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Friday, August 03, 2018

The necessity of trade war

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% 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.

Labels:

90 Comments:

Blogger dvdivx August 03, 2018 12:13 PM  

A death sentence is flooding this country with immigrants. Stop the h1b program cold and kick out the illegals.

Blogger Azure Amaranthine August 03, 2018 12:23 PM  

"If one looks at debt growth, one will actually achieve a deeper understanding"

No Daddy! Nooo!

Seriously though, there's a black pill. Or a rage pill, if you understand how/why it exists and how/why it could stop existing.

"The USA can only benefit from a trade war. That, of course, is why everyone around the world is freaking out."

A strong USA is a USA that can't be easily brought to heel by the globohomos.

Blogger Damn Crackers August 03, 2018 12:51 PM  

Even Adam Smith recognized a possible exception to free trade: using tariffs to support domestic industries that are vital to national defense.

If trying to equalize trade with the Chinese isn't national defense, I don't know what is!

Blogger Stg58/Animal Mother August 03, 2018 12:53 PM  

Dvdivx,

I've read that H1B approvals are steadily drying up by various bureaucracies inexplicably dragging their feet.

Blogger Azimus August 03, 2018 12:56 PM  

@1 - An immigration policy makes economic sense if you need the workers... But if we are exporting the work to cheaper parts of the world AND simultaneously bringing in people for whom there is no work, it fairly obviously becomes a purposeful attempts to impoverish a nation. Sometimes I think the race or white genocide or black lives matter or la Raza thing is all just a distraction from the fact that our leaders are intentionally trying to destroy our wealth . Not steal it necessarily, but destroy it.

Blogger Stg58/Animal Mother August 03, 2018 1:00 PM  

Vox,

Is he describing China's unofficial policy as nothing more than modern mercantilism?

All modern economists look down their noses at mercantilism, so why couldn't what Trump is doing be framed as an attack on an economic system they all sneer at anyway, ulterior motives excepted?

Blogger kh123 August 03, 2018 1:05 PM  

Free Trade and globalism are the death squads standing over those about to die and handing them their shovels. "Comparative advantage makes you free, comrade."

Blogger James Dixon August 03, 2018 1:05 PM  

> The USA can only benefit from a trade war.

As you have pointed out, we currently run a trade deficit. If we stop foreign trade completely, we still win. It really is that simple.

> I've read that H1B approvals are steadily drying up by various bureaucracies inexplicably dragging their feet.

It's a continuous battle, but my understanding is that you are correct.

Blogger Resident Moron™ August 03, 2018 1:08 PM  

"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."

In the 90's I read an American economist in the NYT talking about how crazy it was that American industrialists complained about the ongoing balance of trade deficits with multiple wealthy nations (I believe Japan was the object of concern at the time) when maintaining such imbalances had been official US foreign policy since World War Two.

Not paying too much attention to the economic grounds of the argument itself at the time, my instinctive reaction at the time was:

"It's done. It's time to stop!"

Does the USA really need to keep subsidising the lifestyles of wealthy Japanese industrialists in order to keep Japan from becoming Communist?

Really?

Blogger Ariadne Umbrella August 03, 2018 1:09 PM  

My husband earned an MBA after we got married. He would talk about trade, protectionism and manufacturing security on the continental USA. His professors would basically lay out the magic Victorian economist incantations, and not listen to him at all. He is right, they are now being shown wrong.

He also did demographics and faith papers, as an undergraduate. Stuff that no one talked about until the alt-right, maybe five years ago.

I mostly sound smart by parroting what he talks about.

Blogger Lyon August 03, 2018 1:12 PM  

"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..." - Vox

Yet another reason the adversary needs Trump to disappear.

Blogger dvdivx August 03, 2018 1:13 PM  

We "need the workers" like Jews need Zyklon gas. Anyone saying that should be exiled to India along with the h1b workers they love so much.

Blogger John Calla August 03, 2018 1:17 PM  

Basically, the Bretton Woods era is over. Trump isn't the only one who knows this and I doubt he's the only one pushing for a new order. Hopefully by now our "trading partners" and "allies" are well aware of what the future holds, or they'll be caught off-guard. The next few years will have tumultuous politics but it's an inevitable transition.

Blogger Stg58/Animal Mother August 03, 2018 1:21 PM  

After absorbing all of this information, I can say this is the most important post on economics to grace this blog.

Blogger James Dixon August 03, 2018 1:23 PM  

> Basically, the Bretton Woods era is over.

Agreed, but that has an important side effect. It means that the era of the dollar being the world reserve currency is also over.

Blogger pyrrhus August 03, 2018 1:24 PM  

@15 Agreed, but that has an important side effect. It means that the era of the dollar being the world reserve currency is also over.

Which will be a very good thing for Americans.....

