China Saves Too Much!
The economists tell us the Chinese save too much money. Thus they do not spend enough money.
China — in this telling — is overproducing and underconsuming.
This condition represents a dreadful menace to the United States… and the world.
Argues Treasury Secretary Bessent:
China's current economic model is built on exporting its way out of its economic troubles. It's an unsustainable model that is not only harming China, but the entire world. China needs to change. The country knows it needs to change.
Thus communist China is afflicted with the plague of "excess savings."
A ghastlier condition is scarcely conceivable.
Consumption Is the Key to Prosperity
"Excess savings" is a devilish condition that — happily — your humble correspondent has never endured.
Excess savings reduces sufferers to purchasing all goods and services with money in their actual possession.
A credit card would be an unknown. As would monthly interest payments at 23%.
Thus excess savings would shatter the central pillar of American economic life — debt-based consumption.
Pity the forsaken land of excess savings, unblessed by debt.
The Chinese, alas, are afflicted with the plague of excess savings.
They fail to appreciate the infinite wonders of debt.
Say's Law
They are evidently slaves to Say's Law — that production must precede consumption.
That is, slaves to the theory that a man must produce before he can consume.
And that the savings he accumulates through production represent his purchasing power.
I must concede that the practice does not strike me as communistic.
It strikes me instead as rather capitalistic.
The United States has long revolted against Mr. Say's primitive — yet iron — law.
It pegs along under a sort of Keynesian anti-Say's law — that consumption precedes production.
Consumer spending represents some 70% of the United States economy… or so we are told.
Yet perhaps China is not the United States' central trade menace.
Perhaps the United States' central trade menace is its own central bank.
The Fed Inflated Us Into a Huge Trade Deficit
Mr. David Stockman directed the Office of Management and Budget under Ronald Reagan.
From whom:
Somehow this communistic practice of saving too much accounts for the massive US trade deficits with China.
The real cause, of course, is the inflated production costs and wage levels in the US versus the dollar equivalent in China… Since 1992… the US price level has risen by 131%. Not surprisingly, the American market soon became flooded with labor-intensive Chinese [goods]…
The nominal wage gap in USD was already large in 1992, but has steadily expanded ever since. In fact, in nominal USD terms the US/China manufacturing wage gap of $16.50 per hour in 1992 has more than doubled to $34.25…
In short, the Fed has inflated its way into a flood of imports from China due to the $34/hour wage gap, not trade barriers… or Secretary Bessent's risible claim that 18-year old Chinese girls working their fingers to the bone in a Foxconn iPhone plant save too much!
I hazard there is tremendous justice in this claim.
The Chinese Aren't Very Good Communists
Meantime, Communist China does not appear to embrace the communist doctrine of "from each according to his ability, to each according to his need."
The United States comes nearer to it. Mr. Stockman:
Capitalist America has a prodigious Welfare State and Communist China does not.
The US Welfare State… provides a population of 335 million about $4 trillion per year in transfer payments, ranging from social security to foods stamps and subsidized housing. This compares to just $1.7 trillion provided to a population of 1.41 billion by the Chicoms in Beijing. In per capita terms, the comparison is $12,000 in the US versus $1,200 per capita in China.
Communist China's more impecunious approach to welfare, of course… can hardly be said to be a sinister plot to cheat on trade with the US…
Once again, I must agree. More:
Households save modestly more in China because they know the government isn't doing it for them with a massive social insurance Ponzi Scheme like America's soon to be bankrupt Social Security system. And yet, Secy Bessent says that it's China that is cheating?!
Beltway B******t
In conclusion:
In short, the "excess savings" canard is just beltway b******t. It's the go-to excuse… to obfuscate the trade disaster that the Fed has brought down upon America's industrial economy.
Does the president seek to balance trade with China?
Perhaps he should train his cannons on the Eccles Building at Washington — and away from Beijing.
The Federal Reserve has visited far more damage upon the United States than Communist China has.
Brian Maher
for Freedom Financial News
P.S. Here's an important message from Jim Rickards, and my friends at Paradigm Press.
"Let's get straight to the point…
I strongly advise taking action ahead of this NEW kind of economic crash…
What makes this new crash so uniquely dangerous is its power to ERASE bank accounts — even accounts "protected" by the $250,000 FDIC insurance.
My best followers are already following the steps laid out in my new book, MoneyGPT: AI and the Threat to the Global Economy.
But, I don't expect you to drop what you're doing to read 159 pages…
That's why I put together a summary video — you can watch it here.
You can either prepare now, warns Jim, or potentially be decimated if the market implodes by 40% in a single day.
How concerned should you be?
Go here and judge for yourself.
No comments:
Post a Comment