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Nicky

What would Mexico's failure mean for the US?

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Every time Trump expresses hostility towards Mexico, the peso takes a significant tumble. This has been happening for months, so, surely, even Trump noticed the correlation by now. Whether it's just a negotiating tactic or destabilizing the Mexican economy is his end game, he's clearly trying to hurt Mexico, on purpose. And there are voices on the right cheering it on, as if Mexico's failure would be some kind of victory for the US.

So what happens if it works? Clearly, Mexico is at the United States' mercy. Just the threat of a trade war has caused the peso to drop 12% over the last three months, with experts predicting a 50% drop if the rhetoric escalates. What happens if Trump blows up NAFTA, starts a trade war, Mexico devolves into hyperinflation, and the already unpopular government is overthrown or replaced by populists or radical socialists like in Venezuela? Or worse, a civil war between a weakened government and the cartels?

Could the US end up with a failed state, like Syria or Venezuela, on its doorstep, with tens of millions of economic migrants, and cartel soldiers and Islamic terrorists hiding among them, flooding across the border? And would it be possible for a populist demagogue to exploit that crisis, and expand his power beyond constitutional limits?

And, even if Trump gets voted out of office in four years, could the next President deal with the crisis he inherits? Would there be a way to walk back the failure of the Mexican economy, and stabilize the region? Or will the US be faced with permanent war on its southern border?

Edited by Nicky
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I fully expect the US to have military involvement in Mexico by the time Trump's first term is up. We have to have war somewhere -- I think Trump's blustery temperament, desire to demonstrate strength, and unwillingness to back down virtually guarantee it  -- and why not with the country against which we're currently building a wall, and going to "make" pay for it?

Will that be a pretext for further erosion of civil liberties? I don't see why not. I'd imagine that to be more of a feature than a bug, really.

What would all of this mean for the US (let alone the individuals living in it)? Nothing good.

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3 hours ago, epistemologue said:

Build a wall.

For what purpose?

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3 hours ago, DonAthos said:

I fully expect the US to have military involvement in Mexico by the time Trump's first term is up. We have to have war somewhere -- I think Trump's blustery temperament, desire to demonstrate strength, and unwillingness to back down virtually guarantee it  -- and why not with the country against which we're currently building a wall, and going to "make" pay for it?

Step one: Accuse Mexico of sending over their criminals instead of punishing them.

Step two: Say you'll build a wall, to protect yourself.

Then you wait. Let the media go nuts. Add fire to the flame. Say Mexico will pay for it to get people really going. Get people to question the very notion of truth, at least for your supporters. Wait like a snake until the right moment... Republican support shores up nicely. Then we continue the Mexico plan.

Step three: Threaten Mexico, mafia style. "I'd hate to see something BAD happen if you don't help us pay".

Step four: Mexico doesn't pay. So, you say Mexico may as well be supporting criminals attacking the US.

Step five: Go to war. Win. Treaty makes Mexico pay.

I just hope this is a crazy fantasy.

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19 minutes ago, Eiuol said:

Step one: Accuse Mexico of sending over their criminals instead of punishing them.

Step two: Say you'll build a wall, to protect yourself.

Then you wait. Let the media go nuts. Add fire to the flame. Say Mexico will pay for it to get people really going. Get people to question the very notion of truth, at least for your supporters. Wait like a snake until the right moment... Republican support shores up nicely. Then we continue the Mexico plan.

Step three: Threaten Mexico, mafia style. "I'd hate to see something BAD happen if you don't help us pay".

Step four: Mexico doesn't pay. So, you say Mexico may as well be supporting criminals attacking the US.

Step five: Go to war. Win. Treaty makes Mexico pay.

I think there are many possible variations on this theme. Another is the kind of economic and political instability that Nicky suggests in his OP. Given that, President Trump could argue that we have no choice but to intervene in order to protect American interests. It's not like there's not historical precedent for such things, either.

19 minutes ago, Eiuol said:

I just hope this is a crazy fantasy.

It's not so long ago that the idea of a President Trump at all was discussed as a crazy fantasy... a comedian's punchline and little more.

I know that in my own life I've known such stability, politically, (and with respect to what I've always considered as core American virtues) that the idea anything could fundamentally change has always seemed preposterous. Yet I sincerely believe that we've reached a kind of crossroads. Or actually, we already appear to have selected a path; I have no idea where it leads.

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17 hours ago, epistemologue said:

Build a wall.

 

13 hours ago, Nicky said:

For what purpose?