Blogger Stg58/Animal Mother August 03, 2018 1:25 PM  

Trump will then have to forge another agreement to supersede BW that maintains the dollar as the world reserve currency. Hey don't we produce the most oil and gas of anyone?

Blogger James Dixon August 03, 2018 1:28 PM  

> Which will be a very good thing for Americans.....

I don't disagree. But the transition will be, hmmm..., eventful.

> Trump will then have to forge another agreement to supersede BW that maintains the dollar as the world reserve currency.

That would probably be a very bad idea. But that's an argument for the future, not now.

Blogger Bradley Matthews August 03, 2018 1:28 PM  

Vox and Ilk,
Top three no BS books people here recommend on economics.

Blogger pyrrhus August 03, 2018 1:29 PM  

Ricardo's model was BS even at the time...During the Medieval Warm period, England produced lots of wine, and the French winemakers lobbied successfully for tariff protection against imports...Also, English industry was protected against textile imports from India, which would have seriously undercut its economy, by outlawing such production...Later British capital moved to India, the restrictions were removed, and British textile manufacturing was destroyed.

Blogger Stg58/Animal Mother August 03, 2018 1:31 PM  

If not a new agreement that keeps the reserve currency status, a deal that favors the US, obviously.

Blogger pyrrhus August 03, 2018 1:31 PM  

@18 Armstrong's AI predicts China will be the financial capitol of the world in the 2030s...

Blogger Chase August 03, 2018 1:36 PM  

The United States has a comparative advantage in a world of autarky. Our country, with its variable climate (desert Southwest, California PNW, Great Plains, Florida) combined with a relatively high-ability population means that we should be far less reliant on trade to produce what we need relative to, say, Great Britain.

I don’t want to say we have no need or desire to trade, but trust like all things goes in cycles. We are moving from a high-trust period to a low-trust period across the globe. This should redound to our relative (and probably absolute given how bad trade policy has been for decades) advantage.

Blogger Dalrock August 03, 2018 1:36 PM  

I haven't read the entire linked article, but one point sticks out regarding the main chart.

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).


This is obvious. 2000 is the year the max value peaked. Another way to look at it though would be to put the dividing year around 1994, when we first crossed the minimum value. The business cycle now peaks at the 2000 value, and bottoms at the 1994 value. This coincidentally is right around when NAFTA was enacted.

The other point that comes to mind is that China is very fragile when it comes to a trade war. They are like Japan before the lost decade(s). Their financial markets are out of control, and much of their measured growth comes from forced investment in useless things (see the Ghost Cities, for the most tangible example of this).

Blogger Noah B The Savage Gardener August 03, 2018 1:44 PM  

While the media keeps talking about rising prices as a result of the trade wars, look what's actually happening to the prices of base metals.

Blogger Patrick Kelly August 03, 2018 1:51 PM  

There is a local talk radio personality/economics professor at UT whose arguments against tariffs and for free-trade boil down to worshiping the market and low consumer prices for American's toys and gadgets as the highest virtue, above all else.

Yep, as long as they get their cheap iFad screens they really don't care about strategic national interests. They don't even acknowledge they exist.

I'm not exaggerating.

They're not even wrong.

Blogger DonReynolds August 03, 2018 1:53 PM  

The USA is an agricultural country. What we have to sell is not finished goods, but food and fuel. WE are one of the few countries that could sustain ourselves, with abundant water, soils, and favorable climate.

The importance of Capitalism is not that it can make silk stockings. The importance lies in making them cheap enough that common people can afford them.

There are no economists who think that Mercantilism does not work. Of course it works. It worked for much of human history. Adam Smith understood it perfectly. Ricardo did not say that Mercantilism does not work, he merely said there were OTHER opportunities for trade, even when no Absolute Advantage existed. Ricardo wanted to see more trade and this argument resonated with the British Empire at the time. Ricardo's arguments were not with Adam Smith, but with Thomas Malthus.

Blogger John Calla August 03, 2018 2:09 PM  

@22 Armstrong's AI predicts China will be the financial capitol of the world in the 2030s...

Phew... he better get some new algorithms. China is basically screwed. Their demographics are a disaster, the people are not a cohesive nation, and their fiscal policy can be summed up as Paul Krugman on super-steroids. They are heavily dependent on exports to the US, just as we're losing interest in trading with them. They don't have a domestic economy capable of consuming all their production. They're dependent on energy imports and most of that comes from the Middle East (i.e., far away).

One of the reasons China isn't negotiating with Trump on trade is because they have no leeway to move. Their only strategy is to try to hurt Trump politically by targeting US voters through retaliatory tariffs, hoping they can ride this out until DC changes back to pre-Trump era leaders. They will relent eventually though, because they know that in the end, some is better than none.

Blogger Random #57 August 03, 2018 2:17 PM  

@27 DonReynolds

The USA is an agricultural country. What we have to sell is not finished goods, but food and fuel.

