A Jolly Little War

The dawn of war is a time of simple clarity and purpose.  Good guys vs. bad guys.  Cowboys vs. Indians.  Confederates vs. Yankees.  Coppers vs. robbers.  It’s a time when lines are drawn, songs are sung, and drums are beaten with gaiety and confidence.

 

A jolly little trade war – easy to win, according to the CiC [PT]

 

Indeed, calls for ‘a jolly little war’ are always greeted with merriment and optimism.  This also goes for the dawn of a trade war.  Regardless of whether you’re from Scranton or Suzhou, the escalating  Trump vs. Xi standoff all seems so virtuous.  “We are right, they are wrong,” and vice versa.

Here in the USA, the perspective is crystal clear.  America’s rightful bounty is within reach.  After several Presidents that were light in the loafers, there is finally a leader of the free world with the brass and fortitude to reach out and grab it for his fellow countrymen.  And why not?

Several decades of getting spanked by Chinese grunt laborers have American workers longing for reprisal.  This ain’t their granddaddy’s economy.  They have been repurposed from well-paying manufacturing jobs to low-level service workers.  The relentless progression has been demoralizing.  Given a fair shake, American workers just know they will kick tail and take names.

Yet, as far as we can tell, Trump’s fight is a day late and a dollar short.  The time to stand up for the American worker came and went while Ray Dalio was busy getting absurdly rich from the financialization of the economy.  What’s more, the means to stand up for the American worker had – and still has – little to do with slapping tariffs on Chinese made doohickeys.

 

High-level haggling over jobs [PT]

 

We will have more on this in a moment.  But first, some dawn of war merriment out of the Middle Kingdom…

 

Trade War! Trade War!

China’s 40 year economic boom has all the trappings of miraculous growth.  Real wealth has been created.  Living standards have improved.  And mega cities have sprouted up from the barren earth like garden weeds following a spring rain.

For perspective, between 2011 and 2013 China used more cement than the U.S. did in the entire 20th century.  According to the International Cement Review, an industry publication based in London, between 1901 and 2000 the U.S. used 4.4 gigatons of cement, whereas China used 6.6 gigatons of cement between 2011 and 2013.

 

China – the world’s record holder in cement production and consumption… [PT]

 

Without question, China deserve an award for its rapid disfiguration of the landscape.  Yet there are other consequences too. Not only did all this mass splattering of cement rapidly disfigure China’s landscape. It also rapidly disfigured the national psyche.

Hoots, whoops, and the state media’s anti-US propaganda machine has brought forth new and creative additions to the culture.  This week, as reported by Zero Hedge, a song titled “Trade War” went viral on the Chinese social media platform, WeChat.

The song, set to the tune of an anti-Japanese song from the 1960s, begins with the rousing chorus:

 

“Trade war! Trade war!

Not afraid of the outrageous challenge!

Not afraid of the outrageous challenge!

A trade war is happening over the Pacific Ocean!”

 

The lyrics also include: if the perpetrator wants to fight, we will beat him out of his wits.”

What sort of deceit could provoked such drivel?

 

Chinese trade war song…

 

Workers of the World, Unite!

Several decades of perpetual credit creation courtesy of the Fed’s artificially low interest rates have had countless unintended consequences for the global economy.  In short, the economy has reconfigured itself in ways it otherwise wouldn’t have.  One example is the offshoring of U.S. jobs to China and the massive trade imbalance between the two countries.

Where did American consumers get the endless supply of credit to consume all the goods made in China?  Where did the money that showed up in the paychecks of Chinese workers come from?  If you follow the money back up the supply chain the culpability for its origination is the Fed.

Still, it takes two to tango.  You see, China could have rejected the fiat dollars they were being sent.  They were conjured from nothing.  Why trade real goods and products, fabricated with real raw materials, for dubious abstractions?

And therein lies the second part of the deceit.  For the scam to work, the Chinese government had to go along with it.  And as far as we can tell, they went along with it for several reasons: (1) the money was too good, and (2) it gave the Chinese populace a purpose in life.

