The onset of conflict often brings clarity and a sense of purpose. It becomes a straightforward narrative of heroes versus villains—cowboys versus Indians, Confederates versus Yankees, or cops versus robbers. It’s a time when distinctions are made clear, songs are sung, and drums are beaten enthusiastically and confidently.
Indeed, calls for “a cheerful little war” often ignite excitement and optimism. This sentiment also extends to the emergence of trade wars. Whether you’re in Scranton or Suzhou, the intensifying standoff between Trump and Xi carries an air of righteousness. “We’re in the right; they’re in the wrong,” and the reverse is equally true.
From the vantage point of the USA, the outlook is unambiguous. America’s rightful share of prosperity seems within reach. After enduring years of leadership that appeared more feckless than strong, America finally has a leader ready to seize opportunities for his compatriots. And why shouldn’t he?
Decades of being outperformed by Chinese laborers have left American workers yearning for justice. They’re not living in their grandparents’ economy anymore. No longer the backbone of high-paying manufacturing jobs, many have become low-wage service workers. This relentless transition has been disheartening. Given the chance, American workers are confident they could reclaim their prominence.
However, as it stands, Trump’s campaign seems both delayed and insufficient. The moment to advocate for American workers has passed while figures like Ray Dalio have amassed significant wealth through the financialization of the economy. Moreover, addressing the plight of American workers has little to do with imposing tariffs on Chinese imports.
We’ll delve deeper into this later. But first, let’s explore some spirited expressions emerging from the Middle Kingdom…
Trade War! Trade War!
China’s economic surge over the past 40 years showcases astonishing growth. Real wealth has been created, living standards have improved, and massive cities have emerged from the earth like flowers following spring rains.
To put things into perspective, between 2011 and 2013, China used more cement than the United States did throughout the entire 20th century. According to the International Cement Review, a London-based industry journal, the U.S. consumed 4.4 gigatons of cement from 1901 to 2000, while China consumed a staggering 6.6 gigatons from 2011 to 2013.
Without a doubt, China has earned recognition for its rapid transformation of the landscape. However, this transformation has also inflicted profound alterations on the national psyche.
With cheers, celebrations, and the state media’s anti-U.S. propaganda, new cultural expressions have emerged. This week, as reported by Zero Hedge, a song titled “Trade War” gained viral popularity on China’s social media platform, WeChat.
This song, set to the melody of a 1960s anti-Japanese song, begins with the rousing refrain:
“Trade war! Trade war!
Not afraid of the outrageous challenge!
Not afraid of the outrageous challenge!
A trade war is happening over the Pacific Ocean!”
The lyrics also proclaim: “If the perpetrator wants to fight, we will beat him to his wits.”
What sort of deception could incite such sentiments?
Workers of the World, Unite!
Decades of relentless credit creation, thanks to the Fed’s persistently low interest rates, have yielded countless unintended consequences for the global economy. Essentially, the economy has restructured in ways that might not have occurred otherwise. A notable outcome is the offshoring of American jobs to China, resulting in a significant trade imbalance between the two nations.
Where did American consumers obtain the boundless credit to consume a wealth of goods made in China? And where did the increased wages of Chinese workers originate? Following the money up the supply chain leads back to the Fed as a key player in this interplay.
Nevertheless, it truly takes two to participate in this dance. China could have refused the fiat dollars they were receiving; after all, they were mere abstractions conjured from thin air. Why exchange tangible goods built from real resources for something so dubious?
This leads us to the second layer of deceit. For this arrangement to flourish, the Chinese government had to acquiesce. They undoubtedly did so for two primary reasons: (1) the profit was irresistible, and (2) it provided the Chinese populace with direction and purpose.
But as China became increasingly ensnared in the Fed’s fabricated currency, Beijing faced the pressing need to devalue the yuan continually to maintain their competitive edge over U.S. labor. Year after year, decade after decade, the heart of America was hollowed out and deindustrialized, while its former vitality was transferred to China.
Throughout this time, the excess credit fueled the financialization of American businesses, where corporations often chose to borrow funds not for growth, but rather to enhance stock prices. Wall Street benefitted from this arrangement, as the cheap credit inflating financial assets also fueled China’s economic rise. Meanwhile, Main Street faced stagnant wages and crippling debts.
The root of this intricate mess can be traced back to August 15, 1971, when Nixon abandoned the Bretton Woods system and halted the ability of nations to exchange their paper dollars, obtained through trade, for gold. Since that moment, debts and deficits have spiraled out of control.
Ultimately, the grievances of American workers, Chinese workers, and indeed all global workers should unite them—not in opposition to capitalism, as Marx would suggest, but against the scourge of counterfeit money and the governments that perpetuate its existence.
Of course, acknowledging this reality calls for genuine thought and reflection. Yet why engage in such contemplation when it’s so much easier to mindlessly drum up chants and joyfully embrace the mirth of a trade war?
Sincerely,
MN Gordon
for Economic Prism
