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Sunday, Aug 12, 2018 - 22:31 SGT
Posted By: Gilbert

Summer Cleaning

Me: ...well, since you're back, you might as well help in sorting out some leftover bookmarks. That last week went by quicker than I expected; that said, good to be back doing some light exercise, and meeting up with old pals in RT.

Mr. Ham: What do you take me for, cheap labour?

Me: Never was certain about the "labour" bit myself. Anyway, let's go over the big happenings from the last few weeks: one possible local opposition coalition headed by Dr. Tan Cheng Bock in the works, thanks to an SDP initiative. However, while this might go some way towards mitigating the local opposition's longstanding problem of "too many chiefs, too few Indians" - not literal ethnic Indians, of course - but the reputation of the minor parties is going to take some rehabilitating. Got to say, whatever one may think of his politics, Dr. Chee's fitness bod is impressive.

Now, it may be fair to ask - why think of supporting the Opposition? Isn't the incumbent track record second to none? To that, one has to respond that a healthy opposition is necessary for the proper operation of a democratic system, and a weak opposition does not really benefit a country, as a corporate monopoly seldom helps consumers in the longer run. There may be a certain point in a small city-state needing to concentrate (and effectively bribe, unlike with the Old Guard) its talent, but when the rules themselves start changing just to preserve every scrap of power, as seen with the latest Presidential Election, one has to start to worry.

This, as it happens, also undergirds my reservations about China's recent rise, which might otherwise be interpreted as a banana mentality - my estimation remains that they will not reach their potential without some form of liberal democracy, and that Asian culture being incompatible with a democratic system is so much piffle - see Japan, South Korea, Taiwan, etc. While China might yet go some further distance with their existing essentially-authoritarian setup, I am willing to claim that it will be a dead end, and one that will engender much pain before it hits the wall... and thus, my consistent support for a TRUMP Trade War Victory, which is broadly on track.

Whoops. Who knew a tweet could be that influential?


Mr. Ham: Yeah, there's that old story about a wolf cub capturing a duckling, and being asked by its parent about what the mother duck did. The cub replied that the mother duck screamed and threatened, at which the wolf told the cub that it was okay to eat the duckling. The next time the cub took a duckling, however, the mother was entirely unconcerned (see: TRUMP after a U.S. drone got stolen); given this, the wolf told the cub to return the duckling. Well, it sure sounds like there's a lot of screaming going on from China's side right now, as the trade war heats up...

Me: Yeah, basically it's all going as anticipated, but I'll leave the in-depth analysis to Mr. Robo, who's been holed up researching the geopolitical situation. But just to bookend the previous trade deficit discussion, I'll begin with an old joke:

A gentleman had struck up an amicible relationship with a vagabond down the street corner: every weekday for years, mindful of his responsibility towards the less fortunate, the gentleman would slip the vagabond a couple of bucks as he passed by. One day, however, the vagabond discovered that the donation had dropped to a dollar, and was displeased.

"I'm afraid that I'm getting married." the gentleman explained. "I've got to budget my expenses for two now."

The vagabond remained furious. "How dare you use *my* money to support *your* wife?!"


This happens to be the essence of what's going on with TRUMP's efforts to corral the American trade deficit, and its consistent misrepresentation in the mainstream press. Take the constant hammering on bilateral deficits, previously explained to be a strawman - the bottom line, however, should be that the only way to reduce an overwhelming aggregate deficit is through cutting bilateral deficits. Recycling the grocery store analogy, a person may cut down on spending at his grocer, or his barista, or his town vagabond, not because any of them have done him wrong per se. It is just because he has to balance his books - and can we really fault a man, or an institution, for not wanting to continue building what is already an enormous debt?

To this, there are the more-academic dissents, such as protectionism with tariffs not being a cure to the trade deficit. It is further claimed that recessions are the surest way to reducing deficits, in support of deficits "paying for themselves" through general growth, and that national consumer behaviour - and not tariffs - drive trade deficits.

The first reponse to this, is that the TRUMP Trade War was never about imposing permanent tariffs. From the get-go, the intention was to utilize tariffs as a bargaining chip for more favourable trade terms - to win the trade war, and move on. This weapon, it must be said, has actually been wielded by just about everyone else in defence of their own interests. It is just that TRUMP's stick is much bigger, and the basic facts are on his side anyway - even his detractors have had to admit that the U.S. has on aggregate among the lowest tariffs in the world to begin with.

That settled, a more complete answer would involve examining skin-in-the-game, and who benefits from the deficit status quo. Going back to Buffett's fundamental analysis, the losers are easy enough to identify - future generations of Americans. In some hazy future, Billy Bob Jr. will have to toil an extra hour each day, Sally Doe will have to retire a few years later, as America fumbles about in its pockets to honour its debt to the outside. The basic mechanism is not in question: "I don't think it's a problem for the U.S. to have a large trade deficit.", yet another think-tank senior research fellow will say. "Countries such as China and Japan accumulate vast piles of U.S. currency, [they] have to exchange those dollars for something, and for a long time they've used them to buy U.S. assets, such as stock, real estate and Treasury bills... it's a win-win for the U.S.!"

We might identify two broad frames here. From the individual point of view, shorn of all obligation and context, free trade should always win - since trade is assumed to take place only when mutually beneficial, anything that hampers such exchange from taking place must necessarily reduce potential utility.

From the national point of view, however, the deficit matters because much of a nation's responsibility is communal in nature. Even if one argues that America doesn't practice socialized health care, it is undeniable that the government still has to fulfil many needs - defence, administration, infrastructure, education, etc - that all draw upon the public piggy bank. Running an internal budget deficit does not preclude the minimization of external trade deficits, which is the objective here.

The next realisation is that a disregard of national trade deficits makes the most sense for the wealthy - what does any particular citizenship mean to the average billionaire, and the oh-so-educated economists they fund in their various institutes and think-tanks? If it all goes to pot in America, they'll simply be on the next flight out to Canada, or Switzerland, maybe Germany or Britain (but not Mexico, for all their exhortations towards open borders). Their kids won't be stuck with the bill - instead, it'll be the Billy Bob Jrs, who have nowhere to go to, who will inherit the consequences and the tears. But they don't count, do they?

No, it takes a man of extraordinary vision and courage to go against the grain, and fight for the birthright of the yet-unborn, who have no lobby or constituency to defend them; and in the GOD-EMPEROR TRUMP, America has finally found such a man.



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