The most important purpose a transcontinental border wall would serve is to meet the desires and expectations of the American electorate. Regardless of any conversation about the popular vote versus the legitimacy of President Trump, it has been my experience that the Americans who voted for Trump want that wall. It has nothing to do with economic or security benefits; it's a matter of democracy. Trump supporters were gleeful at the thought of the wall. Now, as the fog of campaign rhetoric is lifting, and these people are becoming slightly more aware of the fact that this wall will be one more expensive boondoggle for the taxpayers to bear, they continue to cling to the vision. Will the wall and Trump's other isolationist policies lead to economic and security disaster? They don't care: Build the wall. It will make them feel better.

Here's a fantasy, although not so crazy: A fortification rivaling the Maginot Line and the Chinese Great Wall spans the roughly 1,954 miles of America's southern border. It does exactly that which it was designed to do. The cost of building, maintenance, and staffing it with troops exceeds anything our budgets could sustain. It would make a perfectly good tourist site; visitors from China, Saudi Arabia, and Russia could have their pictures taken while posing atop or in front of the wall brandishing the Trump logo. The heirs of the Trump dynasty would own and operate the hotels and casinos that punctuates the serpentine structure. As our descendants revert to savagery as a means of survival, they can sit around the campfires, and tell their children of the once powerful American Empire, and how the second coming of the Trump-King will once again make America Great!

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21 hours ago, Nicky said:

Could the US end up with a failed state, like Syria or Venezuela, on its doorstep, ...

I'd like to think the chances of this are low, because American business interests in Mexico and with Mexico will put pressure in the opposite direction.

However, we know that Trump is clueless about economics. We know that he would rather stoke his egoless soul with sticking to a stupid idea than admitting he's wrong. We know that the trailer trash that cheered him on wouldn't mind apoorer Mexico that's worse off than they are. 

So, it is possible; though I still believe it is unlikely.

"A prosperous Mexico, caused by a capitalist-leaning Mexico"ought to be an important pillar of US foreign policy. So, it's no surprise that the clueless yahoos and their Dear Leader want the opposite.

Let me add a note of realistic optimism though...

We've all got an overdose of the idiot, but we have not seen reactions. The main reason is that everyone else is waiting to see what the idiot actually does; they don't want to react to his ravings alone. Reactions will come from home and abroad. 

The Mexican president cancelling his visit was one small reaction. Internal Mexican politics made it difficulty or him to meet Trump. Two days later, there are reports that he spoke to the Chiief Yahoo and they agreed not to talk about who will pay for a wall... Not just between themselves, but also in public.

Similarly, The Chief Yahoo said that NATO was obsolete. Then, his defense secretary contradicted him, saying that if NATO did not exist, we'd need to invent it. And, standing by him, Teresa May announced that he'd told her that he was 100% behind NATO, and Cheif Idiot quietly stood quietly by, dangling his bonnet and plume.

As time goes by, we'll see more reaction. It's even possible that the hoards of yahoos will thin as they see their Cheif being caught in more lies, and being bested by others. 

Edited by softwareNerd
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Can someone explain to me how you justify the level of hysteria in this thread? War with Mexico is an absurdity. Does that not bother you? Or has absurdity become such a norm in your life that you don't even notice anymore?

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39 minutes ago, epistemologue said:

Can someone explain to me how you justify the level of hysteria in this thread?

My post was absurd, I basically said so - it wasn't a serious proposition.

It should be clear that either Trump wants a trade war, or that he is a protectionist. Neither is a good thing.

Edited by Eiuol

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25 minutes ago, epistemologue said:

Can someone explain to me how you justify the level of hysteria in this thread? War with Mexico is an absurdity.

Is it an absurdity? Perhaps it is. Though if you had asked me a few years ago about Trump being elected President of the United States (let alone given the campaign he ran), I think I would have described that as an "absurdity," too. These are rather absurd times.

As I've said, I think we have to have war somewhere. I think Trump's demeanor alone demands it, and in the course of "Making America Great Again," you know, he'll want us to flex our muscles. So where will it be? Mexico seems nearly as likely to me as anything else, given the rhetoric and policy goals that Trump's employed throughout his campaign and in his early administration.

Is war with Mexico guaranteed? No. Though as I said, I fully expect military involvement in Mexico. Given Trump's approach, I'd expect that relations with America will become the hot button topic in Mexican politics over the next few years, and with trade agreements crumbling and increased tariffs and such, perhaps their economy suffers, too. The sum total could be quite destabilizing (though maybe I'm too ignorant of Mexican politics to comment on that), and -- who knows? -- maybe we'll be inspired to send a "peace-keeping force."

Or do you think it's absurd that the US would become militarily involved in Latin American affairs at all? Are you familiar with our history in that region? (Some of which is not all that old.)

