Speaker 1: What's going on. Thank you so much for listening to
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to your smartphone or tablet, and again, thank you so
much for your support. All Right, so I'm going to
give you a term of an economic model, okay, and
I think this might be I don't know because I've
not heard people use this term, but I think this
might be what we are seeing part of it with
the whole trade war tariff stuff. Okay. The term is
called that balanced trade, balanced trade, and this is an
alternative economic model to free trade. You've heard free trade,
you probably have heard fair trade, but balanced trade might
be the thing that is actually at the heart of
the stuff that we are seeing. This is according to
I'm going to start with Wikipedia, but like, yes, I
am aware Wikipedia, I know, okay, but for sort of
general descriptions, it's a good place to start. Okay. So
here is the general description for balanced trade. Under this
system or this economic model, nations are required to provide
a fairly even reciprocal trade pattern. Remember we heard that
term reciprocal trade. Remember at the very beginning low those
many well like less than a week ago, that's when
we started hearing this term reciprocal trade. And people were like, well,
I'm for that, and I am too, I would want
to see reciprocity. Sure, if they put a terriff on us,
we put a terraf on them. Fine, that's reciprocity. Mmmm. Yeah,
it's a little bit more involved. And by a little bit,
I mean in economic terms a lot. Okay. So nations
are required to provide a fairly even reciprocal trade pattern.
They cannot run large trade deficits or trade surpluses so
high or low. You're not allowed. It's got to be even.
The concept was introduced by a guy named Michael McKeever
sor Michael McKeever senior of the McKeever Institute. I did
to get that gig anyway, the mckiev Institute of Economic
Policy Analysis. This was back in nineteen ninety six, okay,
And according to this essay that he published, balanced trade
is a simple concept. Okay, just to heads up, beware
of any economist who tells you that the thing that
they're about to describe as a simple concept. Usually when
I hear oh, it's a simple concept, it usually involves
like another I don't know, half an hour of explanation
to me, and it's all very simple to the economist's mind,
but not so much to mine. So, balanced trade is
a simple concept which says that a country should import
only as much as it exports so that trade and
money flows are balanced. A country can balance its trade
either on a trading partner basis, in which total money
flows between two countries, or it can balance the overall
trade and money flows so that a trade deficit with
one country is balanced by a trade surplus with another country. Okay,
so do you follow that? So, like, we have a
trade deficit with China, and we can try to balance
that trade just with China, or we could offset that
with trade from every other nation on the planet that
so it all equals out, so there's zero trade deficit.
That's balanced trade. Okay, that's the economic model. Balanced trade
as a concept has also been suggested. So that was
McKiever back in nineteen ninety six. But it has also
been suggested in the past by a guy named Warren Buffet,
sorry Buffett Warren Buffett in two thousand and three in
a in a Fortune magazine article in November two thousand
and three where he proposed, see this is what I
mean by always be careful when economists tell you that
something is a simple concept. So here was Warren Buffett.
He proposed a system of import certificates or ices. Not
to be confused with what the Republicans do all the time.
That's a different kind of seizing. This is I see
import certificates. Exporters would receive one dollar of ices for
each one dollar of goods they export. Now this is
all goods, just to heads up here, not services. And
that's actually part of the problem in dealing with some
of this trade stuff is because the US specializes in
a lot of exporting of the services more so than
the goods. Right, so they we don't export goods. We do.
We export a lot of goods, but services is not
included in all of these debates about the tariffs and
the trading. It's about goods. So Buffett's idea is that
you create essentially a cap and trade system does that
sound familiar? Anybody who was hanging around during Clinton Gore
would know that, right. The whole cap and trade system
that they developed for carbon credits, except these would be
import certificates. One dollar of goods gets you one dollar
of a certificate. So let's say a certificate is a dollar,
and that's a one for one. Importers would be required
to present one dollar of ICs for every one dollar
of goods that they import. This would limit the value
of imports to at most the value of exports and
presumably exactly the value of imports, assuming no leakage, and
create a market of exporters to sell the ICs to
the importers, right, so then they could sell Do you
understand how this is working. It's a simple concept, people,
It's very simple. Okay. So you have let's say, let's
say I am over in uh you know, Ptastan, and
I'm really good at making burlap sacks for my people.