Must have been my imagination that we're a world class manufacturer of jet engines, something the PRC is so far behind in that they often use foreign including Russian ones by preference for their military jets. Same sort of thing for high performance CPUs, and lots of other hard to make things (not sure who makes the 32 billion ball point pen ball bearings they import each year, but I know we can still make good ones), then all the way down to all sorts of tools and equipment. Oh, yeah, only two places in the world make competitive efficient big jets, US and Europe. I could go on, but the fact is that even now, we still have a remarkably balanced productive economy, between extraction, agriculture, and manufacturing.

Blogger Peaceful Poster August 03, 2018 2:24 PM  

That was a great article. God Bless Trump!

But the USA should still be wary of China. They are moving in next door, guys. And I don't just mean the people invading Canada. I mean the Chinese government is buying up farmland and sending food straight back to China. Same goes for other resources:

Article

Blogger Matamoros August 03, 2018 2:27 PM  

Off topic. Vox, what do you think of Chomsky's assertions in violation of the (((party))) line? Is the unified front breaking?

Chomsky Calls Russian Interference a Joke - Blames Guess Who?

https://www.gatestoneinstitute.org/12799/noam-chomsky-russian-interference

Blogger Chris Ritchie August 03, 2018 2:28 PM  

So refreshing to see this. I've tried arguing these points with the free trade crowd. It's like they are zombies. They can't understand anything they didn't learn in college. First learned, best remembered I guess.

I've tried my best to be open to learning new things and what a journey it is. I'm not trying to convince them anymore. I'm just ready to build our own infrastructure and platforms and let the other camp go their way.

Blogger Emmett Fitz-Hume August 03, 2018 2:32 PM  

@29

"Must have been my imagination that we're a world class manufacturer of jet engines, something the PRC is so far behind in that they often use foreign including Russian ones by preference for their military jets."


Funny you should mention that...

https://www.wsj.com/articles/ge-engineer-linked-to-china-allegedly-stole-power-plant-technology-fbi-says-1533235590

Blogger pyrrhus August 03, 2018 2:32 PM  

@28 Armstrong's AI predicted Brexit and Trump's election, so it's got some serious street cred going....But it's essentially determined by Armstrong's theory of cycles, based on pi, which has also been doing very well...

Blogger Matamoros August 03, 2018 2:41 PM  

Understanding Phase II of the U.S. -vs- China Trade Confrontation….

https://theconservativetreehouse.com/2018/08/02/understanding-phase-ii-of-the-u-s-vs-china-trade-confrontation/

Blogger James Dixon August 03, 2018 2:45 PM  

> But it's essentially determined by Armstrong's theory of cycles

Cyclical based theories work remarkably well, until things change. That's what the dogs of the Dow investment theory is, for example. But things always change eventually. You have to understand the underlying mechanisms behind the cycles to know when the change is going to occur. Even the getting the timing right is extremely difficult.

Blogger Dire Badger August 03, 2018 2:54 PM  

kh123 wrote:Free Trade and globalism are the death squads standing over those about to die and handing them their shovels. "Comparative advantage makes you free, comrade."

You win.

Blogger OneWingedShark August 03, 2018 3:10 PM  

dvdivx wrote:A death sentence is flooding this country with immigrants. Stop the h1b program cold and kick out the illegals.
This, but more.
We need to get rid of H1Bs, H2Bs, illegal immigrants, the so-called "anchor babies", and dual-citizens (force them to renounce all other citizenships if they wish to retain their US citizenship).

Then, we also need to punish those who have been aiding in the H1B-fraud, thi hiring of illegals, and other such practices that put US's Citizens at a disadvantage.

Blogger 罗臻 August 03, 2018 3:12 PM  

A "depression" (very short if they devalue big time) in China wrecks the timeline of the Chinese surpassing the U.S. economy. If the U.S. doesn't make a huge mistake (go full socialist or lose a major war) and launches a new Cold War with China on trade, the odds of China passing the U.S. this century would collapse.

Blogger Ariadne Umbrella August 03, 2018 3:16 PM  

We are not ag only!!! We ran our own, far more humane, Industrial Revolution! Even Washington and Jefferson were running small factories on the lands they inherited or bought.

Our industrial machinery knowledge was forcibly stripped of patent protection and then shipped to the Far East after World War 2. Patent wars over things like sewing machines were a big deal in the 1800s- look at the Singer mansion. That one machine solved a nearly final step in abundant clean clothing for people- sewing by hand was an immense time sink: think of how invigorated Europe was by the automatic spinning wheels and automatic looms. Automating cotton harvesting and ginning brought prosperity. And yet, with only two to four laws, our entire mass clothing manufacturing was stripped out from the USA and shipped to low innovation, low quality control parts of the world. They literally do not even make certain specialized machines anymore. Now, high-end jeans tailors have to collect very old machines- 100 years old, 70 years old- over the course of their career, to even make something of similar quality to the Sears catalogue offerings of 1955.

