Tag: economics

Greg Richards explains why Trump knows the trade war must be fought, and better yet, can easily be won.

Why is this chart important?

It is a death sentence for America.

Although it is a single series of data, the chart is essentially in two parts, split in the year 2000.  There is no manipulation to achieve this effect.  This is how the data lay out, which is why this chart is so significant.

From 1968 into 2000, you see beautiful, real-world steady growth (i.e., “steady” interspersed with recessions).  The red trendline is a trendline of constant percentage growth year to year (i.e., exponential).  When you calculate it, it turns out to be 6{2f950ec02e67afe15e56ddb5018469898c7f7df1891e5cecbf34a80033d044ba} per year.  This is roughly twice GDP annual growth over the same period.  There is no specific significance to that 2X factor except that we would expect capital spending to grow faster than the economy as a whole, as, in fact, it did.

Why is this growth in capital spending important?  Even in our increasingly service-oriented economy, it is capital spending – the stock of capital equipment – that sustains our standard of living.  Healthy capital spending is critical to – really identical with – a thriving economy.  This is why the flat capital spending that America has experienced since 2000 is so grave a condition.

American Thinker readers will be surprised to learn that they are now the only people in the country, aside from this author, who have seen this chart.  I could not be more serious when I say that.

Economists do not think of capital spending in terms of real-world numbers.  They think of it as a concept in their models that self-equilibrates.  There isn’t an economist from Harvard to Stanford or anywhere in between who knows this chart.  Believe me: I have worked with these people.  If you as a reader are in business or in academe, try me out.

The only person in public life who understands this chart is Donald Trump.  I cannot say he has literally looked at it, but he understands it.

Note that we are not talking about the “creative destruction of capitalism” here.  We are not talking about no longer making buggy whips.  We are talking about the staples of a modern economy, many of which we no longer have the capital equipment to manufacture.

We were the only country to emerge from World War II stronger than when we went into it, and our relative strength at the end of World War II was immeasurable.  It became our policy, and then our unconscious attitude, to “help other countries get back on their feet.”  This attitude became a permanent part of our trade policy-making, wherein we essentially opened our markets to other countries while accepting that their markets were closed to us.

The chart shows that our ability to sustain the Lord Bountiful approach to trade ended forever in 2000, although nobody in power saw it until Donald Trump came along in 2016.

If one looks at debt growth, one will actually achieve a deeper understanding, but this will do for non-economists. The most important part of the article is this section, which I have been trying to explain to people in multiple venues with varying degrees of success:

Economists think mercantilism can never work, thus Trump attacking it as practiced by China is a fool’s errand or worse.  This is based on the early 19th-century Theory of Comparative Advantage developed by David Ricardo.  It states that among trading parties, even if one party’s production costs are greater in all goods than the other party’s, the first party should focus on those goods where it has a comparative advantage – i.e., where its own cost of production is lower.  If the two countries then trade, both will improve their welfare.  If, under these conditions, a country practices mercantilism, it impoverishes itself.  This is a substantial insight.

But it depends on a key assumption: that capital is fixed.  Ricardo’s example was that the British should raise sheep and the French should make wine, and they should trade these goods with each other.  The example was based on climate, the ultimate in fixed capital.

With capital mobile, as it is now, mercantilism works.  By forcing a trading partner to move its assets, technology, know-how, intellectual property, and R&D to the mercantilist country in order to participate in its market, a country can build itself up at the expense of its trading partner.  Following its accession to the WTO, China has been strip-mining the U.S. economy of high value-added industries and high-wage jobs by doing this.

The USA can only benefit from a trade war. That, of course, is why everyone around the world is freaking out. The genie is out of the bottle and it is becoming more and more apparent to everyone that the economic foundation for the globalist world order has not only failed, but was built on intellectual sand from the very start.

The core problem with macroeconomics is that it is an abstraction piled upon fiction which is then used to set policies with material consequences. As I addressed in no little detail in The Return of the Great Depression, the margin of error observably involved in the reporting of economic statistics is greater than that required to know something as basic as if the economy is growing or contracting. That is why it matters very much indeed that over half of the government’s spending data is wrong:

A new bipartisan Senate report revealed more than half of the government’s public data on federal spending is wrong, as the website USAspending.gov is riddled with errors.

