by Pepe Escobar for RT
Not only does this represent yet another step in China’s irresistible path towards economic primacy; the Chinese currency’s inclusion in the Special Drawing Rights (SDR) basket will also lead central banks and hyper-wealthy funds – especially from the US – to increasingly buy more Chinese assets.
At the first US presidential debate, Donald Trump took no prisoners, criticizing China’s currency manipulation. This is what he said:
“You look at what China’s doing to our country in terms of making our product, they’re devaluing their currency and there’s nobody in our government to fight them… They’re using our country as a piggy bank to rebuild China, and many other countries are doing the same thing.”
Well, China is not “making our product”; the manufacturing process is Made in China – then exported to the US. Most of the profits benefit US corporations – everything from design, licensing and royalties to advertising, financing and retail margins. If the mantras manage to spell out a partial truth – the US has lost manufacturing jobs to China, China is the “factory of the world” – they don’t spell out the hidden truth that those who profit are essentially major corporations.
China does not “devalue their currency”; the People’s Bank of China periodically adjusts the yuan according to a very narrow band. The major practitioners of quantitative easing (QE) are actually the US, as well as Japan and the European Central Bank (ECB). And the currency of global consumer goods manufacturing continues to be the US dollar, not the yuan.
Beijing also is not “using our country as a piggy bank to rebuild China.” This is all about balance of payments. What US consumers spend on Made in China products – many of them delocalized by US corporations – is pumped back to the US as capital inflows that keep interest rates down and help to support the Empire of Chaos’s global hegemony.
Win-win, Wall Street-style
Trump’s attention span is notoriously minimalist. If his advisers managed to imprint – tweet? – a few one-liners on his brain, he would be able to explain to US public opinion how the US-China game is really played, something that all relevant parties in both nations know by heart.
And the – crucial – missing link in the whole game is Wall Street.
This is how it works. A mighty hedge fund approaches a US corporation and/or large company with “an offer you can’t refuse”: Delocalize to China. This necessarily implies that all the company’s assets are re-hypothecated on a double-entry ledger in Wall Street.
Wall Street “wins” both ways; either by financing the delocalization (and corresponding US job extinction) to China, or buying companies that refuse to delocalize.
Then they go for wage arbitrage concerning products that used to be Made in USA and are now Made in China; that concerns the huge wage gap between the US and China, which also factors the exchange rate between the US dollar and the yuan.
China for their part recycles their US dollars buying US Treasury Bills. This, of course, holds bond prices high, and that helps to keep US interest rates low.
Everything in fact is on a high; bond prices, the US dollar perceived value all over the world, the exchange rate. US dollars keep frantically entering the US economy, then – in theory – used to keep frantically buying Made in China products.
Of course the price of a Made in China product in the US is low – and that is “incentive” enough for US companies to essentially keep Main Street USA unemployed. As Steve Jobs once famously proclaimed, “these jobs are not coming back”.
The US dollar exchange rate will continue to be high as long as China – and others – recycle their excess US dollars to buy US Treasury Bills en masse. The crucial point is that these US dollars never enter the real economy. They are sort of “trapped” either in the extremely cozy upper strata of Wall Street casino capitalism or Too Big To Fail rarefied banking. And the Fed wants the game to go on indefinitely, to prevent a rate collapse.
Beijing for its part plays the game with relish; as the prime global export powerhouse, the agenda is to solidify – and expand – manufacturing know how on the way to achieve a status of “moderate income” nation by the start of the next decade.
The bottom line is that to recover US manufacturing jobs – as Trump has been forcefully promising – he will have to stare down the whole Wall Street finance oligarchy.
So no wonder these oligarchs – responsible for shipping all those US manufacturing jobs to Asia and lavishly profiting from bailouts to the ‘Too Big To Fail’ racket – hate him with all their golden-plated guts.
Hellfiring those Too Big to Fail
For all his incapacity to formulate thoughts above the language skills of a third grader, Trump has been piling up astonishing proposals that resonate wildly, way beyond the “basket of deplorables” spectrum.
He is against Cold War 2.0 and the pivot to Asia, when he says “wouldn’t it be nice to get along with Russia and China for a change?”
He no less than pre-empted WWIII when he said he would be against a US nuclear first-strike.
He totally abhors global “free trade” – from NAFTA to TPP and TTIP – because it has “hollowed out the lives of American workers”, as US corporations (under Wall Street’s “incentive”) delocalize and then import back into the US tariff-free.
Trump was even open to nationalizing Wall Street banks after the 2008 financial crisis.
So we’re faced with the ultimate surrealist spectacle of a billionaire denouncing corporate globalization, which has been responsible for stripping the US lower middle classes of countless, decent blue-collar jobs and social benefits – not to mention turning them into hostages of rotting public infrastructure. And all that with absolutely no one among the US establishment condemning the most astonishing wealth transfer to the 0.0001% in history.
If in the next two presidential debates Trump points to the crucial missing link in the whole plot – Wall Street – he might as well lock on as a surefire winner.
