Donald Trump: The Price is Wrong

[Comment removed pending for supplying false email address and for policy violations. --Econlib Ed.]

[Comment removed pending confirmation of email address. Email the webmaster@econlib.org to request restoring your future comments. A valid email address is required to post comments on EconLog and EconTalk.--Econlib Ed.]

Note from the Econlib Editor:

David Henderson's post is about analyzing the possible policies concerning China, OPEC, and perhaps other policy considerations that are related to the post. All comments with content that pertains to China, OPEC, or other policy considerations or economic analysis pertinent to Mr. Trump's ideas will likely be approved.

Comments that solely remark on or attempt to characterize Mr. Trump as an individual are ad hominem. Ad hominem comments are explicitly unacceptable by EconLog's long-standing rules. It should also go without saying that talking about what people can do with their private body parts is against the rules. Those comments will not see the light of day.

I believe that both China's and OPEC's strategy are very sensible from an economic point of view. They do what is best for them, which might not be what is best for us - but there is just no reason for kicking anyone.

Mfw trump does not complain about china buying our debt.

Trump knows real-estate. Economics not so much.

@Hector,
Who is”them?” OPEC clearly benefits from keeping the price of oil high. But China’s government, if it really is keeping the price of its currency low, is hurting its own people more than it’s helping the subset who are exporters.

The way to wealth is not through consumption?

Consumption is the purpose of all economic activity. It may not be the "way to wealth" but it is the sole justification for pursuing wealth.

Prices of imports from China are too low. Prices of imports from OPEC are too high. Which region's imports to the USA are just right?

To the extent that OPEC maintains large dollar reserves in the same manner as China - as a group they are the 3rd-largest holder of treasuries - they are guilty of exactly the same thing: depressing prices in the US for the benefit of local export. Whether their production quotas are real or not, and manage to compensate for this crude mercantilism (pun intended), is anyone's guess.

Lord - clearly not. Trump's example proves to us that the way to wealth is through bankruptcy.

Noah - couldn't someone also say that "the sole justification for wealth is to increase production"? Why would you prioritize one point in a circular system? Gods, economic or otherwise, defy logical proof.

Trump's understanding of economics is just fine. Negotiation has always been a part of price discovery, unless economics assume price discovery comes from magic.

It seems feasible that there was a cause and effect relationship between the economic prosperity of the '90s and the low gas prices during that period.

As far as China, I am not convinced that exchange rates have as large of an effect on imports and exports as some believe. I do believe that the restrictions on capital flows, ownership, property rights, etc. do provide restictions on trade which are harmful to both American producers and Chinese consumers. Why would the Chinese government not be trying to maximize the standard of living and economic properity of their people? My guess would be power.

Makes me wonder what Trump would think if our oil came from China....

This particular national corporatist circle can be squared...by their lights anyway....

We don't produce (enough) oil for our needs...we cannot easily increase production so we must import oil. Whatever we must consume from outside should be cheap because we need it...so we should bully the providers...

OTOH...we do produce --- or used to --- bras and panties....now the Chinese do...more cheaply than we can....

Anything we can produce domestically we should...and therefore we need to keep out the cheap Asian bras and panties....we don't want to be dependent on them in that critical industrial sector.

Autarky, baby!...yeah!...that's the ticket....

While OPEC would benefit in general from a higher price. It's individual members are often known to "cheat" by selling more oil than OPEC would like, and let's not forget that OPEC as plenty of competition from non-OPEC oil producing countries. Is there any evidence that OPEC is in fact keeping oil prices high? It seems just as plausible that oil prices are high because demand for oil is significantly higher (while supply is growing slowly), due to the influence of rapidly developing countries like China.

I suspect Trump is using OPEC as a whipping boy because it suggests a convenient scapegoat, when the reality is "there's little we can do about oil prices."

That being said, as we all here know. There is nothing fundamentally inconsistent about railing against both artificially high prices and artificially low prices. Both can distort the market.

Trump certainly knows wealth is not about consumption but control. That is why his bankruptcies worked out so well for him. Power is its own reward.

The US imported (net) only 42.26% of its oil consumption in October 2011. Imports from OPEC countries were only 24.3% of US consumption, and imports from the Persian Gulf countries only accounted for 10% of consumption (we get much OPEC oil from Venezuela, Nigeria, Ecuador, and Angola).

Non-OPEC countries Canada and Mexico are the #1 and #3 top countries the US imports oil from. Saudi Arabia is #2.

Sources:

http://www.eia.gov/totalenergy/data/monthly/pdf/sec3_7.pdf

http://www.eia.gov/pub/oil_gas/petroleum/data_publications/company_level_imports/current/import.html

There is a point to be made in the trade issues between the USA and China. Unfortunately, Trump has yet to convince me that he understands it.

Despite all its apparent reforms, China remains an un-free, Communist nation in which entrepreneurs are confined to relatively-small regions. Thus, the vast majority of the potential labor pool remains untapped, leading to massive wage depression. (Similar effects, for different reasons, exist in Mexico, where vast labor pools remain chronically unemployed due to the general corruption so endemic to Mexico's vestigial-Bolshevik political sector, now aggravated by its ongoing drug wars.) Contrast this to the un-free status quo of the American economy, where wages and prices have been driven up and propped up by a century's worth of Progressive-era meddling, such as our minimum-wage laws, our 40-hour work week, government subsidies of housing prices via (the now-defunct) Fannie and Freddie, tax-free health-insurance fringe benefits, massive aid for college tuition, and on and on.

Small wonder America's currently undergoing a job shortage. In such an environment, with institutionalized imbalances on all sides, how can American labor NOT be priced out of the market? The political "fix" would be for the non-American governments to adopt "reforms" that would equalize workplace conditions to those we have here in the USA. (We'll follow the politicians and ignore the economic fix, which would be for American politicians to remove all our Progressive-era mechanisms and "reforms," to allow the economy to readjust prices and heal itself. That would generate far too much personal pain to be palatable to the average American.) But I doubt such political fixes will happen anytime soon -- in China, because they don't want to destroy their competitive advantages, or in Mexico, due to political inertia and probably a degree of racism against their indigenous populace.

Anyway, back to Trump: The takeaway I got from last night's interview with O'Reilly is that with the way he ranted about the Republican candidates' snubbing of his debate event, and his gnashing of teeth about "loyalty," he might just jump into the November election next summer in a fit of pique over the snub.

What is one to say?

How about that Trump is an empty suit who believes that he knows far more than he does and is unaware of the extent of his ignorance?