The horizon is not so far as we can see, but as far as we can imagine

Category: Age of War and Revolution Page 1 of 21

Trump’s Liberation Day: This Boy Could Fuck Up Boiling Water

So, Trump’s tariffs are out. He claims they’re half of what each country tariffs the US, but in fact they appear to have been determined by dividing how much the US sells to a country by how much that country sells to the US.

In other words, the more your trade surplus is, proportionally, the higher the tariffs.

This isn’t, on the face of it, necessarily stupid. But… it’s being done very stupidly.

The first problem is the most fundamental: much of what the US buys it can’t make or grow or dig up itself. New capacity takes time, so in cases where the US could in theory make whatever it is, tariffs should either be phased in, or there should be a delay “in two years the tariff will be X%.” As it stands, in a lot of cases, all this is going to do is make Americans pay a lot more.

Then there are things that the US can’t produce itself, or produce enough of. Potash from Canada, for example. The US can’t produce enough. Period. And farmers MUST have it.

So this means that there’s going to be a massive economic shock: prices will go up and/or profits will go down and the US government will need to provide massive subsidies to some industries at the same time as Trump’s budget plan massively cuts revenue due to tax cuts for the rich.

The tariffs on each country should have been individually determined based on what America buys from them, and what America sells to them. If it’s something the US can’t make, or given opportunity costs shouldn’t make (do you want to build more power plants for AI, or use it for aluminum?) then those things shouldn’t be tariffed. And if you’re buying what you really need from them, and can’t make yourself or shouldn’t (Canadian potash and aluminum, for example) then why are you tariffing? The Canadian example is a good one: Canada imports more manufactured goods from the US than it exports to America. Tariffs encourage Canada to buy less goods and re-industrialize, reducing demand for American goods and encouraging American de-industrialization.

Instead of selling goods to Canada, made using Canadian primary and secondary resources like wood and aluminum and hydro power, America is encouraging Canada to use its own resources to make its own goods. I mean, as a Canadian I think this is great and I’m very grateful to Trump, but this is stupid, really stupid, of Trump for America.

The second issue is that that one goal is to get foreign companies to buy American goods. But most American goods aren’t price competitive, especially not with China. Add on top of that the retaliatory tariffs which most countries are going to respond with, and the likely end result of this isn’t countries buying more American goods, it’s them buying less.

Now some countries are in a different situation. The EU, for example, is very vulnerable here. They have a massive trade surplus with the US, and it’s in goods and their goods are more expensive than Chinese goods, so they’re fucked: who are they going to sell to if they won’t sell to America?

The EU trade surplus is about 600 billion. America sells the EU more services than vice versa, by about 100 billion, however, so the combined services and trade surplus is around 500 billion. Yet if you drill down to balance of payments overall, it’s closer to 200 billion: the US gets a lot of investment income and other streams from Europe, for example, all those patent and copyright payments, 30% at app stores, etc, etc…

A 200 billion dollar balance of payments deficit is about 1.2% of the EU’s GDP. The correct action for the EU is to hit the US hard on services and income: tax the hell out of that and just get rid of it it in some places. Break the DMCA and set up their own app stores, for example. The screams from Silicon Valley would set off Richter 7 earthquakes.

Let’s look at another country. Japan, has a 68 billion goods trade surplus, about a 25 billion services deficit, and actually gets about 50 billion in misc payments from the US. They’re rolling in it and actually much more vulnerable than the EU because of all that payment income, which is easily disrupted. It’s hard for them to retaliate and not come out hurting bad. But there are reports they’re coordinating their response with South Korea and China, and if true, it makes sense, since they have little leverage alone.

China’s trade surplus with the US is now about 1.8% of GDP. Most Americans think it’s still 2008. It’s not. China will be fine and that’s why their official response has been, in essence, “if you want a trade war, let’s have a trade war.”

Generally speaking the correct response for most countries (but not Japan!) is going to be to go after payments: copyright, patents, app stores  and so on, and to tax services.

