October 17, 2019

China becoming the largest economy would be great for Americans

trump-xi-wall-street-1069240Here’s another little piece of evidence that whatever made the American psyche one inclined towards freedom is long dead: the irrational fear China may surpass the United States as the world’s largest economy.

So what?

China’s population is five times larger than the U.S. population. It should be the largest economy in the world. If both countries had laissez faire free market systems, China would have the largest economy in the world and that would be great for the Chinese, for Americans, and for the rest of the world. It would mean an enormous increase in the world supply of goods and services, making the average inhabitant of this planet richer, just as the industrial revolution made richer the inhabitants of the countries in which it occurred.

Anxiety about China’s economy being larger than ours is born out of statist, collectivist thinking, in which the individual is subordinate to the glory of the state collective. In a word, it’s dronethink.

The only reason the U.S. economy has ever been larger than China’s is because it was relatively freer than China’s – by orders of magnitude during China’s communist era. The reason that gap is closing is because China, while still by no means a laissez faire free market, is becoming relatively freer, while the US is becoming relatively less free.

The only way for China to become the largest economy is by continuing to make its markets and, eventually, its entire society freer. Whether it will do so or not remains to be seen. The freedom momentum there has slowed somewhat recently, although the momentum here is in entirely the other direction.

Anyone who wants to live in a freer, richer, and safer world should hope both Americans and Chinese have the good sense to clean house in their respective governments and establish a laissez faire system in both countries, resulting in both becoming far more productive. Yes, China’s economy would then  become the largest economy in the world and that would be just fine.

Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

Why Can’t Russia and China Help Police the World?

n-PUTIN-largePresident Obama today announced his administration’s reluctant agreement to work with Russia and Iran to defeat ISIS and Al Qaeda in the Middle East. This will no doubt be met with howls of “Weakness!” and “leading from behind” by Mr. Obama’s Republican detractors.

We may even hear the tired “appeasement” argument trotted out regarding both Russia’s and Iran’s supposed ambitions to expand their territories.

Republicans have consistently criticized Obama for not being aggressive enough on the world stage and for pulling back too early from Iraq and Afghanistan. With the emergence of ISIS, the GOP has seized the opportunity to quash more reasonable foreign policy positions from candidates like Rand Paul and push for sharper increases in military spending and even more aggressive foreign intervention.

The argument we hear repeatedly from Republican presidential candidates is that Obama has “eviscerated the military” and “led from behind.” If the United States is not “engaged” (i.e., bombing or invading) in all crises at all times in every part of the world, emerging powers like Russia or China are going to fill the resulting vacuum. That raises an obvious question:

So, what?

Read the rest at The Huffington Post…

 

Tom Mullen is the author of A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

>China Saying Goodbye to US Market

>I am not sure if this announcement will receive the attention it deserves, but it is probably the most significant piece of news of this entire turbulent month. China today announced that it will “seek to expand its massive internal market to counter the global economic slowdown that has reduced international demand for Chinese goods.”As reported by Associated Press writer Gillian Wong, China has decided to shift the focus of its economic planning away from exports and toward domestic consumption. This is the beginning of the end for the U.S. dollar and what is left of the U.S. economy.

Fans of Peter Schiff (and I am certainly one of them) are familiar with the central tenet of his thesis: that it is a misconception to believe that China is dependent on U.S. consumption to fuel their export economy. For years, Schiff has been arguing, with few in the mainstream media agreeing, that China would be better off without the U.S. According to Schiff, they would simply consume their own products instead of sending them to America in exchange for increasingly worthless U.S. dollars. In fact, China has suffered its own inflation as a result of pegging its currency to the U.S. dollar. If they unpegged their currency, it would naturally float to its true value on the open market, making it much stronger and the U.S. dollar much weaker. This seems to be what they have finally decided to do.

The official release from the Xinhua News Agency goes on to say, “We should step up efforts to boost domestic demand, particularly domestic consumption, and keep the economy, the financial sector and the capital market stable.”

It is important to remember the definition of demand. Demand is not only the desire for goods or services, but also the purchasing power necessary to acquire them. There is certainly never a shortage of desire for goods and services anywhere. The Chinese people haven’t failed to buy their own products because they didn’t want them. They have failed to buy them because they did not have the purchasing power they needed to buy them. Now, the Chinese government is saying that they are going to try to give them that purchasing power.

However, the Chinese government is also saying that they wish to maintain stability in their financial and capital markets. This means that they must avoid what has been the U.S. method of boosting consumption, namely pumping cheap money and credit into the economy, compliments of the Federal Reserve. However, without new money, what will give the Chinese people more purchasing power?

The answer, obviously, is an increase in the purchasing power of the money that they already have. This will be the inevitable result of unpegging the strong Chinese Renminbi Yuan from the weak U.S. dollar. The Yuan will quickly float to its natural high value, allowing the Chinese people to purchase themselves those products that they used to export to the U.S. This will also mean that U.S. consumers will have to either do without those products, or pay the much higher prices of their counterparts that are made in the U.S. The higher prices of U.S. made products may go even higher due to the decreased overall supply, depending upon how that decreased supply balances against decreased U.S. demand (purchasing power).

However it plays out, it will mean a huge shift in standard of living, with the Chinese enjoying a higher standard, while the U.S. suffers probably the biggest decrease in standard of living in its history.

Make no mistake. The Chinese will have to suffer through an adjustment period as their export economy reallocates resources to sell their products domestically. Their equity markets have reflected this, both over the past year and during the recent crash. However, once the markets bottom and the Chinese complete the adjustment period to a domestic consumption model, Chinese equities will skyrocket as their economy realizes unprecedented growth, this time on much more solid footing as they sell their products to their own citizens in exchange for a currency with REAL purchasing power. As Jim Rogers has said since he moved to Singapore last year, “Moving to Asia in 2007 will be like moving to New York in 1907 or to London in 1807.”

A paragraph near the end of the article aptly reflects the opposite directions that China and the United States are heading in.

“State media reports ahead of the meeting said the committee would review an amendment to give 750 million rural dwellers more freedom to lease or transfer their land, but the final statement did not mention the issue.”

One country is moving toward less regulation and freer markets, and has the most prosperous century in its history ahead of it. The other is moving toward more regulation and increasing government control. For the former, the explosion in prosperity will eventually result in a political revolution that will transform it into the free society it deserves to be. For the latter, only a reawakening of liberty can save it from the fate of all great republics that devolved into empire.

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