China is an Enemy of the United States Dummies

How stupid do you have to be to think that China is a friend of the United States? South Korea and the U.S. were carrying out their usual joint military exercises in the region and so North Korea violated international law and launched four ballistic missiles on Monday in response.

North Korea just figured out how to launch a ballistic missile within the last year or so, something the US figured out how to do in May of 1957. North Korea thinks it’s a big tough guy on the block now and so they are going to launch ballistic missiles every chance they get.

Being the technologically superior country on the entire plant we have deployed the first elements of our advanced Terminal High Altitude Area Defense (THAAD) anti-missile system in South Korea. This missile defense system will protect both South Korea and Japan.

So what does China do? Chinese authorities have closed nearly two dozen retail stores of South Korea’s Lotte Group, which approved a land swap with the military last week to allow it to install the anti-missile system. The Chinese extort businesses inside China because that’s what communists do. If China doesn’t like something that your government does, China will close down all your businesses inside its country.

Why would any US business owner go to China to manufacture things? Are you stupid? China is going to steal your IP, tooling molds, designs, and they will produce your product themselves and sell it everywhere around the planet for cheaper than you do (using slave labor and government subsidies), and what are you going to do about it? Even if you have the money to file with the WTO, get in line buddy, it could be years before the WTO gets around to looking at your complaint and by then, you’ll be out of business and dirt broke.

But China didn’t stop there. China said the US and South Korea should stop doing military drills and stop installing the THAAD anti-missile system in South Korea. Stop doing military drills? Folks, China is no friend of the US and stupid business owners in this country that keep taking their manufacturing to China in the name of profits deserve to be ripped off.

China has risen to power off the backs of American workers, stealing tens-of-millions of our manufacturing jobs. Democrat and Republican establishment globalists said China was going to love us because we helped them out and have given them so much business. China doesn’t appreciate the US. China stole our jobs and manufacturing plants illegally and that’s given them a lot of money to build up their military and to challenge the US every chance they get. China has always been in an economic war with the US and much of the developed world. Want the proof? Check out the documentary by esteemed economist Peter Navarro, now President Trump economic advisor.

I heard Larry Kudlow call economist Peter Navarro a “nut job” on CNBC. This is the same Larry Kudlow who wrote so brilliantly in the National Review in 2007:

The recession debate is over. It’s not gonna happen. Time to move on…. The Bush boom is alive and well. It’s finishing up its sixth splendid year with many more years to come.

Or my personal favorite from February 2000 when Larry Kudlow, then CNBC host, said:

This correction will run its course until the middle of the year. Then things will pick up again, because not even Greenspan can stop the Internet economy.

Americans Are Waking Up But We Still Need To Educate

Americans are waking up to the real threat that China is and we know that because President Trump won the election. However, I talk to people who are so ignorant about China that they say things like, “We don’t need to have a trade war with China.” Reality check: China has been waging economic warfare against the United States since it was accepted into the WTO in 2001. “We” are not waging any war but are attempting to defend ourselves against China before our entire economy is destroyed forever. Wake up.

Folks, we have lost so many jobs to China and our trade deficit is so deep, as a country we may not come out of this. China’s money already influences how mainstream media groups in the US report the news as well as who gets elected.

China saw the weakness in capitalism which is the unbridled pursuit of money, and they manipulated the US Chamber of Commerce into actually pitching to business owners that outsourcing jobs to China was a good thing because it would save on labor costs and help them make even more money. China exploited capitalism to their own advantage. Now, after being in nearly a decade long slump in the economy, these same business owners are scratching their heads wondering where the US consumers are and why the economy is still in a slump. When you move 500,000 manufacturing plants to China along with millions of jobs over a 15 year period so that the US no longer has good paying manufacturing sector jobs, what do you think is ultimately going to happen? You have a lower labor participation rate and a consumer with less purchasing power. This isn’t rocket science folks and globalist sympathizers like Larry Kudlow and most of the guests on CNBC can go shove it where the sun doesn’t shine.

Alex Jones of InfoWars points out how China is buying up media groups in the US and is expanding their influence over how our news is reported and even our movies:

What China could be doing is promoting the anti-Russian rhetoric in the mainstream media so that it can forge a better relationship with Russia against the US. In reality, China is far more an enemy of the US than Russia.

