It's the 1st time I've seen Peter Schiff dodge a point, and at the time I couldn't think of the correct economics either:
In this interview [ http://www.europac.net/Schiff-CNN-12-4-08_lg.asp ], the mayor of Detroit argues that the automakers need a government bailout because, among many other reasons, their foreign competitors are currently being subsidized by their home governments and, as a result, Detroit cannot compete with them.
Let's assume for the sake of argument that this is true. Here's what Robert P. Murphy has to say:
"Fair Trade"
"Many people deride free trade and instead champion what they call "fair trade." To the extent that this is a voluntary plea for consumers to refrain from purchasing the products of slave labor, I have no problem with the movement. But often the proponents of "fair trade" want to use the US government to penalize imports made by foreigners earning low wages or by companies receiving subsidies from their governments. Both accusations have been leveled against Chinese imports that allegedly are "unfair" to their American counterparts.
It is true that the average Chinese worker earns a lower hourly wage than the average American worker. Our workers (in general) enjoy better training, as well as the use of more capital and superior legal institutions. American laborers are hence more productive, and that's why they get paid more. It is also true that in certain industries, American firms can't stay competitive with Chinese imports if they have to pay wages attractive to US workers. Yet that is exactly what should happen when two countries trade with each other; relative prices and wages channel the workers in each country into those industries in which they have a comparative advantage. If cheap Chinese imports didn't put some US manufacturers out of business, then what would be the point of trading with China in the first place? You trade with others so you don't have to make everything yourself.
Regarding foreign governments' subsidies to their manufacturers, we must never forget that receiving gifts doesn't make one poorer. Even in the "worst case" scenario, where the Chinese government (say) completely subsidizes its TV exporters in order to ship US consumers free plasma screens, this would be a boon to the American economy. Yes, it would put US television producers out of business, but it would allow US consumers to get TVs for free. After American workers had reshuffled in response to the free goods, per capita US income would be higher; instead of using scarce resources to produce television sets, we would now be showered with them for free and could use the freed up resources to produce additional goods and services. If, instead of free imports, American consumers receive merely cheap imports, the principle is the same: Foreign governments taking money from their own people and giving it to American consumers doesn't make us poorer."
link: http://mises.org/story/1979
So, in the face of subsidies to foreign car manufacturers by foreign governments, the correct policy looks to be "Great, let's enjoy cheaper vehicles, courtesy of (whichever country). " As for Detroit, again assuming for the sake of argument that foreign competitors are being subsidized, the workers and owners of capital must suffer the individual consequences for the sake of the greater good.
In the short run this is some hard truth to face, to be sure. But the general standard of living will thus be increased.
we don't need to compete. If a foreign competitor wants to subsidize our standard of living by giving us high quality cars for cheaper than the free-market dictates, let them. We benefit.
liberty student:TAXES ARE THEFT!
Obviously. But you haven't identified how or where additional taxes are being raised by this scheme. The
taxes due are the same taxes that are due prior to the scrip loan.
liberty student:It's not legal because you must pay capital gains when converting it into FRNs for tax purposes.
Do you mean to say, instead, that it is legal but inconvenient? I'm waiting to hear what your free money scheme entails.
J:Well, if the companies were credit-worthy they could raise the money themselves through the voluntary system known as "the market", no ?
WR:Yes, of course. And they could build their new car making facilities in China, or Sudan or other poverty pesthole.
I'm saying a scrip loan would be beneficial to the people of Michigan generally.
February 17 - 1600 - Giordano Bruno is burnt alive by the catholic church. Aquinas : "much more reason is there for heretics, as soon as they are convicted of heresy, to be not only excommunicated but even put to death."
Warren Raftshol:Obviously. But you haven't identified how or where additional taxes are being raised by this scheme. The taxes due are the same taxes that are due prior to the scrip loan.
Who is making the loan? Where is the capital coming from?
Warren Raftshol:Do you mean to say, instead, that it is legal but inconvenient? I'm waiting to hear what your free money scheme entails.
You're the schemer. I'm talking about a free market in money. Read Rothbard's book.