And this leads to third issue: hitting everyone at once. This allows coordination. If the US had just hit a few countries, everyone else would keep their heads down and hope to be ignored. One country, alone, breaking patents say, or getting rid of DMCA compliance and breaking US app stores, would be crushed. But if it’s done in a coordinated fashion, the US is toast. They can’t sanction everyone, the US financial system will just be treated as damaged and routed around. A universal clearing currency is NOT needed. In fact, for a variety of reasons, it’s one of the worst things possible. Make the deals in local currencies. Done.

Additional add-ons to all of this include the probability of a lot of free capital flows going away. Countries that want to re-industrialize with domestically controlled supply chains, and many now will, need to keep capital at home and the retaliation against the US is going to be against a capital flow/investment system which has, with a few exceptions like Japan, mostly favored the US.

I can’t even imagine how much US property in other countries is likely to wind up forced to sell to locals, or even nationalized outright.

All of this leads to the fact that this will speed up the loss of dollar privilege, and with the loss of dollar privilege and everyone reluctant to sell to America, well, there’s no way that the US standard of living doesn’t get hit hard.

There’s a lot more to say on this. The US is counting on countries needing to sell to it. The Chinese have far more manufacturing capacity than anyone else and a cheaper cost structure. This leaves places like the EU fucked, hard. They can’t really sell to the US profitably. They can’t sell to China because their goods are too expensive. They don’t have a lot of resources to sell except food.

The correct response is to move to internal demand and collapse the cost structure (rent, housing prizes, all monopoly pricing, etc…) but neoliberal policies don’t allow that, so they’re going to try military Keynesianism, but that won’t work well either.

Truly screwed if they don’t get their heads out of their asses and ditch neoliberal bullshit, start taxing the rich, and figure out their energy situation.

But, they, they have it coming.

Long story short: the US is going to be hit by a huge inflationary shock, a decline in standard of living and, unless other countries are stupid, lose most of its overseas rentier monopoly income. The EU is in for a world of hurt, but has options. China will feel it, but they’ll be fine, they don’t need the US as a market any more.

In the longer term this might lead to improvements in the US economy: it will force reshoring, it’s just doing it in the stupidest way possible. But the US risks winding up in semi-autarchy, with an oligarch controlled economy, authoritarian but ineffective politics (think Yeltsin) amid a huge collapse of standards of living, even as it destroys its scientific and academic communities.

The road back will be a hard one and the suffering in between will be massive. And all this assumes that the political problems in America don’t boil over into civil or serious foreign wars.

Americans aren’t going to take a one-third reduction in their standard of living well, especially when so many of them are just a few hundred dollars a month away from homelessness.

Welcome to the end of the American century.

You get what you pay for. This blog is free to read, but not to produce. If you enjoy the content, donate or subscribe.

Trump’s Negotiating Is Failing

If you want to call it negotiating. Iran refuses to even talk, unless America removes sanctions first. Putin will talk, but he clearly doesn’t intend to end the Ukraine war except on his terms, and certainly won’t agree to a ceasefire without massive concessions. China isn’t panicking over tariffs, but simply counter-tariffing. Europe’s getting uppity. Even midgets like Canada are standing up for themselves. Oh, and Ukraine still hasn’t signed that mineral “deal.”

Trump has said that if Iran doesn’t give up their nuclear program “there will be bombing like they’ve never seen.” He’s threatening Russia with secondary sanctions on oil, and he’s talking about tariffing everyone.

Apparently America doesn’t want any allies, or friends, and soon it won’t have any. This is batshit crazy, loop-de-loop nuts. The way to do this sort of thing is to single out one or two targets at most, and make everyone else think they’re safe, then move on. Trump’s acting like it’s 1991 or 1950, with the US at the top of the world, not like America’s in serious decline.

Oh it may seem like a response to America’s decline, an attempt to reshore industry, withdraw from Imperial over-reach and so on. Superficially it looks like that, but he’s just picking too many fights all once, his tariff threats are incoherent and unplanned, he’s defunding research and forcing brilliant scientists and engineers and scholars out of the US, has no industrial policy worth speaking of and is destroying America’s governing capacity with capricious cuts to the federal bureaucracy.

