing to worry as long as the US dollar is the reserve currency.
All big US companies have subsidiaries in China, India and other countries. They get standard goods and services at much cheaper rates. Even if all the duties are abolished no one will buy the US goods from there as they are available here. Trade parity is not easy to practice. When I write against tariff wars, I have no self-interest. All countries have only their self-interests.
They have no permanent friends. When Trump announces an increase in tariffs on Indian goods, India retaliates. Both create ripples in the stock markets. The same is the case with China. But, no one looks into the fine print. Major Indian imports from the US are Gold(1.643billions). Turbojets (1.575bilions), Coal (1.035Billions), Pet coke(892 millions). All others are small items like spare parts, apples, and dry fruits. India has imposed higher duties on apples and dry fruits. who cares? If duties are increased no one is hurt.
When a country increases the import duties from another country, it is natural to decrease the imports.. After the trade war announcement, the Chinese currency has devalued. This makes Chinese goods cheaper. To sum up, the US sanctions have increased imports from China. Now, the President is after the devaluation of the Chinese currency.
He wants China to improve the valuation of its currency. He wants other countries too to do that. He wants India to stop buying oil from Iran. He wants Mexico to stop people from coming to their country. He wants North Korea to stop making nuclear bombs. He wants the US companies to come back to the US and make their products prohibitively expensive.
The whole world believes, in its integrity and reliability. Unfortunately, the country does not understand the implications of taking debts beyond its repaying capacities. It has been living beyond its means, buying goods and services from other countries with promises to pay later. No one knows where this will end.
India imports hardly anything from the US. But, India exports medicines, IT products and people on H1B visas to the US. There is a trade gap of $21 billion. It is nothing to the US. I would like to see the US stop buying medicines and IT products from India. If our H1B visa holders were not there, there will be no maintenance people there for computers in Silicon Valley. We are damn cheap.
India places 60% duty on cars. On agricultural products, it is sometimes300%. We had done this for years. You will never find a product made in the US in our Indian supermarkets. Since voltage and frequency are different no one buys any gadgets from the US.
The US has a lot of advantages in trade due to its currency reserve status. The US gets IT services very cheaply from India. Remember the Y2k problem. Most IT companies in India are fabulously rich due to profits from the US. They can take a hit. Trump could never make the Chinese bridge the gap. . China exports $128 billion worth of IT products to the US.
There is no transportation cost involved. Engineering machinery, soy products, transport machinery, etc need to be carried on ships 11500 kilometres from the US. Only 17 billion worth of IT products is imports by China from the US. The gap is $400 billion. Even Taiwan and Japan import more from China. Nearness is an important variable in Trade. An example is Mexico and Canada. All that US export is available far cheaply in neighboring countries. Trump is not a fool as we think. His ultimate aim to pull down China.
The post The U.S. Is Buying Goods And Services With Promises To Pay Later appeared first on ValueWalk.