The Permanent Subcommittee on Investigations, led by chairman Rob Portman (R., Ohio) and ranking member Tom Carper (D., Del.), released a report Tuesday finding nearly every agency is failing to accurately report its spending as required by federal law.

The subcommittee reviewed over two dozen inspector general reports and determined 55 percent of the spending data submitted to USAspending.gov was inaccurate. The errors accounted for $240 billion in spending during the second quarter of 2017, according to the report.

The Digital Accountability and Transparency Act of 2014, or DATA Act, required federal spending to be easily accessible to the public through a searchable website, which became USAspending.gov. The website was revamped earlier this year, but agencies are not meeting their requirements to submit accurate, consistent, and reliable data on its spending.

The agency in charge of USAspending.gov—the Treasury Department—is among the worst culprits, as 96 percent of its own data is inaccurate.

To put this in perspective, $240 billion amounts to 1.3 percent of the $18.6 trillion US GDP. Since it was reported that GDP grew 3.1 percent in the first quarter of 2018 compared to the previous quarter, that means that actual GDP growth was either 4.4 or 1.8 percent that quarter, depending upon which way the error lies.

And since the last two quarters growth are reported at 0.7 and 0.5 percent, these government spending errors may mean that the US economy is already in a statistically hidden recession.

The God-Emperor is refusing to play the neo-liberals free trade game for suckers:

President Trump retracted his endorsement of the final statement from the G7, tweeting afterward he had instructed representatives “not to endorse” it. He blamed Canadian Prime Minister Justin Trudeau’s statement afterward that Canada will not be “pushed around” and will go through with retaliatory tariffs.

Based on Justin’s false statements at his news conference, and the fact that Canada is charging massive Tariffs to our U.S. farmers, workers and companies, I have instructed our U.S. Reps not to endorse the Communique as we look at Tariffs on automobiles flooding the U.S. Market!
— Donald J. Trump (@realDonaldTrump) June 9, 2018

Seeing Trump cut off the heads of global government one organization at a time is like watching Hercules kill the Lernean Hydra, but on a grand scale. I just hope he’s remembering to cauterize the necks.

But the post-Imperial idiots now running what passes for formerly Great Britain don’t seem to grasp that they are not a major power anymore.

Abramovich was a protege of Vladimir Putin – the most ruthless leader in Russia’s recent history. Indeed, his decision to shelve plans for Chelsea’s new stadium has all the hallmarks of his one-time Kremlin mentor.

It is a warning shot, while in a fit of pique, from a man who feels he has been more than generous to Britain but who feels insulted in return by the British government.

Also, it can be seen as an ominous hint that he is ready to end his links with Chelsea FC altogether and possibly sell the club rather than continue pouring money thanklessly into one of the kingpins in Britain’s national sport.

But Abramovich’s move is far more complex – and menacing. This is not just a hissy-fit by a spoilt Russian oligarch. I am convinced that Abramovich made this decision with the approval and possibly the explicit instructions of Putin.

Given that Abramovich is a Jew and a newly minted Israeli citizen, it’s remotely possible that this one-man anti-British divestment campaign is being directed by Jerusalem instead of Moscow. But regardless of whether it is the Russians or the Israelis who are reacting to the bizarre ill-treatment of their citizen, the point is that the British are again seriously overestimating their importance.

How can we tell if it is the Russians or the Israelis behind this? Simple. If Russian investors withdraw from the UK in masse and crash the City markets, it’s the Russians. Remember, the Russians already know they are going to have to get out of the SWIFT system and join the Chinese alternative at some point. This could be the first sign that this financial migration is actually beginning.

More likely, it’s just the rational response of a man to receiving a very clear message that he is not wanted, so he is quite reasonably opting not to financially support his declared enemies. Would that conservatives did the same!

Pat Buchanan observes that the central struggle for the future of the West is now between globalists and nationalists:

Robert Bartley, the late editorial page editor of The Wall Street Journal, was a free trade zealot who for decades championed a five-word amendment to the Constitution: “There shall be open borders.”

Bartley accepted what the erasure of America’s borders and an endless influx or foreign peoples and goods would mean for his country.

Said Bartley, “I think the nation-state is finished.”

His vision and ideology had a long pedigree.

This free trade, open borders cult first flowered in 18th-century Britain. The St. Paul of this post-Christian faith was Richard Cobden, who mesmerized elites with the grandeur of his vision and the power of his rhetoric.

