Archive: August 16, 2022

China Syndrome

China Syndrome

Hello Fellow Patriots:

Remember the movie “The China Syndrome”? Well, we’re not discussing that kind of nuclear meltdown today. But instead, we are discussing another kind of meltdown…economic. Most realize that China has eaten our lunch. But what most don’t know is that China was a reluctant participant early on. Every subsequent action is on us!  It was only later that American companies got greedy and decided to trade their patriotism for corporate growth. How else to explain the wholesale exodus of American jobs and technology overseas; particularly to China? The reason: to make our goods more competitive on the world market by utilizing cheaper labor which results in higher corporate profits.  China is not just another country among many who got America’s manufacturing jobs; it was THE country, the number one country that took our jobs. China has cornered 28.7% of all manufacturing jobs in the world. Think about it for a moment. 

Today, we’ll talk about how that came about and discover, in the process, how both corporations and our government put blinders on to make a bargain with the devil. When you look at the logic of trade with China, you realize quickly that our motives were capitalistic, but we neglected to understand the ramifications of building up a country that one day, was likely not to just be a rival, but an adversary, a Marxist Communist adversary. Someone was asleep at the switch as this trainwreck slowly unfolded over decades.

On a secret trip to China in 1971, it was Henry Kissinger, President Richard Nixon’s Secretary of State who got the ball rolling. The strategy was twofold:

  1. To fracture the relationship between the Soviet Union and China, which did happen
  2. To attempt to bring the world’s most populous nation into an alliance with the West, both economically and hopefully and in that way, perhaps naively, change their system of government.  At this point, we can state…not so much.

Alfred Coucher, an old China watcher said “In 1978, two years after the death of Mao, and during the period in which the ‘four Asian Tigers’ began their journey to prosperity, Deng Xiaoping initiated policies designed to reduce dependency on state ownership and central planning, and introduce private incentive to revive the Chinese Economy which had been dormant since Mao initiated comprehensive nationalization in 1956.”

And so began a period of nearly 40 years that unleashed economic reforms in China. The Chinese Communist Party (CCP) encouraged capitalism as a way to prevent the possibility of a populace in revolt who had experienced a severe famine, stark living conditions, and other deprivations under Mao who killed at least 65 million Chinese.  Capitalism there helped lift hundreds of millions of people out of poverty and created trillions of dollars in wealth, but also led to rampant corruption and eroded the ideological basis for continued Communist rule.

Xi Jinping came to power in 2012 when he was elected to head the CCP. Xi lived a carefully curated life designed to assure his ascendancy to control of the CCP. In 2021 the Wall Street Journal ran an article that laid out the rationale for Xi’s change of heart. For him, the capitalistic experiment was over:

“Xi Jinping’s campaign against private enterprise, it is increasingly clear, is far more ambitious than meets the eye… He is trying to roll back China’s decades-long evolution toward Western-style capitalism and put the country on a different path entirely”

The question is why now? To be blunt, the West’s main usefulness is no longer as operative. Thanks to the West and especially the US, China has been transformed from an agrarian economy to a modern high-tech powerhouse. They accomplished that through voluntary and forced technology transfer from Western nations and then, for what they could not get through that avenue, through the theft of intellectual property. It is that IP issue that is of utmost importance today.

The West’s IP is our secret sauce. It is the only thing that China does not already possess. China has an estimated 25,000 spies in the US. Most of them are stealing not only military but economic secrets and technology. They are Vampires sucking our lifeblood. We should see this as economic warfare just short of actual war and thus respond accordingly. 

The biggest question is, what happens when they have sucked us dry? Time will tell, but there are many signs that this won’t end well.  One only has to read the current news of China’s military current encircling Taiwan, ostensibly as punishment for Speaker Pelosi’s visit. It is not.  I believe that was only a convenient tripwire for actions already in the pipeline. 

The American Enterprise Institute has stated that China sponsors the theft of IP because its main challenge is a lack of Chinese innovation. Beijing’s preference for large firms and state funding at the expense of genuine competition ensures it will struggle in key areas, from aircraft development to shale. The main challenge is China’s acquisition of IP and the use of regulatory and financial subsidies to develop products from that IP is to drive the U.S. out of global markets. 

You can read article after article explaining how China has manipulated foreign companies by promising large orders in exchange for technology transfer. 

At the moment, China is withholding fulfillment of orders placed with Boeing and promised under President Trump, even as China just ordered another 292 aircraft from Airbus last month.