Cone Denim was acquired by a multi-national. They forcibly shut down the very last selvedge denim weaving machines in North America last year. They had customers- entire finished jeans brands relied on Cone Denim selvedge denim for quality fabric. They had workers- now getting job counselling and retraining-for what? Coding for internet shipping third rate denim from India?

Simplicity, a big Four pattern company- was bought up by 80s raiders, stripped of its pension fund, then that money was used to gamble on mining stakes in Australia. Then they sold it to the next raiders. You can guess the religious/racial group that broke open that piggy bank. A nearly 100 year, incredibly reliable, high quality vendor with excellent work conditions and a stable, talented workforce!

Just because the media believes Victorian money magic phrases does not make them true or good. It makes them close to black magic phrases that can be broken apart by light and truth.

Blogger eyeslevel August 03, 2018 3:21 PM  

Whether the author knows it or not, this is Austrian economics. Excess debt creation plus government interference in the economy generates MALINVESTMENT which eventually leads to an erosion of the capital base. The virtuous cycle of higher rates of return leading to more incentive to save leading to more capital investment is replaced by a vicious cycle where lower rates of return leads to lower savings and less capital investment. Zero interest rates is not normal. It's like not having a pulse.

Blogger stevev August 03, 2018 3:31 PM  

Can I ask the Ilk/VFM something? I work for a company that designs and manufactures 85% of the world's microprocessors.
That company is heavily invested in China, Malaysia, India as a consequence or requirement of their doing business in these countries. This company is thus heavily invested in the idea of low-cost geographies being the means by which we can get design and manufacture labor costs under control.
Up front, I admit, I don't grok economics, much less macro-economics.
My question: Do any of you maintain the view or hope that TGE's willingness to weather a trade war with China will result in the reformation of companies like mine or accelerate their eventual demise? From my perspective, having watched this company go from majority American employees, where every name plate on every cubicle was evidently American, to barely a 10th being so. (Indian nationals and Chinese nationals are the preponderance of employees) that I have no doubt this company is fully converged and recapitulating the Dem tactic of hiring itself a new constituency. I've lasted over 2 decades, weathered 2 layoffs and was reinstated after 1 and successfully found redeployment in the other, and am trying to hold out until retirement. (I do CAD drawing and assembly of microprocessor circuits)
Cheers, and thanks for your comments.

Blogger 罗臻 August 03, 2018 3:44 PM  

@42 China is trying to steal all the tech in can and create a native industry. Anyone putting plants in China and not doing some in-depth background checks on employees is cruising for major trouble.

I don't understand chip manufacturing all that much myself. How is it cheaper to operate in Malaysia and China? I know in China they'll give free land for factories and there's probably close to zero regulations for construction, but I can't imagine that labor and land are the greatest cost in chip manufacturing. I assume it is capital equipment and human capital, two things that you pay for where ever you locate. When factoring the risk of industrial espionage in a country that is openly saying it wants to replace foreign chipmakers, I don't see how the risks outweigh savings, but maybe it's a lot more savings than I assume.

Chinese Govt Spends Big to Develop Memory Chip Companies

Blogger James Pyrich August 03, 2018 3:48 PM  

From the article: "Since our system is heir to the English Common Law tradition, when we sign an agreement, we carry it out. No other culture takes this view, certainly not China."

Seems like we should be much more circumspect about how we interact with other cultures... almost like they're not all equal...

Blogger Doug Cranmer August 03, 2018 3:49 PM  

Everything possible is already stolen.

The Chinese infiltrated tech companies in Canada in the 90s and 2000s. Moving into management and up where they had access to everything.

Only now is Canada raising an issue with Huawei and 5G wireless. They're 20 years too late.

Blogger stevev August 03, 2018 3:51 PM  

a common refrain, vis-a-vis increasing head counts in low-cost-geographies, is "We can get 5 or 6 of them for 1 of you"

Blogger 罗臻 August 03, 2018 3:57 PM  

@42 Do any of you maintain the view or hope that TGE's willingness to weather a trade war with China will result in the reformation of companies like mine or accelerate their eventual demise?

Supply chains are already moving out of China because of the impact of tariffs. Most of China's trade deficit with the US is not of Chinese origin. China attracting a lot of low-skill late-stage manufacturing (like assembly). When we import an iPhone, we attribute all of the cost to China, but China imported a lot of parts from other countries. It's profit is relatively small. From an economic standpoint the trade war with China isn't going to solve much for the United States, assuming China doesn't throw its doors open. It only makes sense as part of a larger political strategy to damage China (or a larger trade strategy), as Steve Bannon recently said.

