Dow close to breaking into new record high!
THE EGG HAS A CRACK!
BORN IN 1982, WENT TO HARVARD, SERVED IN AFGHANISTAN AND IS SENSIBLY PROGRESSIVE. HE WILL SURPRIZE YOU!
The Dow Industrial Average is up 17% since November and is close to breaking above its all-time high of 26,828 set October 3, 2018 by breaking above it previous high set January 26, 2018 at 26,616. However, economic growth appears to be slowing.
Prosperity and the Political implications.
In particular, growth for exports at 3.7% in 2020 is questionable, depending upon how the China negotiations work out. (More below) Republicans are touting how great the economy is doing. However, the economic blast from the recent tax cuts to the rich, that caused a $2 trillion dollar increase to our debt and the 2018 budget deficit of $779 billion, have only had a temporary effect. GDP growth in 2019 is forecast as up only 2.7% and 2020 up a measly 2.2%.
This slowing of growth could have significant political implications as President Trump’s popularity depends significantly on economic prosperity. Recent surveys have indicated that Trump’s base indicates that as long as the economy is doing well, they care little about the president’s lies (8500+ and counting) or his misogyny, or his obstruction of justice, or his racism or his denial of global warming or his preferential treatment of autocratic leaders, or his lack of empathy for equal upward mobility, or his separation of children from their parents, or his negation of NATO, or that his ‘swamp’ is full admitted law breakers and incompetents, or his lack of concern about anything except his own personal business interests and his popularity. Just as virtues reward, is virtue itself (Spinoza), vice and moral derogation have consequences for those that are complicit.
According to a recent Pew Research report, the United States, as ranked against other nations, is 36th in health care, 44th in math scores, 39th in basic education, 34th in access to clean water, 35th in meeting basic human needs, has the highest first day infant mortality rate and the highest child poverty rate at 21% among industrialized nations. That’s one in every five of our children living in poverty! As great nation, we must be better than that.
For me, it all comes down to this question; Is it human nature for us to be virtuous, kind and fair for the common good by seeking pluralistic solutions through a democratic process OR Is it human nature for us to be emotionally swayed by our greed and prejudices and to deliver our power and trust to an autocratic government of a demagogue? The battle for the hearts, minds and votes of the public continues as I speak.
The Chinese currency has dropped to its lowest level in many years. Possible tariffs could toss China into a recession where growth is already slowing. China’s banks have given loans to questionable companies as $1.3 trillion of corporate loans are owned by companies were profits will not cover their interest payments. The problem in China could trigger banks losses that could start a worldwide recession. Money is flowing out of China. Tariffs will increase the problem. While some manufacturing jobs may come back to the US as a result of the tariffs, more jobs domestically may be lost, because the average American would have less spending power. The Peterson Institute for International Economics estimated that rather than bringing back jobs, Mister Trumps, tariffs could ‘result in a trade war and cost our economy more than 5 million jobs and possibly lead to a recession’.
I believe China is a ‘paper tiger’ that is not as big or as strong as it appears and is hampered by cronyism and corruption. Although China has a supposed $375 billion trade deficit with us, the actual figure is much smaller. For example, the export value give to the Apple X i-phone is $378. China contributes only $14 of the total cost for assembly while the rest of the cost is run through supply chains in the US and the rest of the world. Our trade balance ignores the value created by other countries that have preceded China in the chain. Tariffs may kill more jobs than it saves. In fact The Foreign Policy Association estimates that one dollar spent on Chinese imports is about 75 cents that goes into the US economy and that every job created in the metal industry through tariffs, would eliminate 16 jobs in other industries.
China doesn’t even believe its own statistics, as China’s providences are growing faster than the whole. The China inflation rate is a government secret as they print money indiscriminately to bolster its shaky growth figures. Our Federal Reserve estimates that the US net worth is $60 trillion larger than China and yet, China’s money supply is estimated to be 75% LARGER THAN THE US.
With 20% of the world’s population they have only 8% of the world’s arable land and 10% of that is reported to be polluted. Coal still provides 70% of China’s power creating 16 of the worlds most polluted cities. About 435 of China’s 660 large cities are suffering from severe water depletion.
I fear China not because of its competition, but because of its vulnerability and possible effect on an upcoming economic crisis.
Kleptocracy (from Greek κλέπτης kléptēs, “thief”, κλέπτω kléptō, “I steal”, and -κρατία –kratía from κράτος krátos, “power, rule”) is a government with corrupt leaders (kleptocrats) that use their power to exploit the people and natural resources of their own territory in order to extend their personal wealth and political powers.