What China has already done, and is currently doing, is bad for the US economy and stock market. China is forcing us to respond to the economic warfare they are waging against us as well as their attempts to influence the mainstream media in this country. Our response to the Chinese is going to create stock market volatility and perhaps even a large market crash as the President attempts to wrestle back control of our country from the Chinese.

Trump Administration and Tariffs Versus Quotas

Protectionist policies in the form of tariffs and quotas are coming from a Trump Administration. It seems appropriate then that we examine tariffs and quotas from a macroeconomics perspective.

The two most common ways of restricting trade are with tariffs and quotas. From a political point of view and to prevent a trade war, a Trump Administration should consider the use of quotas over tariffs in some cases.

This figure illustrates the domestic market for food in Europe.

The equilibrium between supply and demand occurs at point A at a price of $8, and quantity of two hundred. Now, suppose that food is available in an unlimited amount from the rest of the world, at a price of $4 per unit and Europe doesn’t like this because it hurts their farmers.

The world supply curve is represented by the red horizontal line. In the absence of any transportation costs, the food price in Europe must be equal to the world price of $4. At the $4 price, you can see that European domestic production is measured by the line segment B, C and will be one hundred units, considerably less than before free trade.

American imports are measured by the line segment C, D and are equal to two hundred units, and revenues from the sale of these imports are equal to the shaded area C, D, E, F.

Now let’s say that European trade ministers impose a tariff of $2 per unit on food imports, where a tariff is a tax levied on imports. What happens now to domestic production and imports?

Clearly, domestic producers win because their production not only rises by fifty units, but their profits rise by the shaded area B, C, H, G.

European food consumers lose, not only because the price of food rises from $4 to $6, but also because they consume fifty fewer units of food. In fact, the total loss to consumers is measured by the area B, D, I, G.

The other big loser is the American food industry, which now exports one hundred fewer units and loses revenues equal to the shaded areas C, J, L, E and K, D, M, F.

The winner is the European governments that imposed the tariff. They collect tariff revenues, equal to the area H, I, J, K.

The Politics of Tariffs

From a political perspective, a relatively small handful of people in one domestic industry, farming, have gained a considerable profit at the expense of a much larger, but politically less powerful group, food consumers.

This protectionist tariff has also considerably harmed food producers in America, and this group is unlikely to remain silent on the tariff.

Why Quotas Trump Tariffs Politically

One likely result is that pressure will build politically in America to retaliate against European food tariffs with protectionist tariffs of its own, perhaps on European clothing imports. There is a way for Europe to avert this trade war and it’s with a quota which is an exact quantity limit on imports.

An equivalent quota, in this case, would be a one hundred unit limit on American food since that is the level of imports after the $2 per unit tariff.

Under a tariff, the shaded area H, I, K, J goes to the European governments in the form of tariff revenues. However, under a quota foreign exporters (American food producers) will be able to capture these revenues which will mostly offset their losses from selling fewer exports. The result in America will be far less political pressure from food producers for retaliatory tariffs.

Deadweight Loss

Whenever a government interferes in a free market, there is usually deadweight loss. There is deadweight loss associated with the imposition of a tariff or quota. In fact, the loss is the same regardless of whether a tariff or quota is used.

The shaded area C, H, J, represents the loss in producer surplus. In this case, too many European resources are being diverted into the inefficient production of food, at the expense of production in other sectors. At the same time the shaded area K, I, D represents the loss in consumer surplus and the loss in consumer satisfaction, from consuming fewer units of food. Together the two shaded triangles measure the total deadweight loss from tariffs or quotas.

Source: This lesson was made possible by the University of California Irvine and my favorite professor Dr. Peter Navarro, now economic advisor to the Trump Administration.

Here Comes Supply-Side Economics and the Laffer Curve

Increases in government regulation, taxes, environmental regulations, and ObamaCare on businesses, shifted the aggregate supply (AS) curve inward and thus reduced aggregate demand (AD).

With the explosion higher in the cost of doing business, businesses hired fewer workers. In fact, many small businesses reduced the size of their workforce in response to ObamaCare. Less hiring means a weaker consumer with less discretionary income.

