Sunday, November 24, 2019

Hong Kong Is In An Unwinnable Position

It is difficult to be optimistic about Hong Kong over the long-term. If you want to call a spade a spade you might even go as far as to say, Hong Kong is doomed. For months hundreds of thousands and at times over a million Hong Kong citizens have taken to the streets to protest several proposed amendments concerning how they are governed. The protesters, predominantly young people, some dressed in black and wearing face masks are often seen dragging metal barriers, linking arms, closing off roads, and surrounding government buildings.

Still, it is bigger than this, civic groups and small businesses have joined in at times with general strikes and school boycotts to “defend Hong Kong.” This started over an amendment that included a mechanism for extraditions to mainland China that triggered fears that Beijing could detain people in Hong Kong and try them on the mainland under China's more opaque legal system. Mounting opposition has stirred from all corners of society, including business-people, lawyers and activists, who say the bill would undermine Hong Kong’s relative autonomy and independent judicial system.

While you might want to consider the idea Hong Kong has no future as simple doom porn certain social and economic factors are coming together that paint a picture devoid of hope. For the protesters, this has become a damned if you do damned if you don't situation. While Hong Kong is considered a city by most people, it is officially the Hong Kong Special Administrative Region of the People's Republic of China. With over 7.4 million people of various nationalities in a 1,104-square-kilometre territory. it is one of the most densely populated places in the world. For many years the area flourished as a tax haven for the British and European elite. The continued viability of Hong Kong was questionable even before the Brits turned it over to China.

Hong Kong Is Most Likely Doomed
Anyone with a knowledge of how repressive governments work will tell you when you think those in charge have surrendered to the cries of the people victory often turns out to be fleeting. As soon as the people return to simply living their lives, the ugliness they crushed will rematerialize. It may be in a slightly different form but it will reemerge. For the people of Hong Kong, the ugliness is China's government forcing its will and way of life upon them. Unfortunately, no matter what those of us living in other countries tell themselves, this is not limited to China.

The rise of totalitarianism and Orwellian rule is surging across the globe with governments nibbling away the rights of the individual for the "greater good". Technology is key in employing tools such as facial recognition and keeping records of our communications. This includes things like China's social scoring program that rewards and punishes citizens for their behavior.  Adding to tensions, the United States Senate unanimously passed the “Hong Kong Human Rights and Democracy Act of 2019”, and the House of Representatives then passed the same bill by a 417 to 1. The Chinese consider this a slap in the face and an assault on their sovereignty.

Circling back to Hong Kong, a big problem is that as the protests turn violent it gives China justification to lower the hammer and crush those standing against it. This, of course, would be done "for the greater good." The narrative that the protesters are destroying  businesses, companies, shopping malls, subway stations, and the economy is difficult to dispute. The decline in tourist stands as a testimony this has effected Hong Kong's hard-earned reputation as a safe international business center.

It is logical to think that China has been busy gathering information on its enemies in Hong Kong and even if protests subside China will be slow to forget what they have done. This means Hong Kong is living under a cloud and most likely China will work hard in coning years to diminish its future by always putting other areas first, call it discrimination if you like. In a study, the Hong Kong Institute of Asia-Pacific Studies asked 707 individuals by phone in late September if they would leave the city because of the turmoil. More than 42% answered yes, this is up from 34% last December. Almost a quarter of these respondents claim they have started plans to leave which includes things like getting out of housing leases, selling their homes and cars, and packing up their possessions.

The political chaos was the most significant element triggering a desire to move. The two largest factors being "too much political dispute or social cleavage" (27.9%) and "no democracy in Hong Kong" (21.5%). Adding to the desire to flee was the fact about 20% of the respondents had no confidence that China or Hong Kong would address overcrowded living conditions. Unfortunately, it is generally those with the best education and most money that have the option to actuality leave. This increases the possibility that the area will suffer financially over the long run as capital and wealth take flight to areas with better prospects.

Chinese Troops Have Assembled Near By
It has been suggested that some of the most extreme violence could be coming from Chinese agents whose goal is to elevate tension to the point where China has no choice but to send in troops to restore order. Beijing has warned for months that Hong Kong's insubordination will no longer be tolerated. Even a video, complete with dramatic aggressive music was published by the state-owned tabloid Global Times, it showed "The People's Armed Police assembling in Shenzhen, a city bordering Hong Kong." The video highlights the idea China is ready to move in. It does not take a rocket scientist to see the writing on the wall, at some point things will most likely get ugly very fast.

