Wednesday, July 6, 2022

China President Xi Jinping’s Worldview Revealed

On June second, a video was released where  Asia Society President and CEO Kevin Rudd examined the ideological underpinnings of China President Xi Jinping’s worldview. The event organized in collaboration with Credit Suisse and moderated by the Asia Society Switzerland Executive Director lasted just over an hour but gave us more insight into the goals China is likely to pursue.

Ten and a half minutes into the video Rudd presents 10 circles of interest that China President Xi Jinping holds dear. He refers to the Chinese President's writings that indicate he is communistic through and through. Around 27 minutes into the video Rudd claims Jinping's goal is "to use the gravitational pull" of the Chinese economy to take over and rule the world without firing a shot. In short, it means making China create a world where it is indispensable to all other countries.

Particularly telling is the President of China contends the reason the Soviet Union collapsed is that it went soft on its communist ideology. With that in mind, it is essential we understand what China wants and how it plans to achieve its goals in order to thwart them. The circles of interest below are prioritized in the way China's President would most likely list them.

  1.   Keep the Leninist party in power, and remain President at all costs.
  2.   National Unity
  3.   Grow the economy so it can fund the other objectives
  4.   Do the above in a sustainable fashion. This will allow things to continue.
  5.   Modernize the military so it can fight and win wars
  6.   Build friendly relationships with neighbors to create a barrier around the country
  7.   Roll back America's naval influence in the area and gain power over the seas. 
  8.   Build on the One Road One Belt initiative to expand influence. This includes Europe.
  9.   Expand into the rest of the world so they will side with China on important votes
  10.  Change the world's view of human rights and move attitudes to parallel China's idea of the future.

Rudd contends the China of 2022 is far different than the China of 2014 when Xi Jinping came to power. Today the Chinese economy is far less friendly towards the private sector. With this in mind, should we view China as an enemy or rival? Rudd agrees with me that nothing will change in China until after the coming party congress this fall. He also thinks it is likely Xi Jinping will remain in power despite recent problems in China. 

Remember, this is all about control, and nowhere in the world are people under more control than in China. Rudd also points out that in our modern world, cyber war has diminished geography and this is another area where China has significant capabilities. His opinion and strategic advice on how other countries should engage with China to maximize their efforts have a fair amount of value. The link to this interview is; https://www.youtube.com/watch?v=szAChpVvQuk 

Not only is Rudd president and CEO of Asia Society but he has also served  for many years as Australia's Prime Minister. In another video At MIT in mid-April,  Rudd delves into the dangers of a catastrophic conflict between the US and Xi Jinping's China." The possibility America will be pulled into a war with China is a subject he covers in his recent book titled; The Avoidable War. That link is https://www.youtube.com/watch?v=Os0KGt81IGU.

All in all, Rudd's views dovetail with many of the ideas put forth on the AdvancingTime blog and can be found in the archives. To be clear, China is determined to move into producing more high-tech products. China's plan centers around both state-owned and private firms investing in and acquiring foreign companies to steal their technological innovations. Subsidizing those companies working within its system in a multitude of ways helps China achieve this goal. 

Countries that export goods at slightly below cost in exchange for manufacturing jobs are not stupid they are predatory and America and the rest of the world are their prey. Overall, China President Xi Jinping’s view of China's role in the world to go does not bode well for mankind. It reeks of control and much of that control comes from increasing "group think" advancing machines into spyware and increasing their ability to alter the way people live.



Republishing this article is welcomed with reference to Bruce Wilds/AdvancingTime Blog 

Thursday, June 23, 2022

The European Union Is Again Close To A Meltdown

The Ukraine conflict is taking a toll on the Euro-zone and it could result in finally pushing it over the edge. Everything flowing from Russia's incursion poses a big negative for the region which is already struggling. When you couple soaring energy prices with stagnate growth and a growing trade balance with China you have the recipe for disaster. This is also apparent on the inflation front.

According to Reuters, the Euro-zone inflation rate surged to yet another record high in May. Inflation accelerated to 8.1% in May from 7.4% in April. A big part of the problem is that  it is no longer just energy pulling up the headline figure. Looking past the headline figure, we find excluding food and energy prices, inflation rose to 4.4% year-on-year from 3.9%. This puts pressure on the European Central Bank to increase rates further. The timing of such a move is horrible in that Europe's dust-up with Russia has brought to the forefront just how weak Europe is. 