All prognostication is fraught, naturally. I could direct you to quotes in this very forum about how Trump would not win the Presidency (and some older than that, guaranteeing Romney's win and such); knowing that A is A does not give one any particular insight into such complicated futures, though it does seem to inspire an undue level of certainty in our predictions. But working with what I have (which includes a decent, if not extensive, knowledge of history; and observing Trump over these last several months), I'm inclined to believe that many things we've considered "absurd" over the last few decades are going to become our new reality.

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6 minutes ago, Eiuol said:

It should be clear that either Trump wants a trade war, or that he is a protectionist. Neither is a good thing.

Is there any question that Trump is a protectionist?

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1 hour ago, epistemologue said:

Can someone explain to me how you justify the level of hysteria in this thread? War with Mexico is an absurdity. Does that not bother you? Or has absurdity become such a norm in your life that you don't even notice anymore?

Are you talking to me?

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3 hours ago, epistemologue said:

Can someone explain to me how you justify the level of hysteria in this thread?

Well, there the likely and there's the possible. He Chief Idiot has already shown he's capable of anything. So, there's I not a bout to central tendency, but about what is not 1 sigma.

 

Meanwhile, your post is content-less ad hominem.

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Japan has no natural resources to speak of and only 12% of it's land is capable of sustaining agriculture.  And yet, it's one of the wealthiest and most stable countries in the world.  

Mexico has an abundance of natural resources, minerals, oil, seafood, livestock and some of the best agricultural land in the world (54% of the land is agriculture) and yet 50% of Mexicans live in poverty - and this hasn't changed a bit since NAFTA. Mexico also enjoys a $60 Billion trade surplus with the U.S. and has access to markets around the world.

Why isn't Mexico one of the richest countries in the world per capita?

Even if, hypothetically, the U.S. were to stop all trade with Mexico, why would that devastate their economy?

Edit:  And no, I'm not a "racists".  My sister has lived in a small town in Mexico for 15 years and is married to a Mexican.  And in Oregon, Mexicans make up a large part of the subcontracting trades in construction and are some of the hardest working and most honest people you could ever want on a job site.

Mexico's internal problems have nothing to do with the U.S.  No more so than Cuba.

Edited by New Buddha
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Quote

 

Japan has no natural resources to speak of and only 12% of it's land is capable of sustaining agriculture.  And yet, it's one of the wealthiest and most stable countries in the world.  

Mexico has an abundance of natural resources, minerals, oil, seafood, livestock and some of the best agricultural land in the world (54% of the land is agriculture) and yet 50% of Mexicans live in poverty - and this hasn't changed a bit since NAFTA. Mexico also enjoys a $60 Billion trade surplus with the U.S. and has access to markets around the world.

Why isn't Mexico one of the richest countries in the world per capita?

What does that have to do with the subject of the thread?

3 hours ago, New Buddha said:

Even if, hypothetically, the U.S. were to stop all trade with Mexico, why would that devastate their economy?

Are you claiming it wouldn't? Are you seriously asking for an explanation?

Edited by Nicky

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7 hours ago, New Buddha said:

Even if, hypothetically, the U.S. were to stop all trade with Mexico, why would that devastate their economy?

It would harm the US even if Mexico were fine.

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11 hours ago, Nicky said:

What does that have to do with the subject of the thread?

Are you claiming it wouldn't? Are you seriously asking for an explanation?

You are correct in stating that the devaluation of the Peso is the problem.  However, it has been the economic policy of Mexico for years.  Not only does it lower the purchasing power of Mexican citizens, it "benefits" the transnational corporations who run the Mexican assembly plants in Mexico.  And it also makes it more expensive for both the U.S. and Canada to export goods to Mexico.  This is Mexico's real problem - their monetary policy.

My outline of the wealth of natural resources that Mexico has was to demonstrate that there is NO reason for Mexico to not be one of the wealthiest countries in the world per capita.  The fact the the GDP has gone up almost six-fold under NAFTA - while the poverty level has remained the same at 50% - is a clear indication the Government of Mexico is largely to blame for the poverty. And crony capitalism corporations who "benefit" from cheap labor.

From the Link:

"While supporters of the North American Free Trade Agreement might be surprised to see the trade deal re-emerge as a campaign issue 23 years after its passage, the consequences of the weak peso made controversy all but inevitable. When NAFTA became law at the beginning of 1994, a peso was equivalent to 32 cents. Today, it’s about a nickel."

[...]

