Chinese Billionaire Linked to Giant Aluminum Stockpile in Mexican Desert(wsj.com)
wsj.com
Chinese Billionaire Linked to Giant Aluminum Stockpile in Mexican Desert
http://www.wsj.com/articles/chinese-billionaire-linked-to-giant-aluminum-stockpile-in-mexican-desert-1473356054
167 comments
A similar, and perhaps more amusing, situation happened in Canada a few years ago. We have a 245.5% import tariff on cheese (why? Because dairy farmers are more important than poor people, apparently) but there was a much lower tax on "food preparations", including packaged pizza toppings.
So companies would package up "pizza topping kits" in the USA, import them to Canada as "food preparations"... and then remove the cheese, which could be sold separately for far more than the cost of the complete kit.
After a couple years, the classification rules were amended to exclude anything containing cheese from the "food preparations" tariff class.
So companies would package up "pizza topping kits" in the USA, import them to Canada as "food preparations"... and then remove the cheese, which could be sold separately for far more than the cost of the complete kit.
After a couple years, the classification rules were amended to exclude anything containing cheese from the "food preparations" tariff class.
This kind of waste seems common and from an outside perspective very frustrating.
There is a famous example where Ford imported cargo vans from Europe to the US with disposable seats in them so they would be taxed (more cheaply) as passenger vans. I think the tax in question was referred to as the "chicken tax".
The situation is a bit different but China's value-added tax scheme combined with the prevalence of factories in bonded export zones leads to a lot of useless shipping of goods (or components of goods) from China to Hong Kong (or another nearby foreign jurisdiction) and back for no good reason other than to avoid tax. I'm sure this works out great for the local freight industry...
There is a famous example where Ford imported cargo vans from Europe to the US with disposable seats in them so they would be taxed (more cheaply) as passenger vans. I think the tax in question was referred to as the "chicken tax".
The situation is a bit different but China's value-added tax scheme combined with the prevalence of factories in bonded export zones leads to a lot of useless shipping of goods (or components of goods) from China to Hong Kong (or another nearby foreign jurisdiction) and back for no good reason other than to avoid tax. I'm sure this works out great for the local freight industry...
I just can't wrap my head around protectionism. We lose, and they lose, and such crazy inefficiencies occur.
But somebody wins, and that's who's usually behind the protectionism in question.
That was the Ford Transit Connect. One of the big ironies of that whole situation was that back in the 1960s, Ford was a beneficiary of the tax (which was mostly aimed at Volkswagen). After the tax was enacted, the Type 2 pickup and cargo van disappeared from VW's US product lineup.
The loophole has been closed, and Ford no longer sells the Transit Connect in the US.
The loophole has been closed, and Ford no longer sells the Transit Connect in the US.
This also reminds that Hynix had to be bailed out in 2001 and in 2003, US and EU imposed high tariffs as a a consequence. I wonder what would happen if Hynix actually failed and had to be bought by Micron.
I loathe farmer subsidies. I have no idea why our government gives farmers so much money and so many advantages - nobody in our society really benefits from those incredible spendings and it's a significant fraction of our state budget.
If you don't subsidize farming in rich countries, all your food will come from poor countries. Poor countries without standards for food safety, scruples about burning down rainforest for a few years of fertility, or worker rights or fair wages. You starve poor countries by selling off all of their food to rich countries and making what's left very expensive. What farming is left in rich countries can only possibly be made economical doing so at the largest most industrial scales. When shit hits the fan external sources get much leverage on rich countries because they don't own their own food supply and don't have the economy in place to make their own when the suppliers get disagreeable.
And folks at the grocery store aren't going to like the prices if they want their unsubsidized groceries to be grown by their own countrymen earning middle-class wages.
Subsidies right now are certainly not where they need to be. The whole thing needs to be reformed but there are basically two classes of people: rich powerful special interests that profit from the status quo, and ignorant citizens that don't understand the very basics of why anything is being done.
Ignorance and greed underly most of our problems. Which one are you guilty of?
And folks at the grocery store aren't going to like the prices if they want their unsubsidized groceries to be grown by their own countrymen earning middle-class wages.
Subsidies right now are certainly not where they need to be. The whole thing needs to be reformed but there are basically two classes of people: rich powerful special interests that profit from the status quo, and ignorant citizens that don't understand the very basics of why anything is being done.
Ignorance and greed underly most of our problems. Which one are you guilty of?
Lovely argument, if only it were true. Your whole argument is all over the place, not least because a lot of food eaten in rich countries is has minimal subsidies already. Why don't you examine the world as it is today rather than how you think it is.
> "You starve poor countries by selling off all of their food to rich countries and making what's left very expensive"
The food produced in the poor country will sell for "the world price", pretty much the same everywhere. Not "cheap" in the rich countries and "expensive" in the poor ones.
I'll assume you are talking about US production. The vast majority of US crops don't need subsidies. They are heavily mechanized on cheap land (middle of Iowa etc) fairly close to markets and with good infrastructure.
> "You starve poor countries by selling off all of their food to rich countries and making what's left very expensive"
The food produced in the poor country will sell for "the world price", pretty much the same everywhere. Not "cheap" in the rich countries and "expensive" in the poor ones.
I'll assume you are talking about US production. The vast majority of US crops don't need subsidies. They are heavily mechanized on cheap land (middle of Iowa etc) fairly close to markets and with good infrastructure.
It's all over the place because there's a tree of possibilities that's difficult to cover succinctly.
>The food produced in the poor country will sell for "the world price", pretty much the same everywhere. Not "cheap" in the rich countries and "expensive" in the poor ones.
Spending power around the world varies by several orders of magnitude. If there's one "world price" for a crop, that price will be incredibly cheap for rich countries and incredibly expensive for poor ones. Agricultural poor countries will not be able to afford the food they grow.
>a lot of food eaten in rich countries is has minimal subsidies already
In the US, SNAP (food stamps) costs about $75 billion per year and is about 80% of the spending on the farm bill. It's hard to think of that as anything but a subsidy, and it covers more or less all food.
There's a lot more as well...
>The food produced in the poor country will sell for "the world price", pretty much the same everywhere. Not "cheap" in the rich countries and "expensive" in the poor ones.
Spending power around the world varies by several orders of magnitude. If there's one "world price" for a crop, that price will be incredibly cheap for rich countries and incredibly expensive for poor ones. Agricultural poor countries will not be able to afford the food they grow.
>a lot of food eaten in rich countries is has minimal subsidies already
In the US, SNAP (food stamps) costs about $75 billion per year and is about 80% of the spending on the farm bill. It's hard to think of that as anything but a subsidy, and it covers more or less all food.
There's a lot more as well...
> Spending power around the world varies by several orders of magnitude. If there's one "world price" for a crop, that price will be incredibly cheap for rich countries and incredibly expensive for poor ones. Agricultural poor countries will not be able to afford the food they grow.
Significant numbers of both poor and rich countries do not subsidize food today. Many agricultural products are commodities and traded at the "world price" already. This is the world you live in right now. Have a look at what is actually happening rather than speculating...
>In the US, SNAP (food stamps) costs about $75 billion per year and is about 80% of the spending on the farm bill
Food Stamps are not a subsidy to farmers, they are a welfare program for poor people. They just are part of the "farm bill" for political reasons.
Significant numbers of both poor and rich countries do not subsidize food today. Many agricultural products are commodities and traded at the "world price" already. This is the world you live in right now. Have a look at what is actually happening rather than speculating...
>In the US, SNAP (food stamps) costs about $75 billion per year and is about 80% of the spending on the farm bill
Food Stamps are not a subsidy to farmers, they are a welfare program for poor people. They just are part of the "farm bill" for political reasons.
>Food Stamps are not a subsidy to farmers, they are a welfare program for poor people. They just are part of the "farm bill" for political reasons.
Food stamps shape the food choices people are able to (and do) make. Giving people money to buy food and giving farmers money to produce food are two sides of the same coin.
For example:
"SNAP increases the likelihood that participants will consume whole fruit by 23 percentage points"[1]
1: https://en.wikipedia.org/wiki/Supplemental_Nutrition_Assista...
Food stamps shape the food choices people are able to (and do) make. Giving people money to buy food and giving farmers money to produce food are two sides of the same coin.
For example:
"SNAP increases the likelihood that participants will consume whole fruit by 23 percentage points"[1]
1: https://en.wikipedia.org/wiki/Supplemental_Nutrition_Assista...