Lurking in the background is the strong possibility that the Ukraine conflict will drag on and Russia could completely cut off gas to Europe. Currently, it appears Russia intends to keep Europe from filling storage, this will substantially increase Russia’s leverage in the winter months. Already talks of gas rationing are being floated if we see further cuts to Russian gas supplies. In the past three months, Russia cut off supply to several European countries that refused to pay for gas in rubles and has also substantially reduced the flow through the Nord Stream. This has cut off supplies to France and reduced flows to Germany by some 60 percent.

With inflation running at 4 times the ECB's 2% target, ECB policymakers are facing the toxic mix of raising rates at the same time the economy is shifting into reverse. The choice between galloping inflation, and political instability due to economic misery, is difficult. Hoping to tame inflation and thread the needle, ECB President Christine Lagarde is moving to raise rates. Some policymakers and economists doubt small moves will be enough, especially since underlying inflation is showing no signs of abating.

Due to supply chain problems following the pandemic, then as a result of Russia's war in Ukraine, prices have been soaring across Europe. This suggests that a new era of rapidly rising prices is now sweeping away a decade of ultra-low inflation. What many economists tried to blow off as a transitory jump in prices is now becoming embedded into the economy. The fear is that once high energy prices flow into the economy, inflation will get entrenched and eventually perpetuate a price-wage spiral. A jump in negotiated wages to broadening core inflation remains a growing risk.

Data from the European Union's statistics agency, Eurostat, is only adding to the euro-zone's woes. It shows the euro zone's trade balance swung to a record deficit in January from a surplus a year earlier as the cost of imported energy increased sharply. The euro-zone's trade deficit in goods, the difference between exports and imports, was 27.2 billion euros ($30.17 billion) in January, compared with a EUR10.7 billion surplus the same month a year earlier.

The Euro-zone has already endured a lot of problems what it does not need is another refugee crisis this time caused by food insecurity across North Africa or the emergence of an energy-scarce winter as 2022 comes to a close. The EU abandoned all structural reforms in 2014 when the ECB started its quantitative easing program (QE) and expanded the balance sheet to record levels. Considering the above, it is difficult to remain optimistic that The European Union is on the right track. 

Volkswagen CEO Herbert Diess told the FT in a recent interview that a prolonged war in Ukraine would be "very risky" for the European and German economies. According to the FT, Diess said the economic damage from the war could be "very much worse" than the pandemic. A slowing economy combined with inflation produces stagflation. If the economy crashes, it will crush savings and cause European corporates to default. 

A big factor I fear many economists are not honing in on is that the Euro-zone region simply isn't competitive. The EU lacks technological and intellectual property and is falling further behind the U.S. and China. Germany, the regions manufacturing powerhouse continues to skirt along narrowly escaping recession while France, Spain, and Italy face years of large unemployment levels. The ugliness is exacerbated by the fact that roughly 80% of the Euro-Zone's real economy is financed by a banking sector that carries more than 600 billion euros in non-performing loans. 

As of 2017, not a single European company ranked among the top fifteen technology companies in the world and only four of the top 50 global technology companies are European. This is why skeptics are concerned that if the politically directed "Green New Deal" agenda doesn't boost growth or reduce debt the Euro-Zone will remain economically stagnate. At the beginning of last year, to generate the impression of hope, the EU's leaders in Brussels tried to pull a rabbit out of the hat by strengthening ties with China. 

The EU-China comprehensive investment agreement clearly signifies a significant shift in EU policy towards Asia. The proposed deal dovetailed with Beijing's "One Belt, One Road" (OBOR) initiative and follows the signing of an agreement made with Italy which is viewed by many as bankrupt. Last year, in what was considered a bold move the Italian Prime Minister signed a historic memorandum of understanding with Chinese President Xi Jinping in Rome. The agreement made Italy the first founding EU  member, and the first G-7 nation, to officially sign on to OBOR in hopes it would shore up its weak prospects. 