Typically, in stage three of an economic recovery, the supply curve (AS) shifts out to AS2, as firms hire more workers, and expand output. Together, these price and wage adjustments drive the economy back to full employment at Q1 and close the recessionary gap, but at a new and lower price of P2.

Increases in government regulation, taxes, environmental regulations, and ObamaCare on businesses, shifted the aggregate supply (AS) curve inward and thus prevented the outward shift of the AS curve that was needed to get the US economy firing on all cylinders.

Supply-Side Economics

You will soon be reading about policy decisions from the Trump administration that are aiming at shifting the supply curve outward. An attempt to shift the AS curve outward means that Donald Trump’s economic team will end things like Dodd-Frank and Federal fracking regulations. The media will correctly call this supply-side economics.

Donald Trump will lower taxes for businesses and consumers in an attempt to reduce deadweight loss as discussed here.

Higher taxes also negatively impact the number of people willing to work as illustrated by the Laffer Curve.

The marginal tax rate is measured on the vertical axis, and total tax revenues are measured on the horizontal axis. Note that the Laffer Curve is backward-bending, reflecting the behavioral notion that at some point, people will work less the more they are taxed. This backward bend means that above a certain tax rate, “m” in the figure, an increase in the tax rate will cause overall tax revenues to fall.

Now here is the important point that Dr. Peter Navarro will likely be advising Trump on, for a supply-side tax cut to increase tax revenues, the existing tax rate before the tax cut must be above “m,” perhaps at a rate associated with point “n” on the curve. The tax rate being above “m” is an important point because, in the early 1980s, the Reagan Administration’s economists believed that the economy was on the backward-bending portion of the Laffer curve (above “m”) and that a tax cut would increase total tax revenues. Based on this assumption, it moved forward with one of the largest tax cuts in American history.

Policies which can successfully shift the economy’s supply curve out, do so with the twin advantages of both lower unemployment and lower inflation.

Guess Who Is On Trump’s Economic Team, SWEET!

Do you remember when the WSJ, CNN, CNBC, NBC, ABC, CBS, Bloomberg, Forbes, and Reuters ran stories at the start of the year about how no one even knows who was advising Trump on economic matters? They even went as far to say that Trump had no support of any economists.

That never sat right with me. I saw what Trump was doing at every level and how it would impact GDP. For example:

Border security = Eliminate illegal workers from coming into this country and competing with American citizens for jobs. Macroeconomic impact of illegal immigration discussed here. The mainstream media tried to convince the public Trump was a racist, bigoted, xenophobe who will send the police around knocking on doors to check your citizenship status.

Eliminate sanctuary cities = Eliminate sanctuary cities as they create lots of inefficiencies in the US economy including the murder of working Americans. Macroeconomics of rent control which is just one negative economic impact of sanctuary cities here. The mainstream media told everybody that Trump was a rich elitist Nazi who was attacking poor people who came to America for better opportunities and that illegals have only killed a few Americans.

Renegotiate international trade agreements = Look at all international trade agreements and renegotiate them so that they are fair to America and its workers. Penalize currency manipulators like China and Mexico. Increase exports and reduce imports as imports subtract from GDP. Macroeconomic analysis of trade deficits here and also here. The mainstream media tried to scare everyone into thinking that Trump was bringing in dangerous “nationalism” and that Trump will start a trade war which will crash the economy and stock market.

Significantly reduce refugees = Block all refugees coming from Syria and other Muslim countries if we cannot do a background check and make sure they are not radical Muslim terrorists coming to America to kill Americans. Terrorist attacks are bad for the economy and stock market. The OPEC cartel has been illegally manipulating the price of oil for decades (although Game Theory explains why they haven’t been too successful at it). Make OPEC countries take care of their neighborhood with all their ill-gotten gains over the years. Establish safe zones in Syria and elsewhere for Muslim refugees. A macroeconomic analysis of the OPEC cartel is discussed here. The mainstream media stirred up Muslims and other races by claiming Trump was a xenophobic racist on the order of Hitler and that he has a vision of a “white” Klu-Klux-Klan America.

