I say: big deal. Our government lies to us about every economic statistic; the Federal reserve manipulates the stock market every day and has been doing so for ages; and when it comes to debt, we're the most indebted nation in recorded history. All of those things make them exactly like us.
China has a corrupt, autocratic government that pretends to embrace the free market but is really all about the leaders' personal benefits. Again, just like us.
Keith Fitz-Gerald of Money Morning writes at Bonner and Partners
Washington openly manipulates every data stream dished out to the American public as gospel. There are seasonable adjustments, cost-of-living improvements, and constantly changing calculations.To be fair, though, every country on earth manipulates its currency to try to gain advantage. We're currently in a worldwide currency war consisting of just this sort of action. Countries are trying to devalue their currencies to make their exports more attractive, or like the Fed, deliberately trying to import inflation from other countries because of their dire fear of deflation.
The U.S. government, for example, has changed the way it calculates the Consumer Price Index (CPI) more than 20 times in the past 30 years. Labor stats are calculated six different ways by the Bureau of Labor Statistics. Gross Domestic Product is deflated or inflated at will depending on “methodological changes” over time. It’s revised incessantly.
Like Fitz-Gerald, I think China's problems are short term. The demographics are on their side: they have a population that is growing and they're an enormous country. They now have the world’s largest middle class at more than 600 million people. That will grow to more than 1 billion by 2020.
By 2020, I predict China will be the world's largest economy, and the US will have continued its decline.
I was at my Chinoy (Chinese Filipino) supplier the other day and he remarked that prices for industrial automation gear was going to go down a lot very soon.
ReplyDeleteHe told me the Chinese gov is subsidizing production to keep the industries working and prevent closure of all those steel mills the Chinese bought from the US.
A little known factoid:
Most of the US steel mills that were closed, we're not abandoned. The Chinese boxed and shipped the machinery to China leaving behind empty buildings.
Comeandmakeit
The U.S. economy will probably continue it's downward trend. But it doesn't have to. It would actually be a simple task to turn it around.
ReplyDelete1. Lower all taxes especially on businesses. I mean REALLY lower like a maximum personal rate of 20% and a maximum business rate of 5%.
2. Eliminate all personal deductions and make everyone pay a minimum of 5%. That means everyone pays taxes on all income: churches 501c's, welfare, everyone.
3. Level the playing field between unions and business. Free individuals to choose or not choose unions and free businesses to choose to deal with unions or not deal with unions.
4. Require that all regulations be approved by congress and be discussed publicly for at least 90 days before congress gets to vote on it.
5. Require that all government departments are subject to a investigation and special prosecutor at the first hint of impropriety in their actions.
Anon - I agree completely, except that in a country where one of the two major parties is openly, proudly running socialists, I think the chances of that happening are a bit less than the chances of a snowstorm here in Central Florida.
ReplyDeleteIt would take massive pressure from the people on our "representatives" to get that agenda passed. You'd need 80% of the people screaming for it. That's a rough guess at the number, but I think you get my point. If there isn't that much clamor for it, the vested interests that make money on the status quo will fight it to the death.
It's like shuttering the IRS. Most, if not all, of the Stupid Party candidates call for a flat tax / fair tax / "fill out your taxes on a postcard" kind of tax code. It has been called for before, and the IRS and other vested interests always get rid of it. With the weaponized IRS we have now, pulling audits on any conservative group with "patriot" or "freedom" in their names, do you think they wouldn't audit and harass any congress critters? The level of IRS harassment would reach the moon.
At least a dozen times, I've said the worst thing about our impending collapse is that it doesn't have to happen. We don't have to run infinitely increasing deficits and we don't have to run this epically corrupt system where the Federal Reserve sets the prices for the stock market, houses and so much of the economy. All you need is for the government to be adults. In other words, we're screwed. Adults recognize that spending way more than they get in income can't last. Adults don't sell favors for contributions.