The ramifications flowing from Italy's deal with China may, in the end, prove to be a deal with the devil. The key motivation behind China working to reach a deal with poor, weak, but lovable Italy was its desire to exploit Italy and use it as a backdoor into the broader Euro-Zone market. The deal China and Italy inked contained development deals covering everything from port management, science and technology, e-commerce, and even soccer. The fact that China now has control of entry points into the European Union that can be lawfully expanded upon does not bode well for the region.

According to data from Eurostat, the EU has for years enjoyed a trade surplus with the U.S. (meaning it exported more to the U.S. than it imported) in 2019. The problem the European Union faces is that it imports far more from China than it imports. Imports from China to the EU surged by more than a fifth last year to 472 billion euros ($522 billion) compared to 2020. This widened the bloc's trade deficit with China to 249 billion euros. The deficit with China is not an outlier but highlights a trend that has been growing. Expect the surplus with America to drop in the future and the deficit with China to grow. 

It could be argued Brussels is leading the EU into an ambush, Europe cannot hold its own against China. Both the United States and the European Union have a long history of complaining that China wants free trade without playing fair. To think China is a tiger that has suddenly changed its stripes borders on insanity. The EU is likely to find this is not the first time that China signs such an agreement without respecting it. Europe which has seen its manufacturing sector debased by cheap knockoffs from China and other low-wage countries will gain nothing by bringing more of these goods into their market. China exploits its trading partners  by exporting goods at slightly below cost in order to draw manufacturing jobs from other countries. This has the potential to hasten the demise of Europe.



The ECB’s Balance Sheet Grew From €1.0 Trillion In 2005 To €8.7 trillion.

Still, the Euro-zone's biggest problem remains its massively flawed currency and banking system. Because many countries and economies share the same currency when a country fails to keep its budget in line or falls on hard times, they become a burden the others are forced to carry. The EU abandoned all structural reforms in 2014 when the ECB started its quantitative easing program (QE) and expanded the balance sheet to record levels. Making matters worse, the ECB has come up with several schemes over the years to kick the can down the road by adding liquidity to this insolvent system.

European Households Tend To Hold More Of Total Assets In Currency And Deposits

In short, when you look at the situation, not only are many of the people living in the Euro-zone politically opposed to Brussels exerting more power, on top of that, the banks are up to their eyeballs with bad debts and holding worthless paper. Simply put, the whole system is rotten to the core. Circling back to soaring inflation, the ECB has little choice but to raise rates in lockstep with other central banks. The Fed rate hikes are toxic to both the euro and the yen. The people of both Europe and Japan face losing a great deal of their wealth if the euro and yen continue to fall. 


Below are two links to other articles relating to China and the situations contained above.        https://brucewilds.blogspot.com/2019/11/chinas-state-driven-business-model.html https://brucewilds.blogspot.com/2019/03/italy-picked-off-by-china-folly-of-it.html

Republishing this article is welcomed with reference to Bruce Wilds/AdvancingTime Blog 

Saturday, June 18, 2022

Prins Claims Nothing Returning To Normal - Is She Right?

Graphic

In a "Sponsored Content" piece by Rogue Economics, Nomi Prins joins those claiming nothing is going back to normal. Prins says we should be prepared for the great distortion to move forward at a faster rate. In this piece, the hyperboles roll off her tongue. Prins says something strange is happening behind the scenes in our financial system and she is one of the few individuals privy to this information. While I like this gal, it is difficult for me not to be skeptical.

Despite the warnings we hear from many notable market watchers such as Wall Street titan Jeremy Grantham the markets seem to be puttering along. But are they? The recent trend has been downward and many currencies are under pressure. The very important currency market is a place few people watch. Grantham’s thesis is that US stocks are in a “Super Bubble”. This is an upgrade on his diagnosis last year that we are experiencing “an epic bubble.”

Grantham states that the US has seen only three other such extreme events in the past 100 years. They are the Wall Street crash of 1929, the turn-of-the-millennium dot-com mania, and the housing market madness of 2006. If Grantham is correct we are about to enter a time of great financial distress that will change the lives of many people as they watch their wealth vanish before their eyes. Grantham points out that all three of these "super bubbles" including Japan's fall from grace, all went through specific events which triggered them to burst and this market has checked all the boxes taking place proceeding market crashes. 