We're not okay, we're not very advanced people, but we
make burlap sacks, which we also wear as clothing and
we host our three legged races. But we have these
we have these sacks, and it just so happens that
you need a bunch of these sacks to Well, actually
you don't. But let's say I export a bunch of
the sacks over into your country. Then you get the IC,
or I get the IC, you get the sacks. Now
I have these certificates, then I can sell the certificates
to the importer. Okay, all right, So that was Warren
Buffett's idea on the balanced trade idea. Then there was
also a guy named William Hawkins. William Hawkins in two
thousand and two, he advocated direct limitations on imports. The
Bush administration should be taking direct measures to reduce the
trade deficit, which means limiting imports both to defend the
dollars integrity and America's economic strength. Okay, that was O two.
And then there was a very extensive argument made for
balanced trade by three brothers, Raymond, Howard and Jesse Richman.
That's their name, Raymond rich Man, Howard rich Man, or
maybe Richmond Jesse Richmond. They did actually two books. One
was published in two thousand and eight, Trading Away Our
Future Right, and then in twenty fourteen they published another
book called Balanced Trade, Ending the Unbearable Costs of America's
Trade deficits. That's twenty fourteen, Okay, so two years before
Trump wins and they propose what's called a scaled tariff.
They say a scaled tariff should be applied to all
imported goods from trade surplus country that have had a
sizeable trade surplus with America over the most recent four
economic quarters. The tariff rate would be designed to take
in a portion of the bilateral trade deficit. Except they
are accounting for goods and services in their model. Okay.
In an interview with Tucker Carlson, Robert Littheiser, this was
the Reagan guy. He said that his views have evolved
from free trade to fair trade and now to balanced trade.
I think this is what's going on all right. So
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You've heard me say it, I am a why guy.
I like to know why. And one of the things
that has concerned me the most in this tariff issue
and the moves by the Trump administration is I'm trying
to figure out the why. What is the reasoning? Because
I have heard all of these different explanations from people
that I thought would have known, and then of course
there's all the speculation from people that don't know, and
I am in that camp. I don't know what all
of the different goals are but and like, for example,
the World Trade Organization, is it possible that all of
this is going to rip apart the World Trade Organization?
They haven't said that. I've heard other people speculate that
that's what could be coming. Because the WTO has not
been particularly helpful in reining in the transgressions of China
when it steals our stuff, right, it dumps their products
and all that. Like, the WTO does not seem to
be an effective mechanism. But nobody is saying that. They're
just saying, trust us, we have the these ideas this
is all going to be great for America, and that
may be true, but I don't know what it is
they're trying to do. So I cannot argue with this
on the specifics because I don't know the why. So
when I came across this, this balanced trade economic model,
this idea that's been kicking around, and you know who
is a proponent of the balanced trade thing, Peter Navarro,
who is in the Trump administration. And so now it's like, okay, well,
that seems like a dot that can be connected because
he's out there, you know, beating the drum for this approach.
So maybe that's what we're seeing a balanced trade economic
model that's being launched. And it also then ties into
an interview that I saw on a podcast called trigger
Nometry and it's free. You can go to YouTube watch it.
I highly recommend the podcast. And a guy by the
name of Jeff Rickards was on there and he was
talking about this same concept and the use of the tariffs.
I've got some audio from that I will play later
in the program. So that's why I feel like, oh, okay,
now I feel like I'm on the trail to maybe
understanding the why. Let me go over and get Ralph
on the program. Hello Ralph, how are you doing well?
Speaker 2: You know, I'd like to kind of put it an
analogy of a sovereign listener and everything. You know, did
you ever go to like the wind Dixie.
Speaker 1: I have been to a wind Dixie.
Speaker 2: Yes, okay, Now you remember the program they had. They
had the sn H green stamp. So I go in
there and buy a bunch of their products that they
have for sale, and then I get to collect these
green stamps. Now, you know, I could either trade them
to somebody else that needed something really bad out of
that catalog, or I could save up and use them
for myself. Now, you know, you would think Tom tell Us,
after his rant yesterday about putting the throne on this
foot on the throat of the ambassador, looks like he
would know about these economic uh things we have down
in the south that are similar to this trade out.
