Buffett's Import Voucher: One MAGA, Two Scripts

The most uncomfortable paradox in the world is that stupidity and greatness coexist. When you encounter this paradox, you will experience the pain of those elites and understand what it feels like to be "furious".

It's like you see an orange man pouring high-concentration fertilizer on a tree, and the result he wants to achieve is theoretically correct - to make the tree grow quickly. What's even more frustrating is that it actually grew up.

You should know who I'm talking about. And what's strange is that this fat man's strange "greatness" actually echoes the beloved and always correct Buffett. This can probably be defined as a "big speechless" event. There must be something wrong. Let's try to see how to make this logic work.

01

First, let me explain the analogy at the beginning:

"Orange man pours high-concentration fertilizer": It refers to Trump's trade policy. Using an extreme method to do something logically correct: correcting the US trade deficit and regaining lost industrial capacity.

"echoing Buffett": refers to a hot word at the Omaha Annual Meeting two days ago:"Import Certificate" (IC). It was proposed by Mr. Buffett in 2003, which is milder than "throwing fertilizer", but has the same purpose as Mr. Trump, a more universal trade framework.

It failed to pass the US Senate in 2006. After nearly 20 years, under the background of Mr. Trump's crazy forcing things to grow, the more people think that IC is too wise. Elders are elders, and your father is still your father.

What is this import voucher?

It comes from an article published by Ba Ye in Fortune in 2003. You can read the original text. Let me create a "three-minute minimalist version":

First, imagine the US trade situation as a leaky bathtub, with imports (water flowing out) far exceeding exports (water flowing in), resulting in less and less US wealth (water left in the bathtub).

At this time, Buffett brought a small valve (import certificate): a faucet and drain linkage device that can automatically balance the water flowing in and out.

How does this small valve work?

• Give exporters "reward coupons": For every $1 worth of goods sold by an American company abroad (export), the government will issue it an import certificate (IC), which itself has a certain market value (for example, Buffett assumes it is worth 10 cents).

• Importers must buy an "admission ticket":Anyone who wants to sell goods to the United States (whether a foreign exporter or a US importer) must first go to the market to buy $1 worth of ICs in order to import $1 worth of goods. Without this certificate, the goods cannot be imported.

• Market pricing, free trade:ICs can be bought and sold on the free market, and prices fluctuate with supply and demand. If more people want to import and fewer people want to export, the price of ICs will rise; otherwise, it will fall. The market price of ICs is equivalent to a floating, market-determined "import surcharge" (does it sound familiar? Does it look like the RMB exchange rate management mechanism?).

After installing this small valve, something magical happened:

A kind of "Market-balanced trade"game rules emerged.  Since the total import volume cannot exceed the export volume (the total IC volume is issued based on the export volume)-the trade deficit automatically disappears. The big bathtub is no longer leaking!

The competitiveness of US exports has greatly increased.  An American aluminum company originally sold aluminum at 66 cents per pound to break even. With the extra 10% income from IC, it can reduce the price to 60 cents without losing money, and it is more competitive in the international market!

It did not trigger a trade war, and other countries did not retaliate. Because IC does not target specific countries or industries, it only controls the total amount, "balance" but not "punishment" - who can enter and who cannot enter is entirely determined by market competition. Countries that export much more to the United States than they import can calculate that it is more cost-effective to change their strategy and reduce exports to the United States or buy more from the United States. You don't have to provoke and annoy people everywhere to achieve the desired results!

Such a perfect little valve is certainly not free. The IC solution is perfect, but it also has a price:

Imported goods will of course increase in price, adding taxes to American consumers. But the short-term pain is much less severe than the long-term consequences of the continuous depreciation of the US dollar and the continuous loss of national assets.And the most amazing thing about the market mechanism is that any game rule has an "automatic retirement at a certain point" setting - once US exports increase, IC prices will naturally fall, and this mechanism will eventually "retire".

You can help Trump achieve his MAGA cause without pouring high-concentration fertilizers - although it sounds uncomfortable, this is how it is. This is how IC works. 02 The underlying logic of import vouchers is still "relying on the market". The "market" has a natural quality of "clarity", which is impossible for any artificial measures to have. The key to using the market to balance trade is that the leader is responsible for setting the balance level, the market is responsible for achieving this balance, and no tariff figures will appear in the whole process - no matter whether they are calculated or made up on the spur of the moment.

But this idea was not originally proposed by Buffett. It came from a German who had been against Adam Smith all his life, was regarded as an opponent of free trade, had a very low sense of existence, and finally died in poverty - List.