The claims the Chinese Communist Party (CCP) and China’s economy would pay a terrible price for a brutal assault may be overdone. We should remember the protesters have been painted as violent thugs going forth every day to harm the economy and other Hongkongers. The big question is whether China moving in and hammering the protesters into submission will trigger a war. If so, such a war has the potential to go global with a great number of nations weighing in. Still, how could you come to the wayward territory's defense? It is both far away and impossible to defend. For Trump and America to draw a line in the sand and not carrying through would be most embarrassing indeed.

Saturday, November 23, 2019

What Happens After The Economic Momentum Ends?

At Some Point We Have Simply Overbuilt!
The economic landscape before us continues to look like something out of  "Alice And The Looking Glass". A bizarre  and unrecognizable land, a land that is distorted and papered over by ream after ream of paper. For over a decade this paper has been rolling off the printing presses of central banks all across the world in an attempt to mask reality. Peter Schiff says, printing money is to the economy what taking drugs is to a drug addict. In the short term, it makes the economy feel good, but in the long run, it is much worse off. Unfortunately, what was once the "long-run" or "distant future" is now getting much closer.

Many people are now set to blame any slowdown in global growth on what has been declared a very dangerous and protracted trade war. Going into it many economists warned it could be truly disastrous for the entire global economy. In my opinion, the fear of slowing trade and how it will affect America is being overplayed and is not the chief catalyst for a slowdown here in America. While it is easy to target trade as the culprit and Trump as the instigator this conclusion is not supported by facts. We should remember the economy moves in cycles and this one is long in the tooth by historical standards.

Since the Bernanke experiment began, time and time again, the green shoots of economic growth have withered and required more stimulus in order to move to the next level. Each prediction of achieving escape velocity has proven to be short-lived or overly optimistic. These bursts of good news have continually been followed by disappointing economic data forcing some kind of stimulus to get the economy over the next hurdle. When all is said and done I expect economists will argue for decades over whether Bernanke indeed took us down the wrong path because "easy money" allows us to ignore important problems.

When it comes to the economy we are not talking about a well-oiled and designed machine and in the end, we may find that events are not completely under the control of those who have been placed in the driver's seat. We have just been through an expansion in credit and the monetary base of a magnitude never before witnessed in modern times. The influx of monetary stimulus from QE and massive government deficit spending has created the illusion of more pent up demand than exists or can be substantiated. 

This has resulted in an elevated baseline for comparing year on year growth, in short, we have to move forward faster next year just to keep growing. For example, if we manufacture and sell twelve million automobiles this year up from ten million because of low interest rates and easy money, we now must sell  the same number for the economy not to contract. This means the bar is constantly being lifted and we must sell even more next year in order to move forward. The whole concept of economic growth is based on an ever-growing trend of year over year increased production.

Click Here To Enlarge
The bad news is that even after the latest wave of fresh stimulus, global growth is again starting to drop according to the OECD's latest report on the Economic Outlook. The report from the Paris based policy forum titled; Weak trade and investment threaten long-term growth, paints a bleak picture of what's to come. The world economy is quickly decelerating after peaking at 3.5% in 2018. Going forward the global GDP is expected to grow at a decade low of only 2.9% this year and remain in the range of 2.9% to 3% through 2021.

Throughout history, new trends and inventions have emerged shaking things up and propelling growth. Also, we have become accustomed to what is known as "sector rotation." Such as computer sales increase when clothing falls, but overall we seek numbers that reflect an upward and onward slope. History shows that such trends falter when they become overdone and become a headwind for growth, Central bank action coupled with massive government spending in recent years has acted as an "artificial tailwind" but this is not a normal state which can be sustained.
So the question is, what happens after the momentum ends? After QE can no longer increase demand. After most or all of this easy money has flowed into the investment "of the day," what happens when it begins to flow out? The problem is this so-called recovery has been constructed on the unstable base of false demand and debt. It is not uncommon to see debt sour when the economy slows, and this can rapidly occur.  Time has a way of revealing certain realities but does so at its own choosing. While we tend to think that we will see "it coming," and have ample time to react if it becomes apparent the markets are about to crash the speed at which events can occur is often a surprise.

