American Trade Policies Are Destroying The Country

 

Why do Americans continuously send politicians to Washington that support free trade when we are one of the few countries that actually truly believe in it.  Everyone else says they do to make us feel better about the fact that we have the world’s dumbest trade policies so they can keep taking advantage of us.  The fact of the matter is that the 2008 economic crisis was because of our moronic trade policies (the Chinese and others invested their obscene profits made from exporting goods to the US in US backed government securities which had the effect of artificially lowering mortgage rates in America thereby creating the housing bubble).

Is it fair to trade with China when we all know they artificially lower their currency to make their goods cheaper here?  Well, one might argue that we get the Chinese to finance our obscene budget deficit that runs over a trillion plus every year.  Fair enough, but does anybody really believe that we are getting good value for that extra trillion we borrow to finance our own governments horribly inefficient operations?  Also if the Chinese pretty much get open access to our market then why don’t we get open access to their market?  If an US auto manufacturer wants to export cars to China they have 3 choices.  First, they can export the cars from the US and pay a steep tariff that will double the price of the vehicle.  Second, they can export the cars in parts that would then be assembled in China ( they call them knock down kits).  Or finally, if they want to build the cars in China they are forced to partner with a Chinese competitor who then has the chance to get a free education on how to build cars to Western standards.  Does any of this sound like it is Free Trade?  Not to me it doesn’t and it begs the question as to why Americans put up with it?  I know this for sure we can’t continue these destructive policies for long because America is on its way to becoming a second world nation because of these policies.

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Consequences Of Globalization

It is interesting to see the consequences of globalization taking place all around the world today.  People so often in the 90’s talked about how globalization would improve people’s lives across the globe.  To be fair to some degree that has happened in places like China where several hundred million people have been lifted out of poverty by moving from the countryside to the urban manufacturing centers of China.  Other nations like Germany have also benefited greatly from globalization in the form of the EU.  With the barriers to trade removed from the internal European market German companies have proceeded to destroy their fellow European competition and reap the rewards.  Unfortunately these two examples of countries benefiting from globalization have also cast a dark shadow across many other countries who have suffered while China and Germany have benefited.  In China’s case many of the jobs in manufacturing that now power the Chinese economy were once based in America.  The fallout from this in America has been significant because many of the jobs lost to China were some of the best paying jobs a non skilled worker could find in America.  Recently in the last several years there has been a small glimmer of hope in the American manufacturing sector where instead of losing jobs they have actually begun adding some.  It remains to be seen if this is just part of the economy coming back from the lows of the economic meltdown in 2008 or if this is part of a new trend of increased American industrial production over the long term.

The situation in Europe seems more straight forward where there is little doubt that the Euro has made life much more difficult for countries like Greece, Italy, and Spain to compete with Germany since they can no longer devalue their own currency to become more competitive.  The result has been that much of southern Europe chose to use debt to fuel economic growth (much like America has done) instead of trying to make their economies more competitive.  The consequences of this have been tragic for those countries with some like Greece in what can only be described as a economci depression.  One thing is for certain, you don’t seem to hear nearly as many world leaders talking up the benefits of globalization because the real long term consequences have now manifested themselves and it is not a very pretty picture.

North Korea Talks Of Using EMP Weapons In A War With South Korea

Recently word came out of North Korea that said the regime was planning on using EMP (electro magnetic pulse) weapons in any future war with South Korea.  EMP blasts have the ability to knock out most if not all electronic circuitry in the blast radius.  Some of you may recall that this blog has done several stories about the effects of EMP blasts.  Recently Newt Gingrich compared the power outages around the 4th of July as similar to what a small EMP blast would do.  To sum it up an EMP blast can send the target area back to the stone age.  North Korea already has nuclear weapons ( which when detonated produce a massive EMP blast wave) so the threat has to be taken seriously.  However, for now it does not seem clear if they have a safe, effective way to deliver the nuclear warhead to the upper atmosphere to detonate it where it could cause the most damage to the south.  This is because of their recent missile test failure, which has done real damage to the credibility to the North’s threats.  The fact that China neighbors North Korea might actually keep them from using this until they can accurately fire the missile, can you imagine the Chinese reaction if the missile veered off course and detonated above their country sending half of China back to the dark ages?  Having said that the North has had successful missile launches in the past so this is cause for concern.

North Korea builds EMP munNorth
Korea’s Taepodong 2 Nuclear Missileition

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Saudi Arabia Pumps It Up

In a very informative article over at www.foreignpolicy.com by Steve Levine entitled The Coming Oil Crash he details the problems petro states like Russia, Iran, and Venezuela among others face with the recent fall in oil prices.  The article gives estimates on what each state needs the price of a barrel of oil to be to balance their budgets.  Russia, for example, is said to require a price of $110 per barrel to stay in the black, oil was going for around $96 a barrel on Monday.  In fact many of the other petro states are in a similar position to Russia, so our gain is their pain so to speak.  Many analysts expect the pain to go up for the petro states for the obvious reasons: global economic slowdown reducing demand, US and Canadian shale oil deposits, and Saudi Arabia insisting on producing 10 million barrels a day when all they appear to be doing is hurting themselves by producing so much.

