Category Archives: Trade

A Sadistic Foreign Policy, by Fred Reed

Sanctions hurt the ordinary people of a country, groaning under the oppression of their rulers, whom sanctions don’t hurt. From Fred Reed at unz.com:

Listening to the pronouncements on Cuba by our cardboard President I wonder what the hell the United States is trying to do in Latin America? Biden, a lifelong hack of little mind and that going south, runs on, or his ventriloquist does, about his support for the Cuban people. He cares deeply about the Cuban people. Yes he does. So why does this malignant drab want to ruin their lives? He is placing more sanctions against the island. Is he too stupid to realize that sanctions hurt only the people, not the leaders, who can get their prime rib and good bourbon anyway? Or does he simply not care?

If there is any place on this or any other planet that poses less danger to America than Cuba, except Venezuela or maybe some undiscovered tribe in the Brazilian rainforest, I can’t imagine who. There are eleven million Cubans, and all but about five want to work, drink, play with their children, and make phenomenal music that would send the solemn horses’ asses of the thinktanks into therapy. For sixty years the goddam United States has tried to starve them, sanction them, make them as miserable as possible out of a weird sort of Nordic sadism. It is sickening.

Kamala might not stand for it. Of course, standing is not her primary talent.

What does this wind-up political toy know about Cuba? Joe presides, dimly, over a country that for over half a century has done everything it can to ensure the misery of those eleven million innocent people, doing everything it can to make their lives as hard as possible. But Joe, he of the forty-weight sincerity probably learned at Central Casting, feels for the Cuban people. Yes, he does. Where did we get this guy?

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America Has Lost the Trade War with China, and the Real Pain Has Yet to Begin, by Charles Hugh Smith

It’s hard to dismiss the suspicion that Chinese business, at the behest of the Chinese government, might try to make life difficult for American business. From Charles Hugh Smith at oftwominds.com:

Corporate America sacrificed national interests in service of greed, and so did the U.S. government.

As we all know, the source of Corporate America’s unprecedented explosion in profits in the 21st century is the offshoring of manufacturing to China. If you doubt this, please study the chart below of corporate profits. Apologists claim many excuses in an attempt to evade the central role of offshoring production to China, but they all ring hollow: no, it wasn’t increasing productivity or automation or Federal Reserve magic, it was shipping production to China and other low-labor-cost nations.

Whether we like to admit it or not–mostly not–the American economy is entirely dependent on manufacturing in China. America’s short-sighted obsession with increasing profits to fund buybacks and golden parachutes for corporate insiders and vast fortunes for financiers has led to a dangerous dependency that has handed China tremendous leverage, which China is now starting to make use of. (And why not? Wouldn’t the U.S. start using the same leverage if it could?)

A long-time U.S. correspondent who prefers to remain anonymous for obvious reasons recently shared his experiences with parts shortages and price increases from previously reliable suppliers in China. Here is his account of the disruptive shift in the supply chain of essential parts from China to the U.S.

China is laying siege to the USA by slowing down production and delivery of goods. It doesn’t take much to hang up US production, just one missing item can do it. So much stuff is sourced through China they can affect all supply chains. Semiconductors are just the canary–because the chains are so long and complex, and specialized materials are required, etc. But it is happening everywhere.

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China Preparing to Expropriate Foreign-Held Tech Shares, by Gordon Chang

The Chinese “reform era” may be over. From Gordon Chang at gatestoneinstitute.org:

  • VIEs, as they are known, evade Chinese law, which prohibits foreign ownership of Chinese tech companies. Through a series of intricate contractual arrangements, however, these structures effectively give foreigners the economic benefits of ownership.
  • People believe that if Beijing were to publicly declare a VIE illegal—in other words, expropriate foreign ownership—it would be like setting off a nuclear weapon, shutting off new Chinese companies from foreign equity markets. Therefore, they believe it could not happen. The last-minute cancellation of the Ant Group IPO in Hong Kong and Shanghai last November, however, shows that Xi Jinping is willing to go to great lengths to protect his system.
  • China’s brand of communism, many forget, is inherently hostile to the private sector in general and foreigners in particular. The so-called “reform era”—the three decades following 1978 when Chinese leaders liberalized the Chinese economy and financial system and opened it to the world—is now over….
  • Xi Jinping believes there is already too much foreign influence in Chinese society, meaning that he would like to limit to the greatest extent possible offshore ownership of China’s enterprises. He will, I think, step up a long-running campaign to harass foreign businesses and begin to force offshore investors out of his country. The questionable VIE structure gives Xi the perfect excuse to now expropriate foreign ownership of his country’s successful tech businesses.
  • China’s ruler, foreign investors often forget, is willful and will do what he wants. “What Xi Jinping says, Xi Jinping does,” Bartiromo correctly pointed out. “And that’s what the law is.”
China’s President Xi Jinping believes there is already too much foreign influence in Chinese society, meaning that he would like to limit to the greatest extent possible offshore ownership of China’s enterprises. China’s ruler, foreign investors often forget, is willful and will do what he wants. He will likely step up a long-running campaign to harass foreign businesses and begin to force offshore investors out of his country. Pictured: Xi (center) at the military parade for the 70th anniversary of the establishment of the People’s Republic of China, on October 01, 2019 in Beijing. (Photo by Andrea Verdelli/Getty Images)

“What do investors need to understand, for those investors that are thinking maybe I want to dip my toe in investing in Chinese companies?” asked Maria Bartiromo on July 14, during her Fox Business show, “Mornings with Maria.”

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Note to Joe: Try These Two Easy Tricks To Promote Freedom in Cuba, by Thomas Knapp

One way the US government could promote freedom in Cuba would be to stop restricting the free choices of Americans and Cubans regarding trade and travel. From Thomas Knapp at antiwar.com:

“We stand with the Cuban people,” US President Joe Biden says in an official White House statement, responding to protests across the Caribbean island country, “and their clarion call for freedom and relief from the tragic grip of the pandemic and from the decades of repression and economic suffering to which they have been subjected by Cuba’s authoritarian regime.”

Cuban President Miguel Diaz-Canel disagrees as to the nature of the protests. “All this discontent, these feelings of dissatisfaction, what is the ultimate cause of all that?” he asks. “It’s the blockade. This is part of the U.S. playbook to destabilize us, to generate chaos, to break our will and spirit.”

Diaz-Canel has a point.

There’s no actual “blockade,” but there is an embargo, now yearly 60 years long, under which most trade with Cuba is forbidden to American businesses (and foreign business which operate the US).

The supposed purpose of the embargo has been, simply put, to make life hard enough on the Cuban people that they rise up and overthrow the communist regime. So when Diaz-Canel blames the embargo for popular discomfort and dissatisfaction, a US claim that he’s wrong is essentially an admission that the embargo serves no worthwhile purpose whatsoever.

Which seems to be the case. Six decades of failure to achieve its purpose kind of speaks for itself, don’t you think?

If Biden really wants to “stand with the Cuban people,” there are two easy steps he can take to do so in an honest way.

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Doug Casey on the End of the Nation-State

We can only hope that the end of the nation-state is coming. From Doug Casey at internationalman.com:

nation-state

There have been a fair number of references to the subject of “phyles” in this publication over the years. This essay will discuss the topic in detail. Especially how phyles are likely to replace the nation-state, one of mankind’s worst inventions.

Now might be a good time to discuss the subject. We’ll have an almost unremitting stream of bad news, on multiple fronts, for years to come. So it might be good to keep a hopeful prospect in mind.

Let’s start by looking at where we’ve been. I trust you’ll excuse my skating over all of human political history in a few paragraphs, but my object is to provide a framework for where we’re going, rather than an anthropological monograph.

Mankind has, so far, gone through three main stages of political organization since Day One, say 200,000 years ago, when anatomically modern men started appearing. We can call them Tribes, Kingdoms, and Nation-States.

Karl Marx had a lot of things wrong, especially his moral philosophy. But one of the acute observations he made was that the means of production are perhaps the most important determinant of how a society is structured. Based on that, so far in history, only two really important things have happened: the Agricultural Revolution and the Industrial Revolution. Everything else is just a footnote.

Let’s see how these things relate.