Many people have come to accept the fact the world might soon witness a major shift in the value of one investment over another as investors seek firmer ground. Derivatives, currencies, plunging stock prices, air rushing out of a bond market bubble, how debts are structured, and the timing or direction from which problems arise are all factors that must be considered. Investors are constantly reminded that investing involves risk, investing in foreign markets is subject to additional risk including currency fluctuations. This means we face the loss of principal or capital. Year after year of climbing markets tends to make people complacent and that is where we are.

Friday, November 8, 2019

Technology Spurs On Our Ability To Deceive

Caught between the forces of mainstream media and government propaganda it seems we can believe nothing we see or hear. Much of this problem is rooted in the agendas of large companies and those who control them. These companies have become so big and powerful that they now influence government's message and direction. Fake news and false flags have left many of us having a difficult time deciding what is real, adding to this is the rapidly growing ability of computers to generate and alter human images. This is all about to go to a whole new level.

Margrethe Vestager, the European Union Antitrust Chief, is busy touting that the EU's influence gives it the opportunity and power to shape the world. She insists the EU is ready to take on companies like Google, Facebook, and Amazon which she contends has used their power to undermine competition, keep out innovation and collect data on us. This has given these companies great power to manipulate society. Google did this when it used the power of its search engine to favor its own comparison shopping service. While the EU  has signaled it is going to make several big companies use their power in a way that’s fair and doesn’t discriminate the fact is this is easier to say than do.

The EU plans to do this by flexing its muscle with a combination of competition policy and regulation changes, however, whether it will be successful remains to be seen. Like many people, I remain dubious. These powerful companies already are overly involved with shaping the message of media and government propaganda are about to unleash upon society a great deal more computer-generated models and images. These have advanced to where they blur reality and diminish the need for humans to act as spokespeople or to represent organizations.

Back in 2011, Swedish fashion chain H&M admitted to using computer-generated models to showcase collections on its website. Since that time the ability to create computer-generated images has only gotten better. We have advanced to where it is difficult, no, it would be more accurate to say impossible to know if what you are seeing is really a person or simply the image of one. Drilling down into this issue forces us to where creativity, marketing, and price-point intersect and that has huge implications for society going forward. We have reached the point where what we are asked to believe in a world of fake news and false flags is only limited by our imagination.

Real Or Not? Click here to take the test
An example of this and somewhat harmless can be seen in the virtual models H&M has generated for use in ads. These images look completely human, but upon inspection, if you look closely, they might all have the same body shape and pose with a real model's head superimposed on the body where the skin tone has been digitally altered to match her complexion. This step which moves past "photoshopping" has created a bit of controversy. H&M has drawn criticism for creating a false reality and creating an unrealistic body image for women to live up to. The Swedish website Aftonbladet first noticed the uncanny similarities of the models. Hacan Andersson, a spokesman from H&M, confirmed the deception by saying:
"It's not a real body, it is completely virtual and made by the computer. We take pictures of the clothes on a doll that stands in the shop, and then create the human appearance with a program on a computer."
Andersson argued the company made the choice to use the images of computer-generated models because it simplified the process of the photoshoot and also that it allowed customers to focus on the clothes rather than the models. He acknowledged, "The result is strange to look at, but the message is clear: buy our clothes, not our models."

The Fact Is Computer-Generated Images Often Appear More Real Than Reality
Computer-generated imagery, known as CGI, encompasses the tricks and the ability to generate and manipulate images. This creates some interesting possibilities going forward as well as greasing an already slippery slope with endless possibilities. Eventually, this could lead to a form of "Photoshop" on steroids. Anyone familiar with Photoshop knows it delivers the magic that helps people bring their creative vision to life. By editing raw image files and photos using state-of-the-art photo editing not only can people create compelling high-dynamic-range images (HDRI) they can also mislead viewers as to what is real.

Expect a lot more of this in the future. By adding distinct characteristics from individuals that society views in a very positive light to a CGI it is not difficult to imagine that we might extend some of that same positive feeling to that image. If this is true then it is not difficult to envision both politicians and others "scrubbing" their voice and persona ever so slightly as to improve the impact they have on advancing their cause. Slowing their speech, deepening the tone of their voice, shaving off a few unwanted pounds. Manipulating people in this way could be looked at as a form of propaganda but in reality, it is only one step farther than we already go when we do extreme editing of a news clip to sway public opinion.

