You Break It, You Buy It !

That politicians even think about crossing swords with the world's largest holder of US debt, setting off a global trade war, is stunningly scary to me.

it was on the News so it must be the Truth...?

I used to have an easy chair with foot stool in my office I named “Complacency” and I have a Fire and Ice Chair called “Damn the Torpedoes”. “Complacency” looked like new. It looked like I never sat in it, which was the case. The soft leather was immaculate, no wear and tear, dull beige. It looked comfortable and inviting. Every day when I passed by “Complacency” I thought: “One day I’m going to fold into you and take a nap in the daytime, stare at the ocean waves rolling in, enjoy warming rays of sunshine and let the world be what it wants to be.”
But after several years I realized that I would never sit down in “Complacency”, no matter how inviting she was. I gave her away because I realized that I will always be drawn to the one with sloppily repaired legs, scratched armrests and partially torn fabric, and a spring on the verge of popping through the seat. “Damn the Torpedoes” is uncomfortable, which is why she keeps me on my toes (literally). She gives me no comfort while I watch the dangerous fiction that is called news these days go by on my computer screens.

I apologize for all the metaphors. Two of my heroes passed away this week with my wife’s birthday celebration smack in the middle of them. A bit unsettling. Two originals who were only 56 years old and full of spit and vinegar, each pushing mankind on their own levels to new heights. My kinship with them is portrayed in this wonderful short video Here is to the Misfits.

I concede that dealing with those losses gives me very little patience dealing with the nonsensical ideas and notions that come from newscasters and reporters parroting the commoditized words of politicians and community leaders on both sides of the fence, when looking at the uncertain world we live in. But in any case this rant has been a long time coming.

News these days is at best a façade and at worst a very dangerous misinterpretation of facts, facts you will only uncover if you come out of Complacency and start peeling away the layers of the message until reality unfolds.
What worries me is that News is consumed and mentally accepted by most of the audience it seems, leaving us all at great risk when the realities become apparent.

Four news issues that got me really fired up this week.

Completely inconsequential compared to the passing of two of my heroes, there were four news issues that got me really fired up this week.

First there was the witch hunt perpetrated on a local business owner on behalf of 13 Turtle hatchlings killed on Fletcher a couple of weeks ago, allegedly caused by a small inn keeper not turning off her lights, who has now “resolved to walk away” from her business as a result of the sub human treatment of the accusing parties. In her own words: “I cannot fight city hall and the infinitely powerful Amelia Island Turtle Watch Association.”
Of course this is not my fight but the ulterior façade of the story is that 13 hatchlings died unnecessary, so let’s put the blame on someone. However when you start peeling the layers of the entire incident away, the blame issue becomes much more dimensional than portrayed, even more so when noting that out of a harvest of 330 some newborn turtles, 13 hatchlings were apparently distracted by light, while the other 315 hatchlings from the same 2 nests made it safely to the water, instead of to the road. Peeling the layers away in order to get to the real story is what a justifiable society does, not scan the outside, render a verdict and move on.
The reference to “fighting city hall” in this context is particularly disturbing to me, as I have heard this same phrase on many occasions lately in reference to businesses closing up or moving to the county.

Also not my fight but equally disturbing was a local Newspaper reference this week to the arrest of a well known local Fitness Instructor. What particularly upset me was that most on the front page of the article was about an entirely unrelated arrest 10 years ago, which was in such detail that it might as well put a target on the man’s forehead that says GUILTY. Come on America, does “Innocent until Proven Guilty” still means something? And by the way, can anyone tell me what happened to Felix Solis? Someone told me all charges were dropped?

Another goody two shoe witch hunt that makes me breath fire and ice, is this ongoing stupid Jax Channel 47 TV attack on restaurants in the Greater Jacksonville area. This week the reporter apparently found a roach in a Town Center establishment. Good Heavens….what else? Get on with your pathetic life TV47 and maybe get someone in your master control control to pay attention when the commercial break is over and it’s time to switch back to general programming instead of giving us black space for 30 seconds or longer. I have dined in restaurants across the globe, from dives to Michelin 3 Stars. On a recent trip to New York we dined with street vendors and Upscale establishments. A roach in a restaurant kitchen is as “normal” as a rat in the New York Subway, unless you apply so much chemical kill in the kitchen, that we all succumb to terrible diseases. Of course it’s disgusting to see a roach in a kitchen, but it happens, more often than not actually. Look at the fruit and vegetable vendors in this video and learn that surviving in this beautiful world of ours requires a lot of creativity and perseverance before you randomly (or maybe not so randomly) abuse your exposure power to kill someone’s already challenged dream to stay open in today’s economic climate .