Circling back to Nomi Prins, she is characterized as a former Wall Street managing director who walked away from a million-dollar career. She is now an author and claims the mainstream media is completely ignoring what might be the most important story in the financial world today. She notes that amid the distractions caused by conflicts overseas, shortages, and inflation, Treasury Secretary Janet Yellen recently took the stage at an event called COP26 in Glasgow, Scotland to address some of the world’s most powerful people. There, Yellen called for world leaders to commit to a $150 trillion ‘global transition’ of our economy.

According to Prins since Nixion cut the link between the dollar and gold in 1971 the economy has undergone a massive distortion. Her research indicates the Fed can’t raise rates enough to stop inflation and they won’t stop printing. Her newest prediction is we are about to witness the biggest transfer of wealth in history and that ten years from now, we’ll look back to see nearly every industry has been fundamentally reshaped. The areas she keys in on are energy and what she calls a new financial system. She talks about an entirely new kind of infrastructure spending with great upside for investors and a small company that is building the bridge between the legacy banking world and a new financial system. These are the answers she sees as carrying the world forward.

Rather than focusing on whether Prins is on to something or merely trying to sell her book and promote her brand, it is important to note, that when looking at content someone is putting out we have to be skeptical. A key part of her premise centers on the so-called power brokers currently in charge being able to pull off the transformation they have planned. Remember, the best-laid plans of mice and men often go askew.

Where I do agree with both the individuals noted above is that we should prepare for a great transfer of wealth and change is in the wind. The economy is in uncharted waters and the transfer of wealth seldom benefits the masses. With that in mind, it would be prudent to be cautious and not depend on paper promises to make your future whole. 

Many of us have constructed scenarios of how things might play out when shit hits the fan. The world we live in after a major financial earthquake is likely to be far different than the one we live in today. Expect huge changes in both the economy and society as people are forced to accept the new realities of the day that get fostered upon us. Whether we enter a time of deflation, inflation, stagflation, or hyperinflation, it is unlikely to be kind to most people, in fact, things might get downright ugly. 


Footnote; To those interested, this link takes you to the Rouge video  ----   https://secure.rogueeconomics.com/?cid=MKT623113&eid=MKT638672&assetId=AST236063&page=1

 (Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)

Friday, June 10, 2022

Expect No Government Help During A Major Disaster

During A Real Disaster, Help Will Be Hard To Find

A recent article on AdvancingTime opined upon how long it has been since America has had a really good leader. Sadly, the damage these "less than stellar" Presidents cause a lot of problems for society that generally linger for decades. With this in mind, it should be noted that bad leaders have a habit of opening Pandora's box for the greater good whenever a disaster strikes. It seems, to some politicians, that the only way the government can help us during a crisis is to focus on taking more control over our lives. 

Recently some Freedom of Information Act (FOIA) documents released by the George W. Bush Presidential Library spotlighted the powers that modern pres­id­ents "claim they possess" in moments of crisis. Following 9-11, this type of expanding the Presidents powers could be viewed as a pure power grab. In short, during a national crisis government seems more interested in control than coming to the aid of its citizens. This caused all my feeling about thinking the government will come to your aid in a time of crisis to come flooding back.

The "presidential emergency action documents" (PEADs), were created during the cold war. This was at a time many people feared we might be attacked with nuclear weapons. These documents authorized the president to enact measures such as suspending habeas corpus, detaining "dangerous persons" within the country, censoring news media, and even preventing international travel. 

The desire to extend power dovetails with today's high-profile disasters where the media generates the feeling our government stands ready to rush to our aid in case of a national disaster. Following a tornado or hurricane in the news, we often see FEMA workers spread out and moving from door to door offering help to Americans in need. This reassuring media coverage is misleading. The truth is if you find yourself in a large area of devastation due to a crisis or disaster  the government will prove largely ineffective. If and when a really large Armageddon event does occur people affected will quickly become acutely aware that God helps those who help themselves.

The trend of pandering to victims that we have seen develop over the years may be a result of the battering former President Bush took in opinion polls following Hurricane Katrina. The pictures that the media posted following a slow response in handling Katrina haunt his administration and paint Bush as being insensitive and out of touch with the plight of poor Americans. At what point did government become responsible for dispensing sorrow and grief?  With the bar to show concern set at its current level little gets done in Washington.