> Spending power around the world varies by several orders of magnitude. If there's one "world price" for a crop, that price will be incredibly cheap for rich countries and incredibly expensive for poor ones. Agricultural poor countries will not be able to afford the food they grow.
This is just bad economics. If food is "incredibly cheap" for rich countries, and agricultural poor countries are unable to afford the food they grow, then the prices will rise. Humans can't survive without food.
This is just bad economics. If food is "incredibly cheap" for rich countries, and agricultural poor countries are unable to afford the food they grow, then the prices will rise. Humans can't survive without food.
>Humans can't survive without food.
When I'm saying "cheap" and "expensive" those are relative terms to the spending power of the population.
If I make $200 a day and some guy in Africa makes $2 a day and we both pay the same price for food. Either I get an incredible deal and pay basically nothing (compared to my income) for all of my food... or he starves to death because he can't afford it.
It has certainly happened. During the Irish Potato Famine, despite the potato disease going around, there was plenty of food to feed the population, they just sold it at a higher price elsewhere.
https://en.wikipedia.org/wiki/Great_Famine_(Ireland)#Irish_f...
When I'm saying "cheap" and "expensive" those are relative terms to the spending power of the population.
If I make $200 a day and some guy in Africa makes $2 a day and we both pay the same price for food. Either I get an incredible deal and pay basically nothing (compared to my income) for all of my food... or he starves to death because he can't afford it.
It has certainly happened. During the Irish Potato Famine, despite the potato disease going around, there was plenty of food to feed the population, they just sold it at a higher price elsewhere.
https://en.wikipedia.org/wiki/Great_Famine_(Ireland)#Irish_f...
That's true; but what I'm saying is that the guy in Africa will raise his/her price to not starve. He/she will double the price and the buyer in the rich country doesn't care. And the competition will do the same thing, as they're starving.
In the Great Famine, exporting leads to economic gain; it's just that people were poor. If you ban exports then exporters lose money and so they'll also become more poor.
Anyways, what you're saying is moot as we already have a world price for most food.
In the Great Famine, exporting leads to economic gain; it's just that people were poor. If you ban exports then exporters lose money and so they'll also become more poor.
Anyways, what you're saying is moot as we already have a world price for most food.
>That's true; but what I'm saying is that the guy in Africa will raise his/her price to not starve. He/she will double the price and the buyer in the rich country doesn't care. And the competition will do the same thing, as they're starving.
The people actually selling the crops in foreign markets won't starve, but these people are often not the actual farmers but middle-men. What about the people who don't farm? Food prices double and they can't just double their own prices and expect to win.
There's a huge economic correction that takes a long time if you break down barriers and the result is a lot of people starving in poor countries and a lot of farms failing in rich ones.
>In the Great Famine, exporting leads to economic gain; it's just that people were poor. If you ban exports then exporters lose money and so they'll also become more poor.
Are you defending the people who found economic gain of the exporters during the famine? 1/8 of the population died. In a closed economy there was more than enough food, prices would have adjusted themselves so that everyone could have eaten. There would have been problems with buying power to import into Ireland, but a million people wouldn't have died and another million wouldn't have fled the country.
The people actually selling the crops in foreign markets won't starve, but these people are often not the actual farmers but middle-men. What about the people who don't farm? Food prices double and they can't just double their own prices and expect to win.
There's a huge economic correction that takes a long time if you break down barriers and the result is a lot of people starving in poor countries and a lot of farms failing in rich ones.
>In the Great Famine, exporting leads to economic gain; it's just that people were poor. If you ban exports then exporters lose money and so they'll also become more poor.
Are you defending the people who found economic gain of the exporters during the famine? 1/8 of the population died. In a closed economy there was more than enough food, prices would have adjusted themselves so that everyone could have eaten. There would have been problems with buying power to import into Ireland, but a million people wouldn't have died and another million wouldn't have fled the country.
There are also some echoes of the world wars. If your country can't feed itself, you can't support an industrial base to fight. Kinda like the highway system.
This argument doesn't hold up. By that reasoning (safety, workers rights, environmental concerns) every industry is special and deserves subsidy. Can mine be better subsidised please?
To be fair, I don't believe in free trade outside equal partners.
That is, I think trade should be completely unrestricted to foreign markets that are within some economic margin (let's say US, Japan, Canada, and Germany to come up with a very incomplete list) and in any other cases should be subject to significant restrictions.
I don't like the fact that it's nearly impossible to pay someone in America an honest wage to put together t-shirts or running shoes. I don't like the fact that I'd be hard-pressed to buy a t-shirt or a running shoe that wasn't assembled by a person who is more like a slave than not.
But also,
Food is something fundamental, something important, more important than almost anything else and really easy to export the production. We might be ok letting some industries be entirely foreign, because maybe they're less essential... basic sustenance though is in a different class of importance. It's not a fad, it'll never go away unlike many industries that seek protections when they should just be allowed to die.
That is, I think trade should be completely unrestricted to foreign markets that are within some economic margin (let's say US, Japan, Canada, and Germany to come up with a very incomplete list) and in any other cases should be subject to significant restrictions.
I don't like the fact that it's nearly impossible to pay someone in America an honest wage to put together t-shirts or running shoes. I don't like the fact that I'd be hard-pressed to buy a t-shirt or a running shoe that wasn't assembled by a person who is more like a slave than not.
But also,
Food is something fundamental, something important, more important than almost anything else and really easy to export the production. We might be ok letting some industries be entirely foreign, because maybe they're less essential... basic sustenance though is in a different class of importance. It's not a fad, it'll never go away unlike many industries that seek protections when they should just be allowed to die.
Your last point is very good. It applies to other sectors too, but I'm not going to die if a few days/weeks without those other things.
Your industry doesn't starve the country to death if it gets outsourced and then blocked as a weapon of war.
You might like to know more about Australia's experience with unsubsidizing farmers.
Or, heck, you might not like it. But I think you should know more about it anyway.
Or, heck, you might not like it. But I think you should know more about it anyway.
Why, what experience is it?
From memory:
Food production (amount of food) rises, while falling as a share of GDP. Agricultural productivity (food output production per unit input) shoots up. A lot of land is repurposed from sheep to other products.
And of course, subsidy spending goes way down.
Food production (amount of food) rises, while falling as a share of GDP. Agricultural productivity (food output production per unit input) shoots up. A lot of land is repurposed from sheep to other products.
And of course, subsidy spending goes way down.
I eat food from the poor country India (I live in India). Sure, food standards aren't as good, but I'm fine.
> Poor countries without standards for food safety, scruples about burning down rainforest for a few years of fertility, or worker rights or fair wages.
The wages are bad but if you don't buy from poor countries their wages will be even worse.
> Poor countries without standards for food safety, scruples about burning down rainforest for a few years of fertility, or worker rights or fair wages.
The wages are bad but if you don't buy from poor countries their wages will be even worse.
Walk through the produce section at Whole Foods, or Safeway.
Play a little game. Try to find the fruit, or vegatables that arn't produced in the rich country, fair wage country, safety conscious country of Mexico.
Play a little game. Try to find the fruit, or vegatables that arn't produced in the rich country, fair wage country, safety conscious country of Mexico.
If even a simple majority of the calories you consume come from the produce aisle, you are in a tiny elite minority.
Even then, where it was produced doesn't matter much, if it wasn't grown in Mexico or shipped in from somewhere more exotic, much of the human labor was likely done by migrant workers from Mexico anyway.
Let's not pretend that the working conditions for the unmechanized portions of most produce-related jobs are anything but appalling.
To put a fine point on it, I don't want any part of my quality of life to be put on the backs of a workforce outside the middle class (or a foreign equivalent through trade)
----
The question is – is your goal replacing all food production with foreign wage-slaves? Are you holding up the current American market for "unsubsidized" produce as a shining beacon to be emulated? If you look into it, you realize far too much of it exploits the desperate and poor and creates shitty situations everywhere it goes. Proper subsidies and market regulations could mean that you could be proud to be a part of the food economy instead of feeling like a 21st century colonialist.
Even then, where it was produced doesn't matter much, if it wasn't grown in Mexico or shipped in from somewhere more exotic, much of the human labor was likely done by migrant workers from Mexico anyway.
Let's not pretend that the working conditions for the unmechanized portions of most produce-related jobs are anything but appalling.