I think that you’ll find that the Peoples’ Bank Of China has not only been dumping US Treasury’s since the beginning of the year, but also divesting itself of US equities for good measure. US Treasury sales have remained fairly stable due to the ‘flight to safety’ which itself has been occasioned for footloose capital looking for safe havens in uncertain economic times, as well as its petrodollar status, and also why the gold price is also bullish (in spite of the market manipulation). The same role was played by QE when the Fed bought up Treasuries. Strange to say that both the $US and gold are both rising concurrently. But these are uncertain times.
Is there any doubt that China will turn TBILL channel on again as soon as QE stops? QE is the only reason China stopped recycling dollars through TBill channel.
QE is pushing bond prices for China, so they don’t need to buy – at this juncture in time. This means that wage arbitrage for Wall Street in China gambit may continue unabated. The idea is to keep Yuan priced under the dollar to then allow mercantilism (more exports than imports). The low price of Yuan means arbitrage for wall street. There are ways to keep Dollar/Yuan ratio in a window; for example either push dollar price, or decrease Yuan.
There is another wrinkle – permanent Chinese efficiency, which means Wall Street .01% Oligarchy arbitrage forever.
Let’s put it in an atlantacist context: Wall Street exports jobs and industry to China, especially starting in 1995. Said industry locates on Chinese Coast lines. This means that there is access to move goods through shipping.
Think of Venice Canals, where goods would about efficiently on canal transport network, ultimately making a final product.
Since China does not have good navigable in-land waterways, and their overland infrastructure was almost non-existent, they had trouble harnessing their “earth” to make goods.
Wall Street China gambit has allowed China economic headroom to develop their infrastructure with new highways, freight rail, high speed rail, airports, etc.
This means in future China can turn away from atlantacism shipping means (over water to the west) and to their land. It also means permanent efficiency to make goods, as China’s interior becomes more efficient.
Chinese labor no longer needs to congregate in sea access zones, as in-land interior opens up, thus making it lower cost for people to live (lower land prices in interior). Goods move efficiently by rail and air. Russia, a land power, provides cheap energy to fuel industry.
In meantime, U.S. is not investing in new efficiency, and instead is in rent extraction mode.
https://www.corbettreport.com/the-most-important-story-you-didnt-see-this-week/ China and the floating of SDR denominated bonds.
I was about to post this article. This can’t be good for anyone. A bunch of creepy globalist-oligarchs
just quietly established the world government/currency while everybody was preoccupied with everything else. It is done. The only country that is not part of this “new world chaos” is Russia.
In addition to that UN just took over the internet.
Man, I don’t know what to say, I sort of wish there were an expert out there who was interested in the stuff that I am thinking. (Actually, people like Pepe and the Saker are awesome, and make my impossible dream almost possible). So this is what I am thinking (and showing my ignorance): I think the lesson of the American Revolution is that a local tyranny is more onerous than a more distant one. However, in the case of the reign of the BIS, Global tyranny will be tethered to local tyranny. Add to that, the stated agendas of environmentalism, zero growth, population reduction, etc. Safe to say that if we are not facing the end of the world we are facing the plague. My second thought is that the BIS, despite the fact of its independence from Switzerland is probably more like a post office box than a principality. Otherwise, what’s stopping, say, a crappy little country from targeting it with its nukes (which it doesn’t officially have).
@ Nightingale Here is an older article on this topic that you also might find interesting for background.
http://www.voltairenet.org/article159686.html
Yes, so much for the BRICS and the false illusion of a “multi-polar” world.
Pepe is perfect!
….except China has not been purchasing US T-bills. They stopped some time ago (years). They have been quietly selling. The biggest purchaser of T-bills is the Fed.
By the way, China has been devaluing its currency. It has devalued in lockstep with the US dollar. “Trading within a narrow band” is, in this case, a euphemism for devaluation. The US dollar has been inflated dramatically and is purchasing power has fallen considerably, even in just the last few years. Pegging against that means you are doing exactly the same thing as them.
China is in significant structural difficulty when it comes to its vast internal debt. This will cause big trouble (already beginning to). The Red Ponzi is yet another government generated bubble and when it collapses (as all bubbles must) it will be interesting to see what choice the Chinese government makes in order to cope with this disaster of its own making. Will they allow state organisations and crony “companies” to go broke or will they bail them out…? If the bail ’em, then they head down the track towards far more trouble- bigger issues still. This is something the US, Japan and the EU are experiencing first hand. For them things are about to get a lot worse economically.
In the end, no matter how clever or powerful you think you are, central planning of the economy fails for there is no solution to the socialist calculation problem. And that is something that has been known since at least the 1920s…
Trump, if President, will have to battle not only against the billionaire oligarchy, insiders, Wall St, the Banks etc. He’ll also have to worry about a yuuuge recession/depression along with all the social unrest coming out of that. Terrible times.
Siotu
Pepe is largely correct. China didn’t need to push tbill prices after QE started. They vectored their dollar holdings (won in trade imbalance) into buying real assets. Africa saw capital inflows. This is easy for china to do since the world takes dollars, as dollars are reserve currency.
The peg window actually became a problem for asia trade. The Yuan followed the dollar at the bottom of the window, thus pushing China outside of other trade partners.
