Draining National Prosperity

Oh boy - back to the Jimmy Carter days...

Now wait just a darned minute. Wasn’t trade going to make it so this couldn’t happen ever again?

Well, Ben Bernake and his crew got rid of M3 so us mere peasants won’t know what’s happening.

Article from a web site http://www.prudentbear.com/ financed by this guy:

http://www.tice.com/

who sells investments based on a bear market he has been predicting since 1995.

Import deflation, import inflation... it’s all just numbers...

I guess he gets “printed” on multiple sites.

But nobody worry, the DOW and NASDAQ were up today.

LOL, yes I remember the ‘just numbers’ from the Carter years.

Now wait just a darned minute. Wasn’t trade going to make it so this couldn’t happen ever again?

No. While trade is enormously beneficial for both parties to that trade, it can't prevent governments from destroying a fiat currency or from deficit spending.

jas3

Some of the comments used to support this rabid free trade were directed at the idea of creating a more stable international situation. I didn’t buy into it then, and I think it’s fairly evident that it hasn’t worked.

>>>Almost certainly, it will prove impossible to put the entire US economy on ice until January 20, 2009, so the financial markets themselves, probably the Treasury bond market, will take control. With the US Treasury’s funding need in the fiscal years 2008 and 2009 already around $500 billion in each year, hiccups in the bond market have an almost immediate way of making themselves felt. To avoid a collapse in the bond market and a catastrophic decline in the dollar as foreign central banks withdraw their money, short-term interest rates will have to be raised very quickly to at least 3% above the then prevailing level of inflation. That would imply a level of 7-8% today, but probably considerably more by the time the crisis hits.

Watch the long term Treasury rates for the signal of serious inflation trouble.

At present short term rates, the saver only loses 2 percent of his money per year.

http://www.sinodaily.com/reports/China_tells_firms_to_brace_for_tough_times_report_999.html

Shanghai (AFP) May 5, 2008

A Chinese government watchdog has warned major state-owned enterprises to brace for tough times given the likelihood of a worsening global economic slowdown, state media reported Monday.
Chinese state-owned enterprises (SOEs) must pay more attention to their financial position to avoid a potential capital crunch, the Economic Observer reported, citing Li Rongrong, director of the State-owned Assets Supervision and Administration Commission.

“Keep a close watch on your pockets and do not deplete yourselves,” said Li, who talked at a recent meeting to senior executives from 150 SOEs directly controlled by the central government.

Li said the SOEs, some of which have already flagged cash flow shortages, should better prepare themselves for tightening monetary policy lasting at least two years, according to the report.

The meeting was held after figures showed that combined profits of the major SOEs in the first quarter dropped 2.9 percent from a year earlier to 203.4 billion yuan (29.1 billion dollars), it said.

Earnings at oil companies and power generators were worst hit, because of rising raw material costs and the government’s central pricing system for oil products and electricity tariffs, it said.

Some still imagine the USA is the world. Li Rongrong says ‘wrong.’

Some of the comments used to support this rabid free trade were directed at the idea of creating a more stable international situation. I didn’t buy into it then, and I think it’s fairly evident that it hasn’t worked.

Free trade creates value for both sides, true. And nations that trade freely with each tend not to fight wars against each other. So in that sense free trade does promote international stability.

Frederic Bastiast said "if goods don t cross borders, armies will," because throughout history, tariffs have been a primary cause of war.

But free trade won't prevent any one or any group of countries from enacting poor local fiscal policies.

Complaining about free trade not preventing the credit contraction of 2007-2009 is a more than a tad off target.

jas3

Fair enough. I would like to mention Germany in WWII. Did trade tame the beast? Is trade placating China?

Fair enough. I would like to mention Germany in WWII. Did trade tame the beast? Is trade placating China?

Actually it was the lack of trade and specifically the imposition of tariffs, such as the Smoot Hawley Tarrif Act of 1930 which antagonized the beast, if you are suggesting that Germany is "the beast". Canada, Germany, and many other countries responded to Smoot with their own tariffs, extending and deepening the Great Depression, and paving Hilter's path to power.

As to whether or not trade is placating China, I would answer definitely YES. I have visited China 9 times in the past 30 years. The level of freedoms enjoyed by her people has grown linearly with international trade. And the level of repressiveness has shrunk linearly with trade.

I would also point out to you that the Chinese just turned around a boat full of weapons that was scheduled to supply Robert Mugabe in Zimbabwe thanks to international pressure. Even 10 years ago it would be unthinkable to suggest that the Chinese would ever bow to political pressure.

Likewise, the Chinese have responded to international pressures regarding the Sudan, and their investments in securing hydrocarbons for their energy hungry economy.