Blogger tz August 03, 2018 4:00 PM  

As I commented to Michael Shedlock:

The problem is you use dollars to denominate things, but it is a person's wages v.s. the prices they pay for goods. We used to have $40/hr (w/benefits) blue collar jobs and $10 T-Shirts. Now we have $10/hr jobs and $5 T-shirts. So for the vast majority of people, T-Shirts take more of their wages for their working hours. And worse, you want them to make $0/hr and go on welfare, so they would be making -$10/hr, which you have to pay for in taxes so they can have $4 T-shirts.

I convert my work into dollars, which is merely a medium of exchange, then convert those dollars into goods and services. So the correct measure is how much work I have to do to buy the goods and services, not how much they cost in dollars.

Blogger DonReynolds August 03, 2018 4:03 PM  

Ariadne Umbrella wrote:We are not ag only!!! We ran our own, far more humane, Industrial Revolution! Even Washington and Jefferson were running small factories on the lands they inherited or bought.

The USA has never been Ag "only" nor did anyone say so, but there is no manufacturing that cannot be outsourced to a foreign country....which we have all witnessed the last 40 years (and more). Mining is an extractive industry and tied to the mines. Agriculture is limited by water, soils, and weather to a scarce number of places in the world. Refrigerators and automobiles can be made anywhere....and are.....same with televisions and cell phones.

The reason for American manufactures is the fact that much of this country's history we protected them from foreign competition and they were most convenient to one of the biggest markets in the world. When that protection was weakened, they went elsewhere.

Blogger Damelon Brinn August 03, 2018 4:05 PM  

@43, I don't know much about chip manufacturing either, but I was listening to an interview with a chip designer/producer the other day. He was saying it's great over in Asia because the women are still taught how to sew, so they're good at close, detailed handiwork on small things. I wouldn't have thought there would be much hand-work in electronics manufacturing anymore, but maybe that's wrong. He seemed to think he needed a bunch of them.

Blogger Resident Moron™ August 03, 2018 4:09 PM  

@44

That's my big problem with the idea of China taking over the financial leadership of the world.

Who in the world is going to trust them?

Blogger Pierre Truc August 03, 2018 4:10 PM  

OT, but I just got a mail:

> My level of interest in backing an Alt★Hero: Q Team comic:

I wish to file a complaint: there is no FUCK YEAH answer to this poll.

Blogger Francis The Pope August 03, 2018 4:12 PM  

Of the two, China or the USA, who is more globalist? The USA has military bases all over the world, sells the narrative that the international order is the US order and is endlessly pushing for foreign interventions all over the plane. So if the there is a battle between the globalists and the nation state, then China is not the globalist here.

Blogger stevev August 03, 2018 4:17 PM  

"He was saying it's great over in Asia because the women are still taught how to sew, so they're good at close, detailed handiwork on small things."

All sorts of wrong about this. Was this an American? Assembling electronic components is not like doing calligraphy on a grain of rice. All the really, really fine stuff is done by robotic armatures. He paints such a caricature of the asian female worker.
I think the main selling point is that these workers are in a society where the individual is cowed into respectful subservience by an elite class. A class that thinks saying sewing skills convey some advantage in electronic assembly is a sophisticated argument.

Blogger DonReynolds August 03, 2018 4:30 PM  

This comment has been removed by the author.

Blogger DonReynolds August 03, 2018 4:34 PM  

stevev wrote:a common refrain, vis-a-vis increasing head counts in low-cost-geographies, is "We can get 5 or 6 of them for 1 of you"

It is actually worse than that. Bernie fools want everyone to get $15 per hour, even if they flip burgers and squirt ketchup. Compare that to the ordinary wage in Mexico of $50 per WEEK, or in China where it is $50 per MONTH. The Chinese are upset because they are losing manufacturing jobs to Vietnam, where they get paid $38 per MONTH.

This country is never going to compete with coolie labor for a good number of reasons....wages only being one reason. There are many reasons...taxes, regulations, torts, social justice harassment, feminism,....and the fact that an increasing amount of their sales are outside the USA.

What we can do is mitigate the non-wage aspects of doing business in this country and limit imports, through reciprocity, import limits, currency controls, regulation, taxes, tariffs, safety and health standards, and consumer protection.

Blogger Random #57 August 03, 2018 4:35 PM  

@55 stevev: @50 Damelon Brinn was listening to a chip "designer/producer", not an electronics PCB manufacturer. I don't know how much this is still the practice, but in the bad old days bonding pads on silicon dies were connected to chip leads by hand by Asian women. Before then, multinational IBM moved its core memory threading to Asia because they could do it by hand cheaper than IBM's machines.

Blogger Crew August 03, 2018 5:02 PM  

@47:

China attracting a lot of low-skill late-stage manufacturing (like assembly). When we import an iPhone, we attribute all of the cost to China, but China imported a lot of parts from other countries.

I don't believe this.

