Trump Suckered at G20

December 3, 2018

https://www.reuters.com/article/us-g20-argentina/trump-chinas-xi-poised-for-high-stakes-summit-over-trade-war-idUSKCN1O031C

There’s just no other way to describe it.  Trump got suckered at the G20 meeting in Argentina.  As reported in the above-linked article, Trump agreed to delay any further tariffs on Chinese goods for at least 90 days in exchange for nothing more than the same vague promises China has been making for 20 years.

“China will agree to purchase a not yet agreed upon, but very substantial, amount of agricultural, energy, industrial, and other product from the United States to reduce the trade imbalance between our two countries,” it said.

“China has agreed to start purchasing agricultural product from our farmers immediately.”

The two leaders also agreed to immediately start talks on structural changes with respect to forced technology transfers, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft, services and agriculture, the White House said.

Regarding that last sentence, these are exactly the same promises made by China for the past two decades.  It never happens but, every time, the Chinese win yet another delay in the U.S. taking any meaningful action to restore a balance of trade.

Then there’s the Chinese take on the agreement:

“China is willing to increase imports in accordance with the needs of its domestic market and the people’s needs, including marketable products from the United States, to gradually ease the imbalance in two-way trade.”

“The two sides agreed to mutually open their markets, and as China advances a new round of reforms, the United States’ legitimate concerns can be progressively resolved.”

The two sides would “step up negotiations” toward full elimination of all additional tariffs, Wang said.

Note the qualifiers in the first sentence:  “… in accordance with the needs of its domestic market and the people’s needs …” and “… marketable products …”  In other words, they will do what’s in their own best self-interest, which is to employ their 1.2 billion people in manufacturing for export.  What “marketable products” are they talking about?  Thanks to China, the U.S. barely manufactures anything any more.  Even American consumers can’t find anything made in the U.S.  Virtually every single product we buy is labeled “made in China.”  The ones that aren’t are labeled “made in Mexico.”  Beyond Boeing aircraft and pickup trucks (of which the latter are largely assembled from Chinese and Mexican parts), what else is there?  Are we really expected to believe that we soon may see Chinese consumers driving around in Silverados, F-150s and Ram trucks?

It’ll never happen because Chinese consumers, thanks to gross over-crowding in their country, are incapable of consuming even their own domestic output, much less any imports from America.  What will it take for American leaders to understand that?  Forty-eight years of consecutive trade deficits, including not a single year in which the U.S. had a trade surplus with China, isn’t enough evidence?

I truly don’t understand the weird infatuation that Trump seems to have with communist dictator Xi.  He seems to have an almost hypnotic effect on Trump, who gushes praise for Xi after every face-to-face meeting.  Beyond Trump, I wish the U.S. would stop attending these G20 meetings.  I challenge anyone to cite a single example of how the U.S. has ever emerged from a G20 meeting with anything that has been beneficial to American workers.  Clearly, the G20 exists for the sole purpose of devising methods of sucking more blood from the U.S. economy, like a swarm of parasites, stopping just short of killing its host altogether.

For nearly two years, Trump has talked tough about putting America first and about making America great again, and restoring a balance of trade has been the central focus of that effort.  But what is there to show for it?  America’s trade deficit in manufactured goods has actually accelerated, setting new records month after month.

It appears that Trump is caving in to pressure from farmers and global corporations who are more interested in total global sales volume than in doing what’s necessary to help American workers and to keep the U.S. from financial ruin.

Trump’s failure at the G20 is extremely disappointing and I fear that I may be losing faith.

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Globalism Establishment Starts to Sweat as their Regime Begins to Crumble

July 26, 2016

These three articles appeared in the news a couple of days ago almost simultaneously in the wake of the Republican convention.

In this first article, finance ministers and central bankers from the G20 nations pledge to “share the benefits of global growth more broadly.”  The article focuses on concerns surrounding “Brexit,” Great Britain’s vote to pull out of the European Union over dissatisfaction with the EU’s open border policies and with being fleeced to prop up the economies of other EU nations.  But the article also takes note of Trump’s vow to pull out of trade agreements.  The G20 is starting to sweat.

