Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Global Trade Battle Explained

Economics / Global Economy Sep 23, 2009 - 12:27 PM GMT

By: John_Browne

Economics

The Obama Administration waited until the wee hours of September 11th, 2009 to quietly inform Americans of its decision to slap new tariffs against low-end tire imports from China. Coming only days before this week's important G-20 meeting in Pittsburgh, an occasion when China will likely renew its campaign to push the world towards a post-dollar economy, the timing of the announcement seems particularly ill-advised. To be frank, it is like waving a red flag in front of a bull. It is not surprising that China instantly retaliated with their own duties on U.S. auto parts and agricultural products.


The Administration's action could be simply explained by the president's need to mollify the trade unions that played a big role in his ascendancy to power. However, the equation may be more complicated.

Despite the mindless chortling of those who believe that the United States will experience a "jobless recovery," employment holds the key to a healthy economy. It is also a potent political issue. In particular, labor unions subscribe to the idea that protectionism, in the form of trade barriers, preserves domestic jobs.

It is increasingly apparent that America and China are competing partners in a delicate and momentous power struggle, held together, temporarily, by mutual interest. America is the great consumer of the world; China, the great producer.

As a result of this relationship, America's manufacturing base has been eroded severely, perhaps even mortally. This industrial destitution has been a key factor in the run up of American unemployment, now approaching twenty percent. Although this number is roughly twice the published official unemployment level of some ten percent, it is in fact a truer indication of the health of the labor market.

The difference is due to the fact that the official unemployment figures exclude all those who have given up searching for full-time employment or are only able to find part-time work. No such pass was given to out-of-luck workers during the Great Depression or the 'stagflation' days of the 1970s. Unfortunately, this propaganda campaign to hide the true level of unemployment has been a smashing success.

Critics of protectionism rightly argue that barriers that would result from a trade war would negate any gains made by the intent to shield domestic industries. As such, they see this policy as a foolish confrontation with China. But bear in mind that these new tariffs come at a time of continued dollar weakness. Perhaps the Administration has come to realize that the retaliatory barriers enacted by the Chinese will be overcome by the increasing competitiveness afforded by a weakening dollar? Perhaps this gives them the confidence to roll the dice.

By making U.S. products more competitive overseas, a weaker dollar would help American exports. From the Administration's perspective, a debased dollar also offers the U.S. other benefits, including reducing the real value of all debts denominated in U.S. dollars. As America now has total debts of some $58 trillion, a devaluation of some 30 percent equates to a debt reduction of 17.4 trillion... a handsome saving!
It is quite possible the Obama Administration is overtly unveiling a new policy of increased trade protection while covertly pursuing a policy of gradual dollar debasement. In so doing, it hopes to both reduce the burden of America's outstanding foreign debts and protect American manufacturing.

But if you let your own currency go up in flames, you'll be the first to get burned. This strategy, though less suicidal than many presume, still ignores its biggest victim: average Americans. While Obama claims credit for a shrinking debt and growing exports, Americans will pay the price through rising costs for everything from tires to milk, continued joblessness, and depleted savings.

By John Browne
Euro Pacific Capital
http://www.europac.net/

More importantly make sure to protect your wealth and preserve your purchasing power before it's too late. Discover the best way to buy gold at www.goldyoucanfold.com , download my free research report on the powerful case for investing in foreign equities available at www.researchreportone.com , and subscribe to my free, on-line investment newsletter at http://www.europac.net/newsletter/newsletter.asp

John Browne is the Senior Market Strategist for Euro Pacific Capital, Inc.  Mr. Brown is a distinguished former member of Britain's Parliament who served on the Treasury Select Committee, as Chairman of the Conservative Small Business Committee, and as a close associate of then-Prime Minister Margaret Thatcher. Among his many notable assignments, John served as a principal advisor to Mrs. Thatcher's government on issues related to the Soviet Union, and was the first to convince Thatcher of the growing stature of then Agriculture Minister Mikhail Gorbachev. As a partial result of Brown's advocacy, Thatcher famously pronounced that Gorbachev was a man the West "could do business with."  A graduate of the Royal Military Academy Sandhurst, Britain's version of West Point and retired British army major, John served as a pilot, parachutist, and communications specialist in the elite Grenadiers of the Royal Guard.

John_Browne Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in