Cashin In

Trade war brewing with China?

Washington slaps tariffs on solar panels

 

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COULD A TRADE WAR WITH CHINA LEAD TO ANOTHER DEPRESSION?

JONATHAN HOENIG: Well Cheryl, all these tariffs, these taxes, these quotas, these subsidies, I mean it's destructive economic force that we're using against our own citizens. Freedom means free trade and unless we're at war with a country, that means that every individual, every citizen, every company gets to decide who to trade with can decide if it's in their own self-interest or not, and you know, one only needs to look back at Ben Stein's classic Ferris Bueller performance to know what regulations and tariffs, like Smoot-Hawley back in 1930, can do to an economy. They crush it and I'm scared that's the direction we're headed in.

WAYNE ROGERS: Well I don't know whether it's a recession or not. They're certainly powerful enough to do whatever they want to; it's a totalitarian government. Listen, Walmart has 350 stores in China. China decided one day that Walmart wasn't playing the game right, so they just closed 15 of them in a southern province. Unilever made some comments to the Chinese press if you can believe this, about some changes they thought the Chinese government should make and the government determined that that undermined their control of inflation, so they fined Unilever three hundred thousand dollars. Now, if they can do that, they can do anything they want to and by the way, our imbalance with them is over 290 billion dollars a year, it was last year, so we're at their mercy, yes.

JULIAN EPSTEIN: Well it was only three percent and look, I don't think there's any chance there will be a trade war, because the two countries depend on each other as much as they do. Wayne is right, the deficit is about 290 billion, but the increase in U.S. exports to China the last couple years has increased about 50 percent, and look, I think even if there were a trade war the estimates are, even if we had 50 percent tariffs, the estimates are that it would cost somewhere in the order of 60 thousand jobs. That's a quarter of what we produce now in a month. I think the point here is this; to Jonathan's point, free trade is a two-way street and we know as a matter of fact that the Chinese cheat. They cheat with respect to currency manipulation. They cheat with respect, in this case, to the subsidies on solar panels. Now, while some consumers may like that cheating, because we get solar panels per kilowatt hour at a less expensive rate. What the Chinese are trying to do, is to corner the market here on solar panel production, and what the commerce department is doing with a very modest 3.5 percent tariff, is trying to stop the Chinese from cornering the market because that will be bad for the U.S. industry in the long-term if they do corner that market.

TRACY BYRNES: Okay, but Cheryl, last year we imported about 400 billion dollars worth of stuff from China. They need us. Who's going to buy that stuff? Their middle-class isn't buying anything. Europe is in the toilet right now. I hate to say that I agree with Julian to start off the show like that, but I do because they need us more and you know what? We need to come out of the box a little braver and say, you guys need us and if you don't like the way we're doing things, than go somewhere else. No one is forced to do business in China. We are certainly not forced to comply with their rules.

JOHN LAYFIELD: Yes it's definitely here to stay. What Julian is talking about, not having a trade war, I agree with completely. I don't think this is going to happen. What happened with the Smoot-Hawley tariff; remember in May, 1929, one thousand and twenty-eight economists went to President Hoover and begged him not to sign the Smoot-Hawley tariff. You had it signed in 1930 and unemployment went from 7.8 percent to 25.1 percent in three years. We simply can't afford to do something like that. I don't think that's going to happen. This is a mutual relationship. They are cheating, there is no doubt about that, but there is very little we can do about that except for a few little small tariffs like we're talking about with solar panels.

ARE THE 'FOOD POLICE' NOW HURTING PEOPLE WHO NEED FOOD THE MOST -- THE HOMELESS?

WAYNE ROGERS: Yeah, you know I love Bloomberg. I think he has done a great job in a city that is essentially un-governable but this one has gone too far. I mean you're right, what are you doing to do? Say okay, you people starve to death we aren't going to give you food because it's not healthy. That's nuts. I remember growing up as a kid everybody in our little town took food around to people who were homeless or didn't have food and it was a charitable thing that you did. Nobody cared whether or not the food was bad it was good food, everybody thought it was good food, and that's the way we should do it.

JOHN LAYFIELD: Well, it's been reported a little incorrectly. Look, I'm a big fan of mayor Bloomberg. I think he's done a wonderful job in the city, but what he was doing in improving the food in the homeless shelters was homeless shelters go to a private vendors. Bloomberg says if you're giving them food, give them healthy food, which I agree with. What he's done with donations is, a New York city rule that has been in place for many, many years is they don't take outside donations because they cannot guarantee food safety. So, they don't take any... it's not a matter of fact if it's healthy or not they don't take any. Bloomberg has been given the blame for this, that he is the one who did this when that in fact is not true. There are a ton of private shelters in this city that take private donations and deal them out and do a wonderful job doing it.

