America’s Caesar

Guest Post by Bill Bonner

The rich man’s wealth is his strong city, and as a high wall in his own conceit.

– Proverbs 18:11

POITOU, FRANCE – “Render unto Caesar” is how we began yesterday’s note. Today, we dig deeper to answer a Dear Reader’s challenge.

Caesar should call the shots in trade, he says.

This discussion (today and on Monday) will help us connect a number of dots… and possibly glimpse at the future, too.

We’ll check out the odds of building a high wall around the American economy – turning it into an island of stability, calm, and high wages in an ocean of globalized competition and chaos.

We’ll take a look at North Korea and see what high walls have done for its economy.

And we’ll see how trade barriers expand the reach of the Deep State, replacing win-win private sector deals with the win-lose deals of the cronies and canoodlers.

So hang onto your hat…

Suicidal Business Strategy

Checking in with the markets first… we see that the Dow fell again yesterday, the eighth day in a row of losses. And on Tuesday, General Electric (GE) was booted out of the Dow after 100 years.

Under former CEO Jack Welch, GE – probably more than any other large company – led the swing away from manufacturing… that is, from honest output to financial hocus-pocus.

It borrowed money to buy businesses at the rate of one new company every five business days. As a business strategy, it was suicidal. There is no way managers could evaluate, understand, and absorb new enterprises at such a rate.

But as a financial strategy, it looked great. Each new business brought top-end growth and lazy, flattering headlines about what a genius Mr. Welch was and what a “dynamic” company he was running.

The share price rose, making it possible to borrow even more money.

But then, like all debt-financed spending sprees, the bills came in and it was hard to pay them. A lot of the acquisitions went bad, and GE executives had neither the time nor the talent to fix them.

Its share price has been falling for the last 18 years, down 55% in the last 18 months alone… And now, it’s back to where it began its spectacular rise in 1995.

GE was also a pioneer of outsourcing. That is, rather than make things itself at Appliance Park, its Louisville, Kentucky plant, it moved manufacturing to cheaper, foreign destinations. The Atlantic magazine was on the case:

By 1955, Appliance Park employed 16,000 workers. By the 1960s, the sixth building had been built, the union workforce was turning out 60,000 appliances a week, and the complex was powering the explosion of the U.S. consumer economy.

The arc that followed is familiar. Employment kept rising through the ’60s, but it peaked at 23,000 in 1973… In 2011, the number of time-card employees – the people who make the appliances – bottomed out at 1,863. By then, Appliance Park had been in decline for twice as long as it had been rising.

The decision to offshore was made – more or less, honestly – by people in the private sector with some skin in the game. Nobody forced them to do it… and they hoped it would pay off.

But Caesar was already pulling strings. His central bank was providing fake money at fake, low interest rates. But that part of the story is for another day.

New Caesar

Today, we look at how Caesar is rigging the game even more directly. Yes, there were trade barriers on this and that… here and there… in Welch’s era.

But almost all economists had realized that they were a drag on wealth creation. Tariffs had generally been coming down for an entire generation.

Cometh now a new Caesar, in the person of the U.S. president, Donald J. Trump – along with his quack trade advisor, and four-time election loser, Peter Navarro.

Modern economists are wrong about a lot of things…

They think they can know things that they can never know. They think they can measure things that they can never measure. And they think they can control things that they can never even understand.

But they’re not wrong about everything. And one thing they are right about is trade. It’s a fairly settled matter: Import taxes may be good politics, but they are very rarely (and perhaps never) good economics.

But a Dear Reader posed an earnest question: Why shouldn’t a high-wage country protect its workers against low-wage competition?

The purpose of a nation is to defend the common interests of its citizens. Certainly, the ability to earn a living at a standard of living higher than that of the Chinese worker, with his family’s bathroom at the end of his block and shared with 50 other families, is part of what our nation exists to achieve.

But your viewpoint shows that you consider nations to no longer be of use. Your elitist underwear is showing. You know that you are smart. But this pride has blinded you from appreciating the true values of conservatism.

Okay. Let’s tuck in our underwear and think about this. This view may be widely shared among our readers. Can the nation – Caesar, using his win-lose power to wallop, whack, bludgeon, and bully – really help Americans earn more?

Hmm…

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CCRider
CCRider

Tariffs are just another division by the free shit army. You need to legislate wealth creation by raising prices on the many to enhance the few. So we bicker and bitch about China or India or some other boogie man and the true culprits, fiat money and democrazy go on unchallenged.

Anonymous
Anonymous

You would prefer a trade deficit with China, Europe and other countries, including Mexico, payable in Gold instead of our fiat dollars?