More to the point, he’s giving everyone else reason to route around America like it’s damage: to stop using the US dollar, to move to using local currencies for trade and to stop buying American goods and services, and yes, to stop selling to the US. The smart move, and it’s going to happen if he keeps this up, will be stop enforcing US intellectual property, end the DMCA clones and the prohibition on breaking digital locks, and to stop paying American internet giants their usurious fees.

The US isn’t agreement capable: you can’t trust them to keep their deals. This was true before Trump, but he’s super-charged them. Iran is right to say “well, we’ll talk after you keep the last deal we signed with you” and everyone else is coming to the same conclusion. If he won’t keep America’s deals, or even his own (the USMCA trade deal with Mexico and Canada is his) what’s the point of even talking? Just stop doing business with the US, period.

Smart policy isn’t to do this in one huge crash, because the US is very reliant on goods, resources and money from everyone else. You boil the frog, make things predictable and ease out of the problem. This isn’t Russia, which had China and India to backstop it when sanctions hit and which wasn’t massively in real trade deficit, making it up with non trade fees from its vassals and from countries which wanted to sell to it.

If you can’t sell to the US, why do business with it? What does it have that you can’t get from someone else? The obvious answer is food, oddly, but if even China is willing to put tariffs on both US and Canadian food, that dog won’t hunt.

It’s not that the US can’t do autarchy. It’s still a continental power, it’s still high tech, it still has plenty of scientists and engineers. But all that was true of Russia after the USSR collapsed, and the first decade and a half were ugly, and only got better because of Putin and the secret police taking charge—and they were able to do so thru a huge economic campaign to sell resources to the rest of the world.

And that’s where the US looks likely to wind up, after a period of chaos and deprivation: its’ behind in 80% of tech, it’s cost structure is too high, so it’ll have to sell food and natural gas: if anyone else is willing to buy. (The Euros may have no choice, everyone else does, because they aren’t blinded by insane fear and hatred of Russia.)

This sure is speed-running imperial decline. An accelerationist’s dream.

And if there’s a real war, what happens if Iran is able to sink an aircraft carrier? What happens when the US campaign against Yemen fails, as it will? What’s left of America if people aren’t scared of it? Nukes and complete pariah status and a massive nuclear proliferation scramble?

Likewise the whole sanctions regime bullshit is possible because almost everyone trades with the US and goes thru American and European banks. If they stop trading, they don’t need the banks and if European banks opt out, well, shit. So the fear of sanctions and the fear of military force goes way down.

Nothing to sell, no fear, and no one wanting to do business with the US, including buying its weapons.

This appears to be Trump’s endgame.

 

You get what you pay for. This blog is free to read, but not to produce. If you enjoy the content, donate or subscribe.

Absolutely Massive Collapse In Travel From Canada To America Incoming

I have to admit, I didn’t think it would be this big:

Using forward booking data from a major GDS supplier, we’ve compared the total bookings held at this point last year with those recorded this week for the upcoming summer season. The decline is striking — bookings are down by over 70% in every month through to the end of September. This sharp drop suggests that travellers are holding off on making reservations, likely due to ongoing uncertainty surrounding the broader trade dispute.

Parts of Florida will be hammered by this. But I’m shocked: seventy percent plus! I hadn’t realized just how unified Canadians are in this.

I suspect it isn’t all the tariffs and Trump’s annexation threats: there’s been significant press of US border services snatching foreigners who are crossing legally but perhaps don’t have their paperwork all right and instead of just sending them back, abusing them and locking them up.

I certainly won’t be traveling to America, probably ever again: after all I’ve insulted Trump repeatedly and said that Israel is committing a genocide and customs officers often search social media. Nothing in America is worth the risk of wind up in some prison camp because I think Palestinians are human beings and shouldn’t be mass murdered.

So far I don’t see evidence of a big drop in European bookings, but if that happens, and there’s plenty of reason to believe in might, well… bad time to be in tourism in America and a good time to be in tourism in alternatives. I think Mexican and Canadian destinations are doing very well out of Canadian’s refusal to visit America.

America wants to be alone, and without allies, and soon it will be. Trump’s hilarious attempts to cozy up to Russia are ridiculous. Putin will do business with America, but he will never, ever trust the US, no matter who is President. Meanwhile America’s real allies are mostly deciding, quite rationally, that one can’t trust America and therefore America can’t be a useful ally.