Over the years in our media-driven world, the President has adopted the role of consoler in chief. This means they are expected to pour forth sympathy and cast out concern for every American following incidents of destruction or violence. It does not matter if it is an accident, shooting, or some natural disaster, in recent years all this has reached new heights where even in the case of a few deaths it is not uncommon to see the President leaping upon Air Force One and rushing to the scene or calling to express a huge dose of heartfelt sympathy. In this politically correct world, it has even gone so far as to the President being expected to weigh in on minor tragedies that occur throughout the world.

It should be noted that much time is wasted performing these acts that could be better used and focused on solving many of the real and pressing problems that face America. In reality, this pandering is a major disservice to Americans in that it fosters the impression that government will be there for you if you ever get into a pickle or jam. While reassuring to many the false illusion of a competent and effective government ready to come to your aid comes at the cost of raising unrealistic expectations. 

I suspect that with the formation of the massive Homeland Security Agency this may be a case of reassuring the masses that their tax money has not been wasted. A perfect example would be the governments reaction to the Boston Marathon bombing. It was overwhelming but in the end, it was a homeowner checking the tarp on his boat that noticed a spot of blood and not the thousands of law enforcement officers that brought the manhunt to an end. 

No Government Is Ready For This!
No matter how much planning is spent it is silly to think someone can quickly rush to an area they are totally unfamiliar with and institute actions to efficiently solve massive problems. Do not be fooled, in the case of a real disaster the government is generally not very effective, the real help will come from your neighbors, this has been the case throughout history.

It is important to remember, that all disasters are not created equal. There is a huge difference between a tornado and a nuclear bomb going off in a major city. Also, what happens if the power-grid would fail and electrical power is lost over a large area for a month or more during inclement weather? In all reality, the Federal government would be relatively ineffective and not much help in a major crisis that covered a large area and affected tens of millions of Americans. 

Anyone who has ever experienced the frustrations caused by a bad storm with power outages and such will tell you most help comes from nearby and government is not the answer. People who adopt the attitude that they are a victim following a real disaster and then simply wait for the government to arrive should expect to wait a very long time. Anyone counting on the government is making a huge mistake, simply waiting for help is the kiss of death. 

(Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)

Tuesday, June 7, 2022

Great American Presidents Are As Rare As Hen's Teeth

A recent article caused me to reflect on how long it has been since America has had a really good leader. While some people see Trump as the best thing since sliced bread or point to Ronald Regan as their choice, it could be argued both were flawed. Both contributed a great deal to the national debt. Also, Trump was very divisive, it was as though he liked to fight rather than reach solutions. In Trump's defense, many of his problems were the result of a corrupt deep state so entrenched in our government that they removed his ability to bring about significant reforms.

When you think about it, how you rate a President is very subjective. It seems dying in office elevates their status. Below are a few examples of Presidents that may have been given far more credit than they deserve.

  • Lincoln has been credited with ending slavery, however, the war was not about slavery and roughly 620,000 Americans died to keep the country together.
  • Many people think Roosevelt ended the Great Depression, but it was really World War II spending that brought us out of our funk.
  • And then there was Kennedy, inspirational, but not without his flaws. Kennedy supported a policy that led to the US becoming mired in Vietnam for nearly a decade.
Like Most, The Trump Economy Was Flawed

Being elected President catapults a man into a position of influence that carries ramifications that reverberate across the world. Their decisions and the direction their policies take us often last long after they have left the office. As noted above, when you think about it, how you rate a President is very subjective. We should not forget the media and current social and cultural norms also play into this. Just as more important are how they face the trials and tribulations that surface while they are in office.

Few people have yet to reach the  conclusion the Trump economy was nothing more than a mirage based on government spending. That could be because it would be in poor taste since so many people benefited from the easy money. The fact is Trump is not a rocket scientist, something he most readily would deny. It is possible he may not have fully understood the economy and the importance of what people buy, where they buy it, and how they pay for it. My conclusion is that Trump was not an economist but simply a businessman who loved the economy when it was in sync with his investments.