Remember that is why we left the gold standard, we didn’t have enough gold to cover our trade debts and all our gold was migrating there instead of staying here with theirs coming here at the same rate ours was going there.

All countries are on fiat systems, not on gold (or other commodity backed) standards.

CCRider
CCRider

I didn’t mention the gold standard although I certainly would be interested to have that option. The free market works with everything tangible. Allow it to work with currency units. Gold is just one of many tangible assets that can back money. I’m too far from my Rothbard studying to explain in detail but this will help if you’re truly interested:
https://mises.org/library/what-has-government-done-our-money

BTW, the history you cite of the reason for our leaving the gold standard is the story advanced by those who wanted to control your money and so your life.

Wip
Wip

Ron Paul argued for competing currencies. Now that would be a free market.

Anonymous
Anonymous

And he ignored Gresham’s law when he argued for it.

At least he never made any mention of how to avoid it.

Anonymous
Anonymous

You either have fiat money or you have commodity based money (it makes no difference whether the commodity is pork bellies, grade 8 bolts or gold and silver, but gold and with silver are the only practical ones since no one in history has used the others).

If money with intrinsic value (i.e. backed by gold or some other metal, even copper) competes with fiat money (money by decree, backed by the threat of a bayonet in your back if nothing else), the money with real (intrinsic) value gets hoarded and the money with none remains in circulation. Why do you think you almost never find real silver coins or even copper pennies in circulation after base metal ones took their place at the same declared value? (That’s Gresham’s law: https://www.investopedia.com/terms/g/greshams-law.asp)

CCRider
CCRider

You make a reasonable point. Again, I’m too far from my real study on the subject decades ago. My sense of it has to do with legal tender laws. I suspect that being confined to a fraudulent currency (if it wasn’t a fraud you wouldn’t be forced to use it) has much to do with his law. Certainly when the u.s. had a silver standard it was the envy of the world and took the force of government to suspend it. But I’d love to hear an expert discuss it in detail.

mark branham
mark branham

Since it’s about money I’ve gotta comment.

Everything can be debased; golds history as a store of value and medium of exchange proves that. So there is no such thing as “hard” money; every form of money throughout history has failed, IT’S ALL FIAT. It’s not our form of money that’s important, it’s us. And on that front we have consistently failed ourselves.

One day, perhaps in a very distant future, or sooner, we’ll move from the savage that we currently are to a civilized person worthy of being termed A Civilization. My best source thinks that’ll take about a thousand years. Then it will make no difference what we call money, it will work.

TampaRed
TampaRed

if your source is like mine he won’t say when the 1000 years starts–

mark branham
mark branham

about 1930

Robert H Siddell Jr
Robert H Siddell Jr

Some of your info went out of date: The Yuan has been exchangeable for gold at the Hong Kong and Shanghai Markets for about 6 months and the Chinese have been buying their oil in Yuan; that is why the Petrodollar is going Kaput. The coming Currency Reset will also consider Commodities; the fiat dollar as the World’s Reserve Currency is on the ropes and US inflation will come howling in like a hurricane. Even though most BRICS use fiat too, they are selling all their US Bonds ahead of the dollar crash and will soon demand Yuan, Rubles, Euros, etc for goods. We can print dollars to the moon but we can’t make foreign merchants want them; the dollar will have to be worth something: got gold?

Anonymous
Anonymous

What is the fixed exchange rate of it? i.e. how many ounces of gold is a Yuan worth in exchange at the bank where you go to exchange it for the gold?

Robert H Siddell Jr
Robert H Siddell Jr

I believe the London fix but the Chinese won’t let their gold go cheap for long so I expect them to do things to increase the value of gold.

Anonymous
Anonymous

If it is the London fix then the United States dollar is also backed by gold since the fix changes from day to day and is the price that determines what it is sold at.

If a currency is actually backed by gold it has a fixed price that it can be exchanged for no matter what other factors are involved and there i are coins containing that amount and there is sufficient gold in the issuing country’s reserve to cover all the money it has issued other than coinage.

The Yuan is not backed by gold, you will not find Yuan gold coins in circulation containing specific amounts of gold and Yuan bills with an equal amount of gold reserved to cover them that can be exchanged for those coinage amounts.

TampaRed
TampaRed

screw oil & the petro dollar–if we have the cojones to use it we have the wheat dollar–

pyrrhus
pyrrhus

Equalizing tariff and customs barriers to trade is essential and normal, except to our bought and paid for Congress…Any country that can impose unequal trade barriers is the ruler, and you are the colony.