For example, companies like Applied Materials, who are at the apex of semiconductor industry (they make the equipment used in the manufacture of semiconductor components) has a big presence in China.

They are not the only ones. Intel does as well.

Are you claiming that these companies are only assembling stuff that is really manufactured elsewhere?

Blogger stevev August 03, 2018 5:12 PM  

@58: Well, I've not personally visited the fabs, but internal promotional videos show bonding pad connections being done by automated machine. Pretty cool looking "choreography".
I suppose what you're saying could still also be true. I know it was done that way in our company's past, too.

Blogger stevev August 03, 2018 5:13 PM  

dang. It's so easy to stray off topic. Apologies to the moderators.

Blogger Damelon Brinn August 03, 2018 5:41 PM  

@55, That's what I wondered, whether it was really more about attitude than skill. To be clear, it was Chuck Peddle, designer of the 6502 CPU. I don't know what he's producing now.

Part of the problem is that regardless of whether it's really more profitable to manufacture overseas, executives tend to be fully convinced that's the case. So they'll talk themselves into all sorts of things to support that conclusion. If you do the math to show them they're actually spending more by outsourcing, they'll just move the goalposts and start talking about how hard-working they are or something else that you can't easily quantify.

So to your question: manufacturers who went overseas for cheap labor should bring those jobs back when it's a better deal here, but it will probably take more than that, because they're so invested in the idea. That'll take more than some small tariffs around the edges of things, which is probably why we're talking about a real trade war.

Blogger Looking Glass August 03, 2018 6:00 PM  

@62 Damelon Brinn

Converged Business Schools. That's where much of the economic damage was done.

Blogger SciVo August 03, 2018 6:02 PM  

Bradley Matthews wrote:Vox and Ilk,

Top three no BS books people here recommend on economics.


The Fifth Discipline by Peter Senge? If you can master systems thinking in a competitive organizational context, you will understand economics better than most economists. (A good test is if you can explain how a rash of apartment-to-condo conversions is a sign of poor lending discipline.)

Blogger DraveckysHumerus August 03, 2018 6:04 PM  

62.
No question attitudes must be overcome. MBAs follow the herd and they've collectively internalized the zeitgeist manufacturing belongs in east asia. Relocating back to the US involves additional inconveniences. Currently China is soup to nuts for industrial design and engineering, a funded executive or manager meets with a single contact in China and after some pleasurable outings every step in the process is addressed without further involvement chop chop. Here in the US we've lost that integration to considerable degree. There are going to be challenges which play out for at least half a generation or more.

Blogger Linus August 03, 2018 6:29 PM  

I second the request for recommendations for economics books. Every time there is a post like this, I realize how much I don't know or understand.

Blogger Ingot9455 August 03, 2018 6:42 PM  

The whole problem with finances moving to China is that no one trusts their legal system (nor should they) even to the extent that they trust the legal system and oversight of the US.

I mean, like Corwin says in the Amber books, with a total stranger there is the possibility however remote that you might be safe. But in the Chinese banking system, it's like dealing with your Amberite relatives all the time.

Blogger VD August 03, 2018 6:54 PM  

I smell heresy.

Alt-Retards are not allowed here, Haxo.

Go cry about the God-Emperor somewhere else.

Blogger Reasonably Honest August 03, 2018 7:09 PM  

@1
@4
@8
@12
@38

Man, after the shit I've been through in IT with the H1b's et al. I feel like a little curry tonight.

Currynacht that is.

Clear those fucks out with truncheons and then move up to the shotguns. It'd be a hell of a lot more honest than how they moved Americans out of IT.

Blogger RA August 03, 2018 7:16 PM  

Speaking of Armstrong, that the Chinese are in trouble now doesn't mean they couldn't come out of it by the 2030's. But they do need to have their own debt and banking crisis gone through and survived before they can progress further.

At the moment, they are tied too closely to us. Screwing us means screwing themselves too and they can't avoid that for their country is one massive social engineering experiment. But there are going to be severe pangs in converting their society into one that can carry the country by themselves.

In the meantime, a few trends: (1), capital keeps leaving the country implying a big distrust of the regime; and (2), they need to import their critical commodities like soybeans, nat gas and oil, hence they're on the hunt for more which explains their inroads in Africa and their desire to control the South China Sea.

If China does go in the tank, one can expect the US stock market to follow. Not a given, though, the markets are irrational enough already.

Blogger Al Du Clur August 03, 2018 7:24 PM  

That Trump's trade war is even the slightest bit controversial (or that it took decades before we fought it) with any group outside of Wall Street is a sign of how dumb and/or evil our elites and experts are in this country.

I have found that even people I meet with Trump Derangement Syndrome get the problem with China or stay silent because they haven't figured a way to attack Trump on it.

However, the trade issue is tied closely with the immigration one, an area Trump is weak on when it comes to taking significant action. As Queen Ann says, Trump (like on trade) just needs to start unilaterally acting or nothing will be done.