To put a fine point on it, I don't want any part of my quality of life to be put on the backs of a workforce outside the middle class (or a foreign equivalent through trade)
----
The question is – is your goal replacing all food production with foreign wage-slaves? Are you holding up the current American market for "unsubsidized" produce as a shining beacon to be emulated? If you look into it, you realize far too much of it exploits the desperate and poor and creates shitty situations everywhere it goes. Proper subsidies and market regulations could mean that you could be proud to be a part of the food economy instead of feeling like a 21st century colonialist.
Everyone is egocentric. For countries, egocentric-ness is maximum.
UBI/FB like threads are filled with comments that seemed to forgot this so obvious fact of life. Its the worst thing about HN.
UBI/FB like threads are filled with comments that seemed to forgot this so obvious fact of life. Its the worst thing about HN.
What point are you trying to make?
No country subsidize for other countries. Certainly not for moral reasons.
Subsidizes get introduced either to score political points and/or bribes. Thats it.
Subsidizes get introduced either to score political points and/or bribes. Thats it.
It's a way of bandlimiting (lowpass filtering?) price change through mild overproduction.
It works because overproducing food costs less than the risk of market shortage transients. It's one of those Catch-22 moments where you feel in awe of the genius of it.
I am very sorry it is a significant fraction of your state budget. Given the nature of the risk profile your state should not be underwriting this risk.
It works because overproducing food costs less than the risk of market shortage transients. It's one of those Catch-22 moments where you feel in awe of the genius of it.
I am very sorry it is a significant fraction of your state budget. Given the nature of the risk profile your state should not be underwriting this risk.
In manufacturing terms it is a way of encouraging the use of inventory to buffer against demand volatility and reduce the probability of shortage events.
Some (likely outdated) idea to do with treating farming capacity as a strategic reserve.
There's some rogue political wing in Japan that wants to have 100% capacity for domestic food production to meet domestic consumption needs. They've been pushing for subsidies for years to achieve "food independence", whatever that means.
I imagine their true goal is to just pad their pockets.
I imagine their true goal is to just pad their pockets.
It really seems to more of a sacrifice to some god of the Apocalypse to me. Although given the history of Japan since the Meiji period, nothing should surprise me.
Medieval Japanese culture is just so achingly beautiful it does not surprise me that people have such love fr it.
Medieval Japanese culture is just so achingly beautiful it does not surprise me that people have such love fr it.
Look, in war times, we can plant potatoes in all our gardens and take our spare meadows. We don't need these farmers in peace time; we really don't. They are leeches.
Tiny little farms like that wouldn't be a huge amount of food. It's vastly inefficient compared to a huge factory farm and you can just summon up the tractors and watering infrastructure to properly run a farm.
Tell that to those who lived under the Soviet collective laws. They were allowed something like 1/2 acre to grow food for their families. Those little patches produced a significant amount of the food that wasn't grown on the collective farms.
Of course, a lot of that had to do with incentives....
Of course, a lot of that had to do with incentives....
Oh you can totally feed your family with a half acre. If you're good at it you can feed several families.
If you only grow and eat potatoes, you can feed 7 people 2000 Calorie/day diets all year. That's the figure if you grow potatoes like big potato farmers. If you nurture the land and integrate other species taking advantage of differing growing seasons and do all you can to make perfect soil conditions, you can get a lot more out of it than potatoes every day for 7.
If you only grow and eat potatoes, you can feed 7 people 2000 Calorie/day diets all year. That's the figure if you grow potatoes like big potato farmers. If you nurture the land and integrate other species taking advantage of differing growing seasons and do all you can to make perfect soil conditions, you can get a lot more out of it than potatoes every day for 7.
Great idea! Maybe this could help Venezuala. Oh wait...
Some places can - if you have huge gardens and areas you're free to make use of. Many can't.
Norwegian farming policy is focused on maintaining near-independence in the food supply because the British embargo during the Napoleonic wars in the early 1800's is still seared in the collective consciousness. E.g. every Norwegian primary school child will go through the very long, very tedious poem "Terje Vigen" about a man who tried to evade the British embargo by taking a small boat to Denmark to get food to feed his starving family.
Starvation happened despite farming most of the available land.
The concern of local food production rose to prominence again during World War II, when German occupation meant strict rationing, which led to "fun" food innovation such as flour substitute made from bark, as growing vegetables etc. in your back garden simply doesn't produce enough for most people to sustain a family.
Norwegian farming policy is focused on maintaining near-independence in the food supply because the British embargo during the Napoleonic wars in the early 1800's is still seared in the collective consciousness. E.g. every Norwegian primary school child will go through the very long, very tedious poem "Terje Vigen" about a man who tried to evade the British embargo by taking a small boat to Denmark to get food to feed his starving family.
Starvation happened despite farming most of the available land.
The concern of local food production rose to prominence again during World War II, when German occupation meant strict rationing, which led to "fun" food innovation such as flour substitute made from bark, as growing vegetables etc. in your back garden simply doesn't produce enough for most people to sustain a family.
That's not the only reason for Norwegian farming policy. Another is to ensure that non-industrial areas and areas where it is simply difficult to live do not become entirely depopulated. I live and work and pay tax in Norway and I am quite happy with the basic principle that the country should produce most of its own food; it helps to reduce the tendency to race to the bottom of the market and, if done well, promotes pride in quality. Of course it is not easy to export the Norwegian experience to a much larger country like the US with a different political system and much higher concentration of ownership of the farms and also difficult to export it to a smaller much more densely populated country like the UK. But that doesn't mean it wouldn't be worth trying to learn from it.
Don't mistake me, I'm not claiming that Norwegian farming policy is perfect, merely that it does seem to work at the moment.
Don't mistake me, I'm not claiming that Norwegian farming policy is perfect, merely that it does seem to work at the moment.
Terje Vigen is a fascinating tale .. thanks for pointing it out. Does it end in a cliff hanger or does he exact revenge on his captor???
There's a full English translation here [1] with details on Ibsens likely sources of inspiration, if you want to read it. It feels a lot longer when you're 9-10 years old...
But here's a summary of the end:
He is released from prison at the end of the Napoleonic wars, and comes home to find his wife and child died while he was in prison, and were buried in a paupers grave.
Years later he comes across a ship in distress and it is the captain of the British ship that caught him, with his family. He threatens revenge, but on picking up the child changes his mind and saves all of them.
[1] http://www.oftebro.com/Terje_Vigen_english.pdf
But here's a summary of the end:
He is released from prison at the end of the Napoleonic wars, and comes home to find his wife and child died while he was in prison, and were buried in a paupers grave.
Years later he comes across a ship in distress and it is the captain of the British ship that caught him, with his family. He threatens revenge, but on picking up the child changes his mind and saves all of them.
[1] http://www.oftebro.com/Terje_Vigen_english.pdf
Why would it be outdated?
The days of sieges and naval blockades are behind us now. Probably.
Then there are those "aircraft carriers made of sand" in the South China Seas.
I wouldn't mind subsidizing smaller farmers. Larger farmers shouldn't be subsidized.
The government would need to prevent large companies from splitting up, and suddenly overnight you have 20 different small companies. They could beef up legal penalties for any blatant, repeated shinagigans. (Will never happen? The money their lobbyists sending congress is staggering?)
It's a shame how taxpayer money is wasted by administrators/politicians.
In the Bay Area, we have a lot of civil engineering jobs. (Those street repair/pipe jobs that never end, and tie up traffic for years). For years, it seemed like one company got all the work-- Billotti Brothers. (Didn't use their real name, out of fear.)
Even though every project required three bids, by three different companies, it seemed like Billotti got all the work. I used to wonder why. They must be one efficent company?
The Internet arrived, and people had some honest questions, basically, the main one was, "Is this the only company?"
I then noticed news papers started to list the construction companies that lost out on the bids. I looked into these companies. They all seemingly were founded by a Billotti? It looks like they sent their kids to Sacramento to get their contractors licenses? (Very easy to get).
These companies then all bid on projects. The lowest bid won! "Hold up a glass of red wine!"
And of course, they didn't plan this wacky coincidence, commingle assets("I don't need that grader brother."), share workers, work on eachother's projects--never.
And I actually don't have a clue to what they did, but it just doesn't look right. And it all could be legal--I just don't know? Or maybe, all the kids/grandkids just followed in dad's footsteps, and got into construction aspect of civil engineering?
(Edit: If I recall, the whole save the American farmer thing was started when I was a child. It sounded great, but farmers bought up all the small farmers, and the subsidies never stopped. Sorry about going off topic with the Billotti Brothers. I've become so dissalusioned with our society.)
The government would need to prevent large companies from splitting up, and suddenly overnight you have 20 different small companies. They could beef up legal penalties for any blatant, repeated shinagigans. (Will never happen? The money their lobbyists sending congress is staggering?)