This will lead to a variety of knock on effects, like diversification from the dollar and use of local currencies in trade, and the American standard of living will collapse by at least a third. Americans have been living way beyond their means, and Trump is bringing that to an end.

So sad.

You get what you pay for. This blog is free to read, but not to produce. If you enjoy the content, donate or subscribe.

 

The End of Empire: The Anger, Glee and Despair Tango

“There are decades where nothing happens; and there are weeks where decades happen”

This statement is—wrong-ish.

For decades various people have been predicting what is happening now: the end of the American empire, the late Imperial wars, the despair and poverty of late-imperial rentier capitalism, and the rise of China.

Indeed a lot of people (your host included) were screaming about this 30 years ago. I read my first book on the way that America was turning to Gilded Age plus inequality in 1986. Everyone who wasn’t stupid, bought or ideologically captured could see what neoliberalism would lead to. From the late 90s we yelled about sending the West’s industry to the West, but hey, it was the “End of History” and capitalism and democracy had won and it didn’t matter where industry was because “comparative advantage” was, and still is, completely misunderstood, as were the constituents of state power.

So—it’s all happening now, along with massive wildfires from climate change and it seems like for decades nothing happened, but really, it was all happening: without deliberate policy choices, these weeks wouldn’t be possible.

The key to making accurate predictions is simply asking “what must happen if the current course continues, and will the course continue.” In 2009, when Obama decided he’d rather have a couple mansions and Hollywood friends than be the next FDR, and massively increase fracking to top it off, it became clear that the course would continue and all this became inevitable. Realistically, the rise of China was locked in when they were allowed to join the WTO and climate change was locked in when Reagan tore down the solar panels on the White House roof.

So it’s been a very easy time to make accurate long term predictions, much as Keynes, upon seeing the post-WWI peace deal was able to predict WWII and the end of the British Empire. It still had to play out, but everyone with sense knew it was inevitable.

Most of the time I’m sanguine about all this, but every once in a while despair and anger at all the harm which was so easily predicted and which could have been avoided wells up. Other times it’s glee: the fall of the American Empire will occasion a lot of horrid events, but unless you’re American or perhaps European, it’s hard to be sad, especially as we witness genocide in both Gaza and Syria, and witness huge homeless camps.

I was sent this video to watch, and it’s so typical of America these days:

Kind of hard to feel sorrow at the end of an Empire which treats even its own citizens this way. Meanwhile China deliberately crashed its own over-inflated housing market when the CCP noticed that too many people couldn’t afford their own homes any more, and is moving to mostly state-built housing. Tell me more about how awful “Communism” is. Nor are they shipping Israel arms and supporting genocide. (No, the Ughuirs are not being genocided, though they are discriminated against.)

If you’re feeling similar emotions, well, that’s understandable and no big deal. Just remember, the world is always and has always been shit for a lot of people, all that’s changing is who, and in a couple decades, how many. But there’s still delicious food, beautiful scenery, and love is just as sweet. All the good still exists, and your sorrow and pain does not help other people, and hurts you.

Live, enjoy, and perhaps allow yourself some happiness at the good amidst all the evil.

 

You get what you pay for. This blog is free to read, but not to produce. If you enjoy the content, donate or subscribe.

The End Of The American Brain Drain

This admission of abject surrender and powerlessness from Colombia University is something I appreciate. Some actual honesty:

America’s in the middle of another of spasmodic crackdown on the free speech like McCarythism or the Red Scare. In this case so that Israel can commit genocide because a controlling number of American elites are scared of Israel, in many cases most likely because Israel has proof they’re baby-fuckers. (Can you say “Epstein”?)

The slightly less depraved ones are just scared of AIPAC funding their opponents. Others genuinely love the idea of mass murder, and probably have screenshots of dead Palestinians and Israeli soldiers wearing Palestinian women’s underwear saved for times when their palms get sweaty and they started breathing fast.

But, let’s bring this back to the more usual themes of this blog. There’s another interesting news story: it seems there’s a bill proposed to ban all Chinese students from studying in America.

Sweeeeet.