Unfortunately, the clock is running out. I am in the camp that thinks a blue wave will hit in the midterms. Even if it doesn't, there will be too many cucks for Trump to accomplish much except by exec order so it is best he moves on immigration before he gets bogged down in impeachment.

Blogger Brett baker August 03, 2018 7:29 PM  

Control the biggest chunk of high quality farmland, quite large deposits of strategic minerals, a still relatively strong, (and the GE is making it stronger) industrial base....
Yeah, we can be the reserve currency for quite a while, with a little work.
Even longer with a few exemplary executions.

Blogger Brett baker August 03, 2018 7:37 PM  

Control the biggest chunk of high quality farmland, quite large deposits of strategic minerals, a still relatively strong, (and the GE is making it stronger) industrial base....
Yeah, we can be the reserve currency for quite a while, with a little work.
Even longer with a few exemplary executions.

Blogger Dad29 August 03, 2018 8:01 PM  

Ricardo never considered currency manipulation or gummint subsidies, either. But according to the Koch Brothers, not to worry!! We live in a perfect world, with perfectly perfect trade partners who would NEVER attempt to throw a curve, or nothing.

Blogger Avalanche August 03, 2018 8:57 PM  

@27 "WE are one of the few countries that could sustain ourselves, with abundant water, soils, and favorable climate."

And when the Ice Age finally sinks in fully? (Expected to be around 2030-2031!) When our favorable climate disappears? Predictions are for Chicago weather in Atlanta -- which is pretty well below the grain belt, is it not?

Blogger VD August 03, 2018 8:58 PM  

Unfortunately, the clock is running out. I am in the camp that thinks a blue wave will hit in the midterms.

You're absolutely and utterly wrong, as I have repeatedly pointed out to you.

Blogger John Calla August 03, 2018 9:06 PM  

@68 Speaking of Armstrong, that the Chinese are in trouble now doesn't mean they couldn't come out of it by the 2030's. But they do need to have their own debt and banking crisis gone through and survived before they can progress further.

Definitely. But then by the time the 2030s roll around they'll have an even bigger problem: their rapidly aging population. Apparently the Chinese thought it would be a brilliant idea to set the fertility rate to 1.0 children per woman for 25 years straight. Who's going to buy all that crap they make? ho, ho... math is so vicious, and God punishes the wicked.

Blogger CoolHand August 03, 2018 9:24 PM  

Al Du Clur wrote:I am in the camp that thinks a blue wave will hit in the midterms.

If you honestly believe that a blue wave is coming in November, you're too short for this ride.

Look at the reality on the ground as it actually is, not as the MSM and your cuckish fear tell you.

Blogger CoolHand August 03, 2018 9:25 PM  

Should have read the rest of the comment thread, VD beat me to the punch by damned near an hour.

C'est la vie.

Blogger CoolHand August 03, 2018 9:29 PM  

Avalanche wrote:@27And when the Ice Age finally sinks in fully? (Expected to be around 2030-2031!) When our favorable climate disappears? Predictions are for Chicago weather in Atlanta -- which is pretty well below the grain belt, is it not?

They've been lying to you serially for the last fifty years, why would you take their latest predictions as gospel now?

If we ARE in a grand solar minimum, it's going to last two or three hundred years. The effects are going going to come on in ten or fifteen years, but gradually over the next hundred and fifty or so years.

It's similar to a sine wave (more or less), not a step function.

Blogger CoolHand August 03, 2018 9:30 PM  

Are NOT going to come in over just ten or fifteen years.

Can't even blame that one on fat fingers...

Blogger DonReynolds August 03, 2018 9:32 PM  

Avalanche wrote:@27 "WE are one of the few countries that could sustain ourselves, with abundant water, soils, and favorable climate."

And when the Ice Age finally sinks in fully? (Expected to be around 2030-2031!) When our favorable climate disappears? Predictions are for Chicago weather in Atlanta -- which is pretty well below the grain belt, is it not?


You will be happy to know that the wheat belt extends well into Canada today, so Chicago weather still means a good growing season. Corn is also very adaptable to short growing seasons. (Illinois is one of the biggest corn producing states today.)

But not to worry about cold weather. Iceland grows more bananas than anyone ever thought possible. Yes, much colder than Chicago.

If a global deep freeze were to take place, it simply means that other countries will have abundance in food (for a change) and will be eager to trade. We have seen this happen before and the most interesting change was from wine to beer in Northern Europe. If it warms up instead, perhaps they will switch back to drinking (and producing) more wine.

Blogger Al Du Clur August 03, 2018 9:37 PM  

"You're absolutely and utterly wrong, as I have repeatedly pointed out to you."

