The United States and China Collide


Justin Smith addresses the ever looming confrontation between the United States and Communist China.

JRH 5/15/19

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The United States and China Collide

America Must Ensure Her Global Dominance

 

By Justin O. Smith

Sent 5/14/2019 6:54 PM

 

Tariffs will make our Country MUCH STRONGER, not weaker. Just sit back and watch! In the meantime, China should not renegotiate deals with the U.S. at the last minute. This is not the Obama Administration, or the Administration of Sleepy Joe, who let China get away with “murder!” ~ President Trump on May 10th 2019

 

The first opening salvos in the most bitter trade war between the United States and China, unlike any witnessed since the 1930s, are simply part of a broader agenda, as both nations jockey for positions of dominance on the global stage. For those who are crying that tariffs are a tax on the consumer, they are much more than a simple tax, and they are a means to ensuring our economy leads on all fronts in the global markets and the U.S. dollar remains the global reserve currency. And as such, this isn’t so much a trade war as it is an effort by President Trump to ensure America’s global dominance and national security far into the future, by increasing and safeguarding our technical advantage and ability to win any war forced upon us, including the next world war.

 

The U.S. and China relations are testing a new low and the United States and China are on a collision course. Goodwill between the two that was purchased by U.S. dollars is rapidly breaking down.

 

As promised, President Trump raised duties on $200 billion of Chinese imports to twenty-five percent from ten percent on May 10th, and in response, China’s commerce Ministry has vowed “necessary countermeasures” are forthcoming. After eleven rounds of negotiations and no deal, President Trump is also now considering applying tariffs to the $300 billion in Chinese goods that are currently tariff free.

 

Even the Obama administration complained during Obama’s second term about China’s unfair trade practices, such as duties on U.S. chicken, Chinese protectionist acts in the aircraft industry, Chinese subsidy of its corn, rice and wheat production and export duties on various metal.

 

At the heart of the matter, China has stated its plan to be the world’s leading superpower, and they are positioning themselves to rocket past the U.S. in economic and military strength on the back of technology China steals from the United States and every other nation that does business with China. China’s President Xi Jinping believes he can turn China into a super competitive nation and a technical juggernaut and superpower by 2025, in the areas of information technology, aerospace, advanced robotics and artificial intelligence.

 

Although China is more than willing to increase its purchases of U.S. goods, especially soybean and natural gas purchases to offset last year’s record $419 billion trade deficit, China will not accept any limitation on its grander vision and its desire to control the technological mountain top. They may stop talking about it, but they’ll never end China’s Made In China 2025 program; they may become even more secretive, but they will never cease their industrial espionage, and they will continue to coerce technology transfers, if only in a less blatant manner.

 

Since 2010, China has promised eight times to stop forcing foreign companies to transfer technology to China, as a cost of doing business in China. And yet according to a 2018 Office of U.S. Trade report, the coercion has continued.

 

Noted by two retired senior Department of Defense officials in 2017, a problem that costs America $600 billion annually, technology and intellectual property theft must be America’s primary focus over the trade deficit. Although few companies publicly acknowledge the problem, forty-four percent of those aerospace companies and forty-one percent of the chemical concerns operating in China felt pressured to “share” technology with China, according to AmCham Shanghai Business (July 2018), and Rand Corp warns its employees against taking their personal electronics with them to China, since several U.S. businessmen have caught people (spies) searching their rooms. Chinese spies have already stolen documents concerning the U.S. F-35 fighter and the space shuttle, along with secrets on our most significant weapons systems.

 

All of this only confirms that the widening rift between D.C. and Beijing goes beyond trade, and it is further exhibited by China’s massive military buildup, which was only made possible through the near $500 billion trade deficit — or more once one includes intellectual property theft — and U.S. wealth. Among other problems, China is claiming ownership and control of international waterways in the South China Sea and disregarding other nation’s territorial claims, as well as the 2016 International Tribunal on the Law of the Sea ruling (although I’m not a big fan of sovereign nations bowing to international entities), it has significantly suppressed liberty in the ostensibly autonomous region of Hong Kong, and it is increasing pressure on Taiwan — a de facto independent and sovereign nation — to reunite with “the Motherland”.

 

“It was way past time to confront China on many of these problems”, Michael Wessel, a member of the congressionally chartered U.S-China Economic Security Review, recently stated. “They’ve been allowed to skate for too many years.”

 

In the meantime, complaints that the cost of these tariffs will be borne by Americans is exaggerated, since it appears that China absorbed the last round of tariffs out of their profits rather than raising the cost of goods at Walmart. It also appears that China underestimated President Trump’s resolve on this issue and their own miscalculation is biting them in the rump right now. President Trump couldn’t have picked a better time for this confrontation, with the American economy riding high.