The Amount Of Debt A President Adds Can Influence Popularity

Obama on the other hand was far more charming than Trump but charm does not make up for the fact he oversaw reshaping healthcare into a massive transfer of wealth. The promise of lower health care costs was only one of his many failures. He turned the Middle-east into a hell hole causing millions of refugees to flee to Europe while also exploding the national debt. His biggest failure may have been his role in ramping up racism in America. This has resulted in more people identifying others by the color of their skin rather than the quality of their heart and what they contributed to society. 

Biden of course falls into a category of his own. I heard the term purposely incompetent used to describe him and while it fits, corrupt to the core may be better. It should surprise no one that Obama did not rush out to support Biden at the start of his primary campaign. With Biden's election, many of the skeletons hidden away by the Clinton and Obama crew have started to fall out of the closet. It seems old Joe, Hunter, and the Biden family have a whole warehouse of secrets they wish to keep away from the light of day. 

Let us not forget George W. Bush who turned 9-11 into something far worse than we could ever have imagined. Not only did he expand war across the middle-east he unleashed upon America the idea of "homeland security" by exploiting fear and the idea there was a terrorist under every bed, Bush unleashed upon the American people the largest government spy operation the world has ever seen. This was rooted in the idea it is for the greater good. Adding icing to the cake, he made us pay for it. The price has been huge in both dollars and a massive loss of freedom. To make his fall from grace even more notable the economy crumbled around him near the end of his time in office, you remember, that thing they called the Great Financial Crisis. 

Yes, these fellas are being taken out of order. but disorder is what many of them unleashed. No account of less than great can be taken without mentioning Bill Clinton the infamous ladies' man who rushed to embrace sending millions of American jobs to distant lands. Sure he did not do it alone but he pushed hard to get it done and all the while reassuring us how well it would work out for the average American. While he did bring the national debt temporarily under control, it could be argued much of that was due to lower interest rates and the work Ronald Reagan and Bush senior had already set in motion.  

Personally, I think a President that was greatly underrated and should be listed among the best is Dwight Eisenhower. He served America without shenanigans.  As he left office he gave a very important speech warning the American people about the Military-Industrial Complex. The world might be a far better place if more people would have taken heed. 

Sadly, even Ike could never have predicted or imagined the far worse evil  alliance of the Federal Reserve, the government, and the too big to fail. This "Financial-Political Complex" developed as a result of the 2008 crisis and has created the precarious situation of massive debt we now face. When looking at the dysfunctional mess Washington has become, like many Americans I keep wishing a hero would arrive to cure our ills. The problem is, where will we ever find one.


(Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)

Sunday, May 29, 2022

No Guarantee Slowing Economy Will Slow Inflation

If you listen to economists and those watching the wave of inflation that is sweeping over us you will hear many of these people predicting it will soon abate. A huge part of their argument being the best cure for high prices is high prices. This is because high prices bring about demand destruction. Taking this to the next level some are looking towards an economic slowdown, a recession, or worse.

Still, with so much money stashed away and so few real tangible assets there is no guarantee inflation will slow or that we will see deflation. For years, central banks across the world claimed the lack of inflation was the key that allowed them to adopt and deploy their QE policy. It was central to their ability to stimulate. The moment inflation began to take root much of their flexibility was lost. Already a great deal of inflation has been baked into our future.

We should not be deceived or led to believe that lower oil and commodity prices will in themselves bring about deflation. Often falling prices in both commodities and goods reflect a lack of demand or temporary supply imbalance that will correct itself. When that happens prices tend to rapidly adjust to reflect the "new reality of the day." In this case, it is very likely that higher prices are here to stay and even move higher. While inflation is painful, it could be argued that stagflation is even worse.

Inflation Is Not Limited To Manufactured Goods

Inflation is not limited to manufactured consumer goods. Currently, prices are surging in the service sector as well as fees, tolls, and taxes. People tend to forget just how much government spending is done at the local and state level. For these entities simply printing more money is not an option for eliminating revenue shortfalls. This translates into a slew of revenue-driven schemes originating on the local level that come back around to drive up the cost of living. 

The huge number of people that work for the government or in quasi-government positions that will never agree to a wage cut create a floor under incomes. Throw in supply chain disruptions that are causing productivity to drop and a troubled energy sector and you have a recipe for soaring prices. Of course, a great deal will depend on where the wealth that escapes the meltdown expected in the stock market flows. I expect that amount will be substantial.