It's a shame how taxpayer money is wasted by administrators/politicians.
In the Bay Area, we have a lot of civil engineering jobs. (Those street repair/pipe jobs that never end, and tie up traffic for years). For years, it seemed like one company got all the work-- Billotti Brothers. (Didn't use their real name, out of fear.)
Even though every project required three bids, by three different companies, it seemed like Billotti got all the work. I used to wonder why. They must be one efficent company?
The Internet arrived, and people had some honest questions, basically, the main one was, "Is this the only company?"
I then noticed news papers started to list the construction companies that lost out on the bids. I looked into these companies. They all seemingly were founded by a Billotti? It looks like they sent their kids to Sacramento to get their contractors licenses? (Very easy to get).
These companies then all bid on projects. The lowest bid won! "Hold up a glass of red wine!"
And of course, they didn't plan this wacky coincidence, commingle assets("I don't need that grader brother."), share workers, work on eachother's projects--never.
And I actually don't have a clue to what they did, but it just doesn't look right. And it all could be legal--I just don't know? Or maybe, all the kids/grandkids just followed in dad's footsteps, and got into construction aspect of civil engineering?
(Edit: If I recall, the whole save the American farmer thing was started when I was a child. It sounded great, but farmers bought up all the small farmers, and the subsidies never stopped. Sorry about going off topic with the Billotti Brothers. I've become so dissalusioned with our society.)
In general, the reason to have farm subsidies is to maintain sufficient farming capability to provide food to the population in case a major disruption (blockade, war etc) that makes it difficult to import food. If not present, this dependency on outside for food can be used as leverage by others and not providing population with food is recipe for civil unrest at the weakest moment.
If you don't provide farming subsidies, farming will move to countries with cheap labor and people with knowledge and capability for farming will become too few to ramp up quickly in case of emergency.
If you don't provide farming subsidies, farming will move to countries with cheap labor and people with knowledge and capability for farming will become too few to ramp up quickly in case of emergency.
Farmers do! And farmers also vote. And that's the reason for why they are subsidised. Farmers have a special interest in receiving subsidies, and politicians gain far more by pandering to them than by saving a little bit of money for everyone else.
I presume you are thinking mostly of the west here. Farmers voting has little or no impact on policy. In most developed countries total employment in farming is less than 5% of the population.
You'd be surprised how much a vocal minority (which is a lot more than 5% in agricultural states) can push senators around. Still, even 5% of the population constitutes a very powerful special interest.
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Isn't the whole point of free trade agreements to prevent those sorts of tariffs? Does NAFTA not cover cheese?
Yes, that is the point. No, NAFTA does not cover importing dairy products into Canada; similarly the USA kept tariffs on some dairy products as well as sugar and peanuts.
Unfortunately pretty much all "free trade" deals turn out to be "free trade except for a small number of politically well-connected industries". :-(
Unfortunately pretty much all "free trade" deals turn out to be "free trade except for a small number of politically well-connected industries". :-(
Or (for example) "free trade, except that Canadian companies can no longer sell Canadian cheese to Canadians at parmesan-style to help the Italian cheese industry".
Kvetching by free trade acolytes about 'real' free market capitalism reminds me strongly of leftists bickering about the USSR not actually being communist.
'real' free market capitalism can't exist because without proper regulation, power/wealth tends to concentrate to a level where the strong ruin the 'free' bit.
'real' communism can't exist (outside small rare communities) because the industrial revolution failed to bring about a post-scarcity economy which was marx's failure of prediction.
A post-scarcity economy which eliminates the importance of capital is probably very possible in the future. Complete hands off capitalism probably is never going to be possible.
'real' communism can't exist (outside small rare communities) because the industrial revolution failed to bring about a post-scarcity economy which was marx's failure of prediction.
A post-scarcity economy which eliminates the importance of capital is probably very possible in the future. Complete hands off capitalism probably is never going to be possible.
Communism failed because of human nature. It is incentives gone wrong. If there is no pressure to become more efficient, or even remain efficient, things will become less efficient and everybody suffers (to the point of starvation). Central planning failed due to complexity of the task.
Free market / small government doesn't work because a) it is inherently unstable due to power laws (rich get richer), b) lots of externalities (e.g. environmental damage) not being priced in, c) lower overall wellfare without government spending on infrastructure etc. In the end, it won't work because of human nature (incentives gone wrong).
So the challenge is to design the system for a society such that incentives are set right, such that a) there is efficient production such that the society can survive in the short run b) it is sustainable such that it and the whole ecosystem can survive in the long run. The past 50-100 years made a lot if progress on a), and the next 50-100 years need to solve b).
Free market / small government doesn't work because a) it is inherently unstable due to power laws (rich get richer), b) lots of externalities (e.g. environmental damage) not being priced in, c) lower overall wellfare without government spending on infrastructure etc. In the end, it won't work because of human nature (incentives gone wrong).
So the challenge is to design the system for a society such that incentives are set right, such that a) there is efficient production such that the society can survive in the short run b) it is sustainable such that it and the whole ecosystem can survive in the long run. The past 50-100 years made a lot if progress on a), and the next 50-100 years need to solve b).
> Central planning failed due to complexity of the task.
Central planning is not a requirement in Marxism or even Marxism-Leninism. Lenin tried it during the civil war, and promptly reversed it in 1921 with the introduction of New Economic Policy, which he indicated he believed needed to be in place for decades (NEP involved re-introducing limited market economy). Stalin then reversed Lenins reforms and went much further shortly after Lenin died.
There are many left wing ideologies including anarchist and communist ideologies that explicitly promote the use of market mechanisms for resource allocation, and many more that take a "whatever works" approach.
The idea of a planned economy is attractive to some because it seems "tidy", while for others it's strongly unappealing because it involves a central authority, which is anathema to a lot of communist ideologies.
Central planning is not a requirement in Marxism or even Marxism-Leninism. Lenin tried it during the civil war, and promptly reversed it in 1921 with the introduction of New Economic Policy, which he indicated he believed needed to be in place for decades (NEP involved re-introducing limited market economy). Stalin then reversed Lenins reforms and went much further shortly after Lenin died.
There are many left wing ideologies including anarchist and communist ideologies that explicitly promote the use of market mechanisms for resource allocation, and many more that take a "whatever works" approach.
The idea of a planned economy is attractive to some because it seems "tidy", while for others it's strongly unappealing because it involves a central authority, which is anathema to a lot of communist ideologies.
Communism or something like it can easily work post-scarcity.
You can't trust human nature to toil away in factories and hard jobs and do so efficiently for 1/2 of waking life.
Make that fraction a lot smaller... say the only people that needed to work on whatever were the ones that actually wanted to... and suddenly communism works. Open source software works and so much of it is done because people just want to do it. Some day automation and efficiency will get to a point where nerds who have interests will end up doing all of the work because it's what they want to do. Imagine a 3d printer capable of making complex metal/plastic/ceramic/electronic/whatever objects. You'd get hordes of people designing and sharing things just because they wanted to. Design a 3d-printer that can print copies of itself (as well as most of the things a person could want) and suddenly a huge chunk of capitalism is just unnecessary.
50 years after the creation of Star Trek, we should be able to at least imagine the Star Trek economy being technically feasible in the not too distant future.
You can't trust human nature to toil away in factories and hard jobs and do so efficiently for 1/2 of waking life.
Make that fraction a lot smaller... say the only people that needed to work on whatever were the ones that actually wanted to... and suddenly communism works. Open source software works and so much of it is done because people just want to do it. Some day automation and efficiency will get to a point where nerds who have interests will end up doing all of the work because it's what they want to do. Imagine a 3d printer capable of making complex metal/plastic/ceramic/electronic/whatever objects. You'd get hordes of people designing and sharing things just because they wanted to. Design a 3d-printer that can print copies of itself (as well as most of the things a person could want) and suddenly a huge chunk of capitalism is just unnecessary.
50 years after the creation of Star Trek, we should be able to at least imagine the Star Trek economy being technically feasible in the not too distant future.
Communism failed? Someone should call the Chinese Communist Party and tell them, they're still acting like they run the place.
https://en.wikipedia.org/wiki/Chinese_economic_reform
What the party calls themselves is irrelevant. "communism" as anyone would define it, is not what China's economy looks like today.
What the party calls themselves is irrelevant. "communism" as anyone would define it, is not what China's economy looks like today.
Indeed. The implied point being that capitalism didn't win either, regardless of what we call ourselves.