  All of the reasons seem to make sense except for the Saudis, why on earth would they purposely drive down the price of oil when all it does is take money out their own pockets?  Well, that is where it gets interesting.  According to the article the Saudis are intentionally trying to drive the price of oil down for several different reasons.  First, they believe cheaper oil will help the global economy weather this rough patch.  They also apparently liked all the prestige they gained by driving down the price of oil in the late 90’s during the Asian financial crisis.  Second, they feel threatened(the original article used the word terrified to describe how they felt) by the shale oil deposits in the US and Canada.  They recognize that shale oil is harder and more expensive to obtain than normal liquefied deposits.  Because of that oil has to be at a certain price to make going after shale oil worth it.  Last but certainly not least, the Saudis are trying to impose their will on both Russia and Iran on two key issues.  The first would be Iran’s attempt to get the bomb.  The Saudis and Iran are natural competitors because one is Sunni and the other is Shia.  The Saudis feel that a nuclear armed Iran would be unacceptable so they are purposely driving down the price of oil to put the squeeze on Iran to force them to give up the pursuit of the bomb.  The second issue is with Russia blocking a deal being made on Syria.  The Saudis once again feel they can pressure Russia into playing ball on Syria by driving down the price of oil.  It will be interesting to see how long and how painful the Saudis are willing to make this.  As the article points out they have one of the largest financial reserves in the world at around $700,000,000,000 so suffice it to say that they can keep this up for some time.  If I was Russia and Iran I would be worried.

The Coming Oil Crash

World On The Brink

 

The world today has not been in a state of flux this great since the collapse of the Soviet Union about 20 years ago.  The difference between now and then was unquestioned American power militarily, economically, and politically.  Today that is no longer the case and the world is worse off for it.  In reality the danger to the world has not been this great since the Cuban Missile Crisis in 1963. 

Threats Of War

1.  From the Iranian pursuit of nuclear weapons to near civil war in Syria the middle east could explode in a major war drawing in outside powers like the US that could have disastrous consequences for the entire globe.

2.  The Arab Spring has resulted in a change of leadership in key countries that have left many guessing what those nations (think Egypt) strategic direction will become.  This level of doubt has added a new twist to the problems of thinking through a potential crisis in the region.  Just like a free market economy despises uncertainty in policy so does the strategic thinker.  Uncertainty in a country’s geo-political thinking leaves its neighbors only able to guess and make assumptions with all the consequences that entails.

3.  Mexico is fighting an insurgency every bit as lethal as that in Iraq and Afghanistan.  The only difference is that we share a large unguarded border with this failed state.  The threat from the flow of illegal drugs and possible terrorist infiltration cannot be underestimated.  The www.latimes.com did a story in June of 2011 (over a year ago) that said 34,000 had already died as a result of the military crack down against drug gangs, it hasn’t gotten any better since then either.  Although the mexican economy is doing well the possibility that this violence will ultimately collapse Mexican authority over large parts of their own territory cannot be ruled out.

4.  Tensions in Asia continue to rise as China begins to flex its muscles by attempting to enforce its disputed territorial claims throughout the region.

5.  Iraq today still struggles with severe violence as the government attempts to finish off the insurgency there.

6.  Afghanistan at best can only be described as a long work in progress.  Which, oh by the way, has to be finished off by Afghans.  Who wants to wager what the outcome will be once US troops leave by 2o14.

7.  Nations like China, Russia, Iran, and Syria seem to be working in informal cooperation against the United States.  Although the US could counter each country individually or even in groups of two, when they all align against America it would be near impossible for America to impose its will on a situation like the insurgency in Syria.  Right now you have China and Russia actively working against the US administration via the UN Security Council to prevent Washington from resolving the situation.  With Europe consumed by the Euro nightmare the United States now truly stands alone against a powerful informal alliance of countries that do not share western values, and are actively working to undermine western strategic goals in the middle east and beyond. 

Economic Collapse

1.  All eyes towards Europe for in spite of continued European attempts to blame America the Europeans have managed to design and implement the biggest threat to the global economy since communism.  They did such a bad job engineering the institutions and laws governing the Euro that its collapse seems all but guaranteed, and it almost makes you wonder if they intended for this to happen from the beginning.  An outright collapse of the Euro would throw the global economy in turmoil and set off a chain of events so destructive that it would take a generation for the world to recover.

2.  Unfortuanately the problems facing the Euro also weigh on the UK, US, and Japan among others.  The difference at least for now is that these countries have the proper institutions and laws in place to attempt to deal with the problem in a reasonable manner.

3.  The entire global economy appears to slowing down all at the same time including the BRICS (Brazil, Russia, India, China, South Africa) which were partly responsible for helping to prop up the global economy during the 2008 meltdown.  If everybody slows down at once where will the help come from this time?