JULIAN EPSTEIN: Well, I agree with both John and Wayne, I'll try and thread the needle here. I mean, when someone is drowning you don't not send them a lifesaver because it's made of polyurethane rather than Styrofoam and I think while it's important, as John pointed out, as we go through the private networks that donate food to make sure that the food is screened for things such as salmonella. I think the idea of screening food for things like trans-fat and salt content, particularly when there is a shortage of food for homeless folks, I think is going a little bit too far. I agree, I think Bloomberg is a great mayor I think his heart is in the right place. I think trans-fat and salt in our diet and lack of exercise costs this country according to PricewaterhouseCoopers, their study when we talked about health care, hundreds of billions of dollars every year, but it sounds like the regulations have just gone too far.

TRACY BYRNES: Here's the problem. We've become such a litigious society. You know Mayor Bloomberg, who's done a fabulous job, is worried that someone is going to come back and say there was so much salt in the food that I got at the homeless shelter that my blood pressure is through the roof, now I'm suing the city. At this point in our lives you would not be surprised to hear something as neurotic as that.

JONATHAN HOEING: Well Cheryl, the only possible explanation I can think of for Mayor Bloomberg here is power lust. Like rats running around a cage, he's running a slimy social experiment in New York and while you're all applauding him he's put regulations on salt, smoking, on trans-fat. He's tried to regulate the sale of alcohol. He passed menu board signing regulations that has cost local businesses millions of dollars; hasn't changed anyone's health. I mean the role of government is to protect our rights, not tell us what to put in our bodies. This shows the slippery slope of government controls that can literally regulate anything.

SENATE TO VOTE MONDAY ON BILL TO KILL OIL TAX BREAKS

TRACY BYRNES: Why are they consistently demonizing these oil companies? Do they get that these guys pay back over 40 percent in taxes back to the United States of America? Do they understand this? Do they understand that the subsidies have nothing to do with the price at the end of the day? When are they going to wake up Cheryl? Yes it's going to make oil prices higher because it doesn't solve the problem. We have a supply issue; we have a Middle East issue; we do not have a subsidy issue.

JOHN LAYFIELD: We're the only developed country in the world without an energy policy. We decide to demonize the oil companies. Look, raise the taxes. Close the loopholes. This accounts for about two to four billion dollars a year. That is what we incur in this nation daily. This doesn't pay off the national debt. This has been a huge political talking point of; let's go after the oil breaks for the oil companies, the tax breaks. This does nothing for the national debt. I don't think it does anything for oil prices either. What it does do is kill people, like who discovered the Barnett shale. It kills the independent. It favors the bigger companies, which is what we're trying to go after, apparently, with this.

JULIAN EPSTEIN: I think I've got to agree with Jonathan Hoenig on this that we're talking about four billion dollars of your money, the viewers' money, taxpayer money going to an industry that's making record profits and for those of you that don't believe in big government, that don't believe in government subsidies and government welfare, I don't see how you can square the circle on that. The problem with high prices is, look, we are producing more than we ever have. Production is way up since 2003. Obama has licensed 400 new permits for drilling. The demand is as low as it's been since 1997. The reason, to Tracy's point about price increases at the pump is clearly a manipulation of the international currency and the international markets by speculators. I don't think there is any debate about that. It's not a question of production and demand is down.

WAYNE ROGERS: I don't think it really matters. One of the biggest problems is if you start drilling right now, you're not going to see that oil for another four years, so that's just dumb to talk about it that oh, we're going to drill and therefore the price is going to go down. It's not going to happen. The biggest problem is Congress. They allowed eight companies in the oil and gas business to become four. They allowed them to consolidate. We have a monopoly in the oil industry in this country and they are bribing the Congress and therefore they can control whatever they want to do. Competition is what lowers the price. That's what you need.

WHAT DO I NEED TO KNOW?

TRACY BYRNES: Bad economy partly to blame for rise in robberies.

JOHN LAYFIELD: (EA) will score big from Tebow and Manning moves.

WAYNE ROGERS: "Unearth" big profits with rare Earth stocks. Buy (MCP).

JONATHAN HOENIG: Nokia making vibrating tattoo to alert you to calls and texts. Dial up profits with BT Group (BT).