I am uncomfortable defending the PRC, which is still a coercive country that does very very many things wrong. But trade has made the government and the ruling class far more responsible to international pressures as opposed to, say, North Korea, which is isolated and pretty much ignores the rest of the world.

jas3

In a non-Biblical sense, yes I was refering to Germany as the beast here. I could add Japan also. Your take on the depression is interesting, but the fact is that Germany (and Japan) did experience significant trade in order to build up it’s war machine. It was doing the same thing in the 30s that China is doing now. The only problem as it applies to our security today, is that we are once again ignoring history to facilitate another massive monster on the world stage.

You can tell me that China has progressed. I can agree with that. Does that neuter China? No. So relatively, it is irrelevent that China MAY have made some long term strides with regard to how it treats it’s people. It may also be a very short lived modernization, with regard to how it treats it’s people.

When push comes to shove, I know that China views it’s citizens as cogs in a wheel. With 1.25 billion people, I am convinced that China’s leadership would be willing to sacrifice hundreds of millions to become the number one hegamon on the world stage. Disagree if you like, but it’s making it’s long term plans quite clear. Either we are going to have to withdraw our fleet away from Asia and half the Pacific, or we are going to clash. China will want to rule at least the Indian Ocean as well. And that ignores the fact that it will want to project it’s fleet around the world just as we are today. We’re looking at a World War here, and as far as I can see, we’re sleep walking into a buzz saw.

China still has it’s thugs in control. It recently sent them out to slaughter Budhist Monks AGAIN! Challenge Beging, and die. That’s the bottom line. Facilitate it’s war machine expansion and it will allow improved income. Cause trouble and you’ll be erased.

We have jump started China by giving it technology that would have taken it fifty years to obtain on it’s own. We financed it’s buildup. China is going to challenge the U.S. within five to fifteen years. This whole modernization thing started around 1992, and in 16 years we have provided about every bit of technical information that it needed to attack us on the mainland. Not only that we transfered our manufacturing, tool and die setups and research to China. And what it didn’t get from us, it got from Russia.

I appreciate your comments and the benefit of your personal views of the China you have observed first hand. I can’t compete with that, but I do read the reports on China and it is clearly headed toward war with the United States. We all know it, and yet we dance on into a massive confrontation sure to come, and sure to cost our nation tens of millions of it’s citizens lives.

I couldn’t disagree more with our China policy today.

In a non-Biblical sense, yes I was refering to Germany as the beast here. I could add Japan also. Your take on the depression is interesting, but the fact is that Germany (and Japan) did experience significant trade in order to build up it’s war machine. It was doing the same thing in the 30s that China is doing now. The only problem as it applies to our security today, is that we are once again ignoring history to facilitate another massive monster on the world stage.

The exact opposite is true regarding trade. Why do you suppose Japan chose to attack the United States at Pearl Harbor rather than Russia in WW2? It was because the Japanese were responding to a US blockade that prevented oil from getting to Japan. I do not mean to defend Japan, which is guilty of many atrocities in WW2, but some nations and ethnic groups they conquered were happy to see the European colonial masters kicked out and the Japanese step into their shoes, e.g. the Malays. That feeling was not universal (eg. the Koreans or Philippinos).

But I stand by my point that free trade tends to reduce international conflict and echo Bastiat's sentiment that when products don't cross borders, armies do.

Also, I would add that nobody is "ignoring" China. China is by far the largest strategic challenge the United States faces in both military and economic spheres.

You can tell me that China has progressed. I can agree with that. Does that neuter China? No. So relatively, it is irrelevent that China MAY have made some long term strides with regard to how it treats it’s people. It may also be a very short lived modernization, with regard to how it treats it’s people.

I did not argue that China is neutered, and if you thought I did, you should more carefully read what I wrote.

You are dead wrong in stating that it is irrelevant that China has made long term strides in the right direction.

The only important metric is to measure how China has responded to additional trade and deeper relations with the rest of the industrialized world VERSUS how China would likely have responded were it isolated as North Korea is. And the only correct reading of the tea leaves is to note that China, the Chinese, the US, and the US population are all better off being able to influence China and to bring her into the international community.

There is no evidence that China's modernization will be short lived, and every reason to believe that the Chinese people will continue to demand more and more freedoms as their economic security grows. There is already substantial progress in freedoms of speech and the press, although they still have a very long way to go.

When push comes to shove, I know that China views it’s citizens as cogs in a wheel. With 1.25 billion people, I am convinced that China’s leadership would be willing to sacrifice hundreds of millions to become the number one hegamon on the world stage. Disagree if you like, but it’s making it’s long term plans quite clear. Either we are going to have to withdraw our fleet away from Asia and half the Pacific, or we are going to clash. China will want to rule at least the Indian Ocean as well. And that ignores the fact that it will want to project it’s fleet around the world just as we are today. We’re looking at a World War here, and as far as I can see, we’re sleep walking into a buzz saw.