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Afghan Withdrawal Opens the Way for China, by Con Coughlin

The Soviet Union made a mess of Afghanistan. So did the US. Now it’s China’s turn. From Con Coughlin at gatestoneinstitute.org:

  • China, which shares a tiny 47-mile-long border with Afghanistan, has long coveted developing closer ties with Kabul, not least because of the large, untapped reserves of mineral wealth that Afghanistan possesses.
  • Rich in copper, lithium, marble, gold and uranium, Afghanistan’s mineral wealth has been estimated to exceed in excess of $1 trillion….
  • Beijing already enjoys good relations with neighbouring Pakistan, where the country’s charismatic prime minister, Imran Khan, was once dubbed “Taliban Khan” for supporting the Islamist movement.
  • As part of Beijing’s efforts to deepen and broaden its ties in Central Asia, Beijing is also concentrating its efforts on expanding its influence in Afghanistan, a policy it expects will bear fruit if the Taliban achieve their goal of seizing control of the entire country.
  • Mr Biden, judging by his spirited defence of his decision to withdraw US forces from Afghanistan, clearly believes that it is in America’s interests to end its two-decade-long involvement in the country. But if the US withdrawal simply opens the way for China to become the new dominant power in Afghanistan, then Mr Biden will be responsible for causing, so far as the West is concerned, a strategic disaster of epic proportions.
China, which shares a tiny 47-mile-long border with Afghanistan, has long coveted developing closer ties with Kabul, not least because of the large, untapped reserves of mineral wealth that Afghanistan possesses. Pictured: China’s Foreign Minister Wang Yi (left), Pakistan’s Foreign Minister Shah Mahmood Qureshi (center) and Afghanistan’s then Foreign Minister Salahuddin Rabbani at the China-Afghanistan-Pakistan Trilateral Foreign Ministers Dialogue in Islamabad, on September 7, 2019. (Photo credit by AFP via Getty Images)

The indecent haste with which the Biden administration has undertaken its military withdrawal from Afghanistan not only raises the prospect of handing control of the country over to the hardline Islamist Taliban movement. It also presents China with a golden opportunity to extend its influence over this strategically important Central Asian country.

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July 4th: Sorry, America, You Lost Me, by Charles Hugh Smith

This doesn’t pretend to be a balanced opinion piece; it’s a screed. However, in today’s screwed up world, sometimes it’s the screeds that make the most sense. From Charles Hugh Smith at oftwominds.com:

Star Wars 24 plus the novelized version, amusement park ride, podcast, action figure and OnlyFans pages, anyone?

I happened to be in a Big Box Emporium, buying two bags of whole wheat flour, when a strange revelation struck me: almost nothing in this giant emporium was made in the USA. Apologists will quickly point out that the two bags of whole wheat flour were “made in the USA,” and note the US-made items in the food, liquor and beverage aisles; but wander out of these aisles and tell me how many of the hundreds of items are made in the USA (not assembled of foreign components, but made entirely in the USA). The answer is very few.

I suppose this fact is unremarkable to the majority of Americans, but my reaction was, sorry, America, you lost me: how is this not insane to depend on sweatshops thousands of miles away to make virtually everything on the shelves and warehouses of the U.S.?

It’s as if a war was declared on manufacturing in America and we lost–or simply surrendered.

If you want to buy a bulldozer or electric vehicle, you can Buy American, and if you buy an iPhone, the firmware is conjured in Cupertino (the phone is assembled in China of components sourced globally). But below a certain price point and outside the snacks, magazines and beer aisles, U.S.-made good are “special order” if they’re available at all.

Is this because the foreign made stuff is so high quality? No, it’s virtually all garbage quality. A war was declared on quality, and America lost. Virtually nothing on the shelves of America’s Big Box Emporiums and fulfillment warehouses is durable; it’s either designed to fail (planned obsolescence) or it’s so poorly made that it breaks, fades, rips, tears, delaminates or fails, and is dutifully hauled to the landfill as part of the entire Landfill Economy. (Forget trying to repair it; it’s been designed to be impossible to repair, and all the components are junk, too.)

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How China Became The Big Winner Of The COVID Era, by Greg Miller

Here’s a nuts-and-bolts look at trade between the US and China, before and since Covid. From Greg Miller at FreightWaves via zerohedge.com:

When news first broke of the COVID lockdown in Wuhan, the initial prediction was: The virus will cripple the economy of China, which is the engine of global trade, and that will be terrible for the shipping business.