Zarathustra

I thought Douglas MacArthur was the American Caesar.

Work-In-Progress
Work-In-Progress

Wow, that was soooo insightful. What kind of trade do we have now? Is it fair trade? Also, if the founders are to be believed, import taxes were the only taxes needed to support the government. But maybe this is only in the case of a small government?

Funny are the comments the writer has for economists and then tells us how trade works. I’m supposed to believe he knows?

starfcker

What Bonner does not realize is that we have already moved on from the type of economics that he promotes. They were always a scam. You can’t put that horse back in the barn. True believers such as him are going to find themselves left behind very quickly. There’s a place for you Bill, it’s called the Democratic Party

pyrrhus
pyrrhus

Bonner is just another peddler of the Narrative that has strip mined America for 60 years, enriched the 1%, and impoverished everyone else…

starfcker

Yup

Robert H Siddell Jr
Robert H Siddell Jr

I consider tariffs like handguns, just another tool that needs to be used wisely. Disarming yourself invites other countries to rob you. Somebody needs to do what it takes to rebuild our economy and Trump is trying harder than anybody since Henry Ford. Of course when he succeeds, there will be nothing but insults from the MSM and the Nobel Prize Committee.

Anonymous
Anonymous

You either play to win or you play to lose.

Trump plays to win and those in the MSM and the other Leftists are dismayed about it because they want to play to lose.

starfcker

Great comment, Robert. You too, Anon.

Thunderbird
Thunderbird

The US has plenty of gold in the ground and other metals too. When it is needed it will be dug up; but not before a federal default.

Robert H Siddell Jr
Robert H Siddell Jr

Not until the price of gold goes up.

PlatoPlubius

The gold price suppression is well documented and for various reasons….

Like when a country asks the FEDERAL RESERVE bank of NEW YORK to return all it’s gold being stored there like most recently Venezuela and Germany….

…keep the gold price low so the FED can buy the gold it doesn’t have at a reasonable price to return it to the depositor nation.

One major reason for the oil price decline was to buy up sweet crude oil from U.S. at cheap prices…not to mention destroy national budgets of nations who rely on nationalized oil profits to stay in the black.

Thunderbird
Thunderbird

I still think the president has a trump card he has not used yet. When the right time comes he will use it. It is not the time now.

Mark
Mark

I know this is well known by many here (one of the reasons I hang) best $18.00 you can spend to open the eyes of anyone (including yourself if you have not delved) to the history and today’s reality of the evil, demonic Money Changers.

If you want to black pill someone buy them this book.

A History of Central Banking & The Enslavement of Mankind Paperback – April 1, 2017

A History of Central Banking and the Enslavement of Mankind is Stephen Mitford Goodson’s companion volume to Inside the South African Reserve Bank Its Origins and Secrets Exposed. While the latter volume describes the mechanics of the fraudulent usury banking system, with a focus on Goodson’s experiences as a director of the SA Reserve Bank, this volume expands the focus to encompass the role of banking and money in history from ancient times to the present. The role of money-lenders in history was once aptly termed by many acute observers as the “Hidden Hand.” It is the power to create, lend and accumulate interest on “credit,” and then re-lend that interest for further interest, in perpetuity, that creates pervasive, worldwide debt, from the individual, to the family, to the entire state. The ability to operate a fraudulent credit and loan system has long been known, and through all the slickness of a snake-oil salesman, the money-lenders – the same types Jesus whipped from the Temple – have persuaded governments that banking is best left to private interests. Many wars, revolutions, depressions, recessions, and other social upheavals, have been directly related to the determination of these money-lenders to retain and extend their power and profits. When any state, individual or idea has threatened their scam they have often responded with wars and revolutions. The cultural and material progress of a civilization will often relate to the degree by which it is free from the influence of debt, and the degradation that results when the money-lenders are permitted to regain power. Hence, Goodson shows that both World Wars, the Napoleonic wars, the American Revolution, the rise and fall of Julius Caesar, the overthrow of Qathafi in Libya and the revolution against Tsar Nicholas, among much else relate to this “Hidden Hand” in history.

This is the key to understanding the past, present and future.

mark branham
mark branham

Damon Vrabel explains it all:

The best one hour you can spend

PlatoPlubius

@ mark branham
Yeeeesssss!!

Vrabels DEBUNKING MONEY whiteboard series is amazing…ive watched it many times…

It’s been awhile since I’ve watched it…need a refresher…lovr how he breaks it down.

PlatoPlubius

The Money Masters documentary does a brilliant job showing history from a different analysis, focal point…not from the nation state perspective so much, rather, an economic model analysis

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