China most certainly used the TBill gambit starting in mid 90’s after MFN. After 2008 American and Euro partners engaged in equal rounds of QE, thus raising their bond prices in lock step. Bond price up interest rate down.
Interest rate down, then the hope is that people will take out new loans to pay old loans. This means that humanity is walking inside of a funnel, as the future must be “more” to pay the past.
The Red Ponzi along with ghost cities is another thing that Western observes like to point out. It is a red herring.
China has state banks. These banks channel new loans against real assets they would like to acquire, for example the solar cell industry. This sort of channeling can build infrastructure, for example, new semiconductor plants. How many new semiconductor factories are being built in the U.S.?
What most, if not all, western economists and pundits DON’T GET, is that when a state bank issues a loan, they hold the debt instrument. That means that State Power can erase said debts. These particular debts can be easily erased.
Another factor in erasing debts of this type, is that the Yuan remains in money supply. The Yuan is no longer destined to enter the ledger to disappear. In effect, the state banks of China can easily emit Yuans debt free. This debt free money can then go on to pay down private debts.
There are two main ways a debt money system cancels debts: 1) Harvesting real assets to swap and then cancel the debt instrument. 2) Issue exogenous debt free money, outside of private banking system, which then goes on to pay salaries, and then pay off private debts.
With regards to private debts, most of those types of debts in China were built up in land price bidding.
In the first cycle, the Communist government had fees on land, which held price down. During the second cycle people started bidding up prices. This is on China for bad tax policy, as land does not follow supply demand curves. Land must be taxed. See Georgist economics.
China has since suppressed some of the land ponzi they unleashed, but they still need to have better fiscal policy.
With regards to economics, all economies are planned. In the absence of planning the banks will do it for you. The west is showing us just how bad that can be.
There are three kinds of markets, elastic/inelastic/mixed. Most neoliberal economists spout nonsense that markets are perfect predictors of price, and that everything is perfectly price elastic, as if all markets are elastic.
So how is it working out? China has the jobs, and they are building out first rate infrastructure. They can easily cancel sovereign debts, and they can turn on internal consumption any time they want with direct stimulation.
With regards to SDR’s China will have the ability to conjure synthetic money relating to trade, and they will use their state banks to channel and manage their Yuan economy, especially by targeting industry and funding inelastic markets.
Many in the U.S. are in deep denial about how money systems work, especially as the Chicago School monetarist neo-liberal nonsense spreads into the minds of the hypnotized, but the factual evidence is to the contrary. Others that make usury gains from the system (wall street) continue with promoting hypnotism because it is a feature that works for them.
“The bottom line is that to recover US manufacturing jobs – as Trump has been forcefully promising – he will have to stare down the whole Wall Street finance oligarchy.”
That ‘s what it boils down to, and that’s too tall an order.
The 45% tariff that Trump has proposed in the past on Chinese imports terrified the Republican party leadership. During the debate, Trump was given a good opportunity to present his ideas in this regard. Instead his reply degenerated into the standard neoliberal positions of deregulation and corporate tax cuts. The 45% tariff was not mentioned. If that is any indication, he has probably already abandoned using the “stick” on the multinational corporations and instead will only use the traditional “carrot”.
Jobs will only come back if taxes and regulations are in line with what they are in outsourcing countries (Mexico, China, Burma, Vietnam…). But new trade agreements will kick in as these countries, seeing outsourced jobs going back home will likely raise trade barriers. US Phones, cars, A/C … will become less competitive than locally made brands, wherever these brands originated. Short of having DJT style leaders elected in Japan and Europe, this will merely penalize US exports.
The solution is to radically change WTO rules, globally. We have been doing crazy things under the “free trade” and globalist banners for too long. And the multiple business disruptions created by Internet were never properly managed.
Here is a radical proposal: “Finished goods/products can be freely (no import taxes) traded worldwide if the manufacturer’s margin remains higher or equal to the sum of distributors margins”.
Anon
To get jobs going in USA demand all currency be specie backed. Fractional reserve banking would be over in no time. Govt and cronies could not borrow without limit any longer. People who saved would find that their wealth would not be getting eroded by inflation. Productive workers would be rewarded as their spending power increased dramatically. Meanwhile manipulators would fail. Time for some honest price discovery.
Siotu
“stare down the whole Wall Street finance oligarchy…and that’s too tall an order”.
maybe not. either way it’s gratifying to see this site expanding from war coverage to the larger contextualization of “4th gen warfare”- hence the formative trends and forces of the historical transition.
IIRC, some factors in the mix:
the yuan enters the SDR, but there’s another currency in the wings (as reported on this site), the Russo-Chinese oil currency. how stable might it be, and depending on what? didn’t Putin publicly state that Russian oil out-of-the-ground costs $3/bbl, same as Saudi? this introduces the next question, ignored by the press; is oil in fact abiotic, as publicly claimed by Russ scientists at an int’l conference in Los Alamos in the early 90’s?
there’s a cultural symbiosis btw the US and China forming in the tech sector. a second wave of Chinese money (the Hong Kong turnover being the first) is massively inflating SF Bay Area real estate -$1-2M homes- often sight-unseen. the Bay Area is a city-state/R&D tank; you’d be amazed how little you get for $1M. what the Chinese are buying is access to the school systems, and university and corporate research departments.
