5 ms·

Buffett actually does share a fear of trade deficits, though. His proposed solution, as an alternative to tariffs, were "import certificates"-essentially a mark

Buffett actually does share a fear of trade deficits, though. His proposed solution, as an alternative to tariffs, were "import certificates"-essentially a marketable credit required to import goods. These would be earned via exports by exporters, be freely priced and traded, and would essentially bind import levels to export levels.

nabla9 1y ago
It's really a non-problem. Net capital inflows into the U.S. = U.S. trade deficit. The balance of payments is simply: Sales of assets – Purchases of assets = Purchases of goods – Sales of goods If you balance the trade, it means foreigners must stop investing into the US.
- chrisco255 1y ago
  If you balance the trade, it means reduced foreign ownership of U.S. assets, yes, which means ownership of U.S. assets by domestic citizens will increase. One of the primary problems with an unbalanced trade deficit is that your own inhabitants are left with less wealth over time, as assets are sold off to fund consumption.
  - ChadNauseam 1y ago
    That’s zero-sum thinking. Increases demand for US assets can make americans wealthier in many ways (e.g. providing more capital to american businesses).
    - bnjms 1y ago
      Some goods are zero sum. Land is zero sum. Ownership of land by non local entities is… idk seems bad
      - epolanski 1y ago
        Why? What's the issue, if me, an Italian, own land in Indiana or North Cali?
        chrisco255 1y ago
        You, a single actor, probably wouldn't be a significant factor. However, an international government or corporate entity owning hundreds of thousands of acres and exploiting resources on the land and routing them back to their home country can be problematic. It places additional strain on limited resources and the profits are not spent in the local economy...just sent overseas. Absentee ownership of non-productive real estate can also drive up the costs of housing for citizens, making homeownership more difficult and driving down wealth in the middle class.
        epolanski 1y ago
        I see it completely opposite of you. 1) The foreign entity is investing where Americans aren't. 2) There is a very huge risk for the foreign entity to own such an operation because of political changes. By law or decree the US or the state can always nationalize these lands. Thus, ultimately, I see no issue there.
        gwbrooks 1y ago
        1. Foreign entities are also investing in land that is strategically or tactically important -- agricultural land is a good example of the former; land near military bases an example of the latter. China has demonstrated a willingness to do both. 2. I think this represents a misunderstanding of the U.S. Constitution and U.S. law. The Constitution provides no power for the federal government to acquire land without just compensation, which courts have regularly held to mean fair market value. Put another way: The feds can likely devise a path for buying your land, but can't outright nationalize it. Changing that is not a matter of presidential decree or even a law by Congress; it would require an amendment to the Constitution itself, which is an extraordinarily heavy political and policy lift.
        1y ago
      - yellowapple 1y ago
        The solution to that is land value taxation, not foreign trade policies that have zero bearing on land ownership.
  - dragonwriter 1y ago
    > If you balance the trade, it means reduced foreign ownership of U.S. assets, yes, which means ownership of U.S. assets by domestic citizens will increase. Proportionately, perhaps, but that doesn't mean by value of assets owned. It just means the aggregate value of assets in the US will be less.
  - monadINtop 1y ago
    >which means ownership of U.S. assets by domestic citizens will increase Which to be clear will be largely domestic oligarchs and other whales since the vast majority of domestic citizens in the US don't have enough capital to own any significant amount of assets, US or otherwise.
    - chrisco255 1y ago
      It applies across the spectrum, but to your point, at least domestic billionaires pay domestic taxes and spend money domestically. Speaking to the middle class, home ownership (traditionally one of the most reliable sources of wealth for the middle class) would increase.
      - monadINtop 1y ago
        Yeah that's a fair point as well.
  - nabla9 1y ago
    >U.S. assets by domestic citizens will increase. You think zero sum like accountant or land owner. They money coming is invested for opportunities. There will be less opportunities for startups, less VC money. Less affordable loans for corporations to expand and invest.
  - epolanski 1y ago
    Why would it even be desirable to have less foreign ownership of US assets? Like what is the sound logic here? As an Italian I would love more foreign ownership of Italian businesses, that would not only bring capital but more scrutiny.
    - Ekaros 1y ago
      On one side it could mean that less money leaves. That is no dividends are paid to outside the country. All profits stay in. On other hand the economy overall and stock market especially have enormously increased due to outside investments. As injection of money in later one directly pushes valuations up. And the borrowing is only possible when someone loans money...
    - chrisco255 1y ago
      If the foreign entities are not aligned with your country's values, what good is it? For example, Putin is arguably one of the wealthiest individuals in the world. Would you be bothered if he scooped up a controlling share in Italy's defense contractors or machining manufacturers?