But as China reaped more and more of the Fed’s fake money, Beijing had to debase the Chinese yuan at greater and greater rates to keep their cheap labor advantage over U.S. workers.  Year after year, decade after decade, the U.S. heartland was hollowed out and deindustrialized, and its prior vitality was reconstructed in China.

All the while, the excess credit was used to financialize American businesses, where, rather than borrowing money for capital expenditures, corporations borrowed money to boost share prices.  Wall Street was rewarded for their part in the money shuffling, as the cheap credit that pumped up financial assets was the same cheap credit that pumped up China’s economy.  Main Street, on the other hand, was rewarded with stagnant wages and exploding debts.

 

Total US credit market debt – after Nixon defaulted on the gold exchange standard, debt and money supply growth began to skyrocket [PT]

 

The real dirty dead, which allowed the giant fiasco in the first place, occurred on August 15, 1971.  That was when Nixon defaulted on the Bretton Woods system and terminated the agreement that allowed other nations to redeem their paper dollars, acquired through trade, for gold.  Since then, debts and deficits have gone completely haywire.

When it comes down to it the gripes of the American worker and the Chinese worker – and all workers of the world – should be united not against capitalism, as promoted by Marx, but against the curse of fake money and the governments that perpetuate it.

 

пролетарии всех стран, соединяйтесь!  Woikers of the world, un-Marx yourself… and save those receipts [PT]

 

Of course, recognition of this fact would require honest thought and contemplation.  And why bother when you can mindlessly bang the drums and chant the songs of jolly trade war merriment?

 

Charts by: Forbes/Statista, Washington Post, St. Louis Fed

 

Chart and image captions by PT

 

MN Gordon is President and Founder of Direct Expressions LLC, an independent publishing company. He is the Editorial Director and Publisher of the Economic Prism – an E-Newsletter that tries to bring clarity to the muddy waters of economic policy and discusses interesting investment opportunities.

 

 

 

Emigrate While You Can... Learn More

 


 

 
 

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

   

Bitcoin address: 12vB2LeWQNjWh59tyfWw23ySqJ9kTfJifA

   
 

One Response to “Workers of the World, Unite!”

  • Kreditanstalt:

    Trump (and Trump wannabes) are simple men, and they see the world simply.
    The Leader and his sycophants imagine a “homeland” (where DID this tribal-sounding word come from?!) surrounded by enemies. They see good and evil, black and white. There are no competitors, no other acceptable stakeholders…only obedient and grateful friends and implacable enemies.
    He conducts trade “negotiations” this way too: FORCE is all he knows. That this approach is incompatible with the entire idea of voluntary trade goes over his head…
    Only the US is a “capitalist democracy”, “indispensable”, the “essential country”…the others are all “communist” and/or “evil” and “dictatorships”.
    It’s true that this is all patently nationalistic government-loving jingoism…but the masses LOVE it…lap it up. The rust-belt trailer park-dwelling set in the US is listened to and likes this. Wedge issues abound, and serve to keep the public divided and obedient…even though “abortion”, “immigration”, Russia/Mueller/Trump and “socialist” name-calling are all essentially distractions.
    The only fear of the deep state neocons is that one day the public sees the REAL enemy: government itself.