A number of people are predicting this money will flow into bonds causing bond yields to drop. While this could happen it is possible a lot of this money could flow into tangible goods that increase in value during times of inflation. It is important to remember inflation is not all about interest rates. A huge part of Fed policy is rooted in quantitative easing and tightening. Asset valuation growth is greatly dependent on the liquidity resulting from the unfettered flow of new money and credit. When all is said and done liquidity and money supply matter far more than interest rates.

Circling back to the idea there is no guarantee a slowing economy will slow inflation, part of the problem is fees, tolls, and taxes could surge higher. When we look at where inflation has occurred during the last decade or so we find it centered in areas where the government has expanded its influence. Inflation is not just prevalent in manufactured consumer goods. Two areas where inflation has run rampant that rapidly come to mind are healthcare and education. A less often noticed area that carries massive implications over time is the broken legal system but that is its own story.

Other sectors where the government is moving prices higher are utility bills, new construction, and the cost of providing local services such as police and fire protection. This is why the next surge in inflation or higher cost to consumers, regardless of the pace of economic growth, might well come from huge increases in fees and taxes. An example I have used in the past of surging tolls was highlighted in a Philadelphia Inquirer op-ed. In 2008, it cost just $15.25 to travel across the state from New Jersey to Ohio, over the years this has jumped to $61.20.

State And Local Governments Need Revenue

People tend to forget just how much government spending is done on the local and state level where simply printing more money is not an option for eliminating revenue shortfalls. The theory is based on the fact local and state governments have hidden and masked the size of their growth and financial promises from the public. A factor many people fail to grasp is just how much government has expanded over the years. Governments mask growth by "outsourcing" a great deal of the work their workers had been doing. Another place this sneaks under the radar is in the huge growth of "quasi-government " entities such as airport authorities and downtown improvement districts which are able to levy special taxes.

Since state and local governments lack the federal government's ability to print money and buy back their own debt they must pay higher interest based on their credit rating. As a state or local government's debt rises so does the amount of interest they must offer to sell their bonds. The damage this can cause is becoming evident in Illinois which is the poster child for dysfunctional state and local governance.

The average Joe or Jo may not see many of these increases in fees and taxes aimed at increasing revenue because they are not assessed against them personally. Still, they do directly affect businesses and landlords which are forced to eventually pass on the added cost to consumers. Often this is through higher prices. Another way to do this is by transferring responsibilities, limiting warranties, or reducing goods and services that had been previously provided. 

In the end, tolls, taxes, increased cost for permits, dropping productivity, and fines flow back into society and our economy in a complex way with intricate ramifications to America's ability to compete going forward. Inefficient and wasteful government does have a cost and it must be paid. It will as I have outlined above come in many forms. Do not be surprised if these extra costs really begin to hammer brick and mortar retailers as well as commercial real estate across America. If so, we will all be forced to pay the price of this "cost-shifting" through inflation and a lower standard of living.


(Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)

Saturday, May 21, 2022

If China Attacks Taiwan, We Have Few Good Options

Stories about how America is amassing more US Navy ships near China in a show of force aimed at deterring an attack on Taiwan should be causing Americans greater concern. War breaking out in that area is not unthinkable, if coupled with what is happening in Ukraine it would greatly increase the possibility of world events spiraling out of control. Adding to the worry is the fact that if hostilities escalate, it seems none of the parties involved would be in a hurry to wave an olive branch. Such a move so early in the game would scream weakness which would be considered political suicide. 

Anyone paying attention will most likely agree tensions in the area are escalating. America has been upping the ante by moving two carrier strike groups and other resources into the area. This is in response to what seems to be a probing of America's resolve to back Taiwan's independence. This follows America's rather benign reaction to China's recent takeover of Hong Kong. Chinese fighter jets, now cross the so-called “median line” of the Taiwan Strait at will. This brazen move violates the implicit agreement made decades ago not to cross that line. 

The idea China will attack Taiwan has been battered around for years. What better time to test America's resolve than when its attention is already focused on the war in Ukraine? Currently around one million Taiwanese work and live in China and China is one of  Taiwan’s most important trading partners. It accounts for an estimated 40 percent of Taiwan’s outbound trades. Taiwan's heavy dependence on China for trade and commerce complicates an already complex relationship and is another reason China resents what it views as outside interference.