Germany’s ready to bolt. their multinationals want in on the Silk Road project.
American infrastructure issues are going epic: California water shortage is now chronic- massive fires all the time. the wheat belt will fail; the Ogallala Aquifer is nearly gone. the Buffalo Commons is a growing romance.
i’m not pretending to be Walter Benjamin, these are “known knowns” and now. Trump, for better or worse, represents autarky.
more: http://www.oftwominds.com/blogaug16/long-game8-16.html
Julie Bishop and mass murderers…a bit of history
http://www.heraldsun.com.au/news/breaking-news/bishops-lawyer-work-a-source-of-shame/story-e6frf7kf-1226525303554
So I’m curious, where does China, Russia, and India’s push to substantially increase nationally and privately owned gold reserves figure in the Game of Currencies? From what I understand, China is investing in major infrastructure for the exchange and storage of physical gold. Are these actions real signs of an attempt to shift global trade away from petro-dollars to metals-backed currencies? Such action surely requires escalation and projection of military force in order to secure trade corridors and would certainly explain a lot in terms of the current geopolitical situation. I’m not well versed in the complexities of reserve currencies and banking but I can see potential benefits of a global system of currencies based on the supply of a physical commodity readily accessible to individuals as opposed to oil, printing presses and central bank policy. Undoubtedly the entrenched unipolar elites are apoplectic at the thought of the demise of American hegemony of trade and military might and their self-induced nightmares of apocalypse are bleeding out in the mentalities of average citizens, many of whom are screaming frantically that we are on the verge of horrific collapse and only “insert favorite candidate’s name here” can save us if they “insert simplistic action here”. I would not be surprised about any kind of major crisis perfectly timed with the incoming president, (whoever it may be) that sucks up all of their time and attention. So once the president is off dealing with whatever has been engineered to distract them, how do the rest of us work to create prosperity and improve international relations?
Erin
The trouble with fiat currency is that in the end it falls to its intrinsic value (in this case pieces of paper with pretty patterns and pictures of ugly politicians and the like). The purpose of gold or silver (specie) is to prevent the inflation of the currency. That is, it prevents the fraud of bringing into existence more and more unbacked currency. The trouble with unbacked currency is that it destroys the purchasing power of currency already in existence. Every worker, every retiree, every person who is not a direct recipient of the newly created currency is invisibly bilched. Their wealth is gradually stolen. The effect is dramatic. People stop saving and go into debt. Wages and salaries lose purchasing power. Cost of living rises inexorably. Worse, the system is biased in favour of consumption and not saving or investment (governments are not investors by the way, they are very large consumers of wealth). This has massive social consequences. It changes cultures irretrievably. It changes people from self-sufficient into submissive dependents. It makes many the recipients of hand-outs and welfare. It kills productive activity dead.
I suspect that the Chinese are aware of it. They can see the USA and Japan. They are aware of what is doing in the EU. This is what makes China such an interesting case to study in terms of economics. What will they do? What will they do about their internal economic problems? How will they act- bail outs or let the economic dead-wood fail and go broke?
On th international trade front it appears that China and Russia are hedging their bets with specie. Could be they see a future where trading is done with gold backed currency. If that is the case, then the US dollar is in terminal decline- already “doomed as the reserve currency of the world”.
What would make the USA great again would be for the US government to admit it exists in a multi-polar World. Not only does that require doing a deal with President Putin (which I understand Trump would do). It also requires the US military to return to its prime responsibility of defending the territorial integrity of the USA. They need to go home. Budgets need to be reduced and the US needs to rediscover the principles of some of its founders (not the Hamiltonians though!).
Siotu
All money is law. Fiat means faith i.e. faith in law and high agreement.
Gold gets its faith by its stamp. There is no such thing as intrinsic value.
The VOLUME of money in supply should match the amount of goods and services extant.
All foreign trade is only barter. There should be a third accounting device to allow foreign trade, and the best device devised is the bancor – NOT SDR’S.
Debt money that comes into existence against a hypothecated asset, to then grind through an exchange rate function based on market manipulations, is a shadow of a shadow. This is the problem with supposed fiat – it is that money systems are not truly law or morality based. Oligarchy has gamed systems to their advantage.
Even Russians think they need to sell state assets to gain conjured foreign currency, to then emit Rubles. And of course the foreign currency must run through an exchange rate converter, which may be entirely capricious or manipulated. Witness George Soros and his currency trading shenanigans, all based on bear raid shorting schemes.
Mefobills
“Gold gets its faith by its stamp”.
Whatever is that supposed to mean?
“The VOLUME of money in supply should match the amount of goods and services extant.”
The volume is arbitrary. There is no correct or perfect volume. What matters is that the currency remains 100% specie backed and is not inflated by issuances of unbacked currency, nor manipulated by fractional reserve practices etc. (which are frauds against the existing holders).
