Tag Archives: economics

Deflationary Pressure in the PRC

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A quick note. As The Wall Street Journal writes, the People’s Republic of China is facing the threat of economic deflation.

Prices charged by Chinese factories that make products ranging from steel to cement to chemicals have been falling for months. Consumer prices, meanwhile, have gone flat, with prices for certain goods—including sugar, eggs, clothes, and household appliances—now falling on a month-over-month basis amid weak demand.

There are a number of causes for the nation’s falling prices, including to some extent, the deflationary pressures being relative to the inflation spike that the PRC experienced as the world came out of the economic dislocation the Wuhan Virus Situation engendered.

However, there’s another factor—a critical one IMNSHO—that pushes for deflation in the PRC. That factor is the nation’s shrinking population. With fewer people even available to buy things, demand necessarily must fall, and if the supply of goods and services doesn’t fall commensurately, prices will come down. If those prices already are flat, or falling, then they’ll only fall further. With that lessened demand, the only way producers can stay in business is to reduce production—to reduce payroll costs, either by reducing pay, laying off workers, or some combination of the two. That reduced income will drive further reductions in demand.

Deflation sets in, and it deepens.

The Quiet Part…

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…out loud, to coin a hackneyed, but cogent, phrase.

On the matter of Federal government industrial farm policy, the Biden administration has made itself crystalline. This is the backdrop:

In January 1994, the North American Free Trade Agreement went into effect, followed by other trade pacts, which significantly increased commercial opportunities for American farmers. Those arrangements have borne great fruit: US agriculture exports stood at $196 billion in 2022, up from $62.8 billion in 1997.

President Joe Biden’s (D) National Security Advisor, Jake Sullivan, doesn’t like that, but in a recent speech, Sullivan went even more broad than just NAFTA, to openly disparage the general policy environment surrounding the development of that treaty. Sullivan lamented that this era of policy was one that

championed tax cutting and deregulation, privatization over public action, and trade liberalization as an end in itself.

Because leaving more money in the hands of us ordinary citizens by taking less of it as taxes, by reducing our cost of doing business by getting regulations out of our way, is inherently bad, says this maven of the Progressive-Democratic Party. Even more: public action must take precedence over private action—because, apparently, Government Knows Better than us ignorant ordinary citizens. And trade liberalization, which further reduces our costs, is a bad end in itself.

This demand that Government must control what our private enterprises produce is a well-understood and textbook…ideology…regarding the importance of government control over our lives. And it’s a central plank of the Progressive-Democratic Party platform.

Inadequate Electricity Infrastructure

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There is a move afoot, spearheaded by a number of car companies, to expand the number of battery car charging stations in the US. iSeeCars.com says that planned expansion is inadequate. The company’s Executive Analyst Karl Brauer:

[E]ach of these fast chargers can cost $50,000 or more to install, and this joint effort claims it will utilize 100 percent renewable energy to power the new chargers, which can only mean higher costs for each unit[.]

And that’s just for a few midwestern States.

Bauer is right about the infrastructure’s inadequacy, but the shortfall is much deeper than just battery cars’ electricity demands.

Our electrical infrastructure is inadequate because it’s built on antiquated wiring/cabling, too few and too restricted fossil fuel-powered generating stations; too few generating stations of any sort; lack of spares, particularly transformers and transformer parts and fluids; poor-to-nonexistent (still!) cybersecurity; and on and on.

Those shortfalls need to be filled regardless of the number of battery cars and trucks are on the road.

A Rich Property Transfer Tax

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Chicago, already a heavily taxed city, is looking at increasing the tax it claims on the sale of properties valued at more than $1 million. It’s no tweak, either: the increase would be from the current 0.75% to 2.65%. Even so, it’s projected (more like hoped IMNSHO) to raise $163 million per year. The money ostensibly is to be explicitly earmarked for construction of (and, presumably, conversion of existing structures for) permanent supportive housing units for the homeless.

I have questions.

Chicago—Cook County—is losing population at a high rate.

Cook County lost more population than almost any other county in the nation, with the exception of Los Angeles County, from July 2021 to July 2022, according to U.S. Census Bureau estimates released March 30.
The leading cause of the drop was 94,344 residents who moved out of Cook County during the year, completely driving the county’s population to shrink by 68,314 residents.

With the city undergoing such high net outmigration for greener [sic] regions, who’s going to be buying those rich properties? Not folks in the surrounding counties; those regions are losing population, also, and not into Chicago. No one in his right mind is moving into Cook and surrounding counties. Sales are going to fall off year by year, and the sales that do occur are going to be at increasingly lower prices, reducing the number of million-dollar properties that exist, much less that are up for resale.

I have a downstream question, too. What properties does the city plan to seize for the construction/conversion? What does the city plan to do with the residents who will be displaced by this construction/conversion?

American Worker Shortage

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The Wall Street Journal‘s editors have taken note of our nation’s workforce problem and its relation to our immigration problem.

The birth rate has been sliding for years, and it’s about to translate into a shrinking labor force. By 2040, according to a study out this week, America could have more than six million fewer working-age people than in 2022. The only way to counter the domestic trend is by attracting workers from abroad.

One thing that would help with this worker shortage would be to raise the Social Security full retirement age to 70, or even 75. When Social Security was first developed at a national level, some 85 years ago, full retirement was 65, the worker:retiree ratio was 7:1, and life expectancy in retirement was on the order of 7 years. Today, the worker:retiree ratio is less that 3:1 and falling, and life expectancy in retirement is on the order of 15-20 years. Raising the retirement age would increase the number of workers in the labor force.

That by itself, though, would be only a Band-Aid fix outside the strong benefit it would provide to Social Security survival.

What’s far more broadly needed is to build the “big, beautiful wall” all along our southern border, pierced every mile with a border crossing station through which legitimate immigrants and guest workers could enter (and the latter leave), with that combined with a vastly streamlined legal immigration system that removed visa quotas, sped up vetting of immigrant wannabes, and applied requirements that the immigrant wannabes have economic value to add to our nation.

Even that, though, would be insufficient as a stand-alone fix. Our tax regime and our welfare program badly want reform. With lower tax rates on individuals and businesses, there’s more incentive to work and to hire. That incentive can be further expanded by eliminating the areas of overlap among our welfare programs (which will include eliminating some programs and combining parts of others into single programs) and adding work requirements to remaining programs.