The basic logic of Buffett's import voucher comes from List's view on "trade balance" in National System of Political Economy in 1841 (Chapter XXIII, Chapter XXXIV).

Because List has always insisted on criticizing the Adam Smith theory that everyone regards as the golden rule, his views have been widely ignored. The only ones that make sense and have been adopted into the entire national economic system are: Wilhelm Germany and post-war East Asia.

But reading List now has side effects - a little man may be born in your head, making you doubt the current mainstream narrative - free trade is always right, and trade protectionism is destined to be crushed by the wheels of history. This little man will tell you that the current direction of the wheel of history is unfortunately trade protectionism; and even more unfortunately, this is the inevitable "correct" direction at the moment.

03

Why is trade protectionism needed in the real world?

Under Smith's assumptions, Smith is completely correct. But there is only one "small" problem: There is no "country" in the assumption.

Smith's theory should be considered as "cosmopolitical economy" - applicable to a planet with only one country. The Wealth of Nations is based on a fantasy setting: a "cosmopolitical economy" with no national borders, no conflicts, and everyone living in peace. In a cosmopolitan world, free trade is of course good, and why would family members tax each other? Adam Smith's theory is perfectly applicable to the world family, but in a world of political division, intrigue, and coexistence of countries at different stages of development, we cannot do without List.

List compares national development to human growth:infancy (early agricultural period)of countries need parents (developed countries) to feed them and teach them skills, so open learning is very important at this time;in adolescence (starting industrialization)of countries need umbrellas and need to pay tuition fees;

emergence

of countries need protection and need to pay tuition fees;

emergence

List believes that: since no one can be separated from the carrier of "country", the absolute free trade under Smith's world unity hypothesis, under the reality of the coexistence of cub countries, adolescent countries, and mature countries, will only lead to strong countries becoming stronger and weak countries never getting ahead - a strong adult and a five-year-old child "freely competing" for toys.

To give a specific example, a cub from an agricultural country and a big industrial country play games together without supervision:

The cub from the agricultural country will frantically import industrial products from the big country, but will not be able to sell any of its own agricultural products. At the same time, the trade deficit must be filled with real gold and silver, and the reserves are getting less and less; without gold and silver reserves, banks will be weaned and companies will have no money to turn around. Then prices plummeted, companies closed down, people went bankrupt, and the economic dominoes fell. The cubs in the agricultural country cried loudly and were dying.

So in the real world, there are always two types of countries that must practice protectionism: one is the country in the catching-up stage: It needs to protect the cubs, cultivate its own industries, and "help them get on the horse and send them on their way." The other is the country with a long-term trade deficit: Otherwise, there will be currency turmoil and economic crisis.

List's point of view is not only the above, this point of view has a lot of context and logical preparation, such as protectionism is a means rather than an end, national development cannot be completely measured by "growth", and so on.

However, I can't stop everyone from picking a sentence in the article, drawing a line, and then classifying me as a "butt sitting crooked". But that's the way it is.

04

To be honest, the king of understanding has a pretty accurate intuition, perhaps more accurate than many economists. But the problem is that there is only intuition, nothing else. Just like driving a car with only a sense of feeling, without a map and without looking at the road, you don’t know how to step on the accelerator.

As long as you show the right attitude and have trade protection, the mysterious power will help you handle all the rest: find people, give money, build factories, issue licenses... "Ding", the manufacturing industry will return.

Of course, the United States now has a higher starting point than China and South Korea did back then; of course, the mercantilism of the 1970s could have saved the American industry (although it has been strangled by free trade), but that time is gone, and now it is already here, and reconstruction may be more difficult than new construction.

Although, this does not prevent us from thinking:

If the manufacturing industry really "ding" back to the market, how many steps are needed in total?

The supply chain is like a complex human body. In a healthy state, the organs are complete. But now if a disabled person wants to become a healthy person and have a complete supply chain, then he needs to complete his organs, grow a leg, and regenerate a kidney.

The doctor said that Option 1: Conventional cultivation takes 10-20 years for an organ; Option 2: Concentrated high-intensity 3D printing in a super culture dish only takes 1-2 years (the premise is that only organs are printed and not brains).

In other words, the only way to quickly grow organs, complete decent industrial relocation, and complete the industrial chain is: Central unified planning, centralized resources, and concentrated efforts on major tasks.

Build an integrated industrial chain, develop new quality productivity, extend from the top of the industrial chain to the consumer end, and complete a closed-loop dual circulation. Wait until the whole system runs smoothly, then open up the market and let the market bear its own profits and losses.

What will this look like? Have you seen any country with similar experience?