China Claims It Is Ready For War
Little in the way of provocation might be needed to set an attack in motion. In a recent phone call China’s top diplomat Yang Jiechi warned national security adviser Jake Sullivan, “The Chinese side will take firm actions to safeguard its sovereignty and security interests. We live up to our words,” he said. This was seen as sending Biden a message prior to his upcoming trip to East Asia. It started on Friday with a visit to South Korea to meet the country’s newly elected president. 

Biden then plans to travel to Japan, India, and Australia to meet with a joint security partnership called the Quadrilateral Security Dialogue. During the visit, the United States and Japan are expected to release a statement calling for both countries to join together to "deter and respond to" China's aggressive military activities in the region.

In the past, China has made it clear that any interference in the area will be considered an attack on China, in reality, bringing warships into the area or increasing military exercises should not be a deal-breaker. Only an attack or bombs hitting China's mainland should constitute widening the hostilities. Simply coming to Taiwan's aid should not reach the level of elevating the conflict, however, that does not translate into saying it won't. In short, any escalation of the current situation could lead to a full-blown war.

Most people assume that any attack on Taiwan will result in a loss of life, aircraft, and most likely ships. In such a situation it is not difficult to imagine things getting out of control. If a large ship is sunk the loss of life could easily be in the hundreds or even thousands. In the past, China has never had the capability to take Taiwan. Still, from China's point of view, I cannot see that they have much to lose by rattling their swords.

In the event shit would hit the fan and bombs are dropped on a Chinese city, the Chinese people are already conditioned to view America as the aggressor. On the other hand, few Americans have ever considered such a thing happening in America and would demand a violent and harsh response to any attack within America's borders.

Adding to Biden's problem if an invasion of Taiwan does occur is that it is in China's neighborhood which is well over seven thousand miles from America. This means America is at a distinct disadvantage when it comes to resupplying troops. This is the same reason some of us claimed Putin had a big advantage in Ukraine and urged America to keep out of the conflict. Long supply lines have been the bane of military leaders since distant wars began.

China Has Built A Slew Of Cutting-Edge Weaponry

Over the last few years China has beefed up its military. While some experts continue to think China lacks the ability to mount a massive cross-strait amphibious offensive across the roughly 100-mile-wide Taiwan Strait, such an effort is not out of the question. China has produced a new generation of amphibious ships. The Type 075 can transport troops and weapons while launching aerial and undersea drones to conduct surveillance operations. 

This is a war Beijing would want to win incisively and swiftly. The largest barriers to such a victory are Taiwan's rugged shorelines, mountainous topography, and a populace that knows how to maximize these strategic features. Still, if nothing else, an attack would once and for all test how far America is willing to go in support of Taiwan. If America's response is as mild as it was to China taking over Hong Kong, China would have removed its biggest obstacle in a war with Taiwan and that is outside interference. 

Such an attack would also signal to the world China is ready to cement its place as a world military power. it could also be argued this is not a conflict where China has much to lose. Other issues feed into the notion of this conflict. For example, the Chinese Communist Party (CCP) will hold its 20th National Party Congress later this year and as it nears things that occur will be rooted in politics rather than economics. Also, it would put the global supply chain under even more stress and since housing is no longer a source of economic growth for China, it might even turn the communist regime towards expanding its military as a way to spark growth.

Americans would be naive not to consider that even in China suffers a great number of soldiers being killed, their propaganda machine will hide the truth. America on the other hand with its attitude that every American soldier's life is precious will wither in pain. The thing we must never forget is that Chinese culture is very patient and even if we thwart its efforts to take Taiwan back into its fold, it will try again. In short, if China attacks Taiwan, America has few good options.


Footnote; For more background on China and this subject see the articles below.        https://brucewilds.blogspot.com/2020/11/china-has-plan-and-we-are-not-in-it.html  https://brucewilds.blogspot.com/2022/02/china-expect-change-to-bubble-up-from.html https://brucewilds.blogspot.com/2021/10/china-housing-market-is-on-life-support.html https://brucewilds.blogspot.com/2021/03/chinas-strength-should-be-evaluated.html

 (Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)