The future of TV news could be very different in that it could be completely computer-generated. Take, for instance, the many imitation sounds engineered into some electronic keyboards today. While an audiophile may be able to tell the difference the average listener cannot and most people don't care if it results in a less expensive download for their iPod. Since the same thing can be said about music and even art this can be scary, especially if you are the person suddenly discovering that a robot could take your job. In Vegas, stage shows used to all have live orchestras but now many musicians have a difficult time finding work on the strip. We have also seen the electronic equivalent of human-generated music gain a foothold as a genre and become a market all its own. Voice actors are already feeling the heat as the encroachment of synthetic voices hit the industrial/corporate market and push into audiobooks.

The ability to produce a human-sounding voice with all the inflections, nuances, and timing that makes it interesting often requires as much technical artistry from a software engineer as it does from an experienced voice actor, however, at some point computers will be able to take over and perform this task as routine. This should not come as a surprise to anyone who has been watching recent trends in technology. A quick search for the words "voiceover" and "computer voice" will bring you rapidly up to speed. Apple has even designed into its iPhone a feature called voiceover which the visually impaired find very valuable, it reads the words on the screen out loud in what Apple calls a "spoken English interface."

Much of this is happening beneath the surface with little fanfare because most people consider it harmless. The fact is we now have computers that sound more human than humans and on a positive note speak more clearly. It is not difficult imagining such figures saving media networks money by delivering the news. All this takes us to a time in the future when computers have the ability to generate images that deliver dialog and can act with emotion. By mimicking figures of the past or their best qualities and traits it would be possible to create false figures with compelling personalities.

In life most people never meet or hear their Senator or President speak in person, this means a "gentle concealed" enhancement could go a long way to make them appear more appealing. It is important to consider that if this technology can be used to enhance the stature of a person it could also be used to diminish their standing or even as a tool for character assassination. This makes this sometimes deceptive and potentially dangerous area of technology ripe for abuse. Sadly, it appears in the future it will become even more difficult to determine what is real and what is false.

Footnote; If you did not hit the "Click here to take the test" line under the image of 25 Years Of Photoshop it is a highly recommended exercise.

Wednesday, November 6, 2019

Speculation, The Giant Time Waster That Sucks Us In

Someone recently mentioned they wished they could have back the week of their life they spent glued to the television during the Kavanaugh hearings. While the Senate Judiciary Committee hearings on sexual assault allegations against Supreme Court nominee Brett Kavanaugh riveted Washington and the nation with hours of fiery, emotional testimony, in the end, it may not have been the best use of time for those watching. Speculation has the potential to be a massive time-waster, but both men and women tend to get sucked into this pastime that can while away the hours.

Speculation Was Not Kind To Mark Twain
This is not to say thinking through problems or looking at the various options being presented has no merit, but more often than not humans waste a lot of time pondering things that will never happen or never did. We even ponder why someone took a certain action or why something took an unpredictable turn. The habit of carrying speculation to an extreme is a curse.  
Speculation is defined by Oxford University Press as the forming of a theory or conjecture without firm evidence: such as "there has been widespread speculation that he plans to quit" or as the act of investing in stocks, property, or other ventures in the hope of gain. This article is focused on the first definition of speculation. It is true that in terms of investment or other such pursuits speculation can extend into a form of placing a bet by buying or selling a commodity or stock. It can also be the driver for someone to scream a prediction from the rooftop as a way to prove their superior judgment or intellect.  As I have written in a prior post I consider predicting the future as an impossible task, a fool's errand, full of pitfalls.

Events never seem to unfold as we might expect or predict. When you see how the world has developed, the twist and turns are most unpredictable and full of what the author, Nassim Taleb calls "Black Swans." This term is used to describe events that seem to  descend out of nowhere catching everyone by surprise. A great example of speculation gone wild can often be found on the Sunday morning talk shows emanating from our nation's capital. These shows originally designed to inform and report the crucial news of important issues facing our nation tend to quickly leave the facts and stray into the area of speculation. The line between opinion and speculation is fine and can easily be crossed. Blurring this, even more, is the habit many people have of stating an opinion as a fact, this does not make it one.