Conclusion

As the world hurdles towards darkness one has to wonder if this madness can be stopped?  I am sure that many of the situations can be managed to outcomes that are not so catastrophic, but the original idea in the first paragraph of massive change and imminent danger to global order should not be underestimated.  The challenges are as great as they are numerous, although some challenges (perhaps Afghanistan) will appear as less important if others play out in dire fashion.  The two that I feel are the most worrisome; the Euro, and Iran are also the two most likely to come to a head in the near future.  Both of these situations are real and will be resolved one way or another.  The Euro will either collapse dragging down the world economy with it or the Europeans will take the necessary steps in fixing the Euro.  Iran will either get the bomb and begin to act even more belligerent, or the US and Israel will strike Iran to try to prevent this.  The problem is that a strike will only delay Iran, the only way to prevent them from getting the bomb is to end the regime.  Unfortunately after the debacle in Iraq no one has the stomach for that kind of action so it will be interesting to see what happens.  Either way both of these issues will be resolved in the near future for better or worse.  

How many have died in Mexico’s drug war? – latimes.com

 Iran, Russia, China, Syria Plan Massive War Game with 90,000

 

US Reclaims Super Computer Crown

For the first time in several years the US has the world’s fastest supercomputer with the Department of Energy’s new IBM produced Sequoia.  The computer will be used to run simulated nuclear weapons test in the hopes of extending the life of the US’s nuclear deterrent without having to set off a real nuke.  The Sequoia is 1.5 times faster than the previous champ that was made in Japan.  However, it is not just speed that makes the Sequoia great, it is much more energy efficient.  The Sequoia consumes 7.9 megawatts vs. 12.6 for the Japanese super computer which can be a pretty big deal when a supercomputer can consume millions of dollars in electricity per year.  Building supercomputers is like an arms race being number one matters for prestige but also to compete globally in scientific research you must have massive computing power.  The Sequoia can do in days what a supercomputer 20 years ago would have taken months or maybe even years to calculate if it tried to do the most comples problems being worked on today.

US regains supercomputer crown…

How IBM Built the Most Powerful Computer in the WorldRead more: How IBM Built the Most Powerful Computer in the World – Popular Mechanics

Europe Overwhelmingly Favors Obama

 

 

French Obama supporters react to his election victory in November 2008.

 

If the Europeans could vote in the US presidential election Obama would win one of the most lopsided victories in US history.  Obama had the most support in France (no real surprise there) with 92% saying they would vote for him.  Interestingly enough China and much of the middle east were all against Obama’s reelection, so much for his dialogue with Islam.  The way I see it is all ways do the opposite of what the french would do and you can’t go wrong.  The first link below takes you to the original story which is pretty brief.  The second link takes you to a recent report about global attitudes towards the US, dealing with many issues like politics, business, culture, etc.  It is pretty interesting, it even shows you how opinions have changed over time.  If you ever cared what the rest of the world thinks of America you should take a look.

92% Want Obama Reelected – In FRANCE!

http://www.pewglobal.org/files/2012/06/Pew-Global-Attitudes-U.S.-Image-Report-FINAL-June-13-2012.pdf

China, Japan, And Germany Are The Real Axis Of Evil

 

The title says it all, the nations listed above prey on all the other nations they trade with by promoting their export based economies that purposely intervene to keep their currencies weak, have policies designed to discourage consumption, and encourage saving money.  Well that doesn’t sound that bad does it, they are only organizing themselves in a smart way, being competitive.  Wrong, their policies and the massive global imbalances (trade deficits countries like the US have with all of them) are directly responsible for the economic crisis in 2008.  Their trade surpluses with our country helped to fuel the housing bubble in this country that eventually went bust and collapsed the financial markets here.  It is well documented that German economic policies or german influence on EU economic policy has greatly contributed to the current crisis in Europe.  German banks helped fuel the housing bubble in Spain, as a matter of fact it is quite possible that the Euro has or will eventually turn into nothing short of a German economic empire, accomplishing what they failed to do militarily in the last century. Free Trade is a grand idea and would probably be a great thing for America if we could ever get it, but we won’t get it unless we  hold predatory nations such as these to account and level the playing field once and for all.  Until then we are just waiting for the next big melt down to happen.

Eurointelligence – Currency – The Weapon of Choice in Trade Wars

Insane in Spain – NYTimes.com

 

He Drove A What?

When I first read the story about the Commerce Sec. Bryson getting in all of those wrecks recently the first thing that jumped out at me was this guy needs real help.  The second, what the heck is this guy driving around in an import while he is at commerce.  This should just be so obviously wrong it should never happen.  Here is part of the mission statement of what the commerce department is supposed to be about lifted off their website.

“To drive U.S. competitiveness in the global marketplace, the Commerce Department works to strengthen the international economic position of the United States and facilitates global trade by opening up new markets for U.S. goods and services.”

If I was the leader of a government organization and the above was part of my job assignment I certainly would not be driving an imported car.  Besides the fact that the commerce department is the lead organization in the Obama administration quest to double American exports.  Hard to do that when your driving an import.

Why aren’t we more upset that the commerce secretary drives a Lexus?

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