    - yupitsme123 1y ago
      The extreme opposite of zero foreign ownership would be full foreign ownerhship, ie. colonization. All your resources and wealth belong to a foreign nation. If we agree that that's a bad thing, then it stands to reason that there's a certain point where foreign ownership becomes a bad thing. I think China has done an excellent job of bringing in foreign investment while keeping those foreign investors from running amok.
    - robocat 1y ago
      > I would love more foreign ownership of Italian businesses, that would not only bring capital Capital investments are like credit card spending, feels good for a while, but ultimately outwards-capital value should always exceed inwards-capital value (that's why somebody makes an investment). Sometimes everybody is better off (the ideal founder story with VC investment) but all too often the investment money is stolen or misused (but the debt remains for the country to repay). The 1MDB investments didn't help Malaysia: US investment bank Goldman Sachs helps 1MDB sell bonds worth $3.5bn... Goldman Sachs helps 1MDB raise a further $3bn in an additional bond sale, this time to cover “new strategic economic initiatives” between Malaysia and Abu Dhabi https://www.aljazeera.com/news/2020/7/28/timeline-how-malaysias-1mdb-financial-scandal-unfolded https://www.aljazeera.com/news/2020/7/28/timeline-how-malays...
- johntarter 1y ago
  It was a problem to Warren Buffet and he used a parable in the past to explain the issue: A perpetuation of this transfer will lead to major trouble. To understand why, take a wildly fanciful trip with me to two isolated, side-by-side islands of equal size, Squanderville and Thriftville. Land is the only capital asset on these islands, and their communities are primitive, needing only food and producing only food. Working eight hours a day, in fact, each inhabitant can produce enough food to sustain himself or herself. And for a long time that’s how things go along. On each island everybody works the prescribed eight hours a day, which means that each society is self-sufficient. Eventually, though, the industrious citizens of Thriftville decide to do some serious saving and investing, and they start to work 16 hours a day. In this mode they continue to live off the food they produce in eight hours of work but begin exporting an equal amount to their one and only trading outlet, Squanderville. The citizens of Squanderville are ecstatic about this turn of events, since they can now live their lives free from toil but eat as well as ever. Oh, yes, there’s a quid pro quo–but to the Squanders, it seems harmless: All that the Thrifts want in exchange for their food is Squanderbonds (which are denominated, naturally, in Squanderbucks). Over time Thriftville accumulates an enormous amount of these bonds, which at their core represent claim checks on the future output of Squanderville. A few pundits in Squanderville smell trouble coming. They foresee that for the Squanders both to eat and to pay off–or simply service–the debt they’re piling up will eventually require them to work more than eight hours a day. But the residents of Squanderville are in no mood to listen to such doomsaying. Meanwhile, the citizens of Thriftville begin to get nervous. Just how good, they ask, are the IOUs of a shiftless island? So the Thrifts change strategy: Though they continue to hold some bonds, they sell most of them to Squanderville residents for Squanderbucks and use the proceeds to buy Squanderville land. And eventually the Thrifts own all of Squanderville. At that point, the Squanders are forced to deal with an ugly equation: They must now not only return to working eight hours a day in order to eat–they have nothing left to trade–but must also work additional hours to service their debt and pay Thriftville rent on the land so imprudently sold. In effect, Squanderville has been colonized by purchase rather than conquest. It can be argued, of course, that the present value of the future production that Squanderville must forever ship to Thriftville only equates to the production Thriftville initially gave up and that therefore both have received a fair deal. But since one generation of Squanders gets the free ride and future generations pay in perpetuity for it, there are–in economist talk–some pretty dramatic “intergenerational inequities.” Source: https://www.berkshirehathaway.com/letters/growing.pdf https://www.berkshirehathaway.com/letters/growing.pdf
- danielmarkbruce 1y ago
  By this definition "investing in" includes people overspending and getting themselves in a huge hole with debt. Sure, tell yourself that "creditors are investing in them".
- next_xibalba 1y ago
  With respect, I’m not sure I’ll take an internet commenter’s Econ 101 dismissal over the word of the greatest investor of all time.
chrisco255 1y ago
Sounds like it would achieve a similar effect, but would be far more complex to implement and yet would still have the effect of being a tax on imports while not actually generating any revenue for the federal government.
deleted 1y ago
[deleted]
Keyframe 1y ago
That sounds awful a lot like we had it back in the Yugoslavia days. It wasn't exactly free market, as you might know. Companies that exported stuff had credits attached to them and with that quota they could then import goods. They couldn't trade those credits. You then had absurd situations like a company that sells agricultural stuff and has stores for those was also selling, for example, commodore 64 in their stores since that's what they imported.