 

China also didn’t count on the rising antipathy of Americans towards it, as Americans see China unfairly undercut our economic prosperity, threaten our security and challenge our values. Republicans and Democrats alike are rallying around the flag on this issue, in a rare bipartisan consensus that America must stand up to China.

 

If nothing else, any shift away from China will only be a benefit to America, when U.S. businesses and manufacturers return to America out of cost concerns. Although tariffs do hit consumers, they don’t if one chooses not to buy those particular goods, opting instead to buy comparable goods made in other nations or America. So, President Trump should place tariffs on all Chinese goods and cripple China’s economy, however long or temporary.

 

Just as the Plaza Accord of 1985 forced Japan to act more fairly on trade, by devaluing the dollar against the yen, and eliminated trade barriers, it also demonstrates that White House initiated trade wars do not automatically end in disaster. Aggressive trade measures can and often do work and succeed in placing the global economic system on a more feasible trajectory of an open and rules based economic order.

 

Pat Buchanan recently noted: “Of the nations that have risen to economic preeminence in recent years — the British before 1850, the United States between 1789 and 1914, post-war Japan, China in recent decades — how many did so through free trade? None. All practiced economic nationalism.”

 

President Trump recognizes the party is coming to an end and that America must extricate Herself from the unholy alliance with “the Dragon” and enabling its path to global dominance. He understands that economics do not receive an exemption from the dynamics of geopolitical competition and growing national security concerns associated with China; and, by walking a fine line and between targeted measures and negotiations, President Trump should be able to hand China a face-saving defeat that protects and saves America’s own economic independence, sovereignty, greatness and national identity, without devolution into all-out war. Simply stated, this is one war America must win.

 

By Justin O. Smith

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Edited by John R. Houk

Source links are by the Editor.

 

© Justin O. Smith

 

What Action will Balance the American Budget?


Dem-GOP Deficit Pig

John R. Houk

© July 4, 2011

 

Tony Newbill sent me an article but failed to include the author and the publisher. The article is about America’s budget deficit problem. The premise of the article can be summed up in this paragraph:

 

Those who have bought into the notion that cutting our deficit, especially by cutting government spending, will somehow stimulate the economy couldn’t be more wrong.  Cutting the deficit, regardless of whether it’s done by cutting spending, increasing revenue or some combination of the two, will take money out of the economy.  Collecting revenue takes money out of the economy as Republicans correctly point out.  Government spending puts money back in, as Democrats correctly claim.  Taking more out in the form of revenues or putting less back by cutting spending leaves the economy with less than it started.  While that helps the nation’s balance sheet in the long run, leaving the next generations better off, it’s bad for the economy in the short run.

 

I disagree with the criticism of Republicans to cut spending and raising revenue is an unworkable paradigm. The point is to cut wasteful government spending while enabling business owners from small to large to grow. Growing means more employed people. More employed people means an increase in taxable income. More revenue into the government means a lowering of the debt.

 

I also disagree with the affirmation that the Democrat paradigm of more government spending puts money back into the economy. How can you put something back into the economy that was taken out of the economy by taxation to finance government spending? I am not an economist but the old saying of robbing Peter to pay Paul (or is it the other way around) does not increase revenue. Rather the robbing of Peter to pay Paul only brings a temporary solution until the problem of the necessity to rob Peter is solved. The Peter-Paul paradigm is the illusion of maintaining a status quo; however the reality is the Peter-Paul paradigm stalls an inevitable outcome which Peter demands his money back. If Paul spent the money, that ain’t gonna happen. That means the robber pays the penalty for the robbery. The question then becomes: Who does the robber represent?

 

A premise touched on later in the article is that the real solution is to figure a way to reverse a trade deficit with foreign nations. When the money coming into the American economy is dependent on revenue from foreign trade that benefits the foreigner’s economy more than the American economy, the foreign nation’s economy is stimulated at the expense of American failure to produce competitive goods which would better the American economy. A trade exchange that favor’s a foreign nation’s government revenue collection while lessening American collection of revenue will harm the American economy by causing an increasing American debt.

 

Some of you who are economist minded, comment alternative solutions.

 

JRH 7/4/11

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Debt Ceiling Negotiations to End Badly

 

Sent by Tony Newbill

Sent: 7/3/2011 11:48 PM

 

By this time next month, the long-running battle over raising our nation’s debt ceiling will have come to a resolution, one way or another.  Either the U.S. will be forced to default (or not?  see below) or an agreement will have been reached to raise the ceiling in return for a cut in the projected size of the deficit.  Possible outcomes range from a catastrophic global financial melt-down at one end of the scale to a mere collapse into the 2nd dip of the recession at the other end of the scale.  There are no possible good outcomes here.  This is going to end badly.

