When times are good, people think they're being clever.
When times are bad, they wondered why.
If they had known, they would not have gone that far.
But it's their cleverness that had brought them to where they are.
It is very sad to realise how people have brought trouble to themselves
We only wish they hadn't. But who are we to tell them so.
The writings on the wall.
1. They had decided on a global liberal economy where labour and capital can move freely.
2. Europe with its fear of stagnation opened up to the free movement of labour.
All that they got is the free movement of Islamic extremists.
3. Capital is free to flow. The US Fed print money and the money went to China to make use of the cheap labour, They lost the capital and the intellectual property.
4. China, feeling rich and capable, use their surplus reserves to buy minerals in Africa.
5. It is inevitable that China will rise and the US will fall. China has newer infrastructure and the US infrastructure is decades old.
6. While the global transition is going to be a gradual process from the US to China, the usual impatience of Marxists to allow historical transition to take its course is ignored and a forced transition is tried. China says it should be the dominant economies and the US economy is in descend.
7. The US while in descent is not without economic and political power and China in ascent is with no economic nor political power. Impatience kills.
8. The US in decline will not decline without a fight. The US still has enough power to kill China.
9. The US dollar is still the reserve currency. Whoever think they can device a good alternative is utterly lack of education on the history of money.
10 While China may strive to live without the US and may possibly succeed, this does not mean that the US is without dominance in the world economy.
11. With the tariff war, the world economy is doomed to recession and high unemployment.
12. China currently suffers from delusion of grandeur, while the US is struggling to stay above water.
13. China for the moment cannot live without the US.
14. The US economy will dominate for the next 5-10 years.
15. The China economy is still in the infant. It has not treated its workers well.
16. It is easy to print money - in the US and China. After printing money, how do you retrieve money from the system?
17. The only way money dies is for banks to go bankrupt.
18. When banks do not lend, the economy goes into recession.
19. Economic growth is borne out of confidence.
20 When there is no confidence in politics and economics, recession looms.
1 comment:
It was painful for both. Still is. But without the pain, no lesson would be learned enough to call for a reset.
Hopefully, saner minds will prevail from now on that tariffs hurt everyone, risks multiply with time, and resets must be made positive by advancing a trust deposit ahead of details. In any case, in the absence of trust, a mechanism to guardrail against failure is better than nothing.
Trump's tariffs is a global baseline of 10%. Except for China which has another 20%. Why? That the 20% is for fentanyl exports which come under national security and not trade. Aside from the fact both came from him so it matters not under which category they are applied, why didn't the US accept China pointing out much earlier that the precursors for fentanyl as categorized by none other than the US National Institute of Health were not banned for import?
Moreover, the US did not penalize with 20% tariff on Canada and Mexico, earlier said to be fentanyl exporters. Since 20% is no small change for small businesses, why weren't these three points brought up?
In any case, the reset is just for 90 days. Problems will come up again. But Trump has already destroyed the US' key asset - its soft power. That Europe is talking more with China again could mean multilateralism will be strengthened as a bulwark to co-share away from recessions.
Tariffs, sanctions and arbitrary penalties leave a bad taste for investors. Coming willy-nilly from a US Republican administration which doesn't even know what it is doing only makes things worse.
Without stable and net positive pro-business policies, investors and suppliers can't plan and thus won't invest so that jobs will fold and demand will dwindle; tariffs just add unnecessary additional costs that deepen the fall of demand and the exposure of banks to bad loans. Societies will destabilize and some of the poorer ones with axes to grind may well start fires again.
Beijing has just lifted the ban on rare earth exports and Boeing imports. Let's see if the US will return the favor by dropping all tariffs to 10%, returning de minimis (not him) to say USD2k, removing the bans against China with regards TikTok, ASML, AM, Synopsys, Cadence and Nvidia, and cancelling one congressional act.
The world needs a chinamerica first before heading to Mars and other exoplanets ahead of any meteor on the way.
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