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Old 07.10.2016, 10:51 AM
davidjones178@hotmail.co.uk
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Originally Posted by Mark_Duper View Post
Fair point but has the extra costs to consumers not gone back into US economy anyway, insteading of Chinese company pockets? What about the effect on spending power from all those US tyre companies and employees not buying and selling goods or homes and being simply out of a job now?

Would you rather spend £20/30 more on a tyre if you knew it was from a UK company and even better a local business?

Or cheap tyre, money to UK based franchise only, out the back door with tax returns and little to nothing put back into UK economy, aside a few jobs or just maybe delivery guys with the imported tyres.

We all want cheap and cheaper, it comes at a cost and works it's way up from the breadline eventually to snare us all, that is global capitalism for you.

Walmart effect, low profit margin, high volume sales, it works, and real well, always at a cost to everyone eventually. Once the global capitalists have taken over everything, then we really will be a slave race again.
Cost matters. Being able to obtain things cheaply is the nuts and bolts of economic growth. It means you have to spend less hours working to buy something or can buy more somethings with the same amount of working hours. It is the practical definition of wealth and it is why you can have a TV, a car and a washing machine. Yes, these could be more expensive. Your car could be individually handmade in West Sussex rather than mass produced in Swindon. Which explains a lot of the cost difference between a Rolls Royce (West Sussex) and a Honda (Swindon). But if the only cars are Rolls Royces a lot of people wouldn't be able to afford one at all.

Imports get a bad press. It's a mystery why. If you buy a TV from Japan then you get a nice new TV. Lovely! What do the Japanese get? They get Pounds Sterling. British money. Which is only paper. Or digits on a spreadsheet. Of course they don't want Pounds Sterling really so they exchange it for Yen, but the bottom line in that transaction is simply this. You gave somebody on the other side of the world some paper and they gave you a TV. What is so bad about that?

What happens to the paper is rather beautiful. The exchange trader who ended up with it sells it to somebody who wants to buy something British and then they buy our exports. Or they spend it in a London hotel.

You can't export unless you import and you can't import unless you export. We sell things to other countries that we can produce more efficiently or with greater quality than they can. Such as tourism, financial services, cars, machines, medicines, aircraft. We buy things from oher countries that they can produce more efficiently or with greater quality than we can. Like toys, rice, white goods and peaches. We get toys, rice, white goods and peaches more cheaply and they get tourism, financial services, cars, machines, medicines and aircraft more cheaply. So we both have lower costs and so we are both wealthier as a result.

Floating exchange rates ensure that the money that leaves the country comes back. It's the only place where it is useful after all.

The loser in this is the tyre factory up the road. But in economic terms, it shouldn't be there. If your local tyre plant gets priced out by foreign competition the market should re-allocate it's capital and labour - to the export sector say, where demand will increase as those pounds sterling come back.

This can be hard on the poor 50 year old tyre maker who doesn't know how to do anything else, but economies do change. Factories, industries and entire commodities are rendered obsolete by time and technology. This is the price of wealth and prosperity. It is why the Luddites were wrong to break the looms. If we had given in then our textiles would still be hand woven and you would be spending half of your money on woollen underpants.

Propping up local industries with trade barriers and subsidies is inefficient and unfair. It discourages investment and good business practice. It makes industry dependent and changes the incentives that encourage efficiency. Put it another way. If the local tyre plant can't compete with the French (say), why is that? Should you have to pay more for your tyres because the manager of the local tyre plant is rubbish at making tyres. Or because he pays himself fat dividends so he can drink champagne every night instead of investing in new machinery? Is it wise to write him a blank cheque? What is his managerial time best spent on? Improving efficiency at his factory or endlessly lobbying for higher trade barriers so he doesn't have to bother? Will you feel obliged to keep buying his tyres when they are 50, 100, 200 pounds more expensive? Who is the slave now?

Where exchange rates do not float (i.e. the Euro), it is more murky because if two countries use the same currency there is no stabilising feature that matches imports with exports. This has caused serious problems in Europe because the Germans export furiously but they do not import much. They prefer to save. This is only really possible because of the Euro.
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