Workers Of The World, Unite!

Authored by MN Gordon via,

The dawn of war is a time of simple clarity and purpose.  Good guys vs. bad guys.  Cowboys vs. Indians.  Confederates vs. Yankees.  Coppers vs. robbers.  It’s a time when lines are drawn, songs are sang, and drums are beaten with gaiety and confidence.

Indeed, calls for ‘a jolly little war’ are always greeted with merriment and optimism.  This also goes for the dawn of a trade war.  Regardless of whether you’re from Scranton or Suzhou, the escalating  Trump vs. Xi standoff all seems so virtuous.  “We’re right, they’re wrong,” and vice versa.

Here in the USA, the perspective is crystal clear.  America’s rightful bounty is within reach.  After several Presidents that were light in the loafers, there’s finally a leader of the free world with the brass fortitude to reach out and grab it for his fellow countrymen.  And why not?

Several decades of getting spanked by Chinese grunt laborers have American workers longing for reprisal.  This ain’t their granddaddy’s economy.  They’ve been repurposed from well-paying manufacturing jobs to low-level service workers.  The relentless progression has been demoralizing.  Given a fair shake, American workers just know they’ll kick tail and take names.

Yet, as far as we can tell, Trump’s fight is a day late and a dollar short.  The time to stand up for the American worker came and went while Ray Dalio was busy getting absurdly rich from the financialization of the economy.  What’s more, the means to stand up for the American worker had – and still has – little to do with slapping tariffs on Chinese made doohickeys.

We’ll have more on this in a moment.  But first, some dawn of war merriment out of the Middle Kingdom…

Trade War! Trade War!

China’s 40 year economic boom has all the trappings of miraculous growth.  Real wealth has been created.  Living standards have improved.  And mega cities have sprouted up from the barren earth like garden weeds following a spring rain.

For perspective, between 2011 and 2013 China used more cement than the U.S. did in the entire 20th century.  According to the International Cement Review, an industry publication based in London, between 1901 and 2000 the U.S. used 4.4 gigatons of cement, whereas China used 6.6 gigatons of cement between 2011 and 2013.

Without question, China deserve an award for its rapid disfiguration of the landscape.  Yet there are other consequences too.  Not only did all this mass splattering of cement rapidly disfigure China’s landscape.  It also rapidly disfigured the national psyche.

Hoots, whoops, and the state media’s anti-U.S. propaganda machine has brought forth new and creative additions to the culture.  This week, as reported by Zero Hedge, a song titled “Trade War” went viral on the Chinese social media platform, WeChat.

The song, set to the tune of an anti-Japanese song from the 1960s, begins with the rousing chorus:

“Trade war! Trade war!
Not afraid of the outrageous challenge!
Not afraid of the outrageous challenge!
A trade war is happening over the Pacific Ocean!”

The lyrics also include: “if the perpetrator wants to fight, we will beat him out of his wits.”

What sort of deceit could provoked such drivel?

Workers of the World, Unite!

Several decades of perpetual credit creation courtesy of the Fed’s artificially low interest rates have had countless unintended consequences for the global economy.  In short, the economy’s reconfigured itself in ways it otherwise wouldn’t have.  One example is the offshoring of U.S. jobs to China and the massive trade imbalance between the two countries.

Where did American consumers get the endless supply of credit to consume all the made in China goods?  Where did the money that showed up in the paychecks of Chinese workers come from?  If you follow the money back up the supply chain the culpability for its origination is the Fed.

Still, it takes two to tango.  You see, China could have rejected the fiat dollars they were being sent.  They were conjured from nothing.  Why trade real goods and products, fabricated with real raw materials, for dubious abstractions?

And therein lies the second part of the deceit.  For the scam to work, the Chinese government had to go along with it.  And as far as we can tell, they went along with it for several reasons: (1) the money was too good, and (2) it gave the Chinese populace a purpose in life.

But as China reaped more and more of the Fed’s fake money, Beijing had to debase the Chinese yuan at greater and greater rates to keep their cheap labor advantage over U.S. workers.  Year after year, decade after decade, the U.S. heartland was hollowed out and deindustrialized, and its prior vitality was reconstructed in China.

All the while, the excess credit was used to financialize American businesses, where, rather than borrowing money for capital expenditures, corporations borrowed money to boost share prices.  Wall Street was rewarded for their part in the money shuffling, as the cheap credit that pumped up financial assets was the same cheap credit that pumped up China’s economy.  Main Street, on the other hand, was rewarded with stagnant wages and exploding debts.

The real dirty dead, which allowed the giant fiasco in the first place, occurred on August 15, 1971.  That’s when Nixon defaulted on the Bretton Woods system and terminated the agreement that allowed other nations to redeem their paper dollars, acquired through trade, for gold.  Since then, debts and deficits have gone completely haywire.

When it comes down to it the gripes of the American worker and the Chinese worker – and all workers of the world – should be united not against capitalism, as promoted by Marx.  But against the curse of fake money and the governments that perpetuate it.

Of course, recognition of this fact would require honest thought and contemplation.  And why bother when you can mindlessly bang the drums and chant the songs of jolly trade war merriment.

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Author: Tyler Durden