Speaker 1: Yet well he's not, but he well, but Ralph, the
problem is, they haven't. They haven't done anything like that.
They haven't introduced any kind of a regime of these
import certificates. They haven't. They haven't suggested that they're talking
about doing deals. So I like they're like they're talking
and Bessent was on talking about how we got all
these countries. They are going to do bilateral deals and
if that's the focus they're going to now they're going
to negotiate individual deals with every single country and they're
going to essentially abandon the World Trade Organization approach and
they're going to do just country to country deals. That's
the to be what they are talking about. They've not
introduced anything like that. What you're describing with the stamps
is very similar to the old Marlborough miles and the
yeah and the camel cash for the smokers, and you
could take the they would give you a little Joe
Camel dollar on the pack of a cigarette box, and
then you would collect them and you'd mail them in
and you would get an ash tray or something.
Speaker 3: Well.
Speaker 2: Also, you know they besides the terraff they get us
with the fat tacks and everything. These countries just slap
on an extra twenty or thirty percent. So you know,
it's really mind bottling that when we go to trying
to sell something over there. I think you know, on
the radio yesterday they were talking about army guy called
in and said, like, we charged one hundred and twenty
eight dollars, I mean a dollar twenty eight to let
Germany import these medical baskets, and then they turn around
and charge just to sell them the same basket one
hundred and twenty eight dollars.
Speaker 3: Jude, you know it's mind bowling.
Speaker 2: And we why do we still give China and India
rural status where they can basically, you know, fire all
the coal plants they want to not have the clean coal,
and can all these green people go over there to
protest them dumping stuff in the ocean. That would be
something I.
Speaker 1: Think you're telling me. I don't know if the World
Trade organization is going that deep into like the net
zero stuff, I don't know. I mean, I know there
are people that would want to have all of that
wrapped in together. But this is why I said from
the very beginning, Ralph, and I appreciate the call I
got to go to news, but that's what I've said
from the very beginning, is that I am for free
trade if it is fair. And if you're Germany slapping
one hundred and twenty eight dollars tax on my product,
but I can't sell into you or you get to
sell your product in my country for one hundredth of
that cost, that's not fair. Yeah. Absolutely So if Trump's
going to do just bilateral deals with every single country
on Earth, one to one, then I mean, and that's
what Bessent has said apparently, and if the balanced trade
approach is what we are actually seeing, then there are
people who have kind of fleshed out some of these
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Keith says. I worked in finance for years. However, I
am not an expert in politics. I have been researching
and analyzing tariffs for the past two weeks trying to
educate myself, and I cannot find any benefits for our country.
Maybe somebody can educate me. What is Trump's checkmate play?
I just don't see it. Well, I don't know if
there's a checkmate play per se. I think see again,
we are all left to speculate as to what as
to what's going on. And that's why when I saw
this balanced trade theory, which was sent to me, I
will say by my brother who sent me a link to.
And my brother works in import exports stuff and he
sent me a link. It was to a site that
I'm not and yes I did open it because it
came from him. And he talked to me about it.
But I will not open links in emails unless you
are related to me. But he sent me this link,
and so that's what set me on the path I
had to go. I had to go chase down other
stuff to confirm that this was not, you know, just
some rantings of a right wing website. But and here's why,
because they quote it's from life sitenews dot com. Okay,
and it's kind of like it's like Wikipedia. I will
use it as a launch pad, like, tell me what
you're talking about, and then I'll find the key terms,
and then I do what's called lateral research by opening
up other tabs in the browser and just keep working
your way and chasing stuff down, you know, laterally and
then when you get your answers, pull it all together
and then close all the tabs and then keep going right.
So and it's like, here's the first thing. It's like
they're quoting a substack writer named Tree of Woe. Okay,
Like I don't even know who this person is, Okay,
so this is random. They turned and they turned it
into a quote, news story and article on this website.
So it's based So it's a blog let's just call
it that. So this blogger says talking about this book,
balance Trade, ending the unbearable cost of America's trade deficits.