That decline has been hard on everyday Mexicans, who watch the value of their savings erode year after year. But the devaluation lowers the cost of goods made in Mexico, so it’s great for companies — including American ones — that manufacture and export from there. It also lowers the cost of Mexican labor, giving US companies a stronger incentive to send jobs southward.

"The other key policy is that Mexico’s government simply let its currency drop. Since NAFTA, the peso has weakened nearly every single year — compounding the advantages on price that Mexico already has over US manufacturers. During 1993 NAFTA hearings, Democratic Representative John LaFalce of New York warned that the treaty had “no mechanism to coordinate monetary policy between the United States and Mexico.” The big fear was that Mexico would weaken its peso for competitive purposes once it joined NAFTA, and the United States would be unable to do anything about it.

The warning was prescient. Within NAFTA, there’s no way to address exchange rate risks. Since 1994, the peso has devalued more than the Pakistani rupee — despite that country’s many troubles. (Canada, the other NAFTA member, has seen its currency strengthen against the dollar during the same period.) Year-to-date, the peso is weaker than the Ukrainian hryvnia, a country busy fighting the Russians."

 

Edited by New Buddha

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23 minutes ago, New Buddha said:

You are correct in stating that the devaluation of the Peso is the problem.  However, it has been the economic policy of Mexico for years.  Not only does it lower the purchasing power of Mexican citizens, it "benefits" the transnational corporations who run the Mexican assembly plants in Mexico.  And it also makes it more expensive for both the U.S. and Canada to export goods to Mexico.  This is Mexico's real problem - their monetary policy.  My outline of the wealth of natural resources that Mexico has was to demonstrate that there is NO reason for Mexico to not be one of the wealthiest countries in the world per capita.  The fact the the GDP has gone up almost six-fold - while the poverty level has remained the same at 50% - is a clear indication the Government of Mexico is largely to blame for the poverty.

From the Link:

"While supporters of the North American Free Trade Agreement might be surprised to see the trade deal re-emerge as a campaign issue 23 years after its passage, the consequences of the weak peso made controversy all but inevitable. When NAFTA became law at the beginning of 1994, a peso was equivalent to 32 cents. Today, it’s about a nickel."

[...]

That decline has been hard on everyday Mexicans, who watch the value of their savings erode year after year. But the devaluation lowers the cost of goods made in Mexico, so it’s great for companies — including American ones — that manufacture and export from there. It also lowers the cost of Mexican labor, giving US companies a stronger incentive to send jobs southward.

"The other key policy is that Mexico’s government simply let its currency drop. Since NAFTA, the peso has weakened nearly every single year — compounding the advantages on price that Mexico already has over US manufacturers. During 1993 NAFTA hearings, Democratic Representative John LaFalce of New York warned that the treaty had “no mechanism to coordinate monetary policy between the United States and Mexico.” The big fear was that Mexico would weaken its peso for competitive purposes once it joined NAFTA, and the United States would be unable to do anything about it.

The warning was prescient. Within NAFTA, there’s no way to address exchange rate risks. Since 1994, the peso has devalued more than the Pakistani rupee — despite that country’s many troubles. (Canada, the other NAFTA member, has seen its currency strengthen against the dollar during the same period.) Year-to-date, the peso is weaker than the Ukrainian hryvnia, a country busy fighting the Russians."

 

Three points:

1. That's not how economics works. In economics, prices (including the cost of labor) are determined by the law of supply and demand, not currency manipulation by bureaucrats.

2. American companies having access to cheap labor isn't a bad thing. It's a good thing, because it lowers prices for American consumers. It's part of the reason why even "poor" Americans have comfortable lives, surrounded by the newest toys, gadgets and luxury. More importantly, it's Americans' RIGHT to trade with Mexicans. Donald Trump is a rights violating thug for trying to stop or tax that trade, NO MATTER WHY he's doing it.

3. You still haven't explained what any of this has to do with the thread. Yes, we know, Mexico is more socialist than the US. That's why they're not as rich. But how is that relevant to what we're talking about? That somehow makes it a good idea to destroy their economy, and create a failed state on the southern border of the US?
 

Quote

You are correct in stating that the devaluation of the Peso is the problem.  However, it has been the economic policy of Mexico for years.  

 

If you're saying that there's no correlation between Trump announcing that he plans to pursue a border tax, and the Peso dropping dramatically hours later, then you just have your head buried in the sand and are refusing to see the obvious.

I really hope that's not what you're getting at with all this.

Edited by Nicky

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5 minutes ago, Nicky said:

1. That's not how economics works. In economics, prices (including the cost of labor) are determined by the law of supply and demand, not currency manipulation by bureaucrats.

lmao.