Bancor? You mean the Keynes atrocity? Forget about it. It is yet another fraudulent rort-fest just as with SDRs and all the rest- another manipulation robbing the productive, the worker, the wage and salary earner, the saver, the retiree,….. Does anyone really believe that any of these vile schemes will not be employed for the enrichment of those who control of them? Does anyone seriously believe this is not going to be to the cost of all other people? Oh well. Perhaps they’ll still respect you in the morning.
Siotu
Gold by weight was money when the temples first deemed it so. It was in the form of barley weight, hence the term “grains” and it was measured on a balance scale. The temples had metal by weight to do long distance trade, as a form of accounting.
It was probably in Lydia Greece where the first stamped coin began. At that point, the King’s stamp, gave the coin its value.
From then on, all money has been fiat. Thousands of years of coin history cannot be ignored.
Volume is not arbitrary. This is why the FED has open market operations. They suck in and out dollars via repos and reverse repos on overnight market. They also make ready dollars for new TBill issuance, hence there is never a bond collapse. In this way bankers control the issuance of private credit (interest rates to control loans), and by proxy credit volume.
I’m not trying to be mean about correcting you, but there is so much nonsense out there and many people are trapped in bad thinking. It is totally understandable, if you have been taught one narrative your entire life.
Mefobills
Quoting, “Gold by weight was money when the temples first deemed it so.”
In other words gold was not money until temple authorities ordered it be money, by so-doing called into existence its value.
Yeah. Right.
Have you actually thought the idea through? What your position presupposes is that in the absence of the authorities proclaiming “gold is money, valuable because we hereby order it to be so” it was not valuable. Clearly the people could not consider it precious or valuable on their own account- not until they were ordered to treat it as valuable. The authorities spoke and yea, suddenly a miracle occurred and gold was transformed from just stuff that happened to be hanging around the scene into…….money!
Nonsense!
Gold was valuable long before the rulers and authorities got involved with it. Its value came from its physical attributes, properties and characteristics recognised by people who sought it and used it. It was ideal for storing value and transacting. This was already known.
Quoting: “All money is law. Fiat means faith i.e. faith in law and high agreement.”
The definition of “fiat” is not faith. It has nothing to do with faith. It is a formal authorization or proposition; a decree, an arbitrary order.
Definition of fiat, according to Merriam Webster:
1 : a command or act of will that creates something without or as if without further effort
2 : an authoritative determination : dictate
3 : an authoritative or arbitrary order : decree
Definition of fiat according to Oxford:
1 : A formal authorization or proposition; a decree. ‘the reforms left most prices fixed by government fiat’
1.1 An arbitrary order.
Faith it aint.
Historically what occurred was that rulers sought power over people’s commercial activities by imposing a currency and specific regulations by coercive demand, backed up by force and extreme violence. At first they utilised that which the people ALREADY held as valuable for the purpose of storing value and transacting- precious metals such as gold and silver (although there were other items which were also used for the purpose, the attributes and properties of the previous metals saw them most commonly adopted for the task). As is typically the case, the base lust for power and unearned wealth (by rulers, authorities and cronies) saw them seeking to spend ever more, even more than the rent seeking they could realise by taxing and regulating transactions, so…. they inflated the currency. This was done by debasement of one sort or another (a favourite being that of coin clipping or, a little more subtle, shaking coins or bullion in leather sacks, collecting the fines thus chipped and using those to smelt new currency!). Of course, it is never enough and it was soon a case of debasing the currency by smelting alloys of copper/gold and using lead with gold plating.
Moving to more recent times. The innovation of paper currency and more recently electronic currency has made the process much easier for authorities to undertake. It is far faster to achieve harm. For example, since the creation of the FED in the US it has taken some 100 years to debase the US dollar by 97% of its spending power. It has been achieved even faster than that; in under a decade in Germany, five years in Hungary and in Zimbabwe they achieved it in under 18 months. The same process took many centuries to occur to the same level in ancient Rome. Ah, the advantages of paper printing presses!
The results of inflation are always the same, every single time. You’d think the authorities would have learned. But no…. and so now we get to watch the impoverishment occur yet again. For a while the rort works (for the authorities and their cronies), but the pernicious effects are inevitable and disastrous for the people. Penury & perdition guaranteed.
“Volume is not arbitrary. This is why the FED has open market operations.”
The volume is arbitrary. It is unimportant what the specific amount of currency is, so long as it is not inflated. The best means to prevent inflation of currency is to ensure it is 100% specie backed. As it is impossible to call specie into existence from thin air, that prevents the authorities or their cronies from creating new currency to debase that which is already in circulation, owned by other people.
The FED open market operations are utter fraud. Too long to go into here, but do you really believe that a bunch of bureaucrats and nomenklatura possess the omniscience necessary to determine what the subjective preferences and time preferences of hundreds of millions of people making trillions of transactions actually is? Do you seriously believe this squad of financial gauleiters could possibly calculate a perfect volume of currency moment to moment, the ideal amount of debt, the perfect value of the interest rate for each transaction and every person? Do you seriously believe that this central planning abortion can actually perceive what is right for each person and act on that? Even the ex-boss of the Fed, Alan Greenspan, admitted the task is impossible.