Your fear that the US will be at war with China over the Indian Ocean or the Pacific Ocean is exagerrated. There is no question that the Chinese government continues to mistreat its population. And the Chinese will have the largest economy and the largest population and the most powerful military within 15 years. There is quite literally nothing that any policy the US enacts can do to stop that. So you are now confronted with the question of how to respond to that fact. You seem to favor isolation rather than engagement. I will again state that your position is far more likely to lead to conflict than is economic and political engagement.

I appreciate your comments and the benefit of your personal views of the China you have observed first hand. I can’t compete with that, but I do read the reports on China and it is clearly headed toward war with the United States. We all know it, and yet we dance on into a massive confrontation sure to come, and sure to cost our nation tens of millions of it’s citizens lives.

It is not a competition between you and me. This is just a dialog to help you understand that "reading reports" about the build up of the Chinese military does not go far enough in analyzing the impacts of isolation versus engagement.

And you are overstating the probability of war, possibly due to a little latent xenophobia and a lack of travel outside the US.

I couldn’t disagree more with our China policy today.

There are no optimal Chinese policies, only a choice of several suboptimal policies. Engagement, free trade, economic and political pressure, and increased freedom and wealth for the Chinese people are the policies that are most likely to lead to a peaceful and wealthy China and planet.

jas3

In a non-Biblical sense, yes I was refering to Germany as the beast here. I could add Japan also. Your take on the depression is interesting, but the fact is that Germany (and Japan) did experience significant trade in order to build up it’s war machine. It was doing the same thing in the 30s that China is doing now. The only problem as it applies to our security today, is that we are once again ignoring history to facilitate another massive monster on the world stage.

The exact opposite is true regarding trade. Why do you suppose Japan chose to attack the United States at Pearl Harbor rather than Russia in WW2? It was because the Japanese were responding to a US blockade that prevented oil from getting to Japan. I do not mean to defend Japan, which is guilty of many atrocities in WW2, but some nations and ethnic groups they conquered were happy to see the European colonial masters kicked out and the Japanese step into their shoes, e.g. the Malays. That feeling was not universal (eg. the Koreans or Philippinos).

Wow. That last part was grasping at straws wasn't it. What you forgot to mention is the other 90% of the people Japan invaded. Nice effort there. As for trade, there is some truth in what you say. What you forgot to mention is that that same United States provided all of the steal Japan used to create it's aircraft carriers and destroyers. Now, you tell me if Japan attacks the United States or just about anyone else without those aircraft carriers and destroyers.

But I stand by my point that free trade tends to reduce international conflict and echo Bastiat's sentiment that when products don't cross borders, armies do.

Look, you can toss out this statement until hell freezes over for all I care. In two very dire situations we know that trade DID NOT prevent war. With Germany and Japan, we know that trade did not endear traders to each other. Please remind everyone why the United States decided to cut off Japan's oil. Good grief.

Here we are building up China. For what purpose? It is hell bent on taking the U.S. down, it's leaders have said so, and their military build-up can't be taken to mean anything other than that it is going to confront the U.S. to take a free people on Taiwan. Taiwan is a free sovereign nation. It is NOT part of China.

Also, I would add that nobody is "ignoring" China. China is by far the largest strategic challenge the United States faces in both military and economic spheres.

Nobody is ignoring China? Since 1992 the United States has conducted trade with China that has allowed it to upgrade it's military to the point that today it is a serious threat to the land mass of the United States proper. I don't really give a damn if we could conquer it in the long run, if it could take out a hundred million U.S. Citizens before we did. And we continue to finance it's plans. To this you respond, nobody is ignoring China. Okay, then you agree with me that our leaders know exactly what is taking place and they are doing it anyway.

You can tell me that China has progressed. I can agree with that. Does that neuter China? No. So relatively, it is irrelevent that China MAY have made some long term strides with regard to how it treats it’s people. It may also be a very short lived modernization, with regard to how it treats it’s people.

I did not argue that China is neutered, and if you thought I did, you should more carefully read what I wrote.

Bud, why did you even mention this? You wax on rhapsodic about modernization and a better situation for the Chinese citizen. Is that going to mitigate the reality that China is building stealth subs as fast as it can. Does it mitigate that it has in it's arsenal five thousand mile capable nuclear tipped missiles for those subs? Does it mitigate the problem with China having supersonic anti-ship missiles?

China is five to ten years away from being able to cause serious havock, and you're fixated on keeping the trade going that finances it's efforts.

You are dead wrong in stating that it is irrelevant that China has made long term strides in the right direction.

