 How people buy into it and again, this this isn't just the left take an economic fallacy on the right The biggest economic fallacy on the right right now is The trade deficits matter, but they don't No serious economists things the trade deficits matter if Trump's problem with China was Intellectual property we can get to that in a minute, but let's put aside intellectual property Let's say Trump's problem with China is human rights What they're doing in Hong Kong? They're okay. I can understand taking an economic hit In order to fight for something you believe in all right if it was intellectual property, I mean One of my favorite economists John Cochran has this thing on intellectual property So imagine imagine that You know, it's What China's what's happening with China is that they are in a sense expropriating half a Trillion dollars as let's say 500 billion dollars of Intellectual property that sounds like a too large of a number given the trade. Let's say it's let's say it's let's say it's 200 billion dollars a year. They're expropriating in intellectual property Let's say the what we cut a deal with them is that they give us they hand us cash of 200 billion dollars a year in a sense royalties on The intellectual property that they have been taking right was selling them an intellectual property for 200 billion dollars a year So let's say we got 200 billion dollars here from them How would they get the 200 billion dollars to give to us? Right to an extra 200 billion dollars in dollars that they don't have they don't get a print dollars They actually have to get dollars. How would they get that? Well, they would get it by investing in more factories Produce more stuff to export to us So that they could get the dollars so they could give us the dollars back in the form of royalty payments in Other words the only way for them to pay us the royalties is is By increasing the trade deficit Or let's do it another way Let's say instead of them giving us a royalty on all the IP that they have stolen Let's say they don't steal it and let's say the consequence of that is American companies in China now have 200 and billion dollars more a profit because They were until that your property wasn't stolen from them, right? What are they gonna do with that 200 billion dollars? They're gonna invest it maybe in Chinese factories to buy more American to sell America more stuff and increase the trade deficit or They're gonna send the money home. Let's say the money. Let's say it 200 billion actually is in the United States It's not even in China. It's in the US already, right? The companies just get to keep 200 billion dollars more in the United States What are we gonna do that 200 billion dollars? Primarily, well ultimately we're gonna use it to buy more Chinese stuff I mean, what's the point of having money if you don't go out and buy? stuff and Who makes the cheapest and best stuff? China, Korea, Japan Germany Some stuff in America, but only some The bigger our economy gets the richer we become the more stuff we're gonna buy. There's no There's no issue of a trade deficit trade deficits matter Zero nada not Not with China not with anybody So the idea that trade deficits matter Is an anti-economic concept and I'm not even talking about the moral aspect I've talked about the fact that as an individualist, it's just none of the government's business who I buy my stuff from None of their business if I want to buy Chinese stuff, why is it a government's business? Why is the government deciding how much Chinese versus German versus Mexican versus American stuff? I buy as an individual isn't it just my business, but from purely economic perspective It's just the whole thing doesn't make any sense as I've often described. I have a huge Trade deficit with a grocery store. I Go to grocery store. I buy stuff. I leave my dollars there They never hire me to give talks at the grocery store. They never hire me. I mean, I feel horrible So trade deficits Don't matter They just don't and there's no So there's no benefit To using tariffs on China I don't know if you saw the deal the deal over the weekend the deal the trump cut phase one of the deal phase one of the deal is Instead of Washington Subsidizing farmers we're gonna get the Chinese American farmers. We're gonna get the Chinese to subsidize American farmers They have supposedly committed to although they have denied it now They're supposed to commit it to buying I don't know 50 billion dollars more of of agricultural goods from the United States Now, why is that good? Why is that good? I mean one is The best use of American capital now to invest in more machinery Buy more land cultivate more land to produce food for the Chinese When they could just as well buy that food from Brazil or from Argentina over somewhere else if Argentina ever opened up their economy enough Why is it? Why doesn't make sense for America to invest in? Farmland because of some artificial Demand coming from China because Trump twisted their arm to do it What benefit does it give America? Yeah? I mean some farmers are gonna get rich, but from an economic perspective. It's Completely wasteful. It makes no sense The only thing that makes sense is that the Chinese to buy what they want to buy however much they want to buy it ideally They lower tariffs to zero, but that's not the issue Good Trump didn't get a concession where they lower tariffs He just got a concession where they committed to buying X amount of stuff from American farmers But that's just another distortion to the American economy it's another External distortion that's gonna create You know massive investment into farming and it's not clear that that investment words It's clear that that investment is completely unjustified given, you know Food production in the world and demand for food in the world. This is completely artificial But that's the kind of Complete economic nonsense Complete doesn't make any sense that you're not gonna hear anyway. Nobody says it Nobody goes on television talking about this the pundits don't talk about it Suddenly the politicians don't talk about it. No neither left nor the right because none of them believe in actual economics None of them know actual economics and none of them believe in actual economics They just do what they think you want to hear which is look. I just created lots of farm jobs I just created gazillions of profits for our farmers our farmers. I don't have farmers. Do you have farmers? Anybody have farmers American farmers who cares? Who cares what happens to American farmers versus Brazilian farmers? What defenses it make doesn't make any difference to my life as long as there's food in the grocery store I don't care where it comes from If farming becomes less profitable than that capital deployed elsewhere and that labor will be deployed elsewhere And people will produce something else and build something else and make something else and create something else so They lie about this stuff all the time and the challenge with that is it's very hard to tell when they're doing it Because they do with confidence and they do it with graphs Let me get rid of the graph. We don't really need to graph on the screen They do it with statistics They do it with people who look like their experts and Who come on television and have PhDs? And yet They're either liars or idiots Or in most cases both and we believe politicians. Why do we believe politicians? Why do we believe politicians? Yeah, Luis says where they're gonna get the 50 billion to buy to buy our You know farm stuff. Well by Selling us more stuff So trade deficits not gonna shrink and the trade deficit it hasn't shrunk with all the tariffs and everything the trade deficit Hasn't shrunk and I've explained the mechanism why it doesn't shrink because the value of the dollar goes up because the Chinese still want dollars in order to either to buy the 50 billion or primarily to invest, you know In the United States. They need dollars. They buy them in the art market driving the value the value of the dollar up So one way or another which makes it cheap of us to buy Chinese goods, right? And if we buy more when the deficit doesn't change the dollar amount of the deficit just seems unbelievably stable Because it's not and tariffs don't matter that much to those kind of things What we need today what I called a new intellectual would be any man or woman who is willing to think Meaning any man or woman who knows that man's life must be guided by reason By the intellect not by feelings wishes women's or mystic revelations Any man or woman who values his life and who does not get want to give in to today's of the spare cynicism and impotence and does not intend to give up the world to the dark ages and to the role of the collectivist Using the super chat and I noticed yesterday when I appealed for support for the show many of you step forward and actually Supported the show for the first time. So I'll do it again. Maybe we'll get some more today If you like what you're hearing if you appreciate what I'm doing then I appreciate your support Those of you who don't yet support the show, please take this opportunity. Go to Iran book show calm slash support or go to subscribe star.com you're on book show and And and make a kind of a monthly contribution to keep this to keep this going. I'm not sure when the next