nabla9 1y ago

It's really a non-problem. Net capital inflows into the U.S. = U.S. trade deficit. The balance of payments is simply: Sales of assets – Purchases of assets = Purchases of goods – Sales of goods If you balance the trade, it means foreigners must stop investing into the US.

chrisco255 1y ago
If you balance the trade, it means reduced foreign ownership of U.S. assets, yes, which means ownership of U.S. assets by domestic citizens will increase. One of the primary problems with an unbalanced trade deficit is that your own inhabitants are left with less wealth over time, as assets are sold off to fund consumption.
- ChadNauseam 1y ago
  That’s zero-sum thinking. Increases demand for US assets can make americans wealthier in many ways (e.g. providing more capital to american businesses).
  - bnjms 1y ago
    Some goods are zero sum. Land is zero sum. Ownership of land by non local entities is… idk seems bad
    - epolanski 1y ago
      Why? What's the issue, if me, an Italian, own land in Indiana or North Cali?
      - chrisco255 1y ago
        You, a single actor, probably wouldn't be a significant factor. However, an international government or corporate entity owning hundreds of thousands of acres and exploiting resources on the land and routing them back to their home country can be problematic. It places additional strain on limited resources and the profits are not spent in the local economy...just sent overseas. Absentee ownership of non-productive real estate can also drive up the costs of housing for citizens, making homeownership more difficult and driving down wealth in the middle class.
        epolanski 1y ago
        I see it completely opposite of you. 1) The foreign entity is investing where Americans aren't. 2) There is a very huge risk for the foreign entity to own such an operation because of political changes. By law or decree the US or the state can always nationalize these lands. Thus, ultimately, I see no issue there.
        gwbrooks 1y ago
        1. Foreign entities are also investing in land that is strategically or tactically important -- agricultural land is a good example of the former; land near military bases an example of the latter. China has demonstrated a willingness to do both. 2. I think this represents a misunderstanding of the U.S. Constitution and U.S. law. The Constitution provides no power for the federal government to acquire land without just compensation, which courts have regularly held to mean fair market value. Put another way: The feds can likely devise a path for buying your land, but can't outright nationalize it. Changing that is not a matter of presidential decree or even a law by Congress; it would require an amendment to the Constitution itself, which is an extraordinarily heavy political and policy lift.
        1y ago
    - yellowapple 1y ago
      The solution to that is land value taxation, not foreign trade policies that have zero bearing on land ownership.
- dragonwriter 1y ago
  > If you balance the trade, it means reduced foreign ownership of U.S. assets, yes, which means ownership of U.S. assets by domestic citizens will increase. Proportionately, perhaps, but that doesn't mean by value of assets owned. It just means the aggregate value of assets in the US will be less.
- monadINtop 1y ago
  >which means ownership of U.S. assets by domestic citizens will increase Which to be clear will be largely domestic oligarchs and other whales since the vast majority of domestic citizens in the US don't have enough capital to own any significant amount of assets, US or otherwise.
  - chrisco255 1y ago
    It applies across the spectrum, but to your point, at least domestic billionaires pay domestic taxes and spend money domestically. Speaking to the middle class, home ownership (traditionally one of the most reliable sources of wealth for the middle class) would increase.
    - monadINtop 1y ago
      Yeah that's a fair point as well.
- nabla9 1y ago
  >U.S. assets by domestic citizens will increase. You think zero sum like accountant or land owner. They money coming is invested for opportunities. There will be less opportunities for startups, less VC money. Less affordable loans for corporations to expand and invest.
- epolanski 1y ago
  Why would it even be desirable to have less foreign ownership of US assets? Like what is the sound logic here? As an Italian I would love more foreign ownership of Italian businesses, that would not only bring capital but more scrutiny.
  - Ekaros 1y ago
    On one side it could mean that less money leaves. That is no dividends are paid to outside the country. All profits stay in. On other hand the economy overall and stock market especially have enormously increased due to outside investments. As injection of money in later one directly pushes valuations up. And the borrowing is only possible when someone loans money...
  - chrisco255 1y ago
    If the foreign entities are not aligned with your country's values, what good is it? For example, Putin is arguably one of the wealthiest individuals in the world. Would you be bothered if he scooped up a controlling share in Italy's defense contractors or machining manufacturers?
  - yupitsme123 1y ago