When China has it's nuclear subs off our shores, which is basically within 5,000 miles, and it's fleet is set to use their supersonic anti-ship missiles, and they have used their anti-satellite measures, and they are destroying our infrastructure and population, please come back and remind me what a great thing it is that the standard of living has risen in China, or that for the moment it isn't running of it's citizens with tanks or mowing them down with machine guns. I'll be all ears.

The only important metric is to measure how China has responded to additional trade and deeper relations with the rest of the industrialized world VERSUS how China would likely have responded were it isolated as North Korea is. And the only correct reading of the tea leaves is to note that China, the Chinese, the US, and the US population are all better off being able to influence China and to bring her into the international community.

Since China has no real-world enemies seeking to take over it's soil, you tell us why it is building up it's military in this manner. Good Lord, do you honestly think this is China being brought into the international community? You are dreaming. You are sleep walking into WWIII. Neville Chamberlain could have said it any better than you are. What part of China intent on replacing the United States as the global leader do you not understand?

There is no evidence that China's modernization will be short lived, and every reason to believe that the Chinese people will continue to demand more and more freedoms as their economic security grows. There is already substantial progress in freedoms of speech and the press, although they still have a very long way to go.

Take a good look at the recent treatment of the monks asking for independence. Those monks weren't armed. They merely spoke out and they were gunned down. I fail to see the rosey scenario you seem to.

When push comes to shove, I know that China views it’s citizens as cogs in a wheel. With 1.25 billion people, I am convinced that China’s leadership would be willing to sacrifice hundreds of millions to become the number one hegamon on the world stage. Disagree if you like, but it’s making it’s long term plans quite clear. Either we are going to have to withdraw our fleet away from Asia and half the Pacific, or we are going to clash. China will want to rule at least the Indian Ocean as well. And that ignores the fact that it will want to project it’s fleet around the world just as we are today. We’re looking at a World War here, and as far as I can see, we’re sleep walking into a buzz saw.

Your fear that the US will be at war with China over the Indian Ocean or the Pacific Ocean is exagerrated. There is no question that the Chinese government continues to mistreat its population. And the Chinese will have the largest economy and the largest population and the most powerful military within 15 years. There is quite literally nothing that any policy the US enacts can do to stop that. So you are now confronted with the question of how to respond to that fact. You seem to favor isolation rather than engagement. I will again state that your position is far more likely to lead to conflict than is economic and political engagement.

If the U. S. and the western powers were to cut trade with China off, it could colapse in on itself within months. It wouldn't be able to afford what it is currently doing. It's internal strife would grow exponentially and then you would see real change. What is taking place today is merely cosmetic. Rights are solid not there. Whats more, you know it.

I appreciate your comments and the benefit of your personal views of the China you have observed first hand. I can’t compete with that, but I do read the reports on China and it is clearly headed toward war with the United States. We all know it, and yet we dance on into a massive confrontation sure to come, and sure to cost our nation tens of millions of it’s citizens lives.

It is not a competition between you and me. This is just a dialog to help you understand that "reading reports" about the build up of the Chinese military does not go far enough in analyzing the impacts of isolation versus engagement.

I don't see it as a competition between you and I. I do see it as another example of wishful thinking by one of our citizens. We have financed China's moves over the last fifteen years without asking it to do one single thing in response. We even conducted trade with it while it placed 40% tariffs on our goods going into China, while we charged little or none on their goods coming in here. We also changed the name of the Most Favored Nation status, so we could extend it to China. And we did it.

And you are overstating the probability of war, possibly due to a little latent xenophobia and a lack of travel outside the US.

Just for the record, I never traveled to pre-WWII Germany either. Winston Churchill called that one precisely right. And IMO you are calling this one precisely wrong.

Please explain why China is building up it's military in the manner it is. Please explain why it's leaders are saying they will replace the United States as the world's leading hegemon. You are simply ignoring the obvious to promote a status quo that is suicidal.

I couldn’t disagree more with our China policy today.

There are no optimal Chinese policies, only a choice of several suboptimal policies. Engagement, free trade, economic and political pressure, and increased freedom and wealth for the Chinese people are the policies that are most likely to lead to a peaceful and wealthy China and planet.

Honest to God, this is one of the most dilusional views I've seen on this fourm. You are advocating arming our number one global enemy, and you will not face the down side if you are wrong.

Your last post is too poorly written to deserve a reply. But you are going to have to learn to live with a PRC that has a larger economy and a stronger military than the United States. The question is how to try to bring her people into the club of peaceful nations that trade with each other. Your xenophobic ramblings give off far more heat than light. I highly suggest you actually visit Taiwan and China to refine your views.

In the meantime, good day.

jas3

ROTFLMAO... and I suggest you visit reality to refine yours.