*Investors Blog*
- Thread starter Warstud
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- May 31, 2024
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You hit the nail.
The tariffs are causing conflicting pressures on the Fed's interest rates.
GON
$150 Site Donor 2025
A lot of people have been and will be hurt for years, they just didn't know it. Like having cancer, but wasn't aware until it was too late.
I had two dear friends die of testicular cancer. One at 28 years of age with four children, and one in his 50s. Both men ignored what was going on in their bodies, to avoid the discomfort of going to their doctor and discussing an uncomfortable subject.
Their cancer was treatable and reversible if addressed early on. Kicking the can down the road was a catastrophic course of action. Both men are in their graves today.
Our great and wonderful nation has been at high financial risk for many, many years. Any nation that imports more than it exports over time, will financially collapse. Any nation that borrows money to pay interest on its massive deficit and debt is bound to fail financially.
Nobody likes a change but a baby. Nobody likes a hip replacement; nobody likes a root canal. But in the long run, are the right and necessary things to do, and often must do.
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Unsure what you mean. Imports are a negative to GDP. If you import less - all other things being constant, GDP rises.
Its math.
Of course it's arithmetic, but you are assuming constant consumption.
GDP is highly dependent consumption, as consumer spending constitutes a large portion of total economic activity, often accounting for around two-thirds of GDP.
Correct - but I wrote out the actual equation covering that.
The theory is if you stopped imports - you would get either a) consumers spending the same on other things, or b) consumers saving the money, which increase the base money supply and possibly would spur business investment - to likely build things that used to be imported.
Granted its a very long process.
Respectfully, I am considering more than our stock market investments. I understand my post sounded that way.
People who are counting on their 401K and investments may not have time to recover.
Most workers do not even know what is in their 401K accounts; few have knowledge of markets.
My larger concern is the likely inflation will certainly hurt those on the margin financially.
An economic slowdown and (hopefully not) recession, depending on depth and duration, will hurt a lot of people.
Recessions disproportionately hurt low-income workers, young people entering the job market, and those in industries sensitive to economic downturns like retail and hospitality, leading to increased unemployment and reduced consumer spending.
Apologies if I sound pessimistic; I am a highly optimistic person. My strategy in life is contingency planning. What if, what if, what if.
I will be OK as I believe you will. Others, not so much. I hope to be wrong.
Yes, but as you said we are in uncharted times. IMO there will be inflation and the Fed is not going to raise rates, they'll cut them instead. The are all kinds of schools of thought floating around, the problem is it will end up getting political and runs the risk of getting this thread locked. I'll just leave it with some are saying the intent is to crash the market, so that money will go into treasuries forcing the Fed to cut rates. Just things that are floating around the web.
I see your point; point taken. But assuming constant consumption is, IMO, a bad assumption. It has to change.
No doubt, but I was making a point. If you shrunk imports by say $100B, you simultaneously shrink the trade deficit by $100B, and Increase GDP by $100B.
I think this is the part most don't understand. Lowering imports is an automatic 2 for 1 benefit.
- Joined
- Mar 9, 2024
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- 167
The United States is a post industrial society. We only need limited manufacturing of foods & equipment for national security purposes. Our GDP per capita didn't get to $82.7k by manufacturing cheap widgets.
Like it or not, this is true. And AI enabled automation will make it even more so.
In lights out factories, base worker labor costs no longer matter.
So at that point yes, we should be able to make the cheap stuff, assuming the volume is high enough to automate.
Respectfully, I have to believe "benefit" is a gross oversimplification.
Importing goods offers businesses and consumers various benefits, including access to a wider range of products, potentially lower costs, and the ability to source specialized or high-quality goods, as well as contributing to economic diversification.
It's fair to say America has sent valuable production overseas, but that was, to a large part, due to business management decisions. That ship has sailed; pretty hard to put the toothpaste back in the tube. Better to go forward.
never underestimate the stupidity of the American consumer.
JHZR2
Staff member
But youāre conflating things.
Someone with a 401k that doesnāt have time to recover, doesnāt have those assets in things that will drop and not recover. If they have one and donāt know whatās in it, they probably arenāt near retirement. If they are, I feel sorry for them, but you canāt fix stupid, and the info is free.
I agree with you that inflation hurts everyone, and in some ways it hurts those on the margin, and with more sensitive occupations. Iād probably argue that the folks with the āsafeā investments whose buying power is eroded are possibly hurt worse, but thatās like asking if youād rather break your left arm or right arm. Both are lousy situations. But if things go right, tariff price increases offset income tax. So goods may increase while taxes go down. I donāt have a lot of faith in that coming through to fruition. And I get it that higher prices due to tariffs will hurt folks who dont currently pay income taxes, but thatās a different discussion on fairness that isnāt suited for here.
- Joined
- Mar 9, 2024
- Messages
- 167
Automation works just as well overseas.
In the US, our environmental laws, declining workforce, along with the extreme expense of construction get in the way.
CEO's believe these policies are temporary & are unwilling to spend big (on new US factories) in the event the tariffs stick around more than 4 years.
As of right now, if you consider "the market" to be the S&P 500, It is flat on a 1 year measure, and up 100%, or double, in 5 years.
Really, no one has anything to complain about. If you have been in the market for a while, you have gotten way outsized gains over the last 5 years still. If you just started in the market, you get to dollar cost average in at a lower base going forward.
What kind of return should these people expect in the stock market? If they can't handle this draw down, they should not have been in the stock market at all. T-bills have been paying South of 4% for at least 2 years.
I have commented many times of how shocked I am that people close or even in retirement are 100% in stocks.
With the possible products price increase and inflation involved for available products (and some product choices could actually disappear - another possible inflation factor), then people may spend the "same" amount of money (or maybe less), but be getting less in return. So their buying habits could change drastically. And combined with savings for actual necessities, I doubt any actual consumer is going to invest in any business ... especially if an actual recession hits this country. Lots of room for an economic disaster.
4WD
$50 site donor 2025
Thatās where FDI can be a plus - once the billions are spent - it has to have a life cycle until that technology falls behind ā¦