What the Fed really does is manipulate financial markets to suppress honest price discovery in order to defend the “too big to fail” (in other words, its cronies and insiders, chums and buddies- & bugger all you peons). What has occurred is that the Fed has now created the perfect conditions for the destruction of the US dollar as a reliable currency. It has impoverished the US people. It has wrecked the culture, values, expectations, potential, opportunities, productivity and wealth of millions of people with its so-called “open market operations”. The correct term is fraudulent currency manipulation. It is indeed fortunate that such nonsense is becoming all too obviously a failure – soon to be at an end. The tragedy is that many, many people are going to suffer for it.
Finally, central planning does not allow control of the economy. It merely changes the nature of some of the transactions within an economy. It moves wealth into different hands. In general it encourages consumption and waste, while punishing productivity and thrift. It encourages debt and dependency while discouraging independence and the building of wealth. Bad news for all but the chosen few and in the end, bad news for them as well. Never forget that the authorities are but a portion of the economy. They are merely mortals within it, inside it, a sub-set of it, subject to the restrictions of economic reality just as every person is. While they can create suffering for the majority, in the end they can’t escape to outside of the economy. They are inside it and do not possess the omnipotence necessary to control it. They get to enjoy consequences, just as do all others. Watch and see. Won’t be long now before you are able to see some sterling examples playing out.
Siotu
Can anyone tell me what US made (not by a US owned corporation,but actually made in the US) products are bought (not just available if anyone wanted to buy them) in Europe and Asia.I know for a fact that in the US in most stores (non-food stores) that anywhere from a third to a half of all products for sale are made outside the US.I’m curious if that is similar Worldwide.Are “international” products more common than local industry products.And if that is true. Then we begin to understand the deep problem with our economies.
I’m a bit old-fashioned (I’m proud to say),but in my thinking if you are depend on global products for your society to function.Then a country is in deep trouble. With no ability to maintain a sovereign existence.In the past ,one advantage to having a large populous country was your ability through economics of scale to provide a decent living for your people.The people made products for sale,and since they were paid adequate wages,they purchased those products.And the economy worked in a circle.The new economy we see,is what seems to me to be a “service” economy. In which only a few high-grade products are produced by fairly high-paid labor.And the mass of the common people are employed (when they are employed) as store clerks,office workers,etc. Usually at much cheaper wages (when gauged by inflation) than previous industrial workers.And the products previously made,bought,and sold,locally, are now produced by cheap labor from other countries.With the enormous profits going to middle persons,and the elite.
We hear conflicting reports,(which no reporters from our elite controlled media want to dig deeply to report on) on the “need” for immigration in Europe (and the US) for workers. And at the same time we see,European countries,with large unemployment statistics.We hear of youth unemployment in the double digits.While in the US,after you discount the false regime figures.You see much the same.Those conflicting stories don’t make sense.The “real” story I believe is that our corporate rulers,”want” the immigration for “cheap” labor. Not because there is a “need” for labor.Only a “want” for cheap labor.
Until our nations’s restructure their economies to benefit their “populations” we can never overcome these problems. And we as citizens are doomed to a downward spiral in our standard of living.We have allowed a global elite to seize power in the World. And unless that can be changed we will have no hope for a better future for ourselves and our children.When a government forgets that its entire reason for being permitted,is for the benefit of its citizenry. It forfeits the reason for it to be allowed to exist. And should be replaced by one that will represent the nations citizens.
I live in Ecuador UB!. At the moment a fair bit of food is brought in from other Andean Nations especially either Peru or Chile. However, this is largely because of the current “luxury” syndrome that expats and freedom [for now] from Yankee exploitation has brought.
But there is this, to all native Ecuadorians. They always say “if it all falls over tomorrow, we still have what we always had – the seas and fishing, the flatlands up the rise of the mountains, and rice and sugar and wheat [some] and the mountain farms that run chickens, cows, vegetables.
We will always get by and be happy. We were happy before, with family, church, love and laughter.
And we will be happy again.
It s a point of view and self sufficiency that the American Anglo world has lost.
Feliz usted!
Yo amo ECUADOR y Presidente Correa! y el gente de Ecuador.
What is US made in Asia and Europe:
1. WMDs like bombs, assault rifles, ammos, TOWs, HumVees and Armored vehicles, fighter planes, etc etc
2. Refugees from various regime change operations….
There is no need for cheap labor in Europe! Employers like to lay off people above 50, because they are more expensive. They never have a chance to be hired again. So they have to bridge 5-20 years and if one has more savings than ca 6000 Euro, or more than ca 30 000 in a home one has to ´eat´ their savings before getting minimal public assistance. Young people (the ones who are hired have a much more subservient mentality) take their place, they get temporary contracts for a lot less, so it is very hard for them to buy a house or even a car. This means in one generation, our middle class has been wiped out, it takes some time before this will show its true magnity. It means the loss of buying power for big ticket items, which will take the economies down further.
The refugee problem is a good distraction as well. They are perfect scapegoats and set the alt-rights against the ´gutmenschen´, a false right-left conflict.