Speculationville is where the confident and suave television and news commentators, politicians, and the experts that speak with false authority live, I include the pundits and so-called specialists. Whenever I find myself drawn down the path that leads towards Speculationville I try to stop and ask if the journey ahead has any real merit or payoff. Often the subject we speculate over is a big factor into just how frivolous the effort is. This means I find very annoying the efforts of media, news programs, and talk shows to drag us into huge areas of speculation instead of focusing on facts and important issues. When they start talking about who will run for President in 2024 or be elected in 2020 we know where they are taking us.

It is often not the message they crank out, but the spin and way they project it with their heads all a bobbing and their arms moving all around that freeze us in our tracks. These people often rise through the ranks by stating their case with such brilliance and force that we are carried away by their enthusiastic message. As the words spew from their mouths and we read the reams of material they write it is easy to overlook the large number of often misstated facts and forget they are speculating or merely guessing. Sometimes they even go as far as to tell us exactly what someone was thinking, for example, a commentator might say, "when Martin jumped he knew it was to his death." I ask, how do they know that? It is possible that Martin was an optimist thinking he might survive the fall or he might not have even jumped but simply slipped.

The fact is that when it comes down to what someone is or was thinking unless these authorities have had a deep honest one on one conversation with that person they are only speculating. After they have used every recent "buzz phrase" they say, "that being said" and after "having said that" they often wow me with "just do the math" or "it is not if, it is when".  A major pet peeve of mine is the mixing up of "millions and billions" of dollars when talking about money or cost. But what sends me over the top is a line of pure speculation often used by politicians and our so-called public servants to justify some unsavory action, "it would have been far worse if we had done nothing". How do they know that? On more than one occasion when it comes to our government I find myself wishing they had done nothing.

We have all witnessed the crazy unenlightening information generated  from media coverage during "live crisis" coverage of a news event, it is a reminder that often the world is clueless. It seems that people love to defer to the opinions and advice of so-called experts so they don't have to think. When we look behind the curtain, we often find their background in the subject is weak and short, or clouded and blurred by bias. One thing I do know that is not based on speculation or hearsay is that a certain point speculating about the future tends to get excessive and becomes a great waster of time. Most of us might better spend our time focusing on real problems in the real world rather than whether Michelle Obama will run for President in 2024.

Tuesday, November 5, 2019

Crashing The Financial System For Fun And Profit

Huge Fortunes Can Be Made In Falling Markets
It would be wise to remember we are in uncharted waters and this market could reverse on a dime. The stories flowing out of companies such as WeWork that are burning through cash screams danger ahead! This means we should not discount the idea that those in charge might reach a tipping point where they crash the financial system for fun and profit. While this may seem outlandish the possibility is real. This doesn't mean that every rich guy and gal would sign on to this plan, just enough to push things over the edge. When things have gone too far in one direction history shows that a correction always takes place. It could be argued we have reached that point and true price discovery has been lost.

A huge amount of money can be made during a market crash for those properly positioned. As long as the Fed and the big banks survive those who control these institutions couldn't care less about how the 99.5% at the bottom fair. In fact, the Dodd-Frank Act which is over 2,300 pages allows this under Title II what is viewed by many as a "bank bail-in". This is done by imposing the losses of insolvent financial companies on their common and preferred stockholders, debt holders, and other unsecured creditors including depositors.

The whole event of a "bank bail-in" can be viewed as another way to disguise a massive default and it can happen here in America. An example of just how delusional we have become as to the fragility of our financial system is that many people have taken comfort in the efforts to control the banking sector through the Dodd-Frank act following the 2008 crisis. This legislation is over 2,300 pages and still growing. Under Title II it allows the government to impose the losses of insolvent financial companies on their common and preferred stockholders, debt holders, and other unsecured creditors including depositors.

Crashing the financial system would result in wiping out the pension funds, the hedge funds, the mutual funds, and more. Of course, if such a scenario were to unfold there would be no smoking gun it would be something that "just happened." Sure there would be a great deal of finger-pointing and experts would opine as to what went wrong and how to fix the system but things would go on. Rest assured that with so much blood in the streets little effort would be made to determine who instigated the trauma. Most likely as in the 2008 crisis, nobody would be held accountable or go to jail.

While this may seem unfathomable to many people it could happen. It also would be extremely profitable to those on the right side of a collapse. If you find this hard to stomach then imagine just how fast this could occur. Most investors think that even if things go downhill fast that they will be smart enough to get out of the markets. But what if it hits like the flash crash on steroids? Imagine a scenario where the market falls like a flash crash on steroids and investors are trapped.

