Posted on 03/31/2025 6:12:57 AM PDT by RandFan
@PeterSchiff
During the months leading up to the 2008 GFC, the government and mainstream financial media remained clueless about what was obviously coming. They are making the same mistake again.
Tariffs mean fewer goods will come into the country, and fewer dollars will go out. More money chasing fewer goods means higher domestic prices. This is an economic certainty. As import prices rise sharply, demand will increase for domestically produced goods, sending those prices higher too. Meanwhile, lower trade deficits will result in fewer dollars being recycled into U.S. bonds, sending long-term interest rates higher.
Higher consumer prices and long-term interest rates will combine to weaken the U.S. economy, increasing the size of federal budget deficits. Middle-class tax cuts will worsen the problem by not only adding to deficit spending but by directly fueling demand for a diminishing supply of goods.
The Fed will respond to this "unexpected" economic weakness with rate cuts, ignoring the surge in consumer prices as a transitory effect of tariffs. They will also incorrectly assume that lower inflation will be the silver lining to the recession cloud.
All of this will weaken the dollar, compounding the effects of tariffs by making import prices rise even higher. Meanwhile, a weaker dollar and larger budget deficits will put even more upward pressure on long-term interest rates, which the Fed will try to offset with a return to QE, throwing gasoline on an already burning inflation fire. This will not be 1970s-style stagflation. It will be something much worse.
No, I don’t think he’s that.
True if the tariffs were long term, but these tariffs are a strong negotiation point for new trade agreements. The European nations and Canada cannot afford to lock themselves out of the largest market on earth. They will quickly come to negotiate new trade arrangements with the US that will open their markets to more US goods. We are already seeing Hyundai building a new assembly line plant in the US which makes their vehicles more profitable as they no longer have high shipping costs to US markets and will avoid any US tariffs. I would expect other companies to do the same. I recently had a friend lament how Canada blocking the sale of soft wood pulp to US toilet paper makers as a result of Trump’s tariffs would result in a toilet paper shortage. The question should be where would the Canadians sell this product if not to US toilet paper makers? The Canadians only hurt themselves as the US has vast resources that could soon replace the Canadian wood pulp. The left does not understand how Trump works deals and immediately in their TDS mindset assume that Trump is crazy and is out to ruin the country.
Americans don’t have patience. 2026 is about as soon as they will decide how things are going. This year they will decide in New Jersey and Virginia. Tomorrow we will also get some hints of American’s patience.
What needs to be done and what actually can be done are two different items.
As it stands, our National debt of $36.5 Trillion is mathematically impossible to pay off, and our annual budget deficit is in the hole, and increasing.
It appears Trump is first trying to get our annual budget deficit ( a seperate issue- don’t confuse the two) under control. Getting our annual budget deficit under control ( -$1.8 trillion) will halt our total National debt from increasing.
Doge, Tariffs, etc will get our budget deficit down, but unless he generates more than $ 1.8 Trillion in revenues, waste cutting, etc our National Debt will still increase.
…. The Biden administration rang up a budget topping $1.8 trillion in fiscal 2024, up more than 8% from the previous year and the third highest on record.
Interest expense for the year totaled $1.16 trillion, the first time that figure has topped the trillion-dollar level…. The Biden administration rang up a budget deficit topping $1.8 trillion in fiscal 2024, up more than 8% from the previous year and the third highest on record, the Treasury Department said Friday.
Even with a modest surplus in September, the shortfall totaled $1.833 trillion, $138 billion higher than a year ago. The only years the U.S. has seen a great deficit were 2020 and 2021 when the government poured trillions into spending associated with the Covid-19 pandemic.
The deficit came despite record receipts of $4.9 trillion, which fell well short of outlays of $6.75 trillion.
Government debt has swelled to $35.7 trillion, an increase of $2.3 trillion from the end of fiscal 2023.
One aggravating factor for the debt and deficit picture has been high interest rates from the Federal Reserve’s series of hikes to fight inflation.