In the 2nd article, U.S. Treasury Secretary Lew is reported as saying that it’s time to “redouble our efforts to use all of the policy tools that we have to boost shared growth.” Why is it time to do that now?  Why weren’t we doing this all along?  It’s because it’s now clear that “free trade” policy is becoming more widely opposed, with the political left now opposing the Trans Pacific Trade Partnership (TPP) and with the right going further, vowing to pull out of all existing free trade deals.  The globalist Obama administration is also starting to sweat.

And further evidence comes in this 3rd article about a meeting on Friday between President Obama and his Mexican counterpart.  Don’t be fooled.  This wasn’t just a meeting designed to stress the importance of the relationship between these two countries.  Both are beginning to sense the very real possibility that their trade regime is nearing it’s end.  I predict that, sometime between now and the election, there will be an announcement of some deal, a deal that had its genesis in this meeting, that will move some token manufacturing back from Mexico to the U.S. in an effort to blunt some of the trade anger.

I have written occasionally about cracks that were beginning to appear in globalization – like more and more economists beginning to openly question whether donor countries like the U.S. and Britain were really seeing any benefit at all from these trade agreements and whether they have been, in fact, a net drag on their economies.  The globalization story has been very much like the annual reports that emanated from the now-defunct Enron Corporation.  We were told by Enron that their business was very complicated – too complicated for analysts outside the company to understand.  As it turned out, it wasn’t really complicated.  It was a scam.  People will only buy into such scams for so long.  And so it is with globalization.  The British people could no longer take it.  Nor can Americans.

Without the support of its donor nations and the continued subservient acquiescence of its citizens, the globalization scheme is doomed.  Good riddance.

 


G20 2-Step to Tackle Global Imbalances

February 15, 2011

http://www.reuters.com/article/2011/02/13/us-g20-eu-idUSTRE71C1JR20110213

The above-linked article appeared on Reuters yesterday.  The G20 nations claim to be serious about tackling global economic imbalances.  That much, at least, is encouraging.

Such imbalances, reflected in the current account balance, private and public savings, debt and capital flows, can trigger or augment crises, destabilizing the world economy.

So give them credit for seeing through all the superficial reasons for the global economic collapse – subprime mortgages and Wall Street greed – to the heart of the matter:  global imbalances – most notably the trade (or “current account”) imbalance.  They plan a two-step approach to the issue:

The first step would be to identify the imbalances using an agreed set of economic indicators and benchmark values.

The second step would be to analyze the causes of the imbalances and possibly make policy recommendations on how to deal with them.

The second step gives us reason for hope, but for fear as well.  What are the chances that they’ll arrive at the real cause of the imbalances – the disparity in population density from one nation to the next – when economics doesn’t even recognize the relationship between population density and per capita consumption?  And if they can’t arrive at the real cause, what are the chances that they’ll implement policy changes based on a false conclusion, making matters worse?

If they’re truly interested in the real cause, here are some simple facts about trade results just among the G20 nations.  (By the way, there are only 19 nations on the G20.  The 20th seat is held by the EU, giving Germany, Italy and France double representation.  Hardly seems fair, does it?)

