David Stockman On An Unprecedented Collapse Of The Global Financial System
Via InternationalMan.com,
ZeroHedge.com
Sat, 09/07/2019
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.
So, we have this huge gap overall, which is $423 billion, in other words, exports minus imports. But almost 55% of that is accounted for by two trade code categories that really focus on smartphones, laptops, desktops, other computer equipment, electronics, and so forth.
Apple iPhones and the whole rest of it—the supply chain has been entirely transplanted to China. That’s because of a wage arbitrage. Last year, in those categories, we imported $275 billion worth of stuff, including about $90 billion worth of cell phones—and we exported to them only $27 billion worth of stuff.
So, there’s a massive 10-to-1 ratio of imports to exports, and it’s due to wage and cost differences, not because the Chinese cheat. The point is you’re not going to negotiate that away.
Trump has identified the problem of $423 billion merchandise trade deficit of one country. He’s only going to blow up the global trading system and supply chains with these idiotic tariffs. They’re really getting pretty serious.
There’s no doubt that this isn’t going to stop anytime soon.
The Rest…HERE
