Mish's Global Economic Trend Analysis |
| Sweet Deals and Cookie Crumbles; Sugar, Sugar Posted: 22 Aug 2015 07:24 PM PDT Nearly every week I receive emails from readers asking me to explain my stance against tariffs. The typical claim I hear is that we need tariffs to preserve jobs. I respond that tariffs don't protect jobs, they cost jobs. Take steel for example. Yes, tariffs will save a few hundred or a few thousand steel manufacturing jobs. But at what cost? US car manufacturers have to pay more for steel as do US manufacturers of any product that contains steel. And consumers have to pay more. That's money consumers would otherwise spend elsewhere but cannot. Get Me the Hell Out of Here I recently spoke of manufacturing leaving Chicago. Indeed, six corporations fled in July, and another business did so in August. I mentioned the companies in my August 13 post Get Me the Hell Out of Here. One of the companies that fled Illinois was Mondelez International, maker of Oreo Cookies. Back in May, WGN noted Oreos Maker to Decide between Chicago, Mexico for New Investment. Chicago is competing with Mexico to land a plant that makes Oreos and Chips Ahoy cookies.Chicago Unions, Illinois Taxes, Sugar Dealing with Chicago unions and Illinois taxes is bad enough. The decision to leave Chicago was sound enough on that basis alone. And poof ... 600 to 1,000 jobs will vanish. There is another aspect of the deal that has not been discussed much: sugar tariffs How the Cookie Crumbles Please consider How US Sugar Policies Just Helped America Lose 600 Jobs. The manufacturer of Oreo cookies recently announced plans to move production of Oreos from Chicago to Mexico, resulting in a loss of 600 U.S. jobs.Sweet Deals As I have stated, tariffs costs jobs. Yet we hear asinine cries to "raise tariffs" to protect jobs. Such sweet deals preserve a few jobs (in this case of overly expensive sugar production that is really far better suited to the tropics), at the huge expense of any manufacturer in the US that needs sugar. Net-net sugar tariffs have cost the US countless jobs. And in the sweet deal Obama worked out in the Trans-Pacific Partnership protects among other things sugar. For details please
Mish's Proposed Free Trade Agreement To call TPP a "free trade" agreement is ridiculous. An excellent free trade agreement would consist of precisely one line of text. I propose "All tariffs and all government subsidies on all goods and services will be eliminated immediately." Sugar vs. Sugar Unlike oil, where there are differences between grades, sugar is pretty much sugar. But there are two futures prices. Sugar #11 (the global price), and sugar #16, the US price thanks to tariffs.
US sugar costs 135% more than other countries pay! And economic fools, including unions, want more tariffs to "protect US jobs". Sugar, Sugar As some might have expected, I have a musical tribute to this madness. Link if video does not play: Sugar, Sugar - Archies Job Flight Out of Illinois Finally, it's safe to say that inane policies cost Illinois those jobs. And it's equally safe to say they fled Illinois to Mexico rather than to another state because of inane tariffs. High Fructose Corn Syrup For icing in the cake, please note that sugar tariffs and corn support are behind the use of high fructose corn syrup in US manufactured candy, cookies, and crackers instead of sugar. Still like them tariffs? Mike "Mish" Shedlock |
| Don't Worry, IMF Says "Premature" to Speak of Chinese Crisis Posted: 22 Aug 2015 10:40 AM PDT Growth in China is slowing rapidly. How rapidly is a subject of much debate. Today, a senior IMF official says 'Premature' to Speak of Chinese Crisis. China's economic slowdown and a sharp fall in its stock market herald not a crisis but a "necessary" adjustment for the world's second biggest economy, a senior International Monetary Fund official said on Saturday.Crisis Talk Premature? Is crisis talk premature? The answer depends on what "crisis" means. It may depend on growth estimates as well. While, I concur this is a "necessary" adjustment, necessary does not imply "no crisis". For example, the US housing crash was a necessary adjustment as well. Another crash or lengthy correction in equities is coming as well. Does that constitute a crisis? It certainly will to pension plans that are still hugely underwater despite the massive rally in equities globally. And what about the IMF forecast for a 6.8 percent expansion in the Chinese economy this year? That estimate I believe we can all laugh at. Actually, nearly all IMF growth forecasts are laughable. And no one, except apparently the IMF, remotely believes China's stated GDP numbers in recent years. Looking ahead, four percent or even two percent growth are more likely than 6.8 percent (no matter what numbers China officially says). Would four percent growth constitute a crisis? Two percent? It depends on your definition, but it will likely come with a very "necessary" (and steep) correction in global equities and junk bonds. Don't Worry But hey, don't worry yet. Wait until it's universally clear a crisis is underway. Then worry. That's the apparent message from the IMF. Mike "Mish" Shedlock |
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