Lower taxes = Lower taxes and institute supply side economics like Reagan did during the 80s. Higher taxes result in an increase in deadweight loss. Lowering deadweight loss will improve efficiencies in the economy and lead to both greater demand and supply. A macroeconomic analysis of taxation is here. The mainstream media stirred up class-warfare claiming that everybody should “pay their fair share” when it comes to taxes and that Trump’s tax plan will just allow the rich not to pay their fair share.

End ObamaCare = ObamaCare is a big tax on businesses. ObamaCare passed because Obama and Democrats lied to Congress and the American people about who was going to pay for it. It takes from the value producers and job creators, and gives to illegal immigrants and lower value producers, causing inefficiencies and disincentives in both hiring and working. Worse, it has lowered the quality of healthcare for everyone with long waiting lines and more doctors not accepting new patients. A macroeconomic analysis of ObamaCare is here. The mainstream media told everyone that Republicans just want to take away your healthcare so that they can get even richer.

Guess Who Is On Trump’s Economic Team?

I had to ask myself, was I just biased towards Trump and was I just twisting Trump’s positions into macroeconomics because I support him for President?

Fox News showed who is on Trump’s economic team. You won’t believe this. Dr. Peter Navarro is on Trump’s economic team, my favorite professor that I talk about here!

It now makes sense why I so clearly saw what Trump was doing while so many others did not. My economics professor is advising the Trump team! LOL.

Papa Giorgio posted a recent audio interview on Talk Radio with Peter Navarro:

MSNBC which supports Hillary Clinton had Peter Navarro on under the pretense of a serious talk about the economy. MSNBC then tried to talk about everything but the economy and trap Peter Navarro. Check out this heated exchange:

Folks, I don’t think Trump is going to win the Presidency. Most Americans are just not smart enough to understand economics. All they understand is that Hillary Clinton gives them a free iPhone and $1,500 to cause violence at Trump events. But I could be wrong. I never thought Trump would make it past Jeb Bush or Ted Cruz and he did.

Powerful Macroeconomics Case For Trumponomics

One of the reasons I began supporting Donald Trump and declared GuerillaStockTrading as an official supporter of the Trump candidacy almost a year ago has to do with economics and ultimately the stock market.

The majority of people who are against Trump are not very smart when it comes to understanding international trade and macroeconomics.

Donald Trump has nothing to do with supporting isolationism, protectionism, or racism.

Donald Trump has everything to do with taking back control of the ‘I’ variable in the GDP formula. To improve the economy, Trump must grow GDP.

The GDP equation is: GDP = C + I + G + (X – M)

C = Consumption
I = Investment
G = Government Spending
(X – M) = Net Exports (the difference between imports and exports)

The four drivers of GDP growth are consumption, investment, government spending, and net exports.

Net exports represent the difference between the exports of a nation and its imports. If imports are greater than exports, then a country runs a trade deficit.

[graphiq id=”1QJ1YmXVJZ3″ title=”U.S. Trade Deficit Over Time” width=”440″ height=”494″ url=”https://w.graphiq.com/w/1QJ1YmXVJZ3″ link=”https://www.graphiq.com/wlp/1QJ1YmXVJZ3″ link_text=”U.S. Trade Deficit Over Time | InsideGov” ]

Economic forecasters and stock traders like myself track the four different components of GDP via economic reports. For example, to monitor the C component of the GDP formula, I will watch consumer confidence reports carefully. The idea is that a more confident consumer will spend more. Below is a graphic that shows the different economic reports I track as they relate to the GDP.

Trade Deficits and Offshoring Subtract From GDP Growth

The GDP equation is: GDP = C + I + G + (X – M). The (X – M) component means net exports (the difference between imports and exports).

If a country like the U.S. runs a trade deficit, this directly subtracts from GDP growth. The trade deficit has been a structural drag on the U.S. economy for decades.

The massive trade deficits in the U.S. impact the GDP beyond just the (X – M) component. The huge trade deficit also affects the ‘I’ component of GDP.

Consider that in 2015, the U.S. trade deficit with China was $365.7 billion. The trade deficit with China means lower domestic investment growth, the ‘I’ component of the GDP formula. Companies like Caterpillar, General Electric, Honeywell, and General Motors have built more plants in other countries and fewer plants in the United States.