The book challenges the orthodox theory that free trade is
always beneficial and argues for an alternate policy that they
call balanced trade. And they write in the book quote,
for the last several decades, the United States has generally
played a cooperative strategy on trade with China and others,
and US markets have been opened to Chinese goods. American
leaders selected free trade on the basis of the false
hope that China would reciprocate by opening its markets to
American firms. Right, which would be, by the way, free trade. Right,
when when both countries are open, both markets are open
to each other, that is free trade. The problem is
that it doesn't actually happen. Free trade has never really
been tried. They're not playing on a level playing field.
Speaker 2: Right.
Speaker 1: That's been the criticism my entire life. So Trump's tariffs
are calculated. Get this, remember the formula. I went over this.
It was like, what is this formula? Where do they
come up with this? And people were mocking it and
questioning it doesn't make any sense. But get this Trump's
formula is the exact same formula that's in this book.
I don't think that's a coincidence. I think that the
people in the Trump administration, and maybe Donald Trump himself,
I think they have read this book. I think this
is what they are implementing at this stage. I am like,
I could be wrong on this, but that's what it
looks like. The only difference in the formulas is that
Trump added a national tariff of ten percent as a baseline,
and that wasn't in the book. But that apparently comes
from a guy named Ian Fletcher, and he's got some
He had some article or something called free trade doesn't work,
and that's what that was a theory advanced by him,
the ten percent baseline. So it seems like this is
what they are trying to implement. Why these two models.
The difference between the two is fundamentally a difference in priorities.
Ian Fletcher prioritizes protection of key industries, while the Richmonds
emphasize reciprocity in trade flows, so to achieve balanced trade.
It's not a reciprocity of tariffs, it's a reciprocity of
trade flows. That's different, all right, If you're listening to
this show. You know I try to keep up all
sorts of current events, and I know you do too.
And you've probably heard me say get your news from
multiple sources. Why Well, because it's how you detect media bias,
which is why I've been so impressed with ground News.
It's an app, and it's a website, and it combines
news from around the world in one place, so you
can compare coverage and verify information. You can check it
out at check dot ground, dot news slash pete. I
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using ground News a few months ago and more recently
chose to work with them as an affiliate because it
lets me see clearly how stories get covered and by whom.
The blind spot feature shows you which stories get ignored
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Your subscription then not only helps my podcast, but it
also supports ground News as they make the media a
landscape more transparent. All right, let me jump over and
talk with Mike. Hello, Mike, Welcome to the program.
Speaker 3: How are you, hey, Pete Nis afternoon. How are you doing.
Speaker 1: I'm all right. What's going on?
Speaker 3: I was saying about the news and bruise. I'm not
sure how I'd be received if I came over there,
but you know it sounds like well Jackie caller.
Speaker 1: Jackie came out one uh to one past event and
we mixed it up a little bit. So you are
free to attend.
Speaker 3: Here. I can stand in the corner if we needed to.
I suppose, yeah, But I wanted to follow up on
your question that you asked the last half hour and
are still trying to pose, and that is trying to
figure out why, behind all behind all these policies. I'm
going to tell you I'm as mystified as you are.
Speaker 1: What about the balanced trade, this balanced trade economic model.
Speaker 3: Well that might be part of it again, but the
balance trade, I mean this, this, what he perceives is this,
he Trump proceeds this in balanced trade. All has to
do with goods, and we export a ton of stuff
to the rest of the world that are not necessarily
manufactured goods, but extreme it's extremely profitable. We sent out
upon a bunch of software. We sent out a bunch
of software servicing, we sent out a bunch of entertainment. Uh,
China is not going to let our films profersonal services.
Speaker 1: They're not. They banned our Hollywood films. Now China's like,
no more of your Hollywood films, which I guess means
we're allowed to mention Taiwan in Hollywood again. So that'll
be nice.
Speaker 3: But that would that would be nice. And you know,
and and there's no question that there are specific instances
of treating situations that need to be addressed. In China,
of course, I think is the biggest uh offender of that.