In Free Trade Hall in Manchester, Jan. 15, 1846, the crowd was so immense the seats had to be removed. There, Cobden thundered:

“I look farther; I see in the Free Trade principle that which shall act on the moral world as the principle of gravitation in the universe — drawing men together, thrusting aside the antagonisms of race, and creed, and language, and uniting us in the bonds of eternal peace.”

Britain converted to this utopian faith and threw open her markets to the world. Across the Atlantic, however, another system, that would be known as the “American System,” had been embraced.

The second bill signed by President Washington was the Tariff Act of 1789. Said the Founding Father of his country in his first address to Congress: “A free people … should promote such manufactures as tend to make them independent on others for essential, particularly military supplies.”

What is disturbing to me is how fundamentally dishonest the advocates of free trade are. The more intelligent and insightful of them know that what they are advocating necessarily means the end of the nation-state and the end of the nations, but they are intent on hiding that reality because they know how unpopular it is with the vast majority of the population in every nation.

Sure, if you press them hard enough they will admit that national borders are just “a line on a map” and that they don’t care at all about their fellow citizens, but they certainly aren’t going to publicly own up to the destruction that is inherent in their economic vision.

But the globalists will fail for the same reason that the communists failed and the feminists are failing. Eventually, the weight of the contradictions and the falsehoods will cause their system to collapse.

The future belongs to the nations. Deus le vult.

Uber’s objective, driver-controlled pay system still produces a pay gap:

The mainstream media also continues to cite the pay gap as a problem, disregarding evidence that it’s merely the result of free choice. Recently, an even more convincing rebuttal has arisen from the tech sector.

Uber, which pays its drivers not on an inherently subjective individual basis but via a formula that takes into account time and mileage driven, still has a 7 percent pay gap between male and female drivers. That’s right: a company that allocates salary in a way that is necessarily blind to an employee’s sex has still generated a pay gap, because men and women make different choices.

It turns out that female Uber drivers work shorter hours, are less likely to work during peak times, and drive more slowly. Because the compensation structure is automatic, Stanford researchers were able to pin down the three factors that caused the gap: experience on the platform, willingness to work at peak times and in busy areas, and driving speed preferences.

Somehow, I doubt these facts will even act as a speed bump to feminists rushing to denounce Uber’s sexist pay gap. Still, it would be interesting to see how race and other factors affect average pay.

Immigration is more than just war. It is also a very expensive form of foreign aid.

According to a recent Pew Research report, records from The World Bank show that migrants residing in the U.S. sent a staggering $138,165,000,000 (USD) to family members in their home countries in 2016 alone. To name the top three countries that received the most in remittances, funds flowed out of the U.S. in the amounts of $1,754,000,000 to Mexico, $655,000,000 to Canada, and $459,000,000 to the United Kingdom. $28,126,000,000 to Mexico, China $15,418,000,000 to China, and $10,657,000,000 to India.

Keep in mind that the estimated annual economic effect of immigrants, whether positive or negative, is generally considered to be less than one percent of GDP. Since US GDP was 18 trillion in 2016, and since these remittances are NOT included in those estimates, that means that these remittances either a) cancel out the positive effects or b) double the negative effects.

There is no longer any question that immigration is not only bad for the nation and bad for society, it is bad for the economy too.

UPDATE: The author of the article confused incoming remittances with outgoing. Corrected from the original data.

Written by the greatest living economist, Steve Keen, one of the few professional economists to have correctly anticipated the global financial crisis of 2008, eCONcomics is a series of three satires explaining why the science of economics has gone so terribly wrong.

In these savagely erudite satires, Keen highlights the lameness of the excuses offered by economists for their failure to predict anything from the financial crisis to the recent stock market highs. From “secular stagnation” to the “non-accelerating inflation rate of employment” and the “full employment real interest rate”, Keen expertly mocks both the myths and the incompetence of his professional colleagues.

After reading eCONcomics, you will understand why no economist ever seems to be able to explain what is going on today, or tell you what will happen tomorrow.

Steve Keen is Professor of Economics at Kingston University in London, and an Honorary Professor at University College London.

32 pages. $3.99. eCONcomics: Taking the CON out of Economics is available via Kindle and Kindle Unlimited.

And yes, there is a very good chance that Prof. Keen and I will collaborate on an eCONcomics devoted to the subject of free trade in the coming year. We may disagree on a number of issues, but free trade is not one of them.