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It’s likely that many countries around the world will face import tariffs in retaliation for imposing a value-added-tax on American goods sold in their own country -  alongside other goods, taxed equally, that are not from America. As Steve outs it this week, “What tortured brain cells have communicated to other tortured brain cells to make a proposition that VAT on imports from America is discriminatory”.

Still, it looks like it might happen. And how do you resolve that situation. Do you get rid of a value added tax? Phil asks whether that could be a good thing. It’s unfair, complicated, bureaucratic and easily avoided. Would we all be better off with a transaction tax?

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Are we kidding ourselves when we talk about an energy transition? Sure, we are using more renewables than ever before, but the planet is also using more fossil fuels than ever before. Phil asks Steve whether part of the problem is that we pout faith in incumbent energy companies managing that transition. The way BP and others have switched focus back on fossil fuel exploration shows how ill-conceived that expectation was. But, irrespective of who drives the transition, is it too much to expect that we will leave energy untapped. If renewables provide a new source of energy, won’t we just use up more energy, because the more there is the greater the productivity, the better off we are.

Watch the video of the podcast here: https://www.youtube.com/watch?v=ArfsehlKMo8&t=2s

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In a recent podcast Phil suggested that bringing manufacturing home to America won’t necessarily create jobs, because most factories will be automated. They just need one man and a dog, he said. The man to turn the machine on, and the dog to make sure he doesn’t touch anything else.

That touched a nerve with Brian Hanley has spent his life refining manufacturing processes. The key ingredient suggests, is people. Elon Musk was the latest to try the lights out approach and realised it didn’t work.

Instead, if the US wants to succeed with a competitive manufacturing sector, it needs to look to post-war Japan. Workers were an integral part of the refinement and adaptive nature of manufacturing processes, in part  because of the company-based (rather than industry-speciifc) union structure. Listen in to find out how Japan’s adaptive approach is what’s needed if the US is to develop a successful manufacturing sector.

Two books related to this, that Brian says should be required reading or every economist:

-         Kanban Just-in Time at Toyota by Japan Management Association

-         The Sayings of Shigeo Shingo by Shigeo Shingo

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Phil asked Steve a lot last week about how bank create money through the loans they issue. But he has been, it’s fair to say, a little less convinced about how government deficits create money. So prepare for a light bulb moment as Steve breaks down the process that sees the government spending more, with more money moved to the private sector, and people buying bonds, effectively with new money.  

They also answer a couple of listeners questions -one on the impact of Donald Trump’s tax cuts, another on crypto and another on a Worgel-like supplementary currency. Which of those creates new money?

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