And no, it is not legal but inconvenient. It's illegal to use commodities as money. First, you cannot pay taxes with them. Second, you must pay capital gains on them when converting to FRNs. Any inflation in FRNs discounts the value of your commodity money because the exchange is taxed like profit.
Maybe someone else wants to discuss with you, but I tire of it. I'm not even sure why you are here, because you don't understand the market, you aren't for liberty, I don't think you have a clue about Austrianism, and you're pro-state/pro-protectionism/pro-nationalism/pro-democracy.
It's an enormous waste of time trying to discuss with someone who refuses to critically analyze his position. Best of luck.
Juan:And I'd reply that you're trying to get the majority of people to pay for the mistakes of the automakers.
To that I would say that while the automakers have made mistakes, the majority would be injured by
the greatly increased unemployment should automaking disappear in Michigan. I'm not saying loaning
the existing companies money would be the best idea. Perhaps making scrip loans available to promising
new startups would be better. I am making the point, however, that acting to preserve in some form
automaking in Michigan is a rational thing for the state government to try to do.
liberty student:Who is making the loan? Where is the capital coming from?
The state is making the loan out of scrip it prints out of thin air. Whether or not the car company
repays the loan, the scrip returns to the state treasury where it is paid to state employees and
other state suppliers. The state loses no tax revenue. Indeed, it gains revenue when the loan is
repaid, and the taxpayer gets relief from the interest paid on the loan by the automaker.
liberty student:You're the schemer. I'm talking about a free market in money. Read Rothbard's book.
In scanning Rothbard's book, it seems he's willing to allow, in his free society, a choice between gold and silver
money. Very generous! But what about my almond money? Or what if I am content with a well managed scrip?
Am i not free to choose?
liberty student:It's an enormous waste of time trying to discuss with someone who refuses to critically analyze his position. Best of luck.
I agree with you there. I sympathize with your frustration. I don't see any victim in the scrip loan either.
The private bank Federal Reserve has created the damaging debt fiat system which creates the depressions.
Federal Reserve has created the damaging debt fiat system which creates the depressions.
Yeah, the "private" bank with a governor appointed by the executive, which enjoys a legal monopoly on currency issuance. Very private indeed.
No, the government is very much responsible for this. Sorry if that is something you do not like hearing. As for "interest-free" money, do you have a plan for eradicating time preference, perhaps? Re currencies, Rothbard would allow for anything that consenting individuals wanted to participate in, provided it was not fraudulent.
Freedom of markets is positively correlated with the degree of evolution in any society...
Jon Irenicus:Yeah, the "private" bank with a governor appointed by the executive, which enjoys a legal monopoly on currency issuance. Very private indeed.
Illegitimate privatization of government functions is fascism. The credit is regulated for the benefit of the private banking
cartel, rather than being democratically regulated by Congress as the Constitution mandates.
Well that's the point. Fascism is no less a governmental phenomenon for its nominal privatization of various institutions.
Warren Raftshol: The private bank Federal Reserve has created the damaging debt fiat system which creates the depressions.
The private bank
You mean just like all those "private" companies in Iraq?
"You don't need a weatherman to know which way the wind blows"
Bob Dylan
Warren Raftshol: Jon Irenicus:Yeah, the "private" bank with a governor appointed by the executive, which enjoys a legal monopoly on currency issuance. Very private indeed. Illegitimate privatization of government functions is fascism. The credit is regulated for the benefit of the private banking cartel, rather than being democratically regulated by Congress as the Constitution mandates.
I never really got how people could say Hitler is a "capitalist", it's not as if the clue isn't in the name.
And what the hell is a scrip?
Warren Raftshol: Illegitimate privatization of government functions is fascism.
Illegitimate privatization of government functions is fascism.
Define "privatized." As I see it, there is no difference in kind between the Federal Reserve and any given bureaucracy. Just because the government calls it "private" does not make it so.
Morty:As I see it, there is no difference in kind between the Federal Reserve and any given bureaucracy.
The Federal Reserve is a private corporation. The names of its shareholders is, by law, a secret.
GilesStratton:You mean just like all those "private" companies in Iraq?
Yes. Blackwater was used for policing in New Orleans during Katrina. No Posse Comitatus problem.