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Economy in Brief

China, Please Stop Selling US Goods at Prices Less Than We Can Produce Them
by Paul L. Kasriel  August 28, 2019

Chinese government, are you subsidizing your manufacturers/assemblers such that they are selling us goods at less than their costs of production? Regardless of whether you are doing so, you keep selling us goods at prices less than we can produce them here in the US of A. Please stop. I want to use our labor and other resources to produce these goods at a higher price to me. Also, I want to divert our resources away from producing other goods and services that others and I like to buy or away from rebuilding our infrastructure (have you driven I-294 around Chicago lately?). In other words, Chinese government, I want MASA, Make America Stagflationary Again!

You see, if we start diverting our resources from more productive uses to producing the goods you have been selling us at bargain prices, growth in our aggregate production will slow. It will be akin to a negative technology shock. So, we will have slower economic growth than otherwise. The Fed will probably think that this slower growth is a result of insufficient aggregate demand for goods and services rather than a negative supply shock. In so thinking, the Fed will increase the growth in thin-air credit (everyone knock back a shot now) by lowering the federal funds rate. And that’s the recipe for MASA!

And by the way U.S. corporations, no one is forcing you to open operations in China when you know full well those crafty Chinese are going to “steal” your technology. Evidently, you did the calculation that the theft of your technology, a cost of doing business, was worth it to gain access to the 1.4 billion Chinese potential customers or to produce goods in China cheaper than the U.S. for the rest of the world. Quit your whining.

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