Yes Nicky, that's how Free Market economics works.  Surly your not so dumb as to actually believe that Mexico, the U.S. and Canada (and every other country in the world for that matter) practice Free Market economics.

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3 minutes ago, New Buddha said:

lmao.

Yes Nicky, that's how Free Market economics works.  Surly your not so dumb as to actually believe that Mexico, the U.S. and Canada (and every other country in the world for that matter) practice Free Market economics.

We'll continue this conversation after you inform yourself on what the law of supply and demand is.

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1 hour ago, Nicky said:

We'll continue this conversation after you inform yourself on what the law of supply and demand is.

Are you seriously saying that countries don't devalue their currency for political reasons?

Devaluation:

Devaluation in modern monetary policy is a reduction in the value of a currency with respect to those goods, services or other monetary units with which that currency can be exchanged. "Devaluation" means official lowering of the value of a country's currency within a fixed exchange rate system, by which the monetary authority formally sets a new fixed rate with respect to a foreign reference currency. In contrast, depreciation is used to describe a decrease in a currency's value (relative to other major currency benchmarks) due to market forces, not government or central bank policy actions. Under the second system central banks maintain the rates up or down by buying or selling foreign currency, usually but not always USD. The opposite of devaluation is called revaluation.

Another article:

THE opening paragraph of Bloomberg's news story on Venezuela's currency move is a classic example of what devaluation actually means.

Venezuelans lined up to purchase airline tickets and TVs this weekend in a bid to protect themselves from price increases after ailing President Hugo Chavez devalued the bolivar for a fifth time in nine years.

The official rate is falling from 4.3 to the dollar to 6.3; a 32% devaluation. Foreign goods will cost more. In other words, a devaluation is a decline in the country's standard of living. Traditionally, it is a tool used by a desperate government with a poor economic policy. Venezuela, despite its oil wealth, has a 22% inflation rate, even before the latest move. Sometimes countries get trapped in a dismal cycle in which high inflation causes the country's exports to be uncompetitive, prompting a devaluation that only leads to more inflation and so on.

Edited by New Buddha

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1 hour ago, New Buddha said:

This is Mexico's real problem - their monetary policy.

Ok, so NAFTA isn't the cause.

Permitting trade generally helps everyone - it may be one thing that makes bad policy bearable for both countries.

Throwing facts around facts doesn't mean you formed a logical position. You didn't form an argument.

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4 minutes ago, Eiuol said:

Throwing facts around facts doesn't mean you formed a logical position. You didn't form an argument.

Wouldn't want facts to get in the way of a good argument.

Nicky's understanding of economics is non-existent:  Take this:

1 hour ago, Nicky said:

2. American companies having access to cheap labor isn't a bad thing. It's a good thing, because it lowers prices for American consumers. It's part of the reason why even "poor" Americans have comfortable lives, surrounded by the newest toys, gadgets and luxury. More importantly, it's Americans' RIGHT to trade with Mexicans. Donald Trump is a rights violating thug for trying to stop or tax that trade, NO MATTER WHY he's doing it.

 Devaluation of the Mexican Peso does mean that American companies working in Mexico have cheaper wages.  But it also means that the average Mexican worker has less purchasing power so they have less money to buy American exports.  A Mexican working at a Ford assembly plant now has to work 45 hours to earn the same purchasing power of 40 hours previously.

Currency manipulation is a race to the bottom.  It hurts both Countries.  And as it was pointed out in the Boston Globe story, there are no sanctions in NAFTA for punishing Mexico for devaluating their currency.

Just because the words FREE TRADE are in NAFTA, that does not mean that Free Trade is taking place.  It's not even Fair Trade.  The agreement as it currently stands hurts both countries.  It's not so bad for transnational corporations, but many others suffer.

Can you explain why the GDP of Mexico (corporations) has increased, while the poverty rate is still at 50%?

On 1/27/2017 at 9:47 AM, Nicky said:

Every time Trump expresses hostility towards Mexico, the peso takes a significant tumble. This has been happening for months, so, surely, even Trump noticed the correlation by now. Whether it's just a negotiating tactic or destabilizing the Mexican economy is his end game, he's clearly trying to hurt Mexico, on purpose.

This above is just a mindless screed by someone who has no understanding of economics.

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1 minute ago, New Buddha said:

Wouldn't want facts to get in the way of a good argument.

I'm saying you didn't use those facts to create an argument. It's just a lot of facts.

2 minutes ago, New Buddha said:

Just because the words FREE TRADE are in NAFTA

You didn't say NAFTA originally. You asked what would happen if, hypothetically, trade with Mexico were banned.

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