Worldview Investing - Ruminations on the World Economy

Tariffs      Donald Trump has embarked on his "tariffs are the most beautiful word in the dictionary" program. Every business that brings a product or service to the market incurs costs in doing so. That includes labor, materials, insurance, equipment, shipping, taxes and many other expenses. If tariffs are added to the cost, someone must pay that cost. Trump assumes it will be the foreign exporter. While the exporter may choose to assume a portion of the cost, it is inevitable that most, if not all, of the cost will be passed on to the consumer either directly or indirectly. We noted in our September issue,  [Trump] promises to impose tariffs on all imported goods. This additional cost will be passed on to the consumer in the form of higher prices. Tariffs have the pernicious effect of elevating all prices because the local producer can now raise his price to just below the now-higher cost of the imported good. Result? Consumers are left with fewer choices and ...

   Source: David Stockman     Democracies are founded on the principle that supreme political power is vested in the public who elects people to represent the public's interests in the functioning of the government. While that is how democracies begin, they evolve into something else. Those who run for national public office quickly discover they must raise huge sums of money for publicity to get elected. They may receive small donations from family, friends and members of the public, but the "serious money" always comes from special interest groups, lobbyists, and businesses who will have "favors" to ask post election.      Current o ffice holders need to get re-elected. They look to their big donor group, again and again. That means having to vote for subsidies, handouts, bailouts, favorable legislation and other bills that pass tax revenues collected from "the people" to their big donor base. Cynics argue this proves that political candid...

                         " The Gleaners " by Jean Francois Millet, 1857      During the Middle Ages, European peasants worked land owned either by a wealthy nobleman or the church. The terms of their indentures required them to devote about 165 days of labor a year to their overlord. In the painting above, peasants gather grain that has fallen to the ground during the harvest process. The fruits of the harvest went to the land owner. The workers could keep what they managed to "glean" and grow a the small plot allocated to them. Russian serfs were required to devote some 150 days of labor to their overlord. Thus, the labor of these workers was "taxed" at a rate of roughly 44% (160/365). They were also periodically dragooned into their lord's army to fight wars they played no role in starting and from which they received no benefit. While this scheme allowed the nobility and church hierarchy to le...