Interest expense for the year totaled $1.16 trillion, the first time that figure has topped the trillion-dollar level. Net of interest earned on the government’s investments, the total was a record $882 billion, the third-largest outlay in the budget, outstripping all other items except Social Security and health care.
The average interest rate on all the government debt was 3.32% for 2024, up from 2.97% the previous year, a Treasury official said…. As a share of the total U.S. economy, the deficit is running above 6%, unusual historically during an expansion and well above the 3.7% historical average over the past 50 years, according to the Congressional Budget Office.
The CBO expects deficits to continue to rise, hitting $2.8 trillion by 2034…”
Just kookie not far right. Agree.
It’s a shame Rand Paul’s unrealistic and unworkable solutions limit the usefulness of his voice. He coulda been a contender...not for President but as a force in American politics. As it is he’s a gadfly.
Out of curiosity, what do you see as his unrealistic and unworkable solutions?
Excellent point.
It seems everything, US made or foreign made, is the same price. The consumer gets doubly screwed because first they lose their job as their company moves production overseas, then they get to watch those foreigners come here with the money and buy into colleges, real estate, investments in companies still here, etc.
“Where is the stick you are using to lower tariffs for our trading partners?
These countries have been raping the USA and destroying our industrial base for decades. Tariffs are the only weapon to achieve a change.”
>>>>>>>>>>>>>>>>>>>>
The claim that Europe and Canada have been “raping the USA” and “destroying our industrial base” is not only false but also a harmful misrepresentation of global economic dynamics. The true threat to America’s industrial base has not come from our long-standing allies, but rather from China — an adversary that has systematically undermined U.S. manufacturing by exploiting America’s own business decisions. American entrepreneurs, in pursuit of lower production costs and wages, have outsourced jobs to China for decades, allowing the country to flood the global market with cheaper goods while often engaging in unfair trade practices, intellectual property theft, and forced technology transfers.
In contrast, Europe and Canada are not economic adversaries; they are some of America’s closest allies and most reliable trading partners. The U.S. enjoys a trade surplus in services with both regions, and these partnerships provide tangible benefits that strengthen the American economy. European and Canadian companies invest billions in the U.S. economy, creating millions of American jobs in sectors ranging from automotive manufacturing to pharmaceuticals. Additionally, NATO, which is heavily funded by European allies, directly contributes to U.S. security, reducing the financial burden on American taxpayers for global stability.
The rhetoric suggesting that tariffs are the “only weapon” to fix these trade dynamics is misleading. Broad tariffs on allies do more harm than good, often prompting retaliatory measures that hurt American businesses and consumers. A smarter strategy would involve negotiating fairer trade agreements and addressing the real issue — China’s unfair trade practices—rather than alienating allies who provide the U.S. with economic, technological, and strategic advantages.
I still believe Trump is playing 4d chess, and just pretending to put high tariffs on America’s allies. Its a negotiating trick...
Why is there more money? Theyre cutting jobs and government sponsored GDP all over the place.
“Worse still, other nations are decreasing their investments in Treasuries as we have seen with China and Russia.”
Russia has to sell because their economy is collapsing. High inflation, high interest rates. Now they don’t have any more to sell!
The are also digging into their old folks pension fund heavily to finance the war.
China has been selling for 12 years. Diversification.
When demand goes up and federal interference through regulation in the market is eliminated, the market responds by doing what? [Hint: increases supply].
The deepstate entrenched players in the financial markets hate it. What goes on in commercial markets will be a different matter.
It is disingenuous not to mention that Canada has worked with China to import auto parts from China and then sell them to the US under USMCA rules allowing China to further take advantage of the USA by using Canada as a conduit.
Canada has a tariff on US milk over a certain amount and we bust through that all the time.
I actually don’t see him as having any solutions. To be a solution a plan has to have a chance of being passed in Congress. Rand has some great ideas but none are pragmatic. To win you need to be anchored to reality as well as principle.
That’s a cop out.
By Rand Paul...100%
Yeah, sure.
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