Investors have been assured that can't happen because circuit breakers have been put in place to arrest panic style moves but, if trade is halted, and the market simply does not reopen for days or even weeks suddenly it is a new game. As remote as this might seem, if it were to happen it would have far-reaching ramifications. While you are imagining this scenario realize that America's stock market is the gold standard and consider how less stable global markets would react in countries like China and Brazil.

As for a catalysis, many exist and not all as sinister as what is being predicted by award-winning journalist Dr. Paul Craig Roberts.  The former Assistant Treasury Secretary in the Reagan Administration, who has a PhD in Economics, predicts the oligarchs of the New World Order (NWO) will do anything to boot President Trump out of office. This includes taking down and crashing the financial system as a last resort if all else fails. "They will wipe us out in order to get rid of Trump.”Dr. Roberts says forget about the Left/Right Democrat and Republican paradigm. Dr. Roberts explains, “This isn’t a Democrat vs. Republican thing..."

Adding to questions about where we are heading is just how little most people know about the economy. Years ago, Fed watchers were surprised when Ben Bernanke's former special advisor, Andrew Levin, said that "a lot of people would be stunned to know” the extent to which the Federal Reserve is privately owned, stating next that the Fed "should be a fully public institution." A recent post from the BOE's Banker Underground blog looked at the question of who really owns central banks. It found that around the world, central banks have a number of different ownership structures this means who they must be accountable to varies a great deal.

Central banks, like the Bank of England, are wholly owned by the public sector. Shareholders of central banks, like the Banca d’Italia are wholly private sector entities. Other central banks, like that of Japan, are a mix of the two. The problem is that more than half of the banks the world's central banks oversee are at risk of collapse in the next global downturn if they don't start preparing for tough times ahead. McKinsey & Company warned in a 55-page report titled The last pit stop? Time for bold late-cycle moves, that 35% of banks globally will have to merge or sell to larger firms if they want to survive the next crisis. This adds to the notion the masses will be thrown under the bus when push comes to shove.

Returning to the crux of this article, there is a great deal of money to be made during a market collapse. Those with money can swoop in and pick up bargains when the market is not liquid and fear runs wild. This market is ripe for such a scenario and there is a great deal of money waiting in the wings for such an event. With nothing notable to invest in as of late, it is reported that Berkshire has surpassed Apple and Google as the world's biggest corporate cash holder. In Q3 Berkshire reported a record cash pile of $128 billion. 

Many economy watchers concede the decade long "great manipulation" we have witnessed will not work indefinitely, and eventually markets will come crashing down around those in charge. With this in mind, it is easy to understand the allure of being one of those that will reap a fortune when it unravels. Years ago President Eisenhower warned the American people about the Industrial Military Complex but nobody warned us an even more evil alliance that of the "Financial-Political Complex." It would be wise to remember those at the top control the game and make the rules. In doing so, generous they are not.

Friday, November 1, 2019

China's "State Driven" Business Model Tailored To Exploit

As trade talks continue, it could be said that people are naive if they do not recognize the distinct advantage state-driven economy initially has over free enterprise. Its record of success over the long run is debatable in that political corruption coupled with it being unresponsive to consumer demand tends to derail it over time. We should not forget is that in China, the state is involved in everything. This means much of its economy is driven by politics. The notion of expanding GDP by building bridges to nowhere is solidly entrenched in the Chinese economy.

Well entrenched within the Chinese system is a strong vein of "communist crony capitalism" that has its own special set of characteristics. This results in a system that tends to be predatory and geared to quickly exploit the weaknesses of its competitors. Such systems also fail to react accordingly to market change thus squandering their resources. This feeds into China's One Road One Belt (OBOR) initiative and could seriously jeopardize its potential. The crux of this article is to underline the importance of recognizing China is a state-run economy. It is based on a business model that is geared to expand by crushing the competition. The state subsidizes those companies working within its system in a multitude of ways that helps it achieve this goal.

For years China has been a place were corruption has flourished, partly fueled because any appearance of growth has been rewarded. Also, the rules protect the politically connected.  Donald Trump recognized this and rallied those Americans that have been harmed and most affected by globalization and the "China effect" to put him in office. Trump's so-called base is made up of supporters many of which have lost their jobs or seen wages stagnate over the years. This sometimes referred to as the hollowing out of America is something that has occurred across a broad swath of the country as greedy companies have exploited the concept of "free trade" by having the products they sell in America manufactured in China using cheap Chinese labor.

