LCACM

U.S.-China Trade Spat: Warning of Worse to Come?

During the 1930 Depression, Smoot-Hawley hurt the US economy as the US used to enjoy trade surplusses. When a country enjoys trade surplusses Protectionism hurts its exports. However, when a country has trade deficts, common sense indicates that Protectionism helps the economy. Currently the US is suffering from huge trade deficits, so a Smoot-Hawley type act would greatly benefit US manufacturers.
If Defense spending is good, why is Protectionist legislation considered bad?
Without strong Protectionism, the US Treasury will not have the tax resources to support a strong Defense in these highly troubling times.

Fixing China Trade Is Key to a Sustainable Recovery

The biggest beneficiaries of the trade deficits are the US based importers that buy cheap Chinese goods produced and sell the goods in the US. To keep the voters from demanding fairness the importers pay large sums to the election campaigns of politicians who support one sided trading. The voters meanwhile are too engrossed in the private lives of entertainers such as M. Jackson, or sports personalities. Since this situation is unlikely to change in the near future, this predictable trend of ever greater deficits and fiscal mismanagement presents itself with some stock trading opportunities. It would be better to focus on the stock trading opportunities this situation presents as we cannot change the behavior of selfish politicians or intellectually lazy voters, in the short term.

Will China Drop U.S. Debt? Unlikely

It is strange that now the Chinese government is threatening to dump US Treasuries with the excuse that the US budget deficit is so high. If one looks at the root of the current meltdown it is the overproduction and dumping of goods by the Chinese, aided by the Free Trade policies of the US government and the WTO. The only reason the Chinese purchase US Treasuriies is to funnel cheap credit into the US economy so that US consumers can keep purchasing Chinese goods with Chinese credit. If China were to stop buying US debt and instead use their Trade surplus for their own onfra development, it would bring the both the US government and the US consumer /taxpayer/voter to their senses. This would be a win/win for all.