Tag Archives: Mercantilism

The Global Power Shift Isn’t West to East–It’s Not That Simple, by Charles Hugh Smith

The power shift is going to be from those who borrow or beg to those who produce. From Charles Hugh Smith at oftwominds.com:

The mercantilist dependence on exports for growth, a winner for the past 70 years, has reached diminishing returns. Rather than be a source of growth, it’s a source of stagnation.

Conventional wisdom holds that geopolitical power is inevitably shifting from West to East. It isn’t quite this simple. The real shift is occurring between three sources of power that are not so neatly geographic:

1. The commodity exporters

2. The mercantilist exporters of products

3. The consumer-importing nations

Gordon Long and I tease apart the many dynamics in this complex power shift in Tectonic Shift of Mercantilism Revalued (42 min). There are three starting points: neocolonialism, mercantilism and importer by choice.

In classic colonialism, the colonial power expropriated commodities by force. The invaders took control of commodity-producing nations via military force and then oversaw the extraction of low-cost raw materials to provide the home markets with cheap materials to feed the colonial power’s valued-added manufacturing. The manufactured goods were then sold in the captured markets of the colonial states.

In what I call the Neocolonial Model, the control mechanism isn’t military force, it’s financialization and globalization. The Neocolonial Power extends cheap credit to the commodity exporting nation, and the state and its citizens gorge on this heretofore unavailable banquet of debt. Soon the state and its enterprises are creaking under unsustainable debt loads, and the Neocolonial Power swaps assets for debt, buying up the most valuable resources on the cheap or extracting the wealth via interest payments and refinancing.

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Hey, Donald, Trade Is About Economics, Not War, Part 4, by David Stockman

Trump may be raising tariffs to eventually get our trading partners to lower theirs, but that’s a dangerous strategy with a lot of moving parts. From David Stockman at davidstockmanscontracorner.com:

The only carbon units more delusional than the Donald about the distinctively un-awesome state of the US economy are the boys and girls who inhabit the canyons of Wall Street. They are being given every chance to get out of Dodge, but they keep bellying up to the bar for still another swig.

Consider yesterday’s doings. The White House actually confirmed during market hours that Trump is moving towards a 25% tax on Americans who buy goods made in China—-and those are mostly the cheaper goods in the Wal-Mart aisles which represent what Flyover America can actually afford to buy.

Taxing that stuff by 25% is full retard crazy—-even if the White House might argue that people can still order soon-to-be more costly lamps, travel bags, canned tuna, vacuum cleaners and toilet paper on their trusty iPhones, which would remain tax-free under the latest Trumpian demarche.

But if that’s any consolation to the rank-and-file, you’ve got to wonder about Wall Street. The hideously over-valued S&P 500 dropped by the grand sum of 2.93 points (o.10%) at yesterday’s close, and then took off for the races again today as if a potential $50 billionTrumpian war on the American consumer means nothing at all.

Perhaps the Donald will eventually “calm down” as the Chinese government spokesman sensibly urged, and settle for something less draconian. As we explain below, we think that is highly unlikely and that the Donald’s view of trade is so uniquely ego-driven, win-oriented and primitively mercantilist that he means to take his Trade War straight to the brink and beyond.

But even short of that, how in the world can it be held that the risk of a Trade War that would materially disrupt that world economy and financial system is essentially zero— at a time when the Oval Office is occupied by a trade policy madman, who absolutely does have the unilateral power to create mayhem in the global economy under the wide-open authorities of section 301 and section 232 of the trade acts?

That’s right. When the stock market is priced for perfection and then some—-the risk of a major dislocation like a full-fledged trade war has to be close to zero in order to justify standing pat.

To continue reading: Hey, Donald, Trade Is About Economics, Not War, Part 4