By Simon Grey, on June 20th, 2011
The current support for free trade is based on the supposition of defending consumers from higher prices. What the higher prices would indicate, if they were allowed to occur, is that American production is being destroyed. The laws of supply and demand would bear this hypothesis out because the cumulative effect of domestic economic regulation is to reduce supply of goods produced. Since demand either stays the same or increases (population trends in America aren’t negative yet), the net effect will be increasing prices.
As noted, foreign trade counterbalances potentially rising prices by increasing the supply of goods offered. Foreign nations do not have the restrictions on labor or environmental effects that plague American businesses, which means that they can produce goods cheaply, enabling them to remain profitable.
Foreign trade, then, redirects consumption away from American producers, who could be competitive if the government allowed them, to foreign producers. Free foreign trade policy coupled with oppressive domestic regulation has the same effect as direct subsidization of foreign business, which begs the question: why is the American government subsidizing foreign business?
The answer is not particularly clear-cut. Most conservatives who support free trade don’t view it as subsidizing foreign producers; they view it as defending consumers. And most leftists don’t view foreign trade as a way of destroying business; some see it as imposing proper regulations on business. Actually, leftists are all over the map on this. Pro-union leftists oppose foreign trade; enviro-leftists either support it as a way to encourage raising foreign environmental standards while some oppose it as a way to encourage raising foreign environmental standards. It might help to note that Bill Clinton signed NAFTA into law, and Paul Krugman has written a book defending free trade.
Additionally, multi-nationalists generally support free trade because it destroys national identity and power, and because it undermines the American economy. Of course, some of the latter is America’s own doing: there’s no need for America to handicap its own business with high taxes and excessive regulation.
At any rate, the current policy of foreign trade is quite damaging to the American economy. This does not require import quotas and high tariffs per se, but it requires that foreign producers be held to the same standard as domestic producers if they wish to sell in America. To have a policy which grants special advantages to foreign producers at the expense of local producers is simply asinine.
By Ajay Shah, on June 20th, 2011
Inflation targeting: What have we learned, a seminar by Spencer Dale, Chief Economist of the Bank of England, at NIPFP, 16 June.
By Bron Suchecki, on June 20th, 2011
Gata and ZeroHedge have picked up on this Wall Street Journal
article on bankster owned warehouses restricting deliveries out to the minimum amount allowed by the LME. The scam is summarised by the
Financial Times: buyers
“must keep on paying rent on the metal even after you have asked for it to be delivered, giving warehouse companies a guaranteed income stream”.
But with no restrictions on how quickly metal can come in (and the bankster warehouses have been bidding for metal to be delivered into their warehouses from producers) it “has had the effect of driving the cost of metal in the physical market in the US to the highest level in more than a decade relative to LME prices”. The FT notes however that this creates the risk that “the LME contract risks becoming entirely detached from the physical market.”
Apart from the storage fee scam, an increasing price is good for the banksters because it makes it easier to sell commodities as an alternative investment class to institutional investors (see FT on Goldman Sachs).
Problem is, with lots of metal coming in but restrictions on it going out and you end up with increasing stockpiles. That doesn’t help the story that commodity prices will rise. Solution: take the metal “off warrant” which, as FT Alphaville points out, just transfers it into a “non-LME storage facilities or simply being classified private non-LME registered stock in the very same warehouses. Kept out of sight, so to speak.”
The scam here is that (FT Alphaville again) “the industry still reads canceled warrants as an indicator of physical demand” which is positive for prices, however “many of the ‘canceled’ warrants are … not transforming into real deliveries, they’re just being stacked elsewhere in the same warehouse. In which case the demand they insinuate is potentially not real at all.”
Precious metals are not subject to the warehouse outward restrictions scam and the spot market is much bigger than futures anyway, from a physical point of view. However, the “off warrant” scam can be played, particularly on fools like ZeroHedge who get all excited about COMEX eligible and registered trends while ignoring (ignorant of?) the “stock” sitting in ETFs and, more importantly, the dark pool that is bullion bank vaults. And don’t fall for the “its fractional” false flag. Yeah unallocated is fractional, but what is missed is that if the amount of fractional is giga-enormous, then even at 10:1 or even AIGish 40:1, the amount of physical metal being held in the system is still enormous.
Which is why I am very interested in this ETF bar list project and am doing what I can to help, as this I believe holds the potential to reveal just how big that dark pool of stock really is.
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