Daily Archives: January 27, 2017

Macroeconomics 101

Disclaimer: I am not an economist. But I did take a few Econ courses as an undergraduate and I’ve read Keynes’ General Theory 😉 The opinions herein are mine…

The scenario: We, the consumers, like cheap stuff.

Take cars, for example. We want more goodies on our cars, and they are getting expensive. Car manufacturers say, hmmm. If I put a plant in a country where there’s less expensive labor, I can hold down costs. Plant moves, some jobs lost, but there is more spending since cars are now less expensive, and other jobs created.

Fast forward: For whatever reason, we want to impose 20% import tariff. Now cars cost more, because we, the consumer pay this tax. Spending drops on other goods and services, jobs are lost.

But wait, car manufacturers could bring jobs back. Yes, but higher wages mean a more expensive car. Spending still drops on other goods and services, jobs are lost.

Car manufacturers say hmmm, with tax break on investments, I can build new plant with robots replacing even more jobs, and cars will cost somewhat less, but likely more than before. Especially with that big tariff removed, a 10% increase looks good. But, now, we still don’t have jobs, the car manufacturers have bigger profits, paid to shareholders who buy luxury imported goods…