 

Those who have bought into the notion that cutting our deficit, especially by cutting government spending, will somehow stimulate the economy couldn’t be more wrong.  Cutting the deficit, regardless of whether it’s done by cutting spending, increasing revenue or some combination of the two, will take money out of the economy.  Collecting revenue takes money out of the economy as Republicans correctly point out.  Government spending puts money back in, as Democrats correctly claim.  Taking more out in the form of revenues or putting less back by cutting spending leaves the economy with less than it started.  While that helps the nation’s balance sheet in the long run, leaving the next generations better off, it’s bad for the economy in the short run.

 

So the only possible outcomes here are either a U.S. default on its interest obligations on its bonds, which could conceivably render all U.S. bonds instantly worthless, wiping out banks and investors across the globe, or a recession-triggering pulling of the rug from under the feet of the U.S. economy, an economy barely kept above water by trillions in deficit spending by the federal government and quantitative easing by the Federal Reserve – all of which has come to an end.  No wonder the two sides are battling so bitterly.  Both know the outcome will be bad.  Each wants the other to take the blame.

 

And that’s not the half of it.  Even if a deal is reached, the deficit is cut and the debt ceiling is raised, the only thing that will have been accomplished is that the “can” will have been kicked a bit further down the road.  It’s not as though we’ll be cutting the deficit; we’ll only be cutting the projected growth in the deficit.  The deficit, projected to grow by another $15 trillion or so in the next ten years, will instead grow by only $10 or 11 trillion, a situation that will leave us in far worse shape than now.  What are the odds that it’ll be dealt with then?

 

I’m not arguing that the problem shouldn’t be addressed or that no good outcome is possible regardless of what our lawmakers do.  The problem is that nowhere in these talks is the real problem that drives the deficit spending being addressed, and that is the trade deficit.  As I said earlier, anything that takes money out of the economy, which includes taxes, cuts in deficit spending – even personal savings, is a drag on the economy.  And our trade deficit currently drains over $500 billion per year from the economy.  If that draw-down from the economy isn’t made up by deficit spending, then economic recession is absolutely unavoidable.  Furthermore, without any deficit spending, then the U.S. will not be issuing any more bonds, leaving foreign countries with trade surpluses with the U.S. no way to plow those dollars back into the American economy, throwing a big monkey wrench into the gears of the global economy.  Ultimately, that might be a good thing, forcing a rebalancing of the global economy and global trade.

 

So, without a comprehensive approach to fixing our economy that includes restoring a balance of trade (and perhaps even addressing our goofy immigration policy, but that’s a different topic), merely cutting the deficit and raising the debt ceiling is just another round in a game of economic whack-a-mole, a futile effort to deal with economic side-effects that pop up faster than Congress can swing its little economic mallet.

 

Greece is a good example of what we’re facing.  Like the U.S., Greece has a large trade deficit – about the same as the U.S. in per capita terms.  Like the U.S., Greece is heavily dependent on imported oil.  And like the U.S., its debt exceeds its GDP and has been growing rapidly.  The austerity measures imposed upon Greece by its creditors have resulted in violent civil unrest in that nation in recent weeks.  And the Euro zone has warned Greece that it faces loss of its sovereignty and the prospect of much higher unemployment as these austerity measures take hold.  (See http://www.reuters.com/article/2011/07/03/us-eurogroup-greece-idUSTRE76219J20110703.)  The U.S. will face the exact same things if we implement drastic deficit reduction programs without addressing our trade deficit.

 

Things are coming to a head soon and, regardless of how it turns out, it won’t be good.

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Regarding the whole issue of default, there is a little-known sentence in the 14th amendment that seems to forbid the U.S. from failing to pay its obligations.  That sentence reads, “The validity of the public debt of the United States … shall not be questioned.”  The Obama administration is considering whether, in the event that the debt ceiling isn’t raised, it can invoke this statement and ignore the debt ceiling and continue paying the government’s bills.  Imagine the ramifications.  Without the limitation of the debt ceiling, there will be no rein on government spending.  It would be interesting to see just how fast an amendment to balance the budget, already being suggested by Republicans, would be introduced.  But, again, bear in mind that balancing the budget without balancing trade is a virtual (if not physical) impossibility.  At least such an amendment would pretty quickly force a re-evaluation of trade policy.

 

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What Action will Balance the American Budget?

John R. Houk

© July 4, 2011

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Debt Ceiling Negotiations to End Badly

Sent by Tony Newbill