I hope I am wrong. However, the clock is ticking even if the blue wave doesn't happen in the midterms due to immigration and censorship (which can swing close elections). Trump's moves on the economy have been great but, unless those can swing enough non white men and the remainder of the white working class, the country and the economy will go to shit fairly soon unless Trump takes strong, quick action on immigration and censorship to buy us some time. As Queen Ann notes, Trump needs to take immigration into his own hands (especially the wall) like he does on other, less crucial issues.

Blogger Ominous Cowherd August 03, 2018 10:02 PM  

Bradley Matthews wrote:Vox and Ilk,

Top three no BS books people here recommend on economics.


That's tough, because most academic econ is either voodoo or fraud.

How about:
Bastiat's The Law,
Hazlitt's Economics in One Lesson,
Hayek's Road to Serfdom.

Also consider Kennedy's Macroeconomic Essentials for Media Interpretation. This one is BS, but it teaches you the BS that the journalists and politicians are full of. Understanding what they believe helps you see through their BS.

Blogger DraveckysHumerus August 03, 2018 10:06 PM  

@81. DonReynolds
Chicago is a foodie town. We can buy just about any crop item year 'round. Fresh tomatoes are always in the food case, interestingly, many are grown in Canadian greenhouses during our shared "harsh" winters. Plenty of fresh and arguably nutritious products are amenable to the hothouse techniques.

I disagree with your implication Iceland has good produce. I visit Iceland and return to the island several weeks from now. The grocery produce in Iceland is nonexistent and seldom rises above lousy quality. Even majority the home grown veggies are bad if available and fruit is terrible.

Blogger Ominous Cowherd August 03, 2018 10:09 PM  

Avalanche wrote:And when the Ice Age finally sinks in fully? (Expected to be around 2030-2031!) When our favorable climate disappears? Predictions are for Chicago weather in Atlanta -- which is pretty well below the grain belt, is it not?

We currently grow grain and potatos at 64 degrees north latitude. No worries.

Blogger 罗臻 August 03, 2018 10:28 PM  

@Crew
Not saying those companies aren't there, or that they don't do forced tech transfer, force you to have joint ventures, etc. And as in Korea and Japan, they know to screw the foreigners even if the law and govt don't openly require it.

All I'm saying is the US govt economists don't do value added. They calculate the entire cost of an imported good from the last point of alteration, where it gets the "Made in" stamp. They don't do a percent allocation. The Chinese complain with some truth that the US trade deficit with China is actually smaller than it seems, which is why Trump is hitting all trading partners.

Focusing on China hurts them far more than it helps the US reduce the trade deficit. They will lose global supply chains to Vietnam and other countries, they will see GDP slow and possibly have a major credit/currency crisis. The US might shave 100 billion off the trade deficit.

Blogger James Dixon August 03, 2018 11:24 PM  

> However, the clock is ticking even if the blue wave doesn't happen in the midterms due to immigration and censorship (which can swing close elections)

Of equal concern is that the dems seem to be targeting Secretary of State positions heavily in an attempt to gain control of the electoral process: https://townhall.com/columnists/kenblackwell/2018/08/02/protecting-the-integrity-of-our-elections-n2506029

> As Queen Ann notes, Trump needs to take immigration into his own hands (especially the wall) like he does on other, less crucial issues.

Either he'll get funding this year or he'll shut down the government, at which point he can order the military to build the wall (judges short of the Supreme Court can be declared non-essential personnel).

Blogger wreckage August 04, 2018 3:58 AM  

Just freakin' yesterday I was speculating that capital accrual would be a rational basis for questioning strictly free trade economics, from a free trade perspective.

Holy crap, it looks like I am starting to understand Voxonomics.

Am.... am I evil now? Do I get powers?

Blogger Daniel August 04, 2018 9:26 AM  

He seems a good man. Go blowjob him now

Blogger OneWingedShark August 05, 2018 9:30 AM  

stevev wrote:My question: Do any of you maintain the view or hope that TGE's willingness to weather a trade war with China will result in the reformation of companies like mine or accelerate their eventual demise? From my perspective, having watched this company go from majority American employees, where every name plate on every cubicle was evidently American, to barely a 10th being so. (Indian nationals and Chinese nationals are the preponderance of employees) that I have no doubt this company is fully converged and recapitulating the Dem tactic of hiring itself a new constituency.

This depends greatly on how Trump directs things; the Chamber of Commerce has such a death-grip on politics that its obsession with cheap labor is perhaps one of the most major contributing-factors to today's situations. -- In short, Trump's greatest advantage is his greatest weakness here: he's a businessman.

What's really needed is swift and terrible, but just, judgment as Reasonably Honest wrote:Clear those fucks out with truncheons and then move up to the shotguns. It'd be a hell of a lot more honest than how they moved Americans out of IT.

But then we need to smash the companies, too. Make it painful for both the shareholders [financially] and drop the leadership that imported them via RICO.

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