Offshoring is the act of US corporations building plants in other nations. Offshoring creates jobs in other countries at the expense of U.S. jobs. Where have most of the offshoring of productions gone? China.

Trade deficits with China negatively impact GDP by way of the net exports component (X – M), and by the reduction of investment (‘I’ component) here in the United States.

The double negative impact on GDP from large trade deficits is no longer a subject of debate. Economists have enough data to prove this point. My macroeconomics teacher, the renown Dr. Peter Navarro at the University of California, Irvine, notes when China joined the Word Trade Organization in 2001.

China Joins the Word Trade Organization in 2001

Not coincidentally at the start of America’s new era of slow growth in 2001, China acceded to the World Trade Organization or WTO and was given full access to American markets.

Contrary to the rules of the WTO, China began flooding the U.S. with cheap, often illegally subsidized exports, and over the next decade, the US would see the loss of over 50,000 factories and more than 5,000,000 manufacturing jobs.

The Emergence of Structural Trade Imbalances

Shortly after China joined the WTO, the economies of the UK, Europe, India, Brazil, and others, would likewise begin to have significant growth-sapping trade deficits with China. Global growth fell, and troubles across the euro zone began. A growth-sapping global trade imbalance gripped the planet as shown below.

By the year 2012, trade deficits with China slowed growth dramatically in both Europe and the United States (remember, trade deficits negatively impact net exports and the ‘I’ component of GDP). A bad sort of negative feedback loop took place as China’s two biggest customers, Europe and the United States, slowly became too weak to sustain China’s export-dependent growth.

In a ripple effect, slow growth in China, in turn, lead to slower growth in commodity countries like Australia, Brazil, and Canada, whose economies depend heavily on the sale of natural resources like coal, iron ore, and soybeans to China. These structural trade relationships would lead to a new type of butterfly effect the world had not yet seen.

The New Butterfly Effect Circa 2013

Weak demand for Chinese exports from Europe and the U.S., result in weaker import demand from China for commodities and other natural resources.

Chronic trade imbalances between China and other countries around the world make it tough for a robust U.S. economic recovery to happen.

Why Keynesian Stimulus Failed

From the butterfly effect, you can see why expansionary, Keynesian fiscal and monetary stimulus in the US and Europe, did not have the full results anticipated. Indeed, a short-run Keynesian approach does nothing to address the underlying, chronic, long-term structural trade imbalances, acting as a drag on both the U.S. and European economies and by extension, much of the rest of the world.

Trump Economics

The only way to improve the U.S. economy, and by extension much of the rest of the world, is to deal directly with the structural trade imbalances the U.S. has with several of its trading partners.

Trump economics is all about tackling the ongoing trade deficits that have destroyed so many jobs in the U.S.

Trump is targeting two components of the GDP formula, net exports (X – M), and investments (‘I’ component). By reducing trade deficits, more corporations will invest in production plants inside the U.S. Further, Trump’s fiscal policies will penalize companies that engage in offshoring. Trump’s fiscal policies will also give tax breaks to corporations that create jobs here at home.

The result of Trump’s policies will indirectly help the consumption or ‘C’ component of the GDP formula as well. More corporations creating more jobs here at home will increase consumers buying power.

Building a wall and stopping illegal immigration and reducing the flow of people across the Mexico/U.S. border will help preserve U.S. jobs and wages. Stopping illegal immigration and reducing the flow of immigrants into this country targets the ‘C’ component of the GDP formula.

When labor supply increases from both legal and illegal immigration, this shifts the supply curve of labor outward (to the right), and wages fall.

Trumpnomics

When someone tells you a problem is too difficult to solve, remember, for them it is too difficult to solve, not for you.

Donald Trump wants to shift the supply curve of labor inward (to the left) to improve wages. The left mainstream media says he’s a racist.

Donald Trump wants to reduce trade deficits to improve investments here in the U.S. The left mainstream media says he’s against international trade.

Donald Trump wants to fine corporations that engage in offshoring to positively impact the ‘I’ component of the GDP formula. The left mainstream media says Trump wants to start a trade war with China.

Folks, like I’ve said for almost a year now, Donald Trump knows what he’s doing and how to improve the U.S. economy. Analyzing Trump’s positions from a macroeconomics perspective leaves you with no other conclusion.