You know one of the main reasons why the US took the tech lead so decisively before and after World War II? A massive influx of European scientists and intelligentista, many Jewish, but plenty not. The smartest people in the world disproportionately wanted to live in America.

This continued for generations: you’d be some other nation, you’d train up smart people, educate them, and the ungrateful fucks would go to the US to finish their education, then stay in America. Endlessly frustrating for everyone but America.

So, of course, current American elites, scratching under their armpits, hooting about foreigners, grunting out “Uhmerika, grate” have decided to add to their broad attack on research, brains, intelligence, universities, teachers and books by banning even more smart people coming from other countries.

They will glare at you and tell you it’s “so them Chinese fellers can’t learn our secrets.”

Weird thing, last survey I saw had the Chinese leading in 89% of tech fields, up from 80% and there are more top Chinese AI researchers working in America than American AI researchers.

So, if you go to America you can’t say “mass murder is bad”, and no one can protect you from the government’s thugs if you do, but, fortunately for some, soon you won’t be able to study in the US, so hey, it’ll be a moot point if you’re lucky enough to be Chinese.

American universities are only massively dependent on foreign students and Americans, scared of catastrophic, life long student loan debt increasingly don’t want to to go to university, so I’m sure this won’t hurt America at all. Who needs scientists, engineers, professors, intellectuals, and all them fancy folks who think they’re better than MAGA chuds? I hear some of them academic types say evil worlds like sexism and racism and nasty phrases like settler colonialism, CIS, justice, fairness, genocide and so on.

Yup. Ban ’em or make ’em terrified. Don’t give academics any freedom, they think bad thoughts about how killing brown people might be wrong or that women might be worth something when they aren’t cooking or spreading their legs. They might say “abortion isn’t always evil” or suggest that God isn’t real or something.

Anyway, I’m pleased to notice that America is 110% (as an American manager or coach would say) dedicated to driving itself into the dirt and ensuring China buries it there.

You get what you pay for. This blog is free to read, but not to produce. If you enjoy the content, donate or subscribe.

Trump Is the Best President of My Life Unless You’re American

The Course of Empire by Thomas Cole

The Course of Empire by Thomas Cole

Every day, I become more grateful for the election of Donald Trump. All praise. Millions and millions of people have worked to destroy the American empire, and all of them failed. Donald is succeeding, speeding the process by about a decade, I’d guess.

Likewise, I and many others have hated the neoliberal trade order for decades — since the late 80s, in my case. It was designed to destroy countries’ sovereignty, making it impossible to truly regulate investors, to run industrial policy, or even, in rich nations, to keep wages up. As a Canadian, ever since the FTA Canadian manufacturing has proceeded on a slow death march, till instead of selling the US more good than the US sells us, as was historically been the norm, we buy more goods from the US than vice-versa. (The trade surplus is due to energy.)

Meanwhile, Trump is essentially forcing the Europeans to take charge of their own destiny and stop doing what America says. This should have happened decades ago, and EU elites failure to man-up has cost Europe’s countries dearly. It’s quite likely neither NATO nor the EU itself will survive; both excellent outcomes. NATO should have been disbanded when the USSR fell. American troops may leave Europe, or at least there should be a further draw-down — also excellent. As for the EU, it has been an engine of stagnation and de-industrialization, especially since the introduction of the Euro.

The end of the American Empire, and the end of the “no industrial policy, no sovereignty” free trade order, and possibly the end of NATO and the American occupation of Europe.

Oh, the process will suck, and it will hurt. But for the first time since the US imposed its terrible neoliberal trade order on the world, there is at least a chance for most countries to be able to properly manage their own economic affairs.

Unfortunately for Americans, Trump is doing this in the stupidest and most harmful way possible — for America. It needs to be done, sure, but simultaneously pissing off almost every trade partner in the world and speeding up the end of the dollar’s hegemony in such a chaotic way is not going to go well for America or Americans. As the primary beneficiaries of the previous order (other than the Chinese, who suckered the Americans using their greed), the end of the order is going to be ugly, and because America now has no friends except maybe the lickspittle Brits, there’s going to be little cushion for the America’s fall to real economic status.

