San Juan Mountains

San Juan Mountains
San Juan Mountains: Grenadier Range

Tuesday, January 19, 2016

Schizophrenia Over China

Have you noticed how nuts most people are when it comes to thinking and talking about China?  Career politicians and taxpayer financed economists are downright schizophrenic when it comes to their opinions about China and its place in the world relative to the Socialist Democracy of Amerika.  Let me tell you about a couple of the most glaring examples of mass mental illness I have witnessed in regards to China recently.
Early in 2015 I read numerous stories about how China had overtaken the SDA as the largest economy in the world.  The reports were not true, of course, but they did get a lot of people thinking that it was time for the career politicians who rule over us to "get tough with China," whatever that meant.  China is presently the second largest economy in the world and it will not be long, within a decade in my view, before it will be the largest economy in the world.  That causes problems for many people in this imperialistic land, primarily for two reasons.
First, most people erroneously believe that economic activity is a form of warfare.  When one country grows larger it must necessarily be at the expense of another country.  Since China is getting an increasingly larger share of the total economic pie they believe it must be true that the SDA is getting an increasing smaller share of the world's economic pie.  Calls to the god of this idolatrous country, the federal government, to do something and stop the onslaught of Chinese economic growth fall upon ears willing to do precisely that.  Career politicians and their media lackeys are happy to call for sanctions, tariffs and all sorts of negative economic attacks upon China that will, in the long run, only harm the SDA consumer.  Get it straight....one country does not grow larger at the expense of another.  That is the socialist view of the world and it is dreadfully wrong.  When one country grows larger, every other country that trades with that country also benefits.
Second, most people are aware that having a large economy allows the rulers of that particular geo-political zone to build a bigger and badder military complex.  SDA citizens are terrified at the prospect of another country having a bigger and badder military than theirs.  The idea that everyone in the world would not be afraid of us due to our ability to launch an invasion of their homelands at a moment's notice scares many patriotic Amerikans.  What are the facts of the matter?  According to the World Bank, China's total military expenditures are equal to 2.1% of its GDP.  For comparison purposes, the SDA's military expenditures are 3.5% of GDP.  Gross Chinese expenditures on the military are even smaller when compared to what is spent in the SDA since the SDA economy, for the time being, is larger than China's.  Those who fear an imminent attack from the Chinese would be wise to spend their time thinking about something else.
Perhaps it was with a sigh of relief that patriotic citizens of the SDA realized that China was not yet a larger economy than the SDA and was not yet prepared to invade the SDA homeland but then something schizophrenic happened.  Towards the end of last year the stock market experienced a 12% correction.  As I write this blog post the stock market is in another 12% correction.  Do you know why?  According to the talking heads on the financial television shows we have experienced two steep down markets because of concerns about slowing Chinese economic growth.  What was a good thing at the start of 2015 had become a bad thing by the end of 2015 and the start of 2016.  Most recent GDP figures for China indicate that its annualized rate of economic growth is going to slip from 8.0% to 6.9% in the last quarter of 2015.  At 6.9%/year China will double in economic size in 11 years.  That is why I believe China will be the largest economy in the world in a decade.  The SDA is too burdened with oppressive rules, regulations and corporate taxes to allow domestic corporations to grow at the rate the Chinese profit seeking corporations can grow.  It is only a matter of time before China is the world's economic juggernaut.
So China has gone from being an  economic enemy at the start of 2015 to an economic necessity by the end of the year.  The belief today is that Chinese economic growth must remain robust in order to prop up the ailing economy of the SDA.  Making the situation even more bizarre is the fact that total SDA exports to China make up only 1% of total SDA exports.  If China is so important as a trading partner for the SDA, why does the SDA only export 1% of its goods to China?  At the same time, how can an economic slowdown in China have any meaningful or significant impact upon the SDA when the SDA only sends 1% of its total exports to China?  The answer is, it can't!  Why stock market investors have decided to drive the SDA stock markets down by more than 10% in a couple of weeks, all allegedly due to economic events in China, is a mystery to me.  The whole thing is schizophrenic.
The career politicians campaigning for the office of SDA King and, in one case, Queen, all universally agree that the Chinese are evil and need to be controlled.  They all agree that the SDA needs to put tariffs on imported Chinese goods because the Chinese are stealing "our jobs."  How the SDA could proclaim ownership over a job is never explained by the economic luminaries running for King.  They also agree that China needs to be forced to "play on a level field" with us and stop devaluing their currency to make their exports cheaper.  The totally predictable response of SDA career politicians and bureaucrats to want to enforce a tax on Chinese imports is schizophrenic.  Why should SDA consumers be forced to pay more for Chinese goods that the Chinese are willing to sell to us at a loss, or at least for a lower profit?  Why should the SDA government raise the price of those goods with an import tax and keep the extra money for itself?  If the SDA wants SDA companies to be able to compete on a level playing field it should cancel all tariffs immediately, eliminate the corporate income tax immediately and abolish all bureaucratic rules and regulations that tell businesses, in minute detail, what they may or may not do each day.  It is not a question of regulation vs no regulation.  The question is shall we be regulated by career bureaucrats or the free market?  I choose the free market.  The best way to keep "our jobs" and "level the playing field" is for the SDA to embrace free market capitalism and leave the rest of the world alone.
Apparently none of our rulers knows how or what to think about China.  I have a simple suggestion for all of them.....mind your own business.  Tend to our business and leave the Chinese alone.  Free trade with all and entangling alliances with none.  That should be our mantra.

Attention:  To regular readers of this blog....I am taking a couple of days off and will return late next week.

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