Your world, Vera, will be very different from mine. And I wonder what it will be like. Sometimes, I’m excited by the possibilities; sometimes, I fear the possibilities. One thing that concerns me the most if the utter lack of privacy you’ll encounter. And the power that puts in the hands of others, particularly, those who are intent on using power only for their own self interests. The glimpses we are already afforded into that world are disturbing. Continue reading
My fav British economist-journalist Martin Wolf sums it up well in his most recent Financial Times op-ed titled “US-China rivalry will shape the 21st century.” I recommend you take the time to read it, especially if you want to understand the Trump-China tussle better.
I wish Wolf wasn’t right about this but fear he is. He opines:
The threat is the decadence of the west, very much including the US — the prevalence of rent extraction as a way of economic life, the indifference to the fate of much of its citizenry, the corrupting role of money in politics, the indifference to the truth, and the sacrifice of long-term investment to private and public consumption.
History tells us that the odds are high that the U.S. and China will find themselves in armed conflict before this power shift is complete. It’s not inevitable though.
My hope is that America’s attention will be focused on many of the problems alluded to by Mr. Wolf: the out-of-control rent extraction economy, the indifference to quality of life issues, the corruption (particularly in our deeply flawed system for financing political campaigns), the lack of honesty and virtue, our short-term mindset, our excessive leverage, etc.
China is on the rise. By quite a few measures, America is on the wane. But China’s rise does not require America’s decline. Both can rise together, albeit at different rates (since China has far to go to catch up). But that’s not necessarily what will happen. The choice is ours. And, right now, there’s not a whole lot of reason for optimism.
The war is on. History tells us no one wins such wars. But the U.S. is throwing caution to the wind and proceeding nonetheless. Its president says he’ll win this war. But he’s a fool. No one of any substance believes him.
The war is picking up steam quickly. It started about a month ago with the U.S.’s announcement of new tariffs on steel and aluminum imports. China shot back with a list of 128 U.S.-produced products that would be subject to new tariffs.
The next battle in this war started last night, when the White House unveiled new tariffs on 1,300 additional Chinese products. It’s a long list. I found myself in bed scouring the list to see if a products that compete with any of my clients were included.
The Chinese struck back quickly. It took them only a matter of hours (by the time I got up this morning) to impose new tariffs on 106 categories of goods presently imported into China from the U.S.
The war is now on. In full force.
If you want to see a list of potential losers in this war, all you have to do is scan through the list of products that will be subject to these new stiff taxes and then start working your way backwards to determine who their producers and their suppliers are. Or wait for the inevitable news reports of layoffs and other financial hits that will be taken by affected industries and producers as well as their employees.
Prices may be affected, too. In certain cases, prices could rise due to lessened competition; in other cases, prices could fall, at least in the short term, due to oversupply. It’s too complicated to model in one’s head. We’ll have to await the economists’ modeling or be patient enough to observe price changes for ourself.
There may be other winners, including some domestic producers and other importers who now will have less competition from China. We’ll have to wait and see how this plays out.
Some people who have assessed the list of new tariffs imposed by the Chinese say it appears the Chinese have intentionally targeted states that supported Mr. Trump in the election. I hope so. It would only be fair to the states that didn’t support him. Targeted fallout is always preferable to generalized impact which, by its nature, ends up with innocents taking collateral damage. It’s only fair that those who voted for Mr. Trump bear the brunt of his reckless actions.
Based on everything the president and his minions have said to date, it appears unlikely this is the final battle in this new trade war. It’s likely our neighbors in North America will get pulled into this war as well as our Allies in Europe, especially Germany for whom the president seems to harbor ill-will.
Stay tuned. And hope you don’t get caught in any cross-fire.
The U.S. Government now holds over 30 percent of all consumer debt. When you add in all the federal mortgage guarantees, it’s clear that our national government has slowly but surely become one huge bank underwriting the leveraging of its citizens’ balance sheets.
But, of course, that’s not all. The national government also is one humongous insurance company. It’s called Social Security, Medicare and Medicaid.
I’m not suggesting this role the national government plays in financing and insuring its population is bad. Or good. That’s for you to decide. But it certainly is dramatically different — from what it was 100 years ago, that is.
You might ask, How can the government afford all of this? After all, many borrowers default on their student loans, meaning the government (more precisely, its taxpayers) have to absorb those losses. Plus, the social safety net programs run at a large deficit, which will grow exponentially over the next few decades as baby boomers retire and put unimaginable strain on the Social Security and Medicare systems. So how indeed does the government afford to keep these programs alive?
It’s simple: it borrows. How ironic that the country’s largest bank and insurance company also is one of the world’s largest debtors.
And who does it borrow from? Lots of lenders, including real banks, insurance companies, pension funds, endowments, individuals and a host of countries, the largest being China.
But surely there must be a limit to what constitutes prudent borrowing, you might ask. History tells us there is. More specifically, history tells us that once a country’s debt exceeds 90 percent of its GDP, the debt becomes a drag on growth. Well, ours has or will soon exceed those levels, meaning that it’s likely we’ll grow slower than our potential and that our standard of living will suffer.
That shouldn’t come as a surprise to anyone. But, for reasons I don’t fully comprehend, we’ve decided to take from our children and their children so we can have more today. That tells you something about our character, I suppose.
The other thing that can happen — and which may be happening now — is that the debtor nation’s currency can become less valuable. If that happens, inflation can ensue, further eroding purchasing power and the debtor nation’s standard of living. Given how the U.S.’s currency has been reacting lately (somewhat akin to an emerging market country’s currency, which, of course, isn’t good), it’s possible we’re beginning to see that erosion accelerate. But we still have a ways to go before it becomes a problem. The concern, however, is that these things can unravel quickly. And when they do, it will be too late to reverse the effects.
All and all, it’s a troubling development, this transformation of our national government into a bank/insurance company. Perhaps it wouldn’t have been so bad if we had decided to bear a larger portion of the costs as they were incurred. But we didn’t. Instead, we decided to put the bill on our national credit card. While cutting taxes for the wealthy. Surely, over the long term this is a disaster in the making.
It might be a good time to convert some of those savings to renminbi.