  • Of the six nations less densely populated than the U.S. (Argentina, Australia, Brazil, Canada, Russia and Saudi Arabia), every single one of them has a trade deficit in manufactured goods with the U.S.
  • Of the twelve nations more densely populated than the U.S. (China, Japan, South Korea, France, Germany, India, Indonesia, Italy,  Mexico, South Africa, Turkey and the U.K.), all but two have trade surpluses in manufactured goods with the U.S. – South Africa and Turkey.  South Africa is only very slightly more densely populated than the U.S.  And, at $2.2 billion, Turkey’s trade deficit in manufactured goods with the U.S. is smaller than that of any of the six nations listed in the previous point. 
  • In terms of Purchasing Power Parity (PPP, essentially per capita GDP), Germany’s (seven times as densely populated as the U.S.) is the most enhanced by a trade surplus.  12% of their puchasing power is derived from their surplus of trade in manufactured goods.  Next is South Korea (15 times as densely populated as the U.S.) at 7% of PPP.  Next is China (over four times as densely populated as the U.S.) at 6% of PPP.  Next is Japan (ten times as densely populated as the U.S.) at 5% of PPP.  And so on. 
  • Of the ten nations with a trade surplus in manufactured goods with the rest of the world, the average population density is 413 people per square mile (almost three times the world median), and their cumulative trade surplus in manufactured goods is $1.318 trillion.
  • Of the nine nations with a trade deficit in manufactured goods with the rest of the world, the average population density is 272 people per square mile.  But, take away India (whose small trade deficit landed them in this category) and the average population density falls to 190 people per square mile.  The total trade deficit in manufactured goods of these nine nations is $951 billion. 

Sadly, this relationship between global trade imbalances and population density is sure to escape the leaders of the G20.  They’ll almost surely arrive at the wrong answer, but at least they’ve taken the first step by asking the question.


Tension Over Trade Imbalances Heating Up

November 5, 2010

http://www.cnbc.com/id/40021005

As reported in the above-linked CNBC article, tensions over trade imbalances are heating up, not just in China, as head-lined in the article, but in Japan and Germany as well.  It seems that the U.S. has proposed that other nations “cap” their current account surpluses (trade surpluses) at 4% of GDP:

The United States proposed at the G20 finance ministers’ meeting last month that countries should cap current account surpluses or deficits at 4 percent of GDP as part of efforts to rebalance the global economy.

It was one thing for Obama to suggest at the height of the global economic crisis that nations voluntarily work together toward rebalancing the global economy.  All agreed, knowing full well that there would be no follow-through by the U.S. and they could return to business as usual.  But it’s an entirely different matter for the U.S. to begin insisting on quotas. 

China on Friday pushed back strongly against U.S. policies ahead of the G20 summit, ridiculing Washington’s plan to impose current account targets and warning of risks in the Fed’s monetary easing.

… The idea of numeric targeting met strong resistance from Japan and Germany …

U.S. patience with huge trade imbalances is wearing thin.  Now, even the Fed has joined the fight with its new round of quantitative easing.  If voluntary approaches and pressure on currency valuations don’t work, then the unavoidable question for the U.S. is “what do we do next?”  There are only a couple of options – the ones I’ve steadfastly maintained are the only viable options:  U.S.-imposed quotas and tariffs. 

Forget all the post-election banter about “Obamacare” and about government spending.  It’s all dwarfed in significance by this escalating global war for employment.  The global trade regime set up in the wake of World War II in the hopes of preventing the next war has back-fired and is crumbling, and may very well have provided the catalyst for the next one.


Employment Level Falls by 301,000 in June

July 2, 2010

 

If I were Obama, I’d be ashamed to publish a report like the employment report published by BLS (Bureau of Labor Statistics) this morning.  The reported gain in private sector employment of over 80,000 jobs and the decline in the unemployment rate to 9.5% completely distorts the real employment picture. 

The following spreadsheet provides the BLS data, along with a more realistic picture of unemployment.

Unemployment Calculation

As you can see, the decline in the unemployment rate to 9.5% was made possible only by the government’s assumption that 652,000 workers exited the labor force in June, apparently no longer needing a source of income to put bread on the table.  This was the second month in a row that the labor force has declined, and was exceeded only slightly by the decline in December, ’09.  If the government was honest in their estimation of the labor force, they’d steadily be adding over 120,000 workers every month, thanks to population growth. 