    The extreme opposite of zero foreign ownership would be full foreign ownerhship, ie. colonization. All your resources and wealth belong to a foreign nation. If we agree that that's a bad thing, then it stands to reason that there's a certain point where foreign ownership becomes a bad thing. I think China has done an excellent job of bringing in foreign investment while keeping those foreign investors from running amok.
  - robocat 1y ago
    > I would love more foreign ownership of Italian businesses, that would not only bring capital Capital investments are like credit card spending, feels good for a while, but ultimately outwards-capital value should always exceed inwards-capital value (that's why somebody makes an investment). Sometimes everybody is better off (the ideal founder story with VC investment) but all too often the investment money is stolen or misused (but the debt remains for the country to repay). The 1MDB investments didn't help Malaysia: US investment bank Goldman Sachs helps 1MDB sell bonds worth $3.5bn... Goldman Sachs helps 1MDB raise a further $3bn in an additional bond sale, this time to cover “new strategic economic initiatives” between Malaysia and Abu Dhabi https://www.aljazeera.com/news/2020/7/28/timeline-how-malaysias-1mdb-financial-scandal-unfolded https://www.aljazeera.com/news/2020/7/28/timeline-how-malays...
johntarter 1y ago
It was a problem to Warren Buffet and he used a parable in the past to explain the issue: A perpetuation of this transfer will lead to major trouble. To understand why, take a wildly fanciful trip with me to two isolated, side-by-side islands of equal size, Squanderville and Thriftville. Land is the only capital asset on these islands, and their communities are primitive, needing only food and producing only food. Working eight hours a day, in fact, each inhabitant can produce enough food to sustain himself or herself. And for a long time that’s how things go along. On each island everybody works the prescribed eight hours a day, which means that each society is self-sufficient. Eventually, though, the industrious citizens of Thriftville decide to do some serious saving and investing, and they start to work 16 hours a day. In this mode they continue to live off the food they produce in eight hours of work but begin exporting an equal amount to their one and only trading outlet, Squanderville. The citizens of Squanderville are ecstatic about this turn of events, since they can now live their lives free from toil but eat as well as ever. Oh, yes, there’s a quid pro quo–but to the Squanders, it seems harmless: All that the Thrifts want in exchange for their food is Squanderbonds (which are denominated, naturally, in Squanderbucks). Over time Thriftville accumulates an enormous amount of these bonds, which at their core represent claim checks on the future output of Squanderville. A few pundits in Squanderville smell trouble coming. They foresee that for the Squanders both to eat and to pay off–or simply service–the debt they’re piling up will eventually require them to work more than eight hours a day. But the residents of Squanderville are in no mood to listen to such doomsaying. Meanwhile, the citizens of Thriftville begin to get nervous. Just how good, they ask, are the IOUs of a shiftless island? So the Thrifts change strategy: Though they continue to hold some bonds, they sell most of them to Squanderville residents for Squanderbucks and use the proceeds to buy Squanderville land. And eventually the Thrifts own all of Squanderville. At that point, the Squanders are forced to deal with an ugly equation: They must now not only return to working eight hours a day in order to eat–they have nothing left to trade–but must also work additional hours to service their debt and pay Thriftville rent on the land so imprudently sold. In effect, Squanderville has been colonized by purchase rather than conquest. It can be argued, of course, that the present value of the future production that Squanderville must forever ship to Thriftville only equates to the production Thriftville initially gave up and that therefore both have received a fair deal. But since one generation of Squanders gets the free ride and future generations pay in perpetuity for it, there are–in economist talk–some pretty dramatic “intergenerational inequities.” Source: https://www.berkshirehathaway.com/letters/growing.pdf https://www.berkshirehathaway.com/letters/growing.pdf
danielmarkbruce 1y ago
By this definition "investing in" includes people overspending and getting themselves in a huge hole with debt. Sure, tell yourself that "creditors are investing in them".
next_xibalba 1y ago
With respect, I’m not sure I’ll take an internet commenter’s Econ 101 dismissal over the word of the greatest investor of all time.

chrisco255 1y ago

Sounds like it would achieve a similar effect, but would be far more complex to implement and yet would still have the effect of being a tax on imports while not actually generating any revenue for the federal government.

deleted 1y ago

[deleted]

Keyframe 1y ago

That sounds awful a lot like we had it back in the Yugoslavia days. It wasn't exactly free market, as you might know. Companies that exported stuff had credits attached to them and with that quota they could then import goods. They couldn't trade those credits. You then had absurd situations like a company that sells agricultural stuff and has stores for those was also selling, for example, commodore 64 in their stores since that's what they imported.