In both cases what seems to have emerged from the 20th century as the successful governing model is varying degrees of democratic socialism.
In both cases what seems to have emerged from the 20th century as the successful governing model is varying degrees of democratic socialism.
There's a long elaborate etymology and syntax argument I want to make here.
The gist of it is that capitalism and communism aren't exactly two instances of the same class, communism implies a form of government that capitalism doesn't. Likewise communism implies a precise extreme economy where capitalism is more vague.
Most of the world is mostly capitalist. The presence of extensive social welfare programs doesn't really take away from this in the way that adding a market economy and entrepreneurial opportunity takes away from communism.
The gist of it is that capitalism and communism aren't exactly two instances of the same class, communism implies a form of government that capitalism doesn't. Likewise communism implies a precise extreme economy where capitalism is more vague.
Most of the world is mostly capitalist. The presence of extensive social welfare programs doesn't really take away from this in the way that adding a market economy and entrepreneurial opportunity takes away from communism.
The host of one of my favorite podcasts once asked Milton Friedman (huge free market guy, in case someone doesn't know) what he thought of NAFTA, and Friedman said he didn't like it. Friedman said that a real free trade agreement would've been one page, rather than the pile of exemptions it turned into. Everyone with the political clout to make it to the table was able to keep their protectionism somewhat intact.
I'm missing the part of this scheme where you need to have a large cache of aluminum in any form to make this work.
Related: The Chinese regulations on export of neodymium magnets is similarly structured. Exporting the magnets or the raw metallic ingredients is subject to high tariffs, but export of finished products using them is not. This isn't just about energy exports though, it's straight up protectionism of their manufacturing businesses.
Related: The Chinese regulations on export of neodymium magnets is similarly structured. Exporting the magnets or the raw metallic ingredients is subject to high tariffs, but export of finished products using them is not. This isn't just about energy exports though, it's straight up protectionism of their manufacturing businesses.
Well,
If the aluminum they're getting is worth more than they're paying for it, they want to buy and export as much as possible. They then store it until they can sell it at the appropriate price. Especially considering that you'd assume the loophole is going to close sooner or later.
If the aluminum they're getting is worth more than they're paying for it, they want to buy and export as much as possible. They then store it until they can sell it at the appropriate price. Especially considering that you'd assume the loophole is going to close sooner or later.
If you're taking a protectionist view of their manufacturing business, China relaxing duties on finished goods would make sense. It's unclear (to me anyway) that that decision was made with the intent to spur raw aluminum exports vs some clever guys putting two and two together.
And yes, in case the loophole closes. These guys may have been the largest operation that some guy flew a plane over but they probably weren't the only ones.
And yes, in case the loophole closes. These guys may have been the largest operation that some guy flew a plane over but they probably weren't the only ones.
a guess: in case China closes the loophole.
Where does one go to learn about such things? Is it economics? Any recommendations? Thanks in advance!
How do people sniff out these deals?
Sounds like the real problem is the power subsidy.
until the differences in costs of power to re-melt changes..of course that is why more than one country is used..
“My Moby-Dick has been Zhongwang,” says Mr. Henderson, president of the Aluminum Extruders Council, a U.S. trade group.
Without context, I would have thought that a Markov text generator was on the loose.
Without context, I would have thought that a Markov text generator was on the loose.
Really? Why? Mr. Henderson is simply claiming that hist situation bears some similarities to Captain Ahab's. It might or might not really be true but the statement is clear enough for anyone moderately well read in English language literature.
It's not that the reference is obtuse (it isn't), it's that one usually doesn't encounter "Moby Dick", "aluminum extruders" and "Zhongwang" in the same sentence. It can give one pause, in the same manner as if the sentence were full of alliteration.
The article mentions that aluminum prices have fallen 50% since 2010. However, prices were double historical normal from 2005 to 2011. The price lowering was just a return to normal prices.
This is correct. Three factors drove the bubble in aluminum and other commodities: Increased energy expense, speculative and fraudulent investment, and some increased consumption. However, three factors are likely to continue to drive aluminum and other commodities under the mean: Lack of confidence, spectacular debt burdens and deflationary trends across commodity price inputs. Its likely to be years before a stable mean is established, despite the occasional mirage of stability from month to month.
I remember working at a bike shop around this time and within 6 months all of our bikes went up in price like $50-100. I had no idea what was going on and asked one of corporate office guys what the deal was.
He said between India and China, they had both put huge strains on steel, aluminum and titanium and it was causing a shortage for bike manufacturers, so they were raising their prices since the prices for these metals had skyrocketed in recent months.
Good to know it was a little more to it, but interesting nonetheless.
He said between India and China, they had both put huge strains on steel, aluminum and titanium and it was causing a shortage for bike manufacturers, so they were raising their prices since the prices for these metals had skyrocketed in recent months.
Good to know it was a little more to it, but interesting nonetheless.
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Indeed, one of the motivations for speculation has been the continuous (electronic) printing of money by the US and other governments (combined with massive infrastructure projects by China), leading many investors to logically-if-naively believe that commodity prices (especially gold) would follow "real" money. The problem is that all commodities are actually produced and consumed and speculation simply causes disproportionate production followed by a crash.
And, of course, there are a number of ways to do speculation in a bear market but altogether, more money is going to be made in a bull market.
Even more, since the money coming out of quantitative easing isn't going into consumer goods (that much), it has to go into speculation and it thus seems likely the various kinds of market imbalances will or get worse.
And, of course, there are a number of ways to do speculation in a bear market but altogether, more money is going to be made in a bull market.
Even more, since the money coming out of quantitative easing isn't going into consumer goods (that much), it has to go into speculation and it thus seems likely the various kinds of market imbalances will or get worse.
I'm sure this guy will just get a little slap on the wrist.
Its not clear he's done anything wrong. Shipping Aluminum to Mexico? What's the problem.
It is posited that in fact it is clear - in the article no less!
>In Mexico, Mr. Shen was implementing an audacious plan, according to people familiar with the matter: A network of trading companies could route hundreds of thousands of tons of aluminum from China to Mexico, where a plant would melt it for shipment to the U.S., evading trade restrictions and claiming North American Free Trade Agreement benefits.
>In Mexico, Mr. Shen was implementing an audacious plan, according to people familiar with the matter: A network of trading companies could route hundreds of thousands of tons of aluminum from China to Mexico, where a plant would melt it for shipment to the U.S., evading trade restrictions and claiming North American Free Trade Agreement benefits.
Might as well include
> Meanwhile, setbacks were piling up. Trucks and metal were stolen from the Mexico facility, slowing deliveries, former Aluminicaste employees say. The company failed to obtain Nafta benefits after U.S. authorities concluded that the metal came from China.
> Meanwhile, setbacks were piling up. Trucks and metal were stolen from the Mexico facility, slowing deliveries, former Aluminicaste employees say. The company failed to obtain Nafta benefits after U.S. authorities concluded that the metal came from China.
And why is that a problem, exactly? In the end aluminum is fungible for aluminum, and the US is getting aluminum from Mexico under NAFTA. Trying to enforce a tariff on element production from a subset of external countries seems sisyphean.
> And why is that a problem, exactly?
It says in the article: American companies are being put out of business by heavily-subsidized Chinese companies.
> Trying to enforce a tariff on element production from a subset of external countries seems sisyphean.
Apparently not:
> The company failed to obtain NAFTA benefits after U.S. authorities concluded that the metal came from China.
It helps to read the article you're commenting on ;)
It says in the article: American companies are being put out of business by heavily-subsidized Chinese companies.
> Trying to enforce a tariff on element production from a subset of external countries seems sisyphean.
Apparently not:
> The company failed to obtain NAFTA benefits after U.S. authorities concluded that the metal came from China.
It helps to read the article you're commenting on ;)
But there are essentially no tariffs any more. Not sure how NAFTA changed that. But assuming its true: aluminum is fungible as mentioned. Providing more to Mexico means they can export more of their own to the US.
If China is greatly subsidizing the aluminum production then then how will US producers compete?
It's in the US's interests that they don't allow another country to manipulate the market to destroy the US production capacity. Once that capacity is online the foreign country can then raise prices.
It's not easy or cheap to bring production capacity online.
It's in the US's interests that they don't allow another country to manipulate the market to destroy the US production capacity. Once that capacity is online the foreign country can then raise prices.
It's not easy or cheap to bring production capacity online.
It could be well within the Chinese government agenda to have broader control over global productive capacity. Impossible to prove, I know.