Contrary to this morning’s report, here are the grim facts:

  • In June, the employment level fell by 301,000 workers, the third monthly decline in a row.  (See column E.)
  • Assuming the labor force to be a constant percentage of the population, unemployment rose in June to 11.5% from 11.2% in May.  (See column H.)
  • The number of unemployed Americans rose to over 18 million in June, the 2nd increase in a row. 
  • U6a (see column J), the broader measure of unemployment, spiked above 20% again, rising to 20.4% from 19.9% in May.

As the day wears on, expect analysts to see through the smoke and mirrors and come to the same conclusion:   this is just one more piece of data that supports the view that the economy is sliding back into recession.

Not surprising.  The president has done absolutely nothing to address the fundamental problems with the economy – the huge trade deficit in manufactured goods caused by trade policy that fails to take into account the role of population density disparities (in other words, his failure to act decisively with tariffs to restore a balance of trade), and his continuation of policies that pile more immigrant workers onto an already-glutted labor force.

In fact, he’s making matters worse.  At the conclusion of the G20 last week, he delivered a left jab to American workers by announcing his intention to push through a free trade deal with South Korea, the third most densely populated nation on earth (behind Bangladesh and the Palestinian Territory), 15 times more densely populated than the U.S. and heavily dependent on manufacturing surpluses to sustain their bloated labor force.  And yesterday he delivered a right cross to the jaw of American workers by pushing for amnesty for illegal aliens.  American workers are reeling, about to fall to the mat for the count. 

Obama is no friend to American workers and, despite his efforts to gloss over the employment situation, his policy chickens are coming home to roost.  Each new piece of economic data reinforces the picture of an economy slipping back into decline.  Then what?  Another huge stimulus?  That’s been my prediction all along.  But the markets have absolutely no appetite for any more deficit spending. 

Patience is running short.  I think that soon, in the coming months, we’re going to see the economic you-know-what hit the fan. 

*****

By the way, the following are charts of the data presented in spreadsheet above:

Labor Force & Employment Level     Unemployed Americans     Unemployment Chart


Reshape Global Economy? What Will You Do, Mr. President?

September 21, 2009

 

http://www.reuters.com/article/newsOne/idUSTRE58G34Z20090921?sp=true

The good news is that President Obama understands that global trade imbalances – especially America’s enormous trade deficit – is what collapsed the global economy, and he will push the G20 at the meeting in Pittsburgh to reshape the global economy:

U.S. President Barack Obama said on Sunday he would push world leaders this week for a reshaping of the global economy in response to the deepest financial crisis in decades.

The bad news is that he, like everyone else – including economists – is clueless as to the root cause of the imbalance:

… Obama said the U.S. economy was recovering, even if unemployment remained high, and now was the time to rebalance the global economy after decades of U.S. over-consumption.

Overconsumption in the U.S. is a myth, perpetrated by images of fat Americans returning from the mall with their gas-guzzling SUVs filled to the roof-line.  While this may be an accurate portrait of the top 2-3% of wage-earners, reality for the vast majority of Americans is quite different.  When American families’ median income is something in the range of $48,000, how much money is left for “over-consumption” after paying the mortgage (or rent), putting food on the table, paying the utilities and buying health care?  Precious little. 

The problem with our trade imbalance isn’t that Americans over-consume.  The problem is that virtually everything we do consume is foreign-made.  Would President Obama have us stop consuming altogether?  What would we wear?  Every stitch of clothing sold in this country is foreign.  Would he have us stop maintaining our homes?  Nearly everything on the shelves at Lowe’s and Home Depot is foreign made.  Would he have us stop maintaining our cars?  Try finding an American-made auto part.  Should we stop replacing burned-out televisions?  There hasn’t been an American-made television in decades.

We have no choice but to continue buying foreign-made products, perpetuating the global trade imbalances.  Nothing is going to change until Obama, or some subsequent president with the guts to do it, finally says to the WTO (World Trade Organization) “enough is enough.”  “It’s clear the rest of the world won’t voluntarily eliminate its dependence on exports to America, so we’re putting tariffs back in our trade policy tool box.”  Only then will there be any hope of rebuilding the manufacturing sector of our economy and fixing the trade imbalances that have brought us to our knees.

