The main cause of the Chinese trade “crisis” is the huge wage differential between Chinese and American workers. That differential cannot be negotiated away. From David Stockman at internationalman.com:
Doug Casey’s Note: David Stockman is a former congressman and director of the Office of Management and Budget under Ronald Reagan.
Now, anyone with connections to the government should elevate your suspicion level. But as you’ll see, David is a genuine opponent of government stupidity. Although his heroic fight against the Deep State during the Reagan Administration was doomed, he remains a strong advocate for free markets and a vastly smaller government.
We get together occasionally in the summer, when we’re both in Aspen. He’s great company and one of the few people in this little People’s Republic that I agree with on just about everything. Absolutely including where the US economy is heading.
I read his letter the Contra Corner every day and suggest you do likewise.
International Man: What do you make of the ballyhooed potential trade deal with China?
David Stockman: First of all, the deal is all ballyhoo. You know what they say in Texas, “All hat and no cattle.” That’s what we got here.
There’s not going to be a deal, because the problem that Trump is focused on and obsessed with is that we bought $543 billion worth of stuff from China last year, and we sold $120 billion.
It’s not because of bad trade deals The Donald thinks that his predecessor made. Or because the Chinese are the worst kind of trade cheats in world history.
The reason is the economic differential—the economic cost and wage gap between the two countries is so great, that we have this huge imbalance. The Fed is the partial cause of that economic and cost differential.
If you look at manufacturing, our average wage is over $30, which includes the cash wage plus the health benefits, retirement, and Social Security taxes, and all the rest of it.
And in China, it’s about $5. When you have $30 versus $5, it tells you all you need to know.