So, all hail Trump. He’s an idiot, a monster and is doing plenty of terrible things. But he’s ending the American century sooner and more decisively than anyone could really have expected. There’s still the risk of war, to be sure. But if we can avoid that, well, Trump will go down as a very important President and his reign will have made a better world possible.

Sometimes what the world needs is a colossal fuckup in charge to bring the end of an order.

 

This blog runs on donations and subscriptions from readers. It’s free, but not free to produce. If you value it, please give.

Understanding Trump’s Tariffs Effects on World Trade & How He’s Ending the American Era

To understand how tariffs are going to hit various economies, you need to understand how neoliberal era trade and production was set up. In the old world supply chains were much less integrated. In general, if you made it in your country, your supply chain was in your country. There were always some exceptions, especially for resources like nickel, copper, uranium, etc., but these were the exception to the rule. Trade deals and laws in the old era usually required foreign companies which were set up for production in a host country to source a minimum amount of parts from said host country. Almost always this was over 50 percent. If the infrastructure didn’t exist, the company, usually with government help, would set it up.

Understand clearly that the neoliberal era came out of the inflation crises of the 70s. It had two goals: 1) To reduce consumer inflation and thus growth in petrochemical use, and; 2) To make the rich much richer.

In the post-war era, most production in most Western countries was meant for the internal market. If you needed it, you made it, with some exceptions: The smaller you were, the more you needed to import some goods, and of course, if you’re Norway or Canada you import bananas and coffee, and you imported any resources you couldn’t produce enough of yourself, like wood, oil, gas, and minerals. The high imports of oil were the old world’s achilles heel, and the inability to import substitutes away from them killed it.

So, most things ordinary people bought have an oil input cost, and the more money ordinary people had, the more they’d do things which had an oil cost. There was almost nothing the Arabs needed to buy from the West at the time: They had small populations, and didn’t have consumer economies. We could sell them military goods, but other than that their needs were modest. They had us over an oil barrel.

I remember the post-war world well, it died in stages. In the 70s and 80s, my family lived in Malaysia, Indonesia, Singapore, and Bangladesh at various times. In all these countries, even Singapore, everything was cheaper than in Canada or America. Ex-pats who had incomes denominated in first world currencies lived very well. When in Canada, we were lower middle class. Overseas we had servants.

Yet despite having cheap goods and services, all those countries except Singapore were third world. Poor.

The post-war developed country play was to keep both prices and wages high, and to make sure wages went up faster than prices, while controlling asset prices, which included home prices and rent. Wages were high because prices were high, and because most production was done in country, or in another high wage country, and because there were tariffs on goods from low cost domiciles, and as they didn’t have much industry anyway, it didn’t matter. Even as late as 1980 or so, America made 97 percent of everything it needed, and the Japanese export surge which changed that still came from a first world, high wage/high cost nation.

In this world, there was certainly trade, but countries still strove to make and grow as much of what they needed as they could at home.

Then came the inflation crises, when due to the oil shocks, wages grew slower than prices — a lot slower. I remember the price of a chocolate bar going from 25c to a dollar in the period of two years (I was a kid, so that’s the sort of price that was important to me. Paperback prices also went from about 99c to $2.50 and then up to $3.50).

So, if you’re going to tackle this, you need to reduce the use of oil, which means reduce ordinary people’s use of oil, which means restraining their income growth. This is why, during the 80s and 90s, every time wages grew faster than inflation, the Fed would slam on the brakes and cause a recession.

But the other play, which also helps keep domestic wages down, is to manufacture and grow and produce in really low wage domiciles. You can slowly crush European, American, and Canadian wages, but people in China, Bangladesh, Mexico, India, and so on are already earning one-tenth of what you have to pay first world workers. They were a lot less efficient workers, too, but even so, if you offshored production, you could reduce the price of goods.

So offshoring became a way to reduce inflation. It also juiced profits, since much of the price decreases weren’t passed on to first world consumers, but hey, win/win if you’re a first-world capitalist or financier. Because production was being increasingly farmed out to developing nations, first world economies financialized and the financial elites took control from the old manufacturing elites (who were, for all their flaws, actually capitalists. Financiers are the lowest form of capitalist life.)