Generally I'm pro-free trade, but the issue gets quite messy when you consider government subsidies. As a Canadian, this discussion comes up frequently along the lines of the subsidized agriculture sector.
Generally I'm pro-free trade, but the issue gets quite messy when you consider government subsidies. As a Canadian, this discussion comes up frequently along the lines of the subsidized agriculture sector.
the doc death by china covers some of these issues... not free trade by a long shot, more like an ongoing trade war
Exactly why the Saudis are doing their best to kill the US fracking industry.
Worse still, China could actually start enforcing their restrictions on exporting raw aluminium and drive non-Chinese manufacturing industry out of business by cutting off their supply of feedstock, as they also tried to do with rare earth metals.
This reminds me of "What Color are your bits?" — http://ansuz.sooke.bc.ca/entry/23
That is not how global trade works. In fact what's being described is essentially laundering and the Feds take a very dim view of that.
>Trying to enforce a tariff on element production from a subset of external countries seems sisyphean.
I loved fantasy books as well.
I loved fantasy books as well.
The simple version: If a foreign government is unfairly subsidizing an industry, America will slap a tariff on it. This is good policy - imagine, for example, if Airbus could afford to sell their planes for $1, because they are being entirely subsidized by the French government. Everyone buys airbus, no one buys Boeing any more. Boeing(along with tens of thousands of jobs) goes bye bye, and now Airbus starts selling their planes for whatever they want, because there is no competition left.
So, that's what China was doing - they were giving this aluminum company tons of money, and it allowed them to produce and sell aluminum for far cheaper than should be possible. So America put a tariff on importing that aluminum from China.
Instead, they sent it to Mexico, and then pretended that the aluminum came there when shipping it into America. No more tariffs!
So, that's what China was doing - they were giving this aluminum company tons of money, and it allowed them to produce and sell aluminum for far cheaper than should be possible. So America put a tariff on importing that aluminum from China.
Instead, they sent it to Mexico, and then pretended that the aluminum came there when shipping it into America. No more tariffs!
To play devil's advocate, can someone provide a single historical example of a case where dumping "worked," in the sense that one country's manufacturers were able to rake in large profits after their foreign competitors went out of business due to subsidies?
Because unless dumping actually succeeds at that goal, and I don't see any evidence that it does, it seems indistinguishable to American consumers from a huge technical advance in a foreign country lowering the cost of some import--yes, it may be detrimental to domestic producers, but it's a huge benefit to domestic consumers and a net benefit overall.
Because unless dumping actually succeeds at that goal, and I don't see any evidence that it does, it seems indistinguishable to American consumers from a huge technical advance in a foreign country lowering the cost of some import--yes, it may be detrimental to domestic producers, but it's a huge benefit to domestic consumers and a net benefit overall.
Rare earth metals dumping caused all US mines to close for decades.
Greed by American companies outsource to low cost countries played a part too. The owners of the mines would rather buy and operate mines in low cost countries. It isn't simply the case that evil foreign government sets up a mine and dumps the raw material; often they allow the owners of existing mines in the West to buy concessions to operate them because then the country receives the expertise and a profit at the expense of the workers in the West. But, the Western owners of the Western mines make even more profit, at least in the short term.
Sometimes US firms go out of business when they compete with foreign firms. Even if that's because of "unfair" subsidies from foreign governments, that's indistinguishable from some foreign technological improvement that allows competitors to produce their goods more cheaply than US firms. I'm specifically asking for evidence of the followup: the part where foreign firms have no competition and rack up massive profits at our expense.
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Shale oil?
Note that this trick is very hard to pull off in the long-term. China tried it with rare-earth metals, and production just started up elsewhere. In the short term it's annoying and causes disruptions.
It isn't very hard to pull off dumping, it's game that's been played for centuries. That's why all modern governments disallow it. China especially does it all the time, here's an example with solar: http://www.nytimes.com/2014/12/17/business/energy-environmen... .
A genuine question: why is this dumping, but importing any other electronics (say any modern computer, cellphone, appliances) not so?
As the article mentions:
> the companies were selling products below the cost of manufacture and that the Chinese companies were benefiting from unfair subsidies from their government.
I assume Foxconn does not get subsidies to sell iPhones below cost :)
> the companies were selling products below the cost of manufacture and that the Chinese companies were benefiting from unfair subsidies from their government.
I assume Foxconn does not get subsidies to sell iPhones below cost :)
I just don't understand how easy it is to determine the cost of manufacture something outside of one's economy and infrastruture.
I'm in Argentina at the moment and I'm constantly hearing local businesses accusing china of dumping because they can't produce more cheaply, but than everywhere else in the world we buy Huawei, Xiaomi, etc I feel that accusations of dumping are more political interpretations than measurable facts.
I'm in Argentina at the moment and I'm constantly hearing local businesses accusing china of dumping because they can't produce more cheaply, but than everywhere else in the world we buy Huawei, Xiaomi, etc I feel that accusations of dumping are more political interpretations than measurable facts.
Selling at below cost is dumping. Selling at above cost is not.
I understand. But how do we know the real cost when the country we are talking about is China? Even in transparent economies like the EU, you find convoluted ways to subsidize companies (or convoluted ways to accuse companies of receiving subsidies - depending where you stand in these issues)
Because they aren't being convoluted about it, their costs and subsidies are very obvious. They are simply losing money and keeping the mills going via state guaranteed debt (well, the banks are being ordered to lend).
This is correct. Dumping is very easy to pull off because it takes a long time to obtain a remedy and much damage is done in the meantime.
I think the rare earth mines that tried starting up again were promptly driven under by China. For example, Molycorp (which started up production at the Mountain Pass mine in the US) was driven into bankruptcy a year ago soon after reaching full production. Not a bad deal for China at all - they got an almost decade-long monopoly on manufacturing using rare earth metals, which they can probably continue now, and those that tried to break their monopoly suffered massive losses.
Clearly then the US and EU should slap tariffs on Apple, as it was being unfairly subsidized by Irish tax scheme.
Just a matter of time. http://money.cnn.com/2016/09/09/technology/apple-tax-us-tipo...
Wait, what about the part where everyone buys cheap Airbus planes and hedges them for when the price goes up? At some point, Airbus has to sell them for a profit, and it's at that point that people start selling their stockpiles of cheaply-bought Airbus planes. They could sell it for anywhere between $1 and whatever the price Airbus will eventually want to charge, and still make a profit, while simultaneously taking away all profit from Airbus.
And in the above scenario, Boeing is also someone that could buy those cheap Airbus planes. I know, it's a contrived scenario, but I think it illustrates the point.
In the case of aluminium being subsidized by the Chinese government, same thing. The entire world, including America, get's to benefit from cheap Aluminium. You could argue it's a relatively direct subsidy by the Chinese government to all Aluminium consumers. The Chinese government, and their subsidized aluminium producers will not be getting that money back. And really, all they're essentially buying is a temporary halt on competition. As soon as they monopolize the market, and attempt to abuse it, competitors will start appearing and they're back to square one. With a large capital deficit and negligible profits from the exercise.
Alternatively, you get protectionism via tariffs. One could argue that that is a form of punishment on all the consumers of the tariff-ed good, or consumers of goods that are made from the tariff-ed material. The consumers pay more, and the government get's extra tax revenue. Does it buffer, and protect local industries from turbulent and cheap foreign markets? Sure, but that's at the cost of the consumers again. Really, the only winner is the state's coffer.
</opinionated rant>
And in the above scenario, Boeing is also someone that could buy those cheap Airbus planes. I know, it's a contrived scenario, but I think it illustrates the point.
In the case of aluminium being subsidized by the Chinese government, same thing. The entire world, including America, get's to benefit from cheap Aluminium. You could argue it's a relatively direct subsidy by the Chinese government to all Aluminium consumers. The Chinese government, and their subsidized aluminium producers will not be getting that money back. And really, all they're essentially buying is a temporary halt on competition. As soon as they monopolize the market, and attempt to abuse it, competitors will start appearing and they're back to square one. With a large capital deficit and negligible profits from the exercise.
Alternatively, you get protectionism via tariffs. One could argue that that is a form of punishment on all the consumers of the tariff-ed good, or consumers of goods that are made from the tariff-ed material. The consumers pay more, and the government get's extra tax revenue. Does it buffer, and protect local industries from turbulent and cheap foreign markets? Sure, but that's at the cost of the consumers again. Really, the only winner is the state's coffer.
</opinionated rant>
You are ignoring costs, expertise, and time it takes to get production ramped up.
