Saturday, April 23, 2016

Trump Economics.

Donald Trump struck me as a smart man when it came to real estate and yet not a robust thinker to avoid the bankruptcies he filed for in the past. He has taken the centre stage of Republican politics in a manner what is frightening; slaying the very ethos of good conduct and class. His appeal to the lower middle class, mostly white, Americans is indeed indisputable, backed by a plethora of fear inspiring words he extolls his audience that he only he can change things for them, and hence for Americans.

Aside from his rude appeal to his followers he has fed them some economic 'facts' which on first glance would tell the uneducated audience that the Trump makes sense. However, even to someone with half the wit to search the internet the facts become clear that either Trump is lying about the facts or he just doesn't know his economics.

There is no doubting the fact that Donald Trump scores a "F" on Foreign Policy, Diplomacy and now even Economics. Lets examine his statements:

1. Mr Trump states that China has devalued its currency to benefit its exports to the detriment of the US.

FACT: Over the past 10 years the Chinese Yuan has APPRECIATED 20% so this would have made Chinese goods more expensive. Clearly Donald Trump has fed the masses a big lie to make his case for a trade war.

2. Trump states that the annual trade deficit with China is $500 billion!

FACT: The trade deficit is about $365 billion and this further needs to be analysed. Of this deficit about $154 billion alone is in the electronics and computer industry goods which are the result of out sourcing the production to China. This, my American friends, is what makes it possible for your Apple phone and computers to be competitively priced. Sure those goods can be produced in the US too, but would cost 30-45% more expensive. You cannot expect to have a good deal at Wallmart on a product and then complain of the trade deficit.

3. Trump: Millions of jobs have moved to China from the US.

Fact: In the ten year period 2003-2013 a total of 3.2 million jobs moved to China from the US as a result of outsourcing. The purpose of outsourcing was two fold; to achieve higher efficiency and to reduce the labor cost component of the product. This is economics and happened to many industries where higher efficiency resulted in job losses. Take the example of agricultural sector within the US where more efficiency within the US alone slashed jobs as higher efficiency was achieved.

4. Trump proposes a trade tariff on China and other countries with a trade surplus.

Fact: A proposed 35-45% trade tariff on Chinese, Mexican and Asian goods will start a trade war with all the trade partners of the US. The end result will be more expensive goods for the US consumer and hence a deep recession the result of which will be the American public will suffer. The advantage of the World Trade pacts is that lower margin goods are produced aboard while America benefits from the higher value goods with better margins being produced within the US.

5. Trump: Within the term of his Presidency he will cut the budget deficit and pay back the huge debt the US government owes.

FACT: The massive government borrowing cannot be repaid in one or two terms of the presidency of ANY president. Saying that he knows how to deal with debts, Trump scares us given that his solution has been to file for Chapter 11 protection and insolvency; hardly a solution applicable to sovereign debt.

Trump scares one when it comes down to realities and while he may well inspire the disgruntled populous to believing he has the solution to building a new America, he remains grossly out of touch with the facts.

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