And the strategy that had been used was to frighteningly
unite the rest of the globe against China because their
predatory practices, especially in stealing intellectual property, that's hurting all
these other countries as well.
Speaker 1: So let me give you the response, Well, i'll give
you the response to that is that if other countries
are being harmed by Chinese unfair trade practices, then that
is on those countries to negotiate against China to negotiate
their own deals. We are negotiating our own deal. That's
what our presidents should be doing well.
Speaker 3: I get that response, and I guess my response to
that would be, you know, there's a difference between making
America first and making America alone. No.
Speaker 1: Look, I've expressed my concern about this effort pushing countries
into the arms of China, no doubt about.
Speaker 3: It, no question about it. There was one thing though,
that the President said on his way back from his
golf tournament this weekend that he's getting interview on the plane,
and we wounded it and wrote it down because to me,
it told me a lot and I love your take
on it. And he was, you know, asked a little
bit about, you know, the motivations and stuff, and he's
talking about all the good stuff that will happen after
the you know, in this whole little bit of pain.
He said, eventually it will be meaning us. Eventually, uh,
we will be a country like no other. It will
be the most dominant country economically in the world. And
I'm thinking to myself, well, congratulations, you've already treated achieved
that we are by far the most dominant economic country
in the world.
Speaker 1: I think people would disagree with that. I think there
are people that would disagree with that because as COVID
showed us with the disruption and the supply chains, we
are at the mercy you have so many other foreign countries.
That doesn't make us dominant.
Speaker 3: Well, and as was everybody else as well.
Speaker 1: Right, I know, But I think that's what that's why
people would push back on the idea that we already
are at this status. And I think a country that
is buffered from that kind of disruption that will that
would cripple us, like for example, the pharmaceuticals. Right, we
have like people who are on you know, all these
like blood pressure medicine, and that stuff is manufactured in China.
If China locks that down, you're talking deaths, right and right.
So that's that's one of those things that we probably
shouldn't be relying on a foreign country for.
Speaker 3: And it goes back to what I was saying. And
if there's specific concerns that are rightly had about pharmaceuticals,
about supply chains issues in certain instances, there's certain industries
you want remote like you know we have now developed,
although it's getting dismountled, a real focus on a semiconductor
and being leading the world and Michael chip technology and production.
You focus on those individual issues and industries as opposed
to taking this blunt acts that is clearly you know,
resulting in some huge widespread pain throughout not just our
economy but throughout the world. I can not making tense
to it.
Speaker 1: My understanding of that is much like with all of
the things that Donald Trump does, which he outlines in
his book The Art of the Deal is you create
as much chaos in order to give yourself as much
leverage as possible when going into the negotiation, right, and
then when you're in the negotiation in a bilateral fashion,
it's just now you and me, you know, country mic
versus country Pete, and we sit down and we're like, okay,
let's work through these issues. You got this non tariff barrier.
It's a trade barrier on my product going into your market,
and you want your product to be you know, accessing
mine for no barrier, and that's not fair. So what
are you going to like what is what are you
going to give me instead? And so Trump is doing
like from what I Besen said yesterday, I think it
was or day before that, there they've got like seventy
countries lined up all trying to get in for these
individual negotiations and for a guy like Trump, this is
what he loves to do. So that's why, like I
have taken a wait and see cautious approach to this stuff.
I still have a lot of concerns, don't get me wrong,
very worried about this because it is a break from
the orthodoxy of free trade policy. It is a it
is a break from that. So well, but maybe it
should be broken.
Speaker 3: Well, there are obviously some serious doubts about how all
this is going to oh yeah, eventually work and pan out.
What there's no doubt, however, is that a week ago,
the thirty largest industrial companies making up the Bell Jones
it was a lot more valuable than it is right
right now. The five hundred major companies making up the
S and P five hundred were a lot more valuable
a week ago at four o'clock.
Speaker 1: Yeah, no, that goes to right now, Yeah, Mike, No,
I appreciate the call. It's a good discussion. That goes
to my concerns as well. That you're looking at the
markets and the way they're moving and they're trying to gauge,
but they're also very uncertain and that creates a lot
of volatility. All right, that'll do it for this episode.
Thank you so much for listening. I could not do
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