Eighteen months and 3.9 million deaths later, the pandemic has had the opposite effect. Ships are full and, ironically, the country where the outbreak began has seen the biggest and broadest economic upside.

Chinese exports are now much higher than they were before the outbreak, courtesy of pandemic-induced changes in consumer behavior and COVID-driven fiscal stimulus from the world’s governments.

The only major economy to grow in 2020 was China’s. GDP growth continued in Q1 2021. Business is at an all-time high for Chinese liner operators, shipyards and container-equipment factories.

U.S. demand for Chinese exports is increasingly urgent as sales continue to offset inventory rebuilds. Trade has revved up in the opposite direction, as well: China is buying more American soybeans, crude oil, propane and natural gas.

Pandemic boosts Chinese trade

Nerijus Poskus, vice president of global ocean at Flexport, recently told American Shipper, “Back in 2020, if you’d asked 100 economists what would happen when COVID first hit China, all of them would have probably said that economies will go down, consumption will go down and prices for shipping will fall. Well, all of them would have been wrong.”

Very wrong: China’s export value in January-May averaged $247.5 billion per month, up 29% from January-May 2019, pre-COVID, according to the country’s customs data.

As more goods are going out, supporting container-shipping demand, more raw materials and commodities are coming in, employing tankers, bulkers and gas carriers. China’s import value averaged $206.8 billion per month in January-May, up 25% from the same period in 2019.

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Peter Schiff: Government-Protected Monopolies Are the Ones to Fear

It’s virtually impossible to maintain a monopoly in a free market where you compete by offering the best value. That’s why generations of unscrupulous entrepreneurs have turned to the government for “help.” From Peter Schiff at schiffgold.com:

Earlier this week, a federal court threw out an antitrust case against Facebook. The lawsuit filed by the Federal Trade Commission, along with 48 state governors, sought to force Facebook to divest itself of WhatsApp and Instagram, but the court said the FTC failed to prove that Facebook holds monopoly power. In his podcast, Peter Schiff said whatever problems Facebook may present, the only monopolies we should really be afraid of are the government-protected monopolies.

Peter said Facebook isn’t a monopoly and doesn’t need to be broken up.

Antitrust laws were ostensibly passed to protect consumers. If a company achieves monopoly power, it can jack up prices and take advantage of the public. The consumer is served best in a competitive market because competition tends to keep prices low. Therefore, the government needs the power to break up these monopolies and preserve a competitive environment. Peter said the argument that Facebook is gouging consumers falls a little flat given they give their base product away.

If a company is giving its products away for free, by definition, it’s not gouging anybody. So, even if Facebook had a monopoly, which it doesn’t, but even if it did, who cares? It’s giving away the products. They’re free. So, nobody is being harmed by this so-called monopoly.”

You could argue that the public isn’t really the customer. In a sense, people with Facebook accounts are the product. Advertisers pay Facebook to reach those account-holders. But Facebook clearly doesn’t have a monopoly on advertising. Peter said the advertising market may be more competitive than at any time in history.

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Middlemen, by The Zman

There are only so many ends you can play against the middle. From The Zman at theburningplatform.com:

The American economy is a middleman economy, designed around the idea of there being a person or group of persons between the parties of a transaction. No matter how trivial the transaction, there is someone trying to get in on the deal. This middleman brings nothing to the transaction. He adds no value and only facilitates the deal because the rules have been set so that he is required. The middleman is the ever-present silent partner that is the point of the economic arrangements.

 

If you go back a century, selling a house involved three parties. The seller and buyer, of course, and the government. You had to register the transaction with the government so it was known who held the deed for the property. If there was a lien on the property, then the bank would be involved, but only on one side. Today there are dozens of people involved in the transaction. The government is promising to add dozens more in order to flood stable neighborhoods with magic.

Just about every transaction in the economy now has silent partners. This is why the economy is still a mess due to the Covid lockdowns. Shutting down supply chains was always a dumb idea, but getting them restarted means activating millions of middlemen who have to get paid for the system to work. In a completely financialized economy, nothing moves without money moving first. The money men are the ever-present middlemen in every deal, no matter how small.

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