Now Airborne The C919 Will Be A Major Player
Several articles that appeared on this site over the years support my argument that China is not our friend and that we had better be on our toes. One explored how China was ramping up its fledgling aviation industry and how when it hits its stride we can expect cutthroat competition. The article warns that as China's aviation industry takes flight over the next decade it could pose a major threat to Boeing's dominance. America may be saying say goodbye to a big chunk of its exports in this field. The Chinese manufacturer claims the twin-engine, narrow-body design of the C919 is superior to its competition the Boeing 737, the best-selling jetliner in the world, and its competitor, the Airbus A320. COMAC (Commercial Aircraft Corp. of China) also says it can bring the C919 in at a price lower than the $50 million range that Boeing and Airbus charge for each of their planes.

On Chinese President Xi Jinping's first state visit to the USA, he made a couple of deals said to help foster relations between the two countries. One was to order 300 Boeing aircraft for $38 billion, this was tied to Boeing building the first "aircraft completion plant" in China, it was to be Boeing's first non-U.S. plant. Considering China's knack, or shall we say, history, of taking advantage of sucking production ideas from manufacturers this move was a watershed event to many industry watchers. As noted above China is now in a far better position to realize its dreams to develop this industry because part suppliers such as GE, Pratt & Whitney, and other firms are eager to supply the engines and other key components. The politics of globalization a few years ago have paved the way forward and makes China's effort to produce planes far more likely to succeed. With China's experience of building cities from scratch, why build just one factory when you can build twenty? This means we should not expect this industry to grow organically but to expect its growth to be engineered by an aggressive government with a mission.  

Chinese-Bullet-Trains On Display
Another article deals with the company formed in a recent merger of China’s two largest train makers. This means the production of railway locomotives, bullet trains, passenger trains, and metro vehicles. It points out that no effort is being made to deny that the impetus for the merger of China CNR Corp and CSR Corp in 2015 was the quest for a deeper push into overseas markets. Proof of its ability to compete is that it has been able to win by a wide margin nine-figure contracts, such as the supply of metro cars to Boston and LA. It should also be noted that CRRC recently formed a consortium with Bombardier that allows it to compete for the renewal of the New York subways where it appears they are currently in the lead to win the contract that should amount to around $1.5 billion dollars.

The third article warns that when you closely examine America's trade deficit with Mexico it becomes even more disturbing.  When following the money the United States huge trade deficits you begin to understand the money eventually ends up in China.  When you start thinking about all the money and jobs we shift into Mexico each year you would think by now Mexico would be rolling in cash, however, a bit of research quickly confirms that the money Mexico receives by way of trading with America quickly passes through its lands and flows to Asia. It could be argued that when all is said and done we are still transferring our wealth to the far east only by the scenic route and each year the numbers are huge. The United States ran a shocking $419 billion goods deficit with China in 2018. This is before considering how much American money flows into China through our other trading partners.

It does not take a great deal of foresight to realize that America is on the verge of giving up its role as an economic leader if it continues on its current path. Those who surrender to the idea America is too small to remain a world leader based on its smaller population numbers do not understand that quality beats quantity hands down. Whether driven by greed or suffering from being short-sighted, buyers of the many products we import each year should resist giving up their futures so that we can buy the latest fancy flat-screen television or set of patio furniture made in China for far less than one made in America.

Countries that export goods at slightly below cost in exchange for manufacturing jobs are not stupid they are predatory and we in America are their prey. Sadly, history has shown that trade agreements with low wage nations are not the great job creators we have been told. The "so-called" free trade movement is often driven by greed and the desire of mega-companies to expand their markets. This makes it very important that we generate a solid effort to understand our adversary in this economic struggle. Baked into the Chinese system is a lack of respect for intellectual property and the notion they have the right to steal and copy the products of foreign companies at a lower cost. This makes it crucial we recognize the truth behind what drives the Chinese business model and find ways to level the playing field.

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Footnote; This link is to an interesting YouTube video that delves into the Chinese form of crony capitalism and its characteristics. It features Chang-Tai Hsieh, Professor Of Economics, Chicago Booth School of Business.