Let's say Chinese aluminum makers control the market and puts all other aluminum ventures out of business, and then raises the price until they don't need a subsidy and make a healthy profit.
Ok, so now someone else can jump in the aluminum game. Why would they do that if they knew that China could immediately put them out of business by turning the subsidy back on. Who would invest their money in that venture?
Let's say Chinese aluminum makers control the market and puts all other aluminum ventures out of business, and then raises the price until they don't need a subsidy and make a healthy profit.
Ok, so now someone else can jump in the aluminum game. Why would they do that if they knew that China could immediately put them out of business by turning the subsidy back on. Who would invest their money in that venture?
This is a SLOW process. By the time tariffs are enacted companies (and jobs) can be wiped out.
Thanks for your explanation. Then why does America subsidize its sugar/agriculture industries so heavily?
Why hasn't America slapped a tariff on Uber and Tesla?
tariffs are levied on imports
That's what I was thinking. If China wants to subsidize American manufacturing by selling us cheap aluminum, what's the problem? This is is bad if you're part of the tiny American aluminum mining and extraction business, but it's probably pretty fantastic if you're part of the huge and important industries making anything with aluminum, like cars and airplanes.
Why do we want to protect primary industries when historically there's been so much more money in secondary industries?
Why do we want to protect primary industries when historically there's been so much more money in secondary industries?
Do you know the story of how the British went from petty traders to "greatness"?
And then back again. That's empires for you.
Of course, one could argue that those of us in the US are in fact the British Empire, the narrative slightly complicated by that civil war period of 1776-1812 of course.
True, this seems to be how Foreign policy people view things. This viewpoint shows up in things like "Five eyes" etc.
They're going to build ladders with it!
Or they're going to build Trump's wall.
That was literally the first thought that came to my mind.
Sounds like he's already been hit where it hurts. If his fortune is ~$3b and the stockpile is ~$6b, then he's losing a ton of money every day to interest and opportunity cost and shipping it back to Vietnam and however much the price has fallen since he bought it all, which could be a large fraction. Given how his partners have the knives out for him, he may not even have that $3b. One can stockpile, but as always, how does one bury the body?
Heh, well, depends on whether or not the material was hedged in and how much flat price risk he took. He may very well have caught the market at a good time and storage/carry costs in Mexico should be low.
This reminds me of the 2013 Goldman Sachs aluminum story:
http://www.nytimes.com/2013/07/21/business/a-shuffle-of-alum...
One of the reader comments said: "Extradite him to the US and then prosecute him. Getting rich without any merits is horrible."
and I thought: you must be new here
and I thought: you must be new here
Really? Wouldn't you think U.S. has the lowest proportion of "rich without merits" as %age of rich of any nation in the world – and indeed in history of world?
Not sure why you're getting downvoted. This is a totally valid point. For the downvoters: malchow's claim is that in the US, rich people are more likely to be businessmen or people who have otherwise worked for their wealth, rather than simply having been born to the right parents.
Perhaps one could go off and have a look at the list of the richest people in the US, note how many of them are named Mars or Walton, then return here and realize that this theory, while hardly impossible, requires more evidence than mere assertion.
I agree with what you're saying, but at the same time it's a hell of a lot easier to end up a wealthy adult if you come from a wealthy family. "Small" loans from family etc.
Roughly 80% of American millionaires are the first generation of their families to be wealthy. Here's the surprising part - most of them get there by working hard and spending less money than they earn...
[1] https://www.nytimes.com/books/first/s/stanley-millionaire.ht...
[1] https://www.nytimes.com/books/first/s/stanley-millionaire.ht...
I like your link, but I couldn't find that particular statistic within it. Could you clarify?
Most of the studies I've seen reach the opposite conclusion, that parental lifetime income highly predicts the income of their children. For example, a child of parents in the 90th percentile has an expected income of over $100K, while a child of parents in the 10th percentile has an expected income of less than $40K.
http://www.theatlantic.com/business/archive/2015/07/america-... (which comes from http://inequality.stanford.edu/sites/default/files/economic_...)
Income isn't wealth, but I'd be surprised if the correlation isn't strong. What percentage of individuals in the US of 90th percent household wealth came from families in the top half versus bottom half growing up? I don't know off hand, but if I had to bet blindly on outcomes I'd strongly favor betting on the individual who started out better off.
Most of the studies I've seen reach the opposite conclusion, that parental lifetime income highly predicts the income of their children. For example, a child of parents in the 90th percentile has an expected income of over $100K, while a child of parents in the 10th percentile has an expected income of less than $40K.
http://www.theatlantic.com/business/archive/2015/07/america-... (which comes from http://inequality.stanford.edu/sites/default/files/economic_...)
Income isn't wealth, but I'd be surprised if the correlation isn't strong. What percentage of individuals in the US of 90th percent household wealth came from families in the top half versus bottom half growing up? I don't know off hand, but if I had to bet blindly on outcomes I'd strongly favor betting on the individual who started out better off.
That's true, but won't that apply to Liu Zhongtian (the billionaire in question) too? He probably didn't start out rich, and even if he earned his wealth from this grey-area arbitrage, many rich people in the US do that too.
Grandparent is asserting a fact (that the US rich are probably the most historically meritous group of wealth individuals in history). It is not an intuitive fact, and it isn't presented with evidence.
There are two big issues:
* It is very hard to gut-feel wealth distribution (eg, http://marketrealist.com/2013/10/shutdown-101-perceived-weal...). Identifying who the US rich requires more study of statistics than most people have time for - so this assertion is about a group that is difficult to identify. If most of the US rich were in fact living quietly on family wealth from a generation ago, how would this be identified? How do we verify that these 'rich people' are indeed meritorious? They might not be.
* All of history is a very long time. Although the US is technologically the most advanced nation we have ever seen, to claim that it rewards the meritous more than any nation in history is probably wrong, and suggests grandparent isn't making a point based on careful thought. We have had democracy for more than 2,000 years, the US has only been around for ~300.
There are two big issues:
* It is very hard to gut-feel wealth distribution (eg, http://marketrealist.com/2013/10/shutdown-101-perceived-weal...). Identifying who the US rich requires more study of statistics than most people have time for - so this assertion is about a group that is difficult to identify. If most of the US rich were in fact living quietly on family wealth from a generation ago, how would this be identified? How do we verify that these 'rich people' are indeed meritorious? They might not be.
* All of history is a very long time. Although the US is technologically the most advanced nation we have ever seen, to claim that it rewards the meritous more than any nation in history is probably wrong, and suggests grandparent isn't making a point based on careful thought. We have had democracy for more than 2,000 years, the US has only been around for ~300.
I would think the opposite in the U.S. Surely most wealth of the top N% (for some small N) is either inherited or enabled by existing family wealth and connections. The rags-to-riches hard worker stories are outliers.
The US famously has a high turn-over rate among its elite rich (just look up the Forbes rich lists from ~30 years ago), and also has a relatively high percentage of earned wealth at the top instead of inherited. One reason for that: in the US, extreme charitable giving is routine among the richest, whereas that's rare in eg Europe and Asia (Europe has far more dynastic wealth via family corporations at the top of its food chain; Western Europe has the highest percentage of rich people who inherited their wealth among major global economic regions).
Typically between 2/3 and 3/4 of all members of the Forbes 400 for example, are self-made. Roughly half of all members in that group originate from the middle class or lower.
Typically between 2/3 and 3/4 of all members of the Forbes 400 for example, are self-made. Roughly half of all members in that group originate from the middle class or lower.
Given that the US has among the lowest social mobility of developed nations, this is highly unlikely today.
Interestingly, Americans have more belief that their society is a meritocracy than most developed nations and so are especially unaware of the problem. I submit it is this commonly held perception rather than data that is informing you comment.
Obviously in the past, when democracies were even fewer in number, the situation may have been different.
Here[1] you'll find a bounty of links supporting my point were one to take time time to read it rather than instantly and silently down voting what one doesnt want to know.
[1]https://en.wikipedia.org/wiki/Social_mobility#Patterns_of_mo...
Interestingly, Americans have more belief that their society is a meritocracy than most developed nations and so are especially unaware of the problem. I submit it is this commonly held perception rather than data that is informing you comment.
Obviously in the past, when democracies were even fewer in number, the situation may have been different.
Here[1] you'll find a bounty of links supporting my point were one to take time time to read it rather than instantly and silently down voting what one doesnt want to know.
[1]https://en.wikipedia.org/wiki/Social_mobility#Patterns_of_mo...
