President Trump escalated the trade war this week, making a kamikaze attack on a vast armada of Chinese imports – $200 billion in total – headed for California.
The Chinese say they will retaliate.
Last month, we opined that the trade war wouldn’t go any better than Vietnam… or Iraq… or any of the feds’ other phony wars – against drugs, poverty, or terrorists.
It will be expensive, futile… and perhaps disastrous.
But that doesn’t mean it won’t be popular. Wars give the spectators something to live for – us versus them… good guys against bad guys… winners versus losers.
Their hat size swells as their champion wallops the Chinese. Their girth shrinks as he challenges and taunts the Canadians. Their manhood grows when the enemy gives in and admits defeat.
But while this puerile entertainment is taking place in the arena, the real action is going on in the expensive skyboxes, where the elite collude against the fans.
Wars shift resources from the boring and productive win-win deals in the private sector to the magnificently absurd win-lose deals of the feds and their cronies. The only real winner is the Deep State.
We saw our colleague, former U.S. budget chief under President Reagan, David Stockman, on TV this week. The interview was painful to watch.
He was bravely trying to explain the trade deficit and why it was caused by monetary policy, not by trade ramparts that were too low.
But the young, know-it-all newscasters were such numbskulls – so lacking in any experience, theory, or historical perspective – he might as well have been instructing a walrus on how to chew gum. The lesson was in vain.
The three TV experts saw no problem with the trade deficit… and no danger approaching from Trump’s war on it.
If there were any clouds on the horizon, they didn’t see them; if there was any thunder, they didn’t hear it; whether lightning was striking the light posts near them or not, they had no idea. They wouldn’t even look out the window.
Instead, they seemed eager to get Weatherman David out of the studio so they could go back to their bubble chatter.
They were so confident… so vain… and so dismissive of all risk…
…we thought we heard a bell ringing.
The bell, of course, was the one they don’t ring just before the market collapses. They don’t ring it because they are all sure that nothing could go wrong. And there hasn’t been any real trouble for so long that they’ve forgotten where they put it.
Trade deficits have been growing ever since the U.S. went off the gold standard in 1971 (while tariffs have been going down!).
The stock market has been going up (with only three significant slips… in 1987, 2000, and 2008) since 1982.
The bond market, too, has been rising since 1980 (though it probably topped out two years ago).
The current GDP expansion has been going on since 2009 – and is now the second-longest expansion in history.
And the USA has been a going concern, growing in power and wealth since 1781, when the French beat the English at Yorktown, Virginia and thereby rescued the American Revolution.
All of these trends – except the current economic expansion – are older than any of the three bubbleheads David confronted on CNBC. David had to give them a “heads up” on trends: “They go on until they stop,” he warned.
We could practically hear the cackling of the market gods as the twits on TV assured David that nothing could go wrong:
Will the economy suddenly tip into recession? Will the stock market crash? Will the bond market sink?
Yes… most likely… all of those things will happen.
But what will set them off? What trick will the gods play? What trap will they set? What surprise have they got waiting for us?
We don’t know. But the trade war gives them more to work with.
Tariffs on lumber coming from the evil Canadians are adding about $9,000 to the cost of a new house, according to the National Association of Home Builders.
Washing machine prices have jumped some 15% this year, the fastest increase ever recorded by the Bureau of Labor Statistics.
As for auto prices, CBS News reports:
Consumers may see an average price increase of $5,800 if a 25 percent import tariff that Mr. Trump has threatened goes into effect, according to estimates cited by the Alliance of Automobile Manufacturers (AAM), a lobbying group for carmakers.
That’s a “$45 billion tax on consumers,” the group said, citing an analysis of Commerce Department data.
Automotive news website AutoWise says the top 10 best-selling automobiles will see price increases from $1,000 to $3,600.
Farmers are getting hit hard, too.
The American Farm Bureau says it expects farm incomes to drop to a 12-year low this year, largely because of the trade war.
An agricultural economist at Purdue University, Christopher Hurt, added that 1,000 acres of corn and soybeans would have made a farmer a $42,000 profit on June 1. Now, it could net him a $126,000 loss.
Still, small potatoes? Maybe.
They don’t ring a bell when the end comes. But they do put bubble-brains in front of TV cameras.