Wednesday, July 12, 2017

Quote of the Day: Stealing the benefits of a steel glut...

Driving by Clovis Community Hospital yesterday evening I noticed a large construction project on the south-end of the complex. The setting sun reflected brilliantly off of the building-to-be's dense steel skeleton. I suddenly found myself pondering the current threat of what I consider to be the most destructive government act of cronyism imaginable -- the tariffing of foreign imports.
President Trump, following his predecessor (Obama went after Chinese tires [the U.S. tire industry is the domain of the United Steel Workers' Union]), his predecessor's predecessor, his predecessor's predecessor's predecessor (and so on) lead, is itching to steal from the end user the market-driven benefits of a global glut of steel.

The world overdid steel production, no ifs ands or buts about it! Consequently, the market needs to clear. I.e., the price (and, thus, the production) of the metal needs to be allowed to fall to whatever depths necessary to find its equilibrium. And, in the process, the Clovis Community Hospitals of the world will save untold fortunes/resources that can be allocated to methods and technologies that save human lives and, in the process, create jobs where true progress demands -- as opposed to preserving jobs in a presently dysfunctional industry, and, alas, funding political careers.

Bernanke and Greenspan et al. are spot on:
Bernanke and Other Heavyweights Warn Trump Against Steel Tariffs(Bloomberg) -- Former Federal Reserve chairmen Ben Bernanke and Alan Greenspan and other leading economists are warning President Donald Trump that new tariffs on foreign steel would raise costs for U.S. manufacturers, increase prices for consumers and harm relations with allies. 
Funny thing about it, if politicians would simply leave it be, the market clearing process will sew the seeds of future price increases/stabilization. Think about it, if end users pay less for steel, they retain more to apply to other areas of the economy. That other-area demand equates to legitimately increased activity, requiring the expansion of capacity in those other areas -- which, in many instances, will create new legitimate demand for steel. Hmm....

Who knows, perhaps the process is already underway:

One-year iron ore graph:

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