Some US products exported outside the USA:
Sprint car engines, chassis and components, drag race engines, chassis and components, GM Corvette, lots and lots of trucks of all sorts, SUVs, Cadillacs, machine tools such as Haas, fasteners such as ARP, aircraft such as Boeing and Lancair and Cessna, gas turbine engines for aircraft and ships and electricity generation plants like Pratt & Whitney and Allison and GE and Williams, pumps, valves, heat exchangers, flow meters, macrosonic mixing systems, drilling equipment for mineral and hydrocarbon prospecting and production, fuel cells (various systems and types), sanitary process equipment, tyres, seals, transmissions, hydraulic equipment including servo-valves such as Moog, musical instruments including Gibson guitars, motorcycles like Harleys, all manner of specialist software etc. etc. etc.
I may be clutching at straws here but I notice that a lot of the items on your list, Cessnas, Cadillacs, GM Corvettes, SUVs and Harley Davidson motorcycles are products that could be called ‘luxury sector toys.”
I also see that competition in some of the other, more practical ‘industrial’ items on the list is either already strong or growing exponentially. After all, the US is proving itself to be an unreliable partner not only diplomatically. It has been too eager to resort to sanctions which make the things bought from then in good faith suddenly useless. The weaponization of trade is practically a US patent. Russia has in fact been driven (a good thing) to manufacturing their own medium-long range passenger airplanes. I believe both China and India have placed substantial orders and may be involved in some of the manufacture.
As for “motorcycles like Harleys”, I believe that the US makes no others except perhaps Buell which is Harley-based or assembly for some Hondas like Goldwings which I expect no one in Europe buys anyway. Apart from the fact that it has long been rumored that Harleys are now manufactured in China, only drug dealers, lawyers and accountants can afford them.
Here is the low down as scooped from the internet: “Germany, Japan and China all make parts used on H-D. They are assembled in York, PA. Manufacturers are not required by law to disclose where component parts are made.”
The ‘net’ consensus is that the Harley is now an international machine with Porsche and Brembo involvement, with even some of the assembly/wiring done in Mexico, leaving about 50% of it ‘US manufactured’.
Hi Franz
As is often observed, one man’s necessity is another man’s luxury. For instance, try telling the Royal Australian Flying Doctor Service that a Cessna is a luxury toy.
Anyway, Uncle Bob’was seeking some products. Those were a few that quickly came to mind. There are plenty more. One can keep adding to that list easily enough. More examples, OMC makes two-stroke and four-stroke outboard engines as does Mercury. Hartzell makes propellors, as does Hamilton. Robinson makes helicopters as do several others. Caterpillar makes earth moving machinery. Cummins makes engines. It is just goes on and on and on. And these are just some reasonably well known products I recalled, reflecting over a cup of coffee (Kona, from Hawaii, presently a state of the USA, IIRC).
You are completely correct about the presence of competitive products available from non-US sources as well as US sources and this is exactly how it ought to be. We should to welcome competition, as it means improved products at lower cost to the purchaser and user. For example, when I was a young man automobiles of any sort were pretty much only available to the wealthy professional or to those of senior rank in government. They were expensive indeed. Even vehicles that were of low quality, limited features with mechanical reliability issues (continuous oil leaks, faulty rubber hoses, uncontrolled rust) and most annoying electrical problems (anyone remember Lucas, Prince of Darkness?) were expensive. Within not so many years all that was gone. Cars became affordable, reliable, many were interesting, some were even fun to drive. Outstanding! This advance was marked by a multiplication of available brands and models, sub-models and types. As competition for the customer’s favour heated further, the array of choice got wider and wider. The products got far better. Eventually we got to the stage when even people of average wealth started to purchase the high end brands. By that point competition for the customer’s favour was intense. White hot in fact. Some famous names disappeared when they could not keep up (although, to be fair some were disappeared as the result of governmental interference, but that story can wait for another day).
So bring on competition. It drives innovation. It improves product. In the absence of government interference it dramatically reduces prices. It absolutely drives response to the needs and preferences of the customer. Fail to do as the customer prefers, or fail to see where the customer’s preferences lie, and the consequences are serious. It can mean going out of business. Now that is a motivator that concentrates the mind! It is as it should be.
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Russia has some of the best aviation design and production people on the planet. It is a good thing if famous outfits like Sukhoi et al survive and thrive on the basis of excellent product. They certainly have the potential. I sure hope they end up building wide body (or blended wing-body) long haul. Best of all would be if they got into building supersonic civil aircraft. Such aircraft would be hugely useful. Well worth considering what such aircraft could mean for the people living on the “World Island”.
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Buell, alas, is no longer. Harley purchased that organisation from the founder. Now they have closed it down. The founder, Erik Buell, moved on. More recently it has been reported he may be about to release a new brand of motorcycle. Hopefully it will be a success. He deserves it.
