OK – It’s true, actual trade wars aren’t allowed anymore because everyone has bought into the idea that tariffs and import quotas are bad for everyone. Even if your economy is getting destroyed by the global parasite you’re still supposed to sit still and accept your punishment – as though it’s good for you. “It will force [...]
OK – It’s true, actual trade wars aren’t allowed anymore because everyone has bought into the idea that tariffs and import quotas are bad for everyone. Even if your economy is getting destroyed by the global parasite you’re still supposed to sit still and accept your punishment – as though it’s good for you. “It will force you to be more efficient.” Japan’s economy is in ruins due to this situation so it fired the first salvo on the free trade paradigm last year when it began to intentionally devalue its currency. They have extended the policy by chopping another 10% of the Yen in the last 2 months.
The economies of Europe have been horrible for years, but the superior performance of Germany seemed to stop the European Central Bank from changing policy. Now that Germany’s economy is dying and pan-European inflation rates are crashing, the ECB has decided to go all in, with negative short rates and an apparent complete willingness to let the Euro slide.
So we have a race to the bottom. The best part is that no matter how much your currency falls inflation will never appear since wage growth is dead. Even oil prices are falling by more than these currencies, so importing oil is not getting more expensive (which is a normal negative consequence of devaluation).
The US government has no currency policy so it is just watching or maybe it doesn’t care. Maybe they feel like our (current) superior GDP growth rate renders us immune to such policy changes elsewhere. Have these people ever taken an economics class? Any country can choose not to accept the current undervaluation of the Yuan by devaluing against the dollar because it is pegged (manipulated). If they devalue enough, they’ll reprice Chinese imports and render themselves competitive. Chinese imports will actually decline. Along the way they’ll also elevate the prices of imports from America and their stuff will get cheaper here. Americans will switch to buying the ever cheaper Japanese and German cars and eventually our superior growth won’t look so superior.
Currencies are the things that make everything even out. If they don’t float then huge disparities in growth can develop as we see in the European Union and between the US and China. An intelligent economic policy always includes a currency strategy. China started this war and every country other than the US has now engaged them.
Our indolence is stunning.
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The Hong Kong government structure is being altered to match the mainland Chinese model. This doesn’t strike me as a great surprise. Did the residents believe that the communists would allow the British common law system to prevail? They celebrated their freedom from Britain in 1997 but didn’t seem to look ahead very far.
So now [...]Continue reading →
Leonardo DiCaprio went to the climate rally last week and got hammered for being a hypocrite. Most people, when asked, favor a Buy American philosophy and a Do No Harm to the environment approach. We also eat meat and put Don’t Be Cruel To Animals stickers on our bumpers. When we get to Amazon.com or [...]Continue reading →
Last week Alibaba issued its first listed stock on the NYSE and investors went wild. The P/E came out at 40X earnings and the stock rallied 30% on the first day of trading. Do the buyers know that they actually own equity in a Cayman Islands shell company? The government of China makes it illegal for foreigners [...]Continue reading →
The Middle East is a multi-headed monster. There are so many kinds of bad guys that it fits in with no western paradigm. We just aren’t capable of getting it. Every time a politician asserts with confidence that (s)he has a plan or (s)he knows what any specific group wants, we should tune out – especially if [...]Continue reading →
Every so often we see something so extreme, so far beyond normal that it shakes up our understanding of a subject. The question becomes: What are policymakers thinking?
Many years ago Saudi Arabia began funding religious education in destitute Muslim countries (Madrassas) so as to breed a generation of Sunni fanatics who would attack Shiites and work [...]Continue reading →
Economics textbooks teach us that there is a sort of natural sine wave to the economy: A little growth->higher consumer confidence->more spending->lower inventories>production expansion->higher labor demand->higher wages->higher confidence and spending – and so we go round and round until inflation happens, and the Fed steps in to slow it all down because that’s what they [...]Continue reading →
All the Chicken Littles of the world love to emotionally proclaim that the Fed will ruin us all. Inflation is about to explode due to inappropriately low interest rates. Our currency will collapse when everyone figures out how irresponsible they have been with their balance sheet. Bond yields will soar; stocks will plummet. Needless to say [...]Continue reading →
I have argued that we need two leaders – a President who attends to foreign policy and ceremonial duties and a Prime Minister who works on domestic legislation to fix the (primarily economic) problems of the day. Then only one of the two can be distracted by foreign issues that don’t affect Americans such as Crimean [...]Continue reading →
The latest trend in reducing one’s corporate tax rate is to buy a foreign company so you can move a revenue stream to a foreign/lower tax location. Frankly it’s no more egregious than all the other clever tactics employed over the last 20 years (A few examples). All these efforts have succeeded so [...]Continue reading →
The Rabid Independent
This site is devoted to finding solutions to America’s problems and commenting on public issues. Partisan noise is ignored or mocked. Let’s create our own post-partisan reality where reason wins.
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