[Chapter 711: The Frustrating Exchange Rate]
Many people said lawmakers were complete jerks, clueless about what they were doing and just stirring the pot.
In reality, Washington actually felt more like a marketplace; those lawmakers were merely representatives of various interests, without any real stance of their own.
Calculating the costs in foreign enterprises was straightforward: costs plus labor, and you were good to go. The profits directly came from tax refunds. They didn't even need to think about inventory or receivables. Once boxes were shipped out, they could easily cash in on the letters of credit.
It was all foreign exchange. If the sums were huge, banks would surely extend some leniency. As for how much the Americans raised taxes, that was clearly not their concern.
Many people claimed the quality of exported goods was stellar while still being affordable, but that just wasn't a sustainable model.
In reality, domestic sales proved extremely challenging. Take clothing, for instance: in a decent department store, the markup was at least 35%. If your clothes sold poorly, you might even have to take a loss; otherwise, you risked being cut off.
Then you had the taxes and salaries of the store staff to consider; when all was said and done, for a $100 item of clothing, you'd be lucky if $40 remained.
"What? I can still make $40?"
Yes, that was the truth. Uniqlo might sell a shirt for $200, but the price it paid to the factory wouldn't exceed $50.
The kicker was, if you could actually move the product, all the better. It was more profitable than selling drugs.
Let's be real: if you could clear out 50% of your inventory each season, you were doing well. If you managed to sell off another 20-30% during next year's sales, that was a very profitable business.
With the arrival of online shopping, traditional brands faced increasingly tough times. Consequently, you might notice that shoes and clothing in stores were getting pricier.
Around 2008, shoes priced at $100 were already considered decent. Now? Well, good luck finding anything decent under $200.
That's the ugly cycle: wages and taxes remained static. With declining sales, retail prices had to skyrocket. Remember, if store prices doubled, the processing fees that factories received didn't increase much.
...
"Filson, it seems like there's some good news today."
"Ha, yes, the Soviets have too many big weapons, and they can't manage them. We have quite a few as well, and it looks like a deal's in the works."
William White still felt apprehensive about those rampant weapons of mass destruction; they were indiscriminate, and nobody would escape unscathed.
"Disassembling those things probably costs more than making them, right? Isn't Soviet Union into shock therapy? Where are they getting the funds for this?"
"Sir, that's not something to worry about. Our European partners are willing to help us out."
"Hahaha, see, the fear of death is a rich person's flaw. It's tough to bring these items into the U.S., but tossing them into Europe's backyard seems easy enough. Alright, once this situation concludes, things should quiet down for a while. Next up, we'll see how our new boss conducts business. Sigh, making too much money isn't always good; how's one supposed to spend all that?"
The boss's highbrow banter was wearing Filson thin. Seriously, couldn't he tone it down just a little bit? It was no wonder so many people found him unlikable.
"Sir, we believe the most suitable investments now are farms and sports teams."
"Farms? I already possess a huge one. At these prices for agricultural products, I'm not inclined to sell even a grain."
"Ahem, sir, land has always been a solid investment."
"Sigh, you look for properties with little output. Preferably something where I could go hunting or the like."
Filson was speechless; when others bought farms, they typically inquired about water sources. If there was good irrigation, the price would shoot up. This guy? He preferred no output at all; he just wanted a vacation spot.
"Sir, if that's the case, only Montana would fit. They spend half their time throwing snowballs, so there shouldn't be much output."
"Fine, get something near that spring water factory, buy as much as possible. And let's expand that airport nearby; even if we don't spend the money, it'll go to waste."
U.S. tax policy was fundamentally designed to encourage consumption. If money was available for last-minute spending, one should certainly take advantage of it. Of course, the year-end bonuses couldn't be overlooked either.
Objectively speaking, Clinton did indeed have a strategy for the economic issues. When it fell into George W. Bush's hands, it truly was a mess.
However, after teaching Saddam a lesson and cleaning up the CIA student who hijacked the planes, by 2008, he had already owed a lot of debt.
As for why all the hassle?
It was simple: too much money. If they didn't spend it, they'd just be inviting troubles. The United States printed too many dollars; who knew better than they did about how much? Faced with something that could depreciate at any moment, they might as well throw it around.
Isn't that shameless?
If not for the fact they couldn't beat it, they'd have likely jumped at the chance to knock it down. All day long, stirring trouble and throwing the world's economic stability into chaos.
*****
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