This, of course, lead to first-world countries de-industrializing, and eventually to the rise of China, and the loss of the West’s tech lead, along with the evisceration of the middle class, a huge homelessness crisis, and in Europe, sclerosis.

Now here’s the irony: China has very low costs, so low that I’d argue that the idea that they’re still middle income is false. Their ostensible salaries look low to us, but cars in China can be had for 10K. Earbud equivalents can be had for less than $10. Smart phones are cheaper. Almost everything is cheaper. It’s a weird inverse of the old first world situation: Wages are lower, but costs are lower vs. wages are higher, and so are costs.

Either equilibrium, of course, works for prosperity. What the first-world now has is high-ish wages and higher costs. I saw a factoid the other day that claimed that rent has increased 350 percent more than median wages in the US since 1985, for example.

Now, let’s take closer look at the structure of trade in the neoliberal era: It was based around trade agreements like NAFTA and the WTO which made it essentially illegal to run old-style economies where most production for internal markets was domestic. You couldn’t tariff, you couldn’t subsidize, and you couldn’t enforce ownership rules, domestic content rules, or even rules requiring primary processing of raw resources before export (for example, Canada didn’t used to ship raw logs and canned salmon before selling it overseas.) If you did, the independent trade courts would hit you with huge multi-billion dollar fines. You also had to enforce American IP laws, and thus pay a portion of most profits to America.

What this lead to is countries becoming cogs in production networks; they had part of the supply chain for a product without having most of the supply chain. Their economies were dependent on trade because even if they assembled the final product, most of the supply chain was outside their country.

Let’s take an example from Canada’s current dilemma with regard to American tariffs. Canada’s government made some big bets on EVs, especially batteries. It seemed to make sense: We produce the minerals which go into batteries, so why not manufacture them here and ship them to the US?

This was a BIG bet in Canadian terms. Ontario and the Feds put up about 16 billion of subsidies, perks, and land to get VW to build a battery plant in St. Thomas. This plant, if it goes into full production will produce a million batteries a year. Stellantis’s battery plant in Windsor had 15 billion dollars in subsidies. Honda is retooling to make EVs in Canada, and to produce batteries, and other parts, for EVs — with a 2.5 billion tax cut deal and 2.5 billion in direct and indirect subsidies.

Now here’s the issue, which you may have spotted: They’ll make way more batteries than Canada could possibly need for domestic EVs. Way, way more. With tariffs and uncertainty (after all Trump, could increase them again) none of these projects are viable. Perhaps we could re-tool one of them and really push Canadians to switch en-mass to EVs. If the Feds are smart, that’s probably what they’ll do. (Spoiler, the Feds are not always smart.)

But no matter what, Canada’s taking a huge hit.

In the old world, where you produced primarily for yourself, and if it was more expensive than foreign alternatives said “eat tariffs”, and maybe subsidized, a foreign government couldn’t just decide one day to destroy your industry. Trade was usually in products the other nation didn’t make or grow itself, or genuinely couldn’t make or grow enough of.

The neoliberal trade structure was designed to make national autonomy, in anything (food, energy, manufactured goods) extremely difficult to obtain. It was a giant hostage situation.

It broke down because of stupidity and greed. The full story is long, but the essence is simple: Americans gave China the full stack. The entire supply line for a lot of goods is domestic for China with smaller chunks in close by allies like Vietnam. They were low cost, they had real competitive markets which kept prices low, and, because the manufacturing floor was in China, they eventually took the tech lead. This required about 20 years.

So China’s now the only nation in the world that has an old style “post-war” economy: It now produces primarily for the domestic market, but it also gets the neoliberal era advantage of selling huge amounts of goods overseas. Win/Win. For them.

What Trump’s team (not so much Trump as certain advisors) is trying to do is to re-shore a full manufacturing stack to America. They noticed that everyone industrializes behind some form of price supports, and that usually those are tariffs (China used currency controls), so they’re instituting tariffs. Given that the market for a lot of goods is in the US, they figure, correctly, that a lot of manufacturing will be forced to move back to America.

All those batteries Canada is making.

This screws every single American ally who allowed their economies to be restructured by American lead trade deals in the 80s and 90s. Every single one.