And then last but not least, I have a huge concern when news becomes a pre-packaged opinion for everyone without knowledge on the matter. It was on the News, so it must be the Truth.

This one came at the tail end of the week when the US Senate postponed until next week the Vote on the Currency Reform of Fair Trade Act or the Let’s Piss Off China Act, because they are our largest creditor. Why? Well if this Act is passed it will institute a process allowing the US Commerce Department to levy tariffs when it is believed that the Chinese currency units are undervalued and therefore disadvantageous to US businesses. Kind of like the TSA airport person not letting you board a plane because you look like an unshaved terrorist. But most Americans reading the headline here conclude that:

• China is responsible for US unemployment.U
• China is taking advantage of “our” goodwill.
• The US government is going to fix the situation by making the Chinese pay up.
• Therefore, the Chinese government is bad, and the US government is good.
• Once fixed, US manufacturing jobs will be kick-started, and it will be happy days again.
• Thank goodness the U.S. government looks after us or we’d sure be in a lot of trouble. We should vote these folks back into office!

Mind you, I said most Americans…not ALL Americans. And with this opinion in mind, most Americans will then quickly move their attention to the next headline about a semi-celebrity with a wardrobe malfunction or an idiot football player who uses his iPhone to Tweet the question “Who is Steve Jobs?”

But let’s quickly look at the biggest danger this kind of ignorance has in store for us by peeling the blooming onion of what Washington is trying to impose on us vis-a-vis China.

Layer One of the Onion: It’s an election year.
Both the Republicans and the Democrats are eager to dodge blame for the dead-cat economy by laying that cat on China’s doorstep. The propaganda machine has already caused a majority of Republican voters (55%) to now view China as an active enemy. Making the bill more likely to pass is that the Democrats are desperate to re-engage the trade unions that were so helpful to them in the last elections – therefore it’s no surprise that the Currency Reform of Fair Trade Act bill is cosponsored by senators from three heavily industrialized, unionized states.

Layer Two of the Onion: Blame is written in the rearview mirror.
Sure the Chinese have been manipulating their currency. You would do too if you saw that your debtor (the US) was frantically trying to water down the purchasing power of the currency you were holding the debt in. So what did the Chinese do?
Well, for one they bought US Treasury bills in great quantities. But guess who sold them those Treasuries? Why, that would be the US government.
And why did the US government have to sell such excessive quantities of Treasuries? Because the US government is addicted to spending.
And why is it addicted to spending? Could it be because the US public demands so much more from its government than was ever envisioned in the foundational days of the republic.
The Chinese – along with a bunch of oil sheiks – simply have lately filled the gap between what US citizens were expected to pay in taxes or willing to buy in the way of Treasuries, to cover the government’s mad spending.

Throw in a couple of insanely and massively misguided wars and a bunch of other entitlements and it rapidly becomes clear that absent the Chinese, the Fed would have started printing money like crazy long ago.
Absent the Chinese (and a handful of other nations) buying US treasuries, you might want to remember the old store sign, “You Break It, You Buy It.”
Well, we broke it and without the Chinese, it is ours and our children’s children’s children who will be buying it.

Layer Three: It’s Déjå Vue All over again
For those of you old enough to think consciously two decades ago, it was the Japanese who were being accused of being currency manipulators and worse. The situation with the Japanese then and the Chinese now offers a powerful corollary that reveals that all the arm-waving over China’s currency manipulation is much ado about nothing. I could go into all the details of how stupid it is when governments start intervening in currency markets, but suffice here by saying that historical record does not point or prove a plausible short or long term advantage. Au contraire, history showcases only examples of unsustainable government folly. Besides…anyone glancing at the one-year performance of the Shanghai Stock Index can clearly see that the long crash in China has already begun, just like it did in the early 1990s in Japan.

Layer Four: China is the least of the problems being faced by US manufacturing.
US manufacturing is suffering from shortsightedness, not Chinese ingenuity. US Manufacturing jobs have declined since since 1970s not because of Taiwan, China, Japan, Korea, Indonesia, Mexico or any other would be recipient of our wrath. The exponential increase of computational power is the unstoppable culprit and the creative destruction of technology is about to take things to a entirely new level, thanks to 3D printing; actually it would call it 3D duplication. Watch this video as it explains America’s Future in the World:

Even after watching you will probably not understand how exactly it works, but you may understand the consequences for our lives, employment and what US technology could really mean to the world if it were our focus, instead of being cry babies complaining that these countries are stealing our jobs.