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Components and component sub-assemblies for many products are sourced from all over the world. That is no surprise. It is a good thing. What occurs is that some organisations specialise in particular areas and become the very best in their field. They are then the obvious source of those items. Take for example, Brembo for brakes (although AP, Bendix, CI, Girling, Hagglunds etc are AOK and some manufacturers such as Mercedes even make their own, nothing wrong with those ones although on their top models I see they use components from an outside high end supplier). Notice that Brembo does not necessarily manufacture the entire brake system either. They, in turn, buy a lot of parts in from outside vendors, not all of them Italian. Sometimes they purchase rotors and pads from CI or even Hitco (another US product). The point is that it behooves them to purchase the best parts from the best supplier at the best price. Why go for anything second rate when your reputation and success is based upon the performance of your product and the reputation of your name?
Last year I went to a conference and joined a round table discussion where brakes for trucks were being discussed. During a break for refreshments I overheard an interesting conversation wherein a representative of a leading supplier of brake components was told by a representative of an electrical drive systems manufacturer that the market for conventional brakes was about to be altered by the appearance of regenerative braking systems that harvested kinetic energy. He said, “In the end your business is kaput!” Direct quote. So the quest for better continues and the competition to service custom drives innovation along new lines of potential. Can the conventional be improved further or is it due to be surpassed by something else? Which has superior potential to satisfy? Whichever the case, some specialist outfit will introduce improvement which others will need to match, surpass, purchase or simply concede defeat. This process ought not to be interfered with or distorted by arbitrary fiat.
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Years ago, back when I was still young, I was rebuilding Detroit Diesel engines for a marine engineering company. I used to use the German Mahle pistons in preference to the standard items. In my opinion they were better and delivered superior performance. A few years later I was not so surprised to see that Detroit Diesel themselves started selling the Mahle items. Shortly thereafter they started supplying them in their rebuild kits. They had realised that Mahle pistons were superior and understood they could not do better than the admitted leaders in the field. So they changed over. There is nothing wrong with that. If someone develops a competitive advantage in their area of specialisation, then that is all to the good and we can gain from it. Those Detco engines certainly were improved by the advance.
In the end, it is silly to restrict your purchases to suppliers solely within an arbitrary national or state boundary. Doing so means that necessarily many of the best producers are removed from your supply chain with consequent increases in expense to you or to your customers, reduced quality, reduced utility or reduced reliability. The only way this sort of chauvinism can survive for a time is if people are prevented from purchasing from superior suppliers, discouraged or even banned from purchasing what they themselves prefer. In other words, people are being forced to purchase the inferior in the absence (or even partial absence) of the better. Why force anyone to purchase against their preferences? Is it right to so do just because you do not agree with those preferences? Why provide a guaranteed market and guaranteed custom to an outfit which can’t otherwise compete, which is not the best, whose product otherwise would not be selected? What gives the right to force others to do as you want? After all, surely you wouldn’t accept having others forcing you to live according to their demands, would you?
When I was living in Colorado there was a frequent demand to “buy American”. I used to have a bit of fun with that and respond, “No way! Buy Colorado. Keep out products from the other states” And then when they tried to argue their point further I’d always agree and progress to “Buy Pueblo. No more product from Colorado Springs or Denver or Green Mountain Falls even”. Finally going all the way down to only buying product made along the street we were at the time. Borders are arbitrary and have nothing to do with what is best for the customer, the people, let alone the generation of innovation and progress. It goes to the heart of the matter- protectionist sentiment is based on a breathtaking naivety when it comes to matters economic, let alone matters practical.
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Now let’s have some fun and identify the most well known US export, available nearly everywhere- near ubiquitous in fact. I wonder if anyone can name it.
Cheers
Siotu
Thanks for some practical info on real US products rather than fiat dollar. Good old fashioned competitive markets for goods rather than a rigged financial market.
Steve “Jobs won’t be coming back” any time soon, either.
Neither, presumably, will the predominance of the grasping role of the human thumb return, for the foreseeable future.
These are more or less definite facts, while any return of a global gold reserve standard remains very uncertain as to when and even if, ever. Though that might change, if multi-polarity gains the upper hand.
Trump can’t ‘lock-on to Wall Street for a sure fire winner’. He promised to lower taxes for the wealthy from ‘35% to 15%’ so that Trump’s wealthy beneficiaries of the his tax-cuts can create new jobs.
All of the fiat currency games will eventually fail. This is a historic certainty. When this happens, he with the gold will make the rules. China and Russia are both yyuge gold producers, and little of it leaves their shores. In addition, they also absorb a lot of open market gold as they divest US$. This leaves them with impressive reserves of the yellow metal. When the whip comes down, and it will, it will be the combined reserves of Russia and China vs. the Rothschild holdings for global control. I would have also included India, but it seems they are now absorbed in attempting to switch to a fiat paper gold system, a la the globalists. They seem to want their conservative gold holding population to puke up their gold into the paper ponzi game. The US gold reserves were bled off years ago to artificially support the dollar. What remains in our vaults is storage for other countries. Of course there is no guarantee they will ever get it back.
“What remains in our vaults is storage for other countries.”
And it is likely to be coin gold, an alloy of copper and gold, not deliverable (which is real gold bullion better than 98% pure). Coin gold is worth less than deliverable as may be imagined…
Please send this article to Donald Trump, or maybe Pepe should be on his advisory team.