That’s why Canada and Mexico are in for a world of hurt, and also the EU. It’s also why China is not in for a world of hurt — they’ve got the full stack, and a massive domestic market. Plus, because their goods are cheap, they’ve got almost the entire global South plus most of the SE Asian economies as customers.

And here’s the problem for America: All its got is the US market, because it’s fucking every major trade partner it has. The allies (ex allies?) have to go back to an old style economy too, or form a much smaller and stupider neoliberal bloc, and if they can’t sell to America, they aren’t going to buy from America either. So America can get some full stack back, but only what it’s economy can afford.

And the American economy is much smaller than it looks. Much, much smaller. GDP numbers are massively over-inflated by asset price bubbles, much of the income from foreign assets is going to dry up, almost certainly eventually including IP. If you can’t sell to the Americans, why enforce their IP laws and pay them? Foreign ownership rules will start popping back up, and US assets overseas will be sold to locals — often at cents on the dollar. Of course, the same will happen to foreign assets in the US, but the “world” the US inhabits economically will shrink.

And then, if you can’t sell to the US, why the fuck are you using the US dollar for trade? Trump has made huge threats of tariffs against anyone who moves off the dollar for trade, but if you already effectively can’t sell to the US, again, who gives a fuck? Tariff away, asshole.

And when dollar’s hegemony disappears, the US economy will deflate to its actual size — at least a third, and probably half as large as the official numbers. Think someone pricking a water balloon. It’s going to be amazing to watch.

And that, children, is the end of the American era and Empire. It is very close now, and Trump is making it happen much faster. All praise Trump.

(There’s a lot more to unpack about the effects of Trump’s trade wars but this article is already over 2,000 words. For example, will Trump successfully reindustrialize America and make America, if not great again, at least a decent place to live? More on that soonish.)

You get what you pay for. This blog is free to read, but not to produce. If you enjoy the content, donate or subscribe.

Understanding the Core Goal of Western Governments & Western Decline

I was talking with a friend the other day and he said the problem with democracies is that policy can swing 180 degrees with each election.

And in some ways that’s true: Trump’s switch on Ukraine is a good example.

But it’s not true when it comes to the core goals of Western government since 1979 or so.

The ur-rule of neoliberalism is that the rich must always get richer.

Trump’s budget cuts 600 million from Medicaid, and other health care in order to give tax cuts to the rich.

Trudeau’s big change from previous Prime Ministers was to massively increase immigration. The effect was to depress wages and increase rent and real-estate prices.

When European countries talk about increasing military spending, there is the inevitable comment that this will require slashing social spending. Somehow, the idea of taxing the rich and corporations more is never raised, even though that would easily cover the cost.

DOGE’s civil service cuts will lead to massive outsourcing of whatever the government really has to do, which will cost more than doing it in house, and it will profit the rich.

Starmer’s extate taxes on family farmers will force them to sell their farms to agri-business or developers (and, overall, make the UK even less able to feed itself).

Trump’s proposal to cut the military budget massively, in concert with China and Russia, would open up more room for tax cuts. The savings won’t be used to help poor and middle class Americans, you can be sure of that. (It also isn’t going to happen that way, because China can easily afford its military budget. More on that in a later article, probably.)

This isn’t to say there are never exceptions, but they are exceptions.

This is quite different, by the way, from China.

China used to be willing to mint billionaires, but they figured out it was harming the majority of the population, so they are dealing with it. This is one of the reasons why China has won, and the US has lost. (Another factor is that China doesn’t talk about free markets, but actually has them, while the West talks about them but makes sure they never happen.)

Neoliberalism is in the process of ending, but until the ur-rule of always making the rich richer by screwing everyone else ends, the most important part of the oligarchical state will continue. What’s really happening under Trump is the tech-oligarchs are taking the lead trace away from the banking oligarchs. It’s an internal shuffle of power, while the looting continues.

Because a broad prosperous population, combined with massive industry, is what actually makes post-industrial revolution societies powerful, American and Western decline will continue as long as the determination to fuck over ordinary people remains.

 

You get what you pay for. This blog is free to read, but not to produce. If you enjoy the content, donate or subscribe.

Page 1 of 21

Powered by WordPress & Theme by Anders Norén