And yes there are now 3D printers that “print” other 3D printers. In short, the future will be increasingly dominated and enhanced by technology – and that technology is speeding at us far faster than most people can imagine… or many business can even prepare for. Anyone who tries to cling to the past will find themselves clinging onto little more than wreckage.

Layer Five: Actions have consequences.

Summing up the data, at present the US exports about $92 billion worth of goods and services to China, and China exports about $364 billion back into the US, for a net trade deficit of $273 billion in China’s favor. Sounds like a big deal, doesn’t it? Well it’s actually peanuts when you zoom out your focus a bit. And here is why.

Imports from China 2010

The US economy as measured by GDP rang in at $14.7 trillion last year. While the following is not exactly an apples-to-apples construct, it is useful for comparison purposes to mention that the Chinese manufacturing deficit, therefore, amounts to just 1.8% of the US economy.

To put that number in perspective, the US currently exports about $105 billion in petroleum products but imports $432 billion a year from countries such as Canada, Saudi Arabia, Mexico, Venezuela, Nigeria, and Iraq (the top six sources of US oil, in order of importance – is it just me or can you see a potential problem in that list?), leaving a $327 billion deficit there. Again, compared to the US economy, petroleum imports represent 2.2% of it. Again, that’s substantial for anyone group, but not an overwhelming factor in the broader context of GDP.

So why are Tariffs turning into a leading news headline?

Because Washington needs to detract from the other economic developments that are endangering the nation’s recovery. The US Government figures on inflation talk about 3.2%, which would equal $470 billion off the $14.7 trillion GDP.  HOWEVER, if Shadow Stats is correct – and there is no reason to doubt their statistic – actual inflation is running at about 7%, so the number rises to $1.03 trillion… in other words, an awful lot of currency units. Add to that the $2.16 trillion the Government intends to collect in taxes and there are literally a trillion or so reasons for the government to make you focus on a tangible enemy.

Given that the bottom line of the Chinese trade deficit is not all that consequential, enactment of the Currency Reform of Fair Trade Act is sure as hell going to have repercussions and consequences leading to a Global trade war. Once that shot is fired, the consequences, while unpredictable, are almost certain to be dangerous. That the politicians would even think about risking getting into a pissing match with the world’s largest holder of US debt and very likely setting off a global trade war at this crossroad in history is stunningly scary to me.

And that’s why I write the real stories behind the headlines until “Damn the Torpedoes” crashes and burns.

4 Comments

  1. Philip Edgar Beigbeder

    WE REACHED OUR MENTAL HIGH IN THE 1950S……………….THINK ABOUT IT…..IT WAS WW2 THAT SAVED OUR ASS FROM THE LAST DEPRESSION

  2. Anonymous

    Absolutely. But it was a military confrontation with a build up, clear focus and an exit strategy (even if that happened to be the BOMB). Much of America’s growth after WWII was derived from Empire Building, which is now coming home to roost.

  3. Tris Bux

    Dear Johan,
    I appreciate and agree completely with your comments about the Fernandina Beach Fitness Instructor.  I cannot believe the excessive media attention, complete with background detail and personal information about someone who is only accused.  Where is the innocent until proven guilty?  The Fernandina Beach Leader even printed their home address.  Wow- if life isn’t difficult enough!

  4. Anonymous

    Tris, I resent a system that makes it so easy for some newsmedia to commit the crime of character assassination long before any proof is presented and judged on. Allegations or even accusations are not proof. An allegation is a claim of a fact by a party in a pleading, which that party claims to be able to prove. Allegations remain assertions without proof, until they can be proved. An accusation is a charge of wrongdoing which also needs to be backed by proof. Yet a person’s life and accomplishments often get destroyed with the ease of a news article hiding behind nothing else but allegations or the accusation of wrongdoing and that is not what this country was built on. 

    In 60 years of a highly conscious lifetime I have witnessed the premature destruction of many good people by the mere allegation of guilt, while often turning out innocent in the courtroom. In my opinion News media have an obligation to not abuse their exposure power and certainly not embellish accusation into proven guilty without due process. Unfortunately that doesn’t sell very well in today’s society.

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