Obama understands the problem.  He truly does, as evidenced by this last statement:

“We can’t go back to the era where the Chinese or the Germans or other countries just are selling everything to us, we’re taking out a bunch of credit card debt or home equity loans, but we’re not selling anything to them,” Obama said in an interview with CNN television.

OK, Mr. President, the question now is what are you going to do about it?  Talk, talk, talk and asking other nations to fix the problem for you isn’t action, it’s shirking your responsibility.  What are YOU going to do? 

One final comment about the following paragraph is in order:

For years before the financial crisis erupted in 2007, economists had warned of the dangers of imbalances in the global economy — namely huge trade surpluses and currency reserves built up by exporters like China, and similarly big deficits in the United States and other economies.

What a crock.  Economists’ zeal for one of their pet 18th century theory, Ricardo’s principle of comparative advantage, is what led to the creation of this globalized mess in the first place.  For anyone to claim that economists have been “warning of the dangers” is laughable and the epitome of historical revisionism.  If the U.S. ever does take real action to unwind the mess, it’ll be over the howls of protest from economists. 

The only good news here is that Washington’s patience with globalization’s parasitic predation on the American market is clearly wearing thin.   But real action still seems to be a big leap from where we are today.


China Wants International Supervision of U.S. Economy

April 19, 2009

http://www.reuters.com/article/newsOne/idUSPEK33230620090418

If you’ve followed this blog, you know that one of the negative consequences of our trade deficit that I’ve repeatedly harped on is that with ownership comes control.  Our trade deficit is financed by a sell-off of American assets, both public – in the form of treasuries – and private – in the form of corporate stocks and bonds.  With ownership comes control of those assets – both in the form of actual control of our corporations and in the form of influence on public policy. 

The link provided above takes you to an article reporting on a speech by Chinese Premier Wen Jiabao in which he calls for international supervision of America’s economy:

“We should strengthen the supervision of the economic policies of the main reserve currency economies and push forward the establishment of a diversified international monetary system,” he said in his opening address to the Boao Forum for Asia, held annually in the Chinese island province of Hainan.

It was the second time this month that China has made such an appeal, following President Hu Jintao’s call at the London G20 summit earlier this month for the International Monetary Fund to strengthen its oversight of reserve currency-issuing economies.

No doubt, some better supervision of our economy is in order, but not from the global community.  Constitutional amendments that mandate a balance of trade (See “28th Amendment to the Constitution of the United States“) or even a balanced budget would be a good start.  But restoring America’s economy to health isn’t what Jiabao has in mind.  His only interests are that the U.S. not adopt any protectionist trade measures and that the value of its dollar-denominated reserves be preserved. 

Evidence of such international control of U.S. policy is already manifesting itself.  Obama went to the G20 with one goal in mind – to get the European Union to boost its own economies with stimulus plans similar to what he had recently enacted.  He got none of it.  Instead, Europe got a boost from the International Monetary Fund and America got the bill. 

During his confirmation hearing, Treasury Secretary Tim Geithner said that China was manipulating its currency, a move that would open the door to tariffs, restoring a balance of trade with China.  But now that the economic realities of being literally owned by the Chinese have settled in, he now refuses to label them as such, fearing the consequences of China dumping its mountain of U.S. treasuries. 

Though still a neophyte clinging to the apron strings of the World Trade Organization, China has become an economic know-it-all, believing that a decade of being lavished with American wealth through dumb trade policy has made them some sort of economic experts qualified to lecture the U.S., like a freshman quarterback swaggering onto the field and telling the coach how to run the team.  The situation would be comical were it not such a pathetic spectacle for the U.S. 

What Jiabao needs is a swift kick in the ass, a healthy dose of gratitude for America’s role in pulling his economy out of the third world cesspool and a hefty tariff bill for any future exports.  After a decade of balanced trade with the U.S., then let’s evaluate which economy might need some supervision.