Wednesday, July 25, 2018

China, Tariffs and Jobs

China likes its projection. Its ego desires to be number one. Thus, it does not see its lies and flaws. When President Trump said enough and sought to level the playing field, they reacted tit-for-tat. Trump pinpointed China because they are the poster child for undercutting competition and stealing market share in the global economy. They use the same playbook as all the previous nations like Taiwan, Japan, South Korea, and EU members. Currency manipulation is front and center. Behind the scenes, they layer importers with bureaucratic red tape, time studies and fees. When all else fails, they protect the local competing company with tariffs.

So, for China to fight the US, it added more tariffs to their already protective market. If the Democrats complain about Russia influencing the 2016 election, look around. All the back lass over Trump's tariffs has some Chinese money for shills who argue the same old same old. Of course, there will be inflation. That, dear reader, is pain. If someone is addicted, and seeks to end the bad habit, withdrawal pains are real. Back in time, when someone's factory closed, there was pain in unemployment. It was real.

We, as a nation have become addicted to low prices by foreign entities. We have been buying things that we use to make. When we made things, we increased everyone's standard of living. Now, you see homeless and beggars everywhere. This is evidence in our declining standard of living. Screw China! They have been screwing us ever since tricky Dicky opened up their market. Our corporate leaders are anti-worker. They sought riches by exporting our plants for cheaper labor sponsored by state governments. Foreign companies get government help with regulations, low rate loans and tariffs. Many of our companies don't get this type of help. Our nation does give subsidies to agriculture, government contracts, etc. However, these were band-aid steps that legislatures never talk about but understand as a fact of life. There is no such thing as free trade. It is a lie! Native Americans were only partly right. White men in politics speak with fork tongue not all white men.

Case in point...

In China last week, the largest Chinese coal producer defaulted. Wintime Energy is a classic example of a state sponsored company. They were like a boxing bum who gets carried by his opponent for x-amount of rounds before he becomes a TKO. There are many more out there like Wintime that receive protection from China. If that company was in the US, it would have ceased to be years ago. With fiat money, the government just prints money, buys it and keeps the company a going enterprise. Chinese companies paid old debt with new borrowing. It sounds like our Federal Reserve and in a way, it is exactly like the Fed. This is why our founding fathers insisted upon gold. You can't fake gold.

This is also being reflected in the Chinese stock market. The average total debt-to-equity ratio of listed Chinese companies is rising like a thermometer in summer. It is 99.5% at the end of 2017.  Debt demand continues to rise(addiction) for more leverage to finance projects. However, investment by investors shrank by $691 billion yuan last month. This is the largest monthly drop since China kept records. Who or where will these companies get money?  Daddy of the communist party?Probably. In the US, if this happened, our market would begin to pull back like the many boom and busts in our history.

In any event, the Chinese economy is largely a Ponzi scheme. This type of business model always ends badly like it did for Wintime Energy. This should be the writing on the wall for our government leaders. There is a limit to rolling over debt and a day of reckoning will come. As for the tariffs, we will feel some inflationary pain, but if we become self-sufficient again, we will end our declining standard of living. We will swing the pendulum back to a rising motion. Just think for a moment. Trump announced that he might put a tariff on all the products that we import from China. All those products could have come from factories right here in America. See where this is going?