> has among the lowest social mobility of developed nations
The US also already has among the highest median income of any developed nation, and nearly the highest median disposable income. The US also has a higher median household net worth than either Germany or Sweden. That would inherently make it more difficult for the US to keep pushing the boulder up the hill.
Further, in the US more people are moving up out of the middle class and into the higher income brackets, than are moving down and out of it. That has been true for 40 years running now. Given the immense scale, income and wealth involved in that result, it's a staggering accomplishment.
The US also already has among the highest median income of any developed nation, and nearly the highest median disposable income. The US also has a higher median household net worth than either Germany or Sweden. That would inherently make it more difficult for the US to keep pushing the boulder up the hill.
Further, in the US more people are moving up out of the middle class and into the higher income brackets, than are moving down and out of it. That has been true for 40 years running now. Given the immense scale, income and wealth involved in that result, it's a staggering accomplishment.
"middle class" is defined but the cohort of wages around the median. By definition, were it to disappear, exactly half the population will be above and half will be below its bounds. It is solely a measure of distribution of wealth not absolute wealth. In recent years more people have risen up out of it. And in many of the past 40 years, more have fallen down out of it. necessarily.
Likewise in the last 40 years, the US per capita GDP has risen close to 70% while the median income has risen less then 20%. But the problem of declining social mobility and rising inequality is not remotely unique to the US.
At least as disturbing is the resultant problem of the steady rise and now mainstreaming of politically extreme views in several western countries in (including the current presidential race obviously). I suggest the economic underpinnings of this problem are issues that we really ought to look at objectively rather than waving the flag and insisting we live in the best of all possible wolds.
Likewise in the last 40 years, the US per capita GDP has risen close to 70% while the median income has risen less then 20%. But the problem of declining social mobility and rising inequality is not remotely unique to the US.
At least as disturbing is the resultant problem of the steady rise and now mainstreaming of politically extreme views in several western countries in (including the current presidential race obviously). I suggest the economic underpinnings of this problem are issues that we really ought to look at objectively rather than waving the flag and insisting we live in the best of all possible wolds.
Now imagine the TPP goes through, how much of a footprint will be exposed to similar practices.
It's infuriating how these crooks are the ones who get to be rich, while people who play by the rules, work and live honestly, end up being in debt to these criminals.
Nice bit of reporting by WSJ. I'm sure they will also get blocked in China, just like when NYT reported on the massive wealth of Party officials.
In a few years when people ask "when did the war start?" We might be pointing to this very incident, and many others like it.
Nice bit of reporting by WSJ. I'm sure they will also get blocked in China, just like when NYT reported on the massive wealth of Party officials.
In a few years when people ask "when did the war start?" We might be pointing to this very incident, and many others like it.
Which crooks shall we start with first? The Chinese crooks, the American crooks or perhaps crooks of a less powerful third nation?
IE, US brokerages have engaged in similar or even more baldly speculative dodges -
NYTimes: "Hundreds of millions of times a day, thirsty Americans open a can of soda, beer or juice. And every time they do it, they pay a fraction of a penny more because of a shrewd maneuver by Goldman Sachs and other financial players that ultimately costs consumers billions of dollars."
http://www.nytimes.com/2013/07/21/business/a-shuffle-of-alum...
And whether any of this actually illegal is to-be-determined but we're dealing with the people who make the laws, fighting with other people who also make their laws, right?
IE, US brokerages have engaged in similar or even more baldly speculative dodges -
NYTimes: "Hundreds of millions of times a day, thirsty Americans open a can of soda, beer or juice. And every time they do it, they pay a fraction of a penny more because of a shrewd maneuver by Goldman Sachs and other financial players that ultimately costs consumers billions of dollars."
http://www.nytimes.com/2013/07/21/business/a-shuffle-of-alum...
And whether any of this actually illegal is to-be-determined but we're dealing with the people who make the laws, fighting with other people who also make their laws, right?
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the smoking gun graph[0] is missing how much of MX al is sold to the US.
[0] well, they split them into several images http://si.wsj.net/public/resources/images/BN-PS529_201609_G_... http://si.wsj.net/public/resources/images/BN-PS530_201609_G_... http://si.wsj.net/public/resources/images/BN-PS533_201609_G_... http://si.wsj.net/public/resources/images/BN-PT063_201609_G_...
[0] well, they split them into several images http://si.wsj.net/public/resources/images/BN-PS529_201609_G_... http://si.wsj.net/public/resources/images/BN-PS530_201609_G_... http://si.wsj.net/public/resources/images/BN-PS533_201609_G_... http://si.wsj.net/public/resources/images/BN-PT063_201609_G_...
This isn't happening with just Aluminum. All Carbon and Stainless Steel also.
The Chinese have hacked and stolen many of the recipes the Steel Industry has spent decades working on. It was one of the reasons Washington had to act. Now they can supply markets where their product was not within spec.
Chinese industry gets subsidized by the Chinese Government. Depending on the exact industry they get a certain percentage back on exports. It can be up to 20 % on each export dollar. I once spoke to a shop that made specialized tools for CNC and Screw Machines. The guy told me that if he had a robot that could make the tool from start to finish without anyone needing to even come to work. Just place a load of steel down in the shop and leave. When you get back in a weeks time everything will be made and packed. He still couldn't compete with the Chinese. He says their steel is subsidized, their power is subsidized, they get subsidized to export and by the time you take all the subsidies into account they are 20-30 % cheaper than he can even buy the raw material for. Then to avoid any tariffs they ship product all over the world and move it through other countries. Hence Mexico has become one of these countries, especially when it comes to all metals.
They will stop at nothing to destroy Industry in other countries. They have the support of their Government at the highest levels and are encouraged. It is what makes this difficult to police.
The Chinese have hacked and stolen many of the recipes the Steel Industry has spent decades working on. It was one of the reasons Washington had to act. Now they can supply markets where their product was not within spec.
Chinese industry gets subsidized by the Chinese Government. Depending on the exact industry they get a certain percentage back on exports. It can be up to 20 % on each export dollar. I once spoke to a shop that made specialized tools for CNC and Screw Machines. The guy told me that if he had a robot that could make the tool from start to finish without anyone needing to even come to work. Just place a load of steel down in the shop and leave. When you get back in a weeks time everything will be made and packed. He still couldn't compete with the Chinese. He says their steel is subsidized, their power is subsidized, they get subsidized to export and by the time you take all the subsidies into account they are 20-30 % cheaper than he can even buy the raw material for. Then to avoid any tariffs they ship product all over the world and move it through other countries. Hence Mexico has become one of these countries, especially when it comes to all metals.
They will stop at nothing to destroy Industry in other countries. They have the support of their Government at the highest levels and are encouraged. It is what makes this difficult to police.
Nicely said. Crap Chinese still is causing problems here in New Zealand - and I thought we were too far away to matter.
What an awesome article title
At least it's not a giant pile of cocaine I guess... Edit: that was a bit of sarcasm, as these usually don't get reported...
Good timing to distract public from Clinton's scandal.
Are you referring to the one which she has been cleared of pretty comprehensively? I can't stand her but the faux email scandal is tiresome.
What's wrong with it? https://en.wikipedia.org/wiki/Global_strategic_petroleum_res...
For anyone wondering what he actually did wrong, there are a few key points to note. Aluminum (and all materials, really) is exported and imported and duties are paid on the basis of the HS code and (if there is a trade agreement to be taken advantage of) certificates of origin (COO) along with the usual shipping docs.
China is inclined to tax exports of primary aluminum because aluminum is power intensive to produce. Thus, exporting raw aluminum ingots whose production has been state subsidized is basically akin to exporting (even giving away!) power. However, China relaxed export duties on certain 'finished' aluminum products. This opened up a loophole where Chinese companies could make 'finished aluminum products' which are classified under a different HS code than primary aluminum and ship it out of the country, duty free. In reality, this meant that they sloppily made it into whatever shape wasn't ingots or T bars rather than into any concretely useful shapes.
These 'finished' products then made their way out to places like Mexico and more recently Vietnam. Since they were still carrying Chinese COOs, they couldn't be directly re-exported to the US (or any other country without a FTA with China). They needed to be remelted/recycled into 'raw aluminum' and given a new COO (or for the less scrupulous given a fake COO...), hence the need for the Mexico factory.
So...if cost to ship to Mexico + cost to extrude and remelt < difference in Chinese VS Western manufacturing costs + duties on primary aluminum ... this is a profitable (and legal) trade!