Tariffs and Doing What Feels Good....
If anyone has been following the Trump administration you are not the least bit surprised at the newly imposed Tariffs on various countries and various goods. Perhaps it will be a long term boon for the US economy, I really don't know but for the interim short term, not a prayer in hell.
Here's why.
There is no way for the central banks to control the pricing mechanism that gets passed on to the consumers. This is one area that they have little to no control of. Herein lies the major problem.
This is simply common sense economics 101. If you charge more for your services and goods someone has to pay for it correct?
Well generally that person is the consumer.
There is a reason why most of the online sales go through the portal that Amazon has set up. Quite simply it is the lowest price and most efficient way to get your goods these days. It is willing literally by the way its algorithm is set up to undercut anyone and everyone (even at a loss) to get the business. Quite simply it has worked. This is not a good thing and we can get to that on some other post but suffice to say Jeff Bezos has accomplished his goal. This is not possible without consumers around the world accepting this sort of model and they of course have.
Tariffs are the governments way to force a good deal in the name of the country imposing them. This is perhaps alright in the long run but never works in the short run.
Why doesn't it work?
I have explained this before but we will touch on it again. US consumers along with the rest of the western world consumers are deeply in debt. Pay check to pay check life styles for most of them. Now what happens when you raise the cost of goods and services to the populace that was struggling to begin with?
Right. They stop spending or they buy less products because they can't afford to buy more. Quiet a simple formula isn't it. Then more automation occurs to keep costs down. More layoffs occur, less spending occurs and deflationary forces continue. In short its a lousy strategy now that people are addicted to cut throat pricing which by itself is a stupid business model.
This is like the government determining wage setting or minimum wage. Without subsidizing the difference in pay companies simply cannot afford to pay someone 15 dollars an hour. It results once again in more automation and lay offs. Any increase in prices are passed directly on to the consumer. Do you want to pay 5 dollar for a cup of coffee just because someone wants to make 15 dollars an hour?
Didn't think so.
I am not saying that this sort of thing isn't coming down the pipeline anyway because AI is going to make this happen anyway but these are all deflationary forces. They require constant stimulation from the government to be maintained. What happens to all the bubbles when the forces that involve these policies begin to take hold?
Right. They pop.
Recently some top bankers involved in the crisis of 2008 have cautioned that lessons not learned are doomed to be repeated.
"YA THINK".
Tell me when the lessons are ever learned when you are bailed out and you don't have to worry about any negative effects happening?
This is simple behavior 101. Negative behavior not consequenced is likely to be repeated. It is that simple.
Ok, so all the ranting aside what should you be doing?
Do what feels good. It is that simple.
Follow the powerful trends that are now in motion to change the world for the better and try to do your part to help them along.
Find an area that you are good at. Then do it.
I like writing and I like to stay informed. Therefor I try to pass it on to others. That is one of my likes in my life. I have a host of other things that I like to do which I have posted on before that all make me money. If you are looking to change your life then do the same thing.
In a time of uncertainty and change try to look into the future and see the world you would like our future generations to inherit. Then work towards making that happen. Cheers!
Here's why.
There is no way for the central banks to control the pricing mechanism that gets passed on to the consumers. This is one area that they have little to no control of. Herein lies the major problem.
This is simply common sense economics 101. If you charge more for your services and goods someone has to pay for it correct?
Well generally that person is the consumer.
There is a reason why most of the online sales go through the portal that Amazon has set up. Quite simply it is the lowest price and most efficient way to get your goods these days. It is willing literally by the way its algorithm is set up to undercut anyone and everyone (even at a loss) to get the business. Quite simply it has worked. This is not a good thing and we can get to that on some other post but suffice to say Jeff Bezos has accomplished his goal. This is not possible without consumers around the world accepting this sort of model and they of course have.
Tariffs are the governments way to force a good deal in the name of the country imposing them. This is perhaps alright in the long run but never works in the short run.
Why doesn't it work?
I have explained this before but we will touch on it again. US consumers along with the rest of the western world consumers are deeply in debt. Pay check to pay check life styles for most of them. Now what happens when you raise the cost of goods and services to the populace that was struggling to begin with?
Right. They stop spending or they buy less products because they can't afford to buy more. Quiet a simple formula isn't it. Then more automation occurs to keep costs down. More layoffs occur, less spending occurs and deflationary forces continue. In short its a lousy strategy now that people are addicted to cut throat pricing which by itself is a stupid business model.
This is like the government determining wage setting or minimum wage. Without subsidizing the difference in pay companies simply cannot afford to pay someone 15 dollars an hour. It results once again in more automation and lay offs. Any increase in prices are passed directly on to the consumer. Do you want to pay 5 dollar for a cup of coffee just because someone wants to make 15 dollars an hour?
Didn't think so.
I am not saying that this sort of thing isn't coming down the pipeline anyway because AI is going to make this happen anyway but these are all deflationary forces. They require constant stimulation from the government to be maintained. What happens to all the bubbles when the forces that involve these policies begin to take hold?
Right. They pop.
Recently some top bankers involved in the crisis of 2008 have cautioned that lessons not learned are doomed to be repeated.
"YA THINK".
Tell me when the lessons are ever learned when you are bailed out and you don't have to worry about any negative effects happening?
This is simple behavior 101. Negative behavior not consequenced is likely to be repeated. It is that simple.
Ok, so all the ranting aside what should you be doing?
Do what feels good. It is that simple.
Follow the powerful trends that are now in motion to change the world for the better and try to do your part to help them along.
Find an area that you are good at. Then do it.
I like writing and I like to stay informed. Therefor I try to pass it on to others. That is one of my likes in my life. I have a host of other things that I like to do which I have posted on before that all make me money. If you are looking to change your life then do the same thing.
In a time of uncertainty and change try to look into the future and see the world you would like our future generations to inherit. Then work towards making that happen. Cheers!
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