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • Sovereign Bonds – Stretched to the Limit
    Anti-Vigilantes We dimly remember when Japanese government debt traded at a negative yield to maturity for the very first time. This happened at some point in the late 1990s or early 2000ds in secondary market trading (it was probably a shorter maturity than the 10-year JGB) and was considered quite a curiosity. If memory serves, it happened on just one brief occasion and it was widely held at the time that the absurd situation of a bond buyer accepting a certain loss if the bonds were...
  • Writing on the Wall
    Not Adding Up One of the more disagreeable discrepancies of American life in the 21st century is the world according to Washington’s economic bureaus and the world as it actually is.  In short, things don’t add up.  What’s more, the propaganda is so far off the mark, it is downright insulting.   Coming down from the mountain with the latest data tablet... [PT]   The Bureau of Labor Statistics (BLS) reports an unemployment rate of just 3.7 percent.  The BLS also...
  • Global Stock Markets: Danger Lies Directly Ahead
      A Global Pattern You are no doubt aware of the saying “sell in May and go away”. It is one of the best-known and oldest stock market truisms.   Mark Twain's famous saying about stock market speculation (the other one was “There are two times in a man's life when he should not speculate – when he cannot afford it, and when he can”).  From a seasonal perspective he was definitely right about September and October. [PT]   The saying is in fact justified...
  • Bond Yields in the Netherworld - Precious Metals Supply and Demand
      A Record Amount of Bonds with Negative Yields to Maturity Last week the price of gold went up $22, while the price of silver dropped ¢17. The big news last week was that the yield on all German government bond maturities is now negative. They are also all negative in Switzerland. And in Denmark, all maturities out to 20 years are negative. Interest rates are dropping rapidly in the US as well.   More than $14 trillion in bonds now trade at negative yields to maturity –...
  • Rising Stock Market Volatility – Another Warning Sign
      Bad Hair Days Are Back We recently discussed the many divergences between major US indexes, which led us to expect that a downturn in the stock market was close (see The Calm Before the Storm for details). Here is an update of the comparison chart we showed at the time:   The divergences between various indexes seem to be resolving as expected.   The next chart shows analogous divergences between the S&P 500 Index and two major foreign stock markets:   US...
  • Retail Holders Sell Their Gold - Precious Metals Supply and Demand
      A Myriad of Reasons to Buy Gold – But Small Holders are Selling Big moves occurred in the prices of the metals last week, with that of gold up $57 and silver $0.77. We have now reached a price of gold (if not silver) not seen since 2013, when it was on the way down. What is causing this sudden spike in price and renewed interest in gold?   A well-known depiction of investor emotions over a complete market cycle. Interestingly, it appears as though many retail gold holders...
  • Bitcoin – From Greed to Fear
      A Noteworthy Sentiment Change Bitcoin and other cryptocurrencies have declined quite sharply in recent days. Here is an overnight snapshot of the daily chart:   Bitcoin corrects again...   It is difficult to gauge sentiment on BTC objectively, but there is a service that tries to do just that. According to its greed & fear barometer, the recent decline seems to have triggered quite a bit of apprehension:   The BTC sentiment measure of alternative.me has...
  • Getting to a Special State of Ugly
    Suspicious Phrases There are certain phrases – like “trust me” or “I got this” – that should immediately provoke one’s suspicion.  When your slippery contractor tells you, “trust me, your kitchen renovation will be done before Christmas,” you should be wary.  There is no way it will be done before late spring.   USD-CNH (offshore yuan) exchange rate – the support/resistance level at 7 finally breaks amid escalating trade war rhetoric. [PT]   Or...
  • Interest Rate Watch and Bond Market Curiosities
    Things To Keep An Eye On Below is an overview of important US interest rates and yield curve spreads. In view of the sharp increase in stock market volatility, yields on government debt have continued to decline in a hurry. However, the flat to inverted yield curve has not yet begun to steep – which usually happens shortly before recessions and the associated bear markets begin.   2-year note yield, 3-month t-bill yield, 10-year note yield, 10-year/2-year yield spread,...
  • Tumbling Interest Rates - Precious Metals Supply and Demand
      An Era of Low Time Preference Last week the price of gold moved up another $16, and the price of silver was up $0.14.   10-year treasury note yield since 1999 – it is almost back at the multi-decade low of 2016. The only other time in history when US treasury yields were this low was in 1944-1945, when the Fed was actively suppressing yields in order to provide cheap financing for the war effort. One year later (from mid 1946 to mid 1947) the CPI jumped to more than 17%...
  • A Bubble in Complacency - Incrementum Advisory Board Discussion
      Incrementum Advisory Board Meeting of 31 July 2019 At the end of July the Advisory Board of the Incrementum Fund held its quarterly meeting (a full transcript is available for download at the end of this post). The board was joined by special guest Simon Mikhailovich, a financial market veteran who inter alia co-founded the Toqueville Bullion Reserve. The title of the transcript and this post was inspired by his remarks.   Special guest Simon Mikhailovich   We...

Support Acting Man

Austrian Theory and Investment

j9TJzzN

The Review Insider

Archive

Dog Blow

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

Mish Talk

 
Buy Silver Now!
 
Buy Gold Now!