Reply to: Masters of Money

[Robinho]

Ok.

It had a great effect in getting the US steel industry going.

Is that sufficient?

And what were the costs to the people who were forced to buy more expensive steel?

[Robinho]

Yeah.

Right.

That's why there was a whopping great tariff placed on iron & steel in the mid 19th century, to keep British made iron & steel out of the US.

That statement says nothing on the effect.

[Paddy]

The weirdest thing about the whole global financial mess is that, at root, it appears to have been caused by the American sub-prime mortgage market. Basically, Americans that couldn't afford it were being loaned money under the early Bush administration's Greenspan plan to buy their own homes. That debt and the risk it represented was then being sold on almost straight away through IBs to global 'investors' throughout the world that had no real appreciation of the risk, such as pension schemes and local town councils. If America were Iceland, Europe would have frozen their banks' overseas assets by now for selling such a shoddy financial product that's caused so much unforeseen loss as properties subsequently foreclosed on a massive scale.

I have watched some US programmes about this. Another factor was that at the same time of sub-prime lending, US companies were outsourcing like there was no tomorrow. Outsourcing killed the income of the people who were borrowing. On top of that, mass privatisation pushed up basic prices such as energy (Google "the Enron tapes"). The last straw was the invasion of Iraq. As Sadam said, if the US invade Iraq, it will bankrupt the US.

[Robinho]

It did in the US, Japan, S. Korea and Taiwan. All followed protectionist policies in the early years.
All are rich now, from a poor start.
Oh and also Britain by setting tariffs on Indian cotton.
The evidence is overwhelming that on your way up protectionism can help against foreign competition.
Once you have industrialised it's no good since you need to sell your goods.

The US was a very isolated economy naturally due to sheer size, abundance of virtually all essential resources, and large distances between itself and other countries in a time when transport was not what it is today. Tariffs would have had little effect.

The United States is actually a very good example of how liberal trade across borders boosts everyone's wealth. The commerce clause prohibits restrictions of trade across state borders.

[sasguru]

How can something that is fledgling be well on its way?

By showing profits/benefits at an early stage.

[sasguru]

That doesn't mean it caused prosperity though.

It did in the US, Japan, S. Korea and Taiwan. All followed protectionist policies in the early years.
All are rich now, from a poor start.
Oh and also Britain by setting tariffs on Indian cotton.
The evidence is overwhelming that on your way up protectionism can help against foreign competition.
Once you have industrialised it's no good since you need to sell your goods.

[Robinho]

Why hasn't an ekonomiks jeenius like you made loads of money yet?
Jeez when I was your age my fledgling BTL business was well on its way.

How can something that is fledgling be well on its way?

[Robinho]

It is a fact, not opinion, that tariffs in the US from the 19th century to 1945 were among the highest in the world.

That doesn't mean it caused prosperity though.

[sasguru]

Wrong. Rent is already at what the market will bear thus taxing property owners won't change that, they will take the tax hit not the tenants.

What would increase rents would be if by adding a tax there, we freed it up elsewhere meaning people have more disposable income and could bear to pay more rent. If you didn't free it up elsewhere though it wouldn't change rents.

Why hasn't an ekonomiks jeenius like you made loads of money yet?
Jeez when I was your age my fledgling BTL business was well on its way.

[sasguru]

Says SAS, the person who thinks protectionism boosts an economy.

It is a fact, not opinion, that tariffs in the US from the 19th century to 1945 were among the highest in the world. The US protected its infant industry from competition. Of course when you have successfully industrialised it is better for your economy, if not that of other developing countries, to abjure protectionism and to propagandise against it.

Oh and recently South Korea followed exactly the same policy

[Robinho]

Nothing to be proud of.

[SueEllen]

I've done it! I've done it!

[Robinho]

At the moment all this would do is increase your rent.

Wrong. Rent is already at what the market will bear thus taxing property owners won't change that, they will take the tax hit not the tenants.

What would increase rents would be if by adding a tax there, we freed it up elsewhere meaning people have more disposable income and could bear to pay more rent. If you didn't free it up elsewhere though it wouldn't change rents.

[Robinho]

Really? That is all a country is, is it?
I'm sure my 4 year-old has a more sophisticated grasp of economics than you.
At least he knows about incentives, negotiation, probabilities of success and such like

Says SAS, the person who thinks protectionism boosts an economy.

[doomage]

At the moment all this would do is increase your rent.

Agreed, but there is a natural ceiling to rents (i.e. actual earned income), unlike house prices (which is related to the cost of money - how much will banks lend etc). In the long term a property tax should discourage property speculation which is a prime candidate for root cause of the credit crunch (albeit aided by poor regulation of the banks coupled with a disastrously low interest rate policy). Also it might bring about some forced selling, which is what the market needs to get moving again.

Unlikely - house prices are falling in some areas and the economies aren't moving there.

Maybe prices are falling maybe but have transactions increased? If it gets to the point when houses start trading hands at a decent clip again, then you know that prices have corrected to the point where the average punter will have enough spare money left at the end of the week to start buying other stuff again. If rents / rates come down for businesses too there will be an upswing.

Nobody seems to want this scenario but me it seems.