Debunking Economics - the podcast

It’s likely that many countries around the world will face import tariffs in retaliation for imposing a value-added-tax on American goods sold in their own country -  alongside other goods, taxed equally, that are not from America. As Steve outs it this week, “What tortured brain cells have communicated to other tortured brain cells to make a proposition that VAT on imports from America is discriminatory”.Still, it looks like it might happen. And how do you resolve that situation. Do you get rid of a value added tax? Phil asks whether that could be a good thing. It’s unfair, complicated, bureaucratic and easily avoided. Would we all be better off with a transaction tax?

Donald Trump is doing everything he can think off to improve the US economy. Tariffs, cutting government spending, bringing manufacturing back home, accessing more resources and lowering the cost of energy. Will it work? And, if it does, Phil wonders whether there’s a ceiling to how far the US economy can grow. Or does it grow at the expense of other countries/ In other words, Phil wants Steve Keen to explain what happens as the US, the world’s leading economy, tries to heighten its supremacy.

In a recent podcast Phil suggested that bringing manufacturing home to America won’t necessarily create jobs, because most factories will be automated. They just need one man and a dog, he said. The man to turn the machine on, and the dog to make sure he doesn’t touch anything else.That touched a nerve with Brian Hanley has spent his life refining manufacturing processes. The key ingredient suggests, is people. Elon Musk was the latest to try the lights out approach and realised it didn’t work.Instead, if the US wants to succeed with a competitive manufacturing sector, it needs to look to post-war Japan. Workers were an integral part of the refinement and adaptive nature of manufacturing processes, in part  because of the company-based (rather than industry-speciifc) union structure. Listen in to find out how Japan’s adaptive approach is what’s needed if the US is to develop a successful manufacturing sector.Two books related to this, that Brian says should be required reading or every economist:-         Kanban Just-in Time at Toyota by Japan Management Association-         The Sayings of Shigeo Shingo by Shigeo Shingo

Donald Trump, as the world’s highest profile climate change denier, has famously said, repeatedly, that he wants to drill baby drill, to make US energy even cheaper. It’s already half the price of Europe, and all the productivity benefits that provides. Phil and Steve talk about whether this the final nail in the coffin in a world which is paying lip service to the changes required. Is nuclear our only way to fast track a workable solution?

Reciprocal tariffs could be coming to every OECD country if we believe everything Donald Trump says. He sees VAT as a tariff imposed on US imports, which means he wants to impose the same amount on those countries for goods they export to America. That would apply to every OECD country and, supposedly, the President has said there will be no exceptions. Does this mean a global trade war is just about to happen? Steve has been a supporter of protectionism as a way to aid growth, and understands the need for America to bring jobs back home, but not with the “bull in the China shop approach” that Trump is taking. But Phil asks whether the horse has already bolted. The web of international supply chains is well established and difficult to break. Haven’t we all benefited from lower cost goods? And even if you brought back production functions would automation mean few new jobs would be produced? In short, is Trump too late to make a difference. Will he just create chaos?

The new US Treasury Secretary Scott Bessent recently re-iterated the US desire to remain as the world’s reserve currency, because they like a strong dollar that’s in demand worldwide. Burt he also says he doesn’t want other currencies weak, because that gives thema trade advantage. That sounds like a “cake and eat it” philosophy.   This week Phil asks Steve whether the US would be better off if it wasn’t the reserve currency, and whether,  in these days of electric transfers, do we actually need a reserve currency? 

Phil asked Steve a lot last week about how bank create money through the loans they issue. But he has been, it’s fair to say, a little less convinced about how government deficits create money. So prepare for a light bulb moment as Steve breaks down the process that sees the government spending more, with more money moved to the private sector, and people buying bonds, effectively with new money.  They also answer a couple of listeners questions -one on the impact of Donald Trump’s tax cuts, another on crypto and another on a Worgel-like supplementary currency. Which of those creates new money?

Steve and Phil have described the island of Coinucopia in previous editions of the podcast. It started as a place where only coins were legal tender, and the supply of coins didn’t increase. They explained how that created deflation and inhibited growth, so the government started adding more coins. Then they let banks issue loans.  Now, what happens when the island allows banks to issue electronic loans. Actually, life becomes much simpler. Much simpler than most conventional economists would have you believe. Listen in to understand how banking now works, not just in Coinucopia, but in the real world.