China made that deal with the Trump administration back in 2017 to buy 300 Boeing jets. China, as it frequently does, is using this order for political leverage against the US. This is par for the course with them. China became the last major nation to recertify the Boeing Max just last month. Their delay in recertifying was a studied tactic, not to gain concessions from Boeing, but rather from our government. Whether we can get any on-order aircraft delivered is subject to the approval of the CCP. China only lives up to its word when it is good for them.

For those readers that don’t fully understand it, there is no Chinese government, there is only the Communist Party instructing government functionaries on what to do. The CCP requires all government entities, companies, and even individuals to fully follow its directions, mandates, and orders regardless of the law or China’s Constitution. End of any discussion. 

CCP policy is ultimately anti-American, so our ability to either influence or even require compliance with written agreements is limited. China is a monolithic entity that Americans can’t comprehend. Everyone in China is watched, evaluated and in the end, freedoms recently received are being rescinded.  No court or politician can offer redress. Look up Jack Ma for a better understanding of what can happen to someone who strays too far from government edicts. An order from Xi can be compared to an order from God himself. China shoots or imprisons those that dare to disagree. 

Understand what we are up against. There is no trying to outfox this fox. As a country, we hue to a set of rules that many of our adversaries laugh off as quite quaint. China is playing chess. We dare not allow them to Checkmate us.

Allan J. Feifer

Patriot

 

Imperium

Imperium

Hello Fellow Patriots:

Let me ask you a question. Is our form of government different today than let’s say our government 50 years ago, 100 years, or even back to our founding?

Sure, it is. Our Founding Fathers would not recognize what we’ve done with their “Perfect Vision.” While technically we have the Constitutional Republic and not a Democracy, the drumbeat of the New Left is decidedly pro-pseudo-Democratic as they fight to redefine us. And in doing so, a new Political Super Class of elected officials has formed that no longer respects the conventions, goals, and history that saw our country become the only free Superpower on Earth. Citizens like you and me stand in the way of their New World view. Liberals (Marxists) are gunning for us. The Left is clearly articulating a message for those that stand in their way; it says loudly and clearly…Drop Dead!

Calls for the end of the Electoral College in favor of popular vote elections are but just one example of this new worldview. Another example is a rabid attempt to kill the Senate system of requiring 60 votes to pass legislation. Those are perhaps, the two best-known battles. But, in a myriad of other actions and reactions, our long successful system is under great strain. We return to the same subjects over and over again because the cumulative effects of these anti-democratic practices are eating us alive from the inside out. Constant bickering prevents us from coalescing around common and vital essential truths necessary for our survival.

The new Government Cabal which henceforth, I will call the ‘Imperium,’ is something different than we’ve seen before. There have always been factions, but we’ve been Americans first, especially during times of strife. Not as in America First, but Americans with a common heritage, value system, and shared aspirations.  Sadly, that’s what has changed and is what I believe to be the root cause of the fractious divisions within our system. 

I’ll stay away today from any mention of enemies, conspiracies, or the reasons this conflict commenced. Instead, we’ll just lay bare the issues that divide us and, that we as a society must come to peace with.  We must also relearn and refocus on several critical truths if we are to survive as a recognizable vestige of our former selves. Recognizable in terms of six basic constructs that define us, that I call:

The Uniqueness of America

  1. Freedom from Government Oppression—our government now has the power to intrude in everything we do. The highest achievement of our country should be restraint in the use of its unlimited powers on its people except in support of these enumerated truths. The government has overreached and violated the Constitution by assuming the majority of powers originally reserved for the States and intruded too far into the everyday lives of its citizens.
  2. Individual Freedom to Succeed or Fail on our own.  We have tried to create a benevolent Government that has created a safety net for tens of millions. In the process, we have taken away the principal impetus that each individual requires to learn, fail, try again and then flourish. Failure, ugly failure is as American as Apple Pie. A benevolent government winds up being a tyrannical government such as we have today, by eliminating an ability to fail.
  3. An Open Door Policy for immigrants who desire to become Americans cannot be unlimited.  How painfully we hurt all those souls who do not and cannot live as we do. Millions of caring Americans together allow us to be the most generous nation in the world.
    The beauty of our American system is not that we can take in a billion poor souls and bring them here. No, the beauty of our system is how the American people have changed the world and created, through our economic vitality, hundreds of millions of middle-class individuals.  We then helped to provide clean water and food for many millions more. Opening the door and bringing them here, as Biden is doing, won’t fix economic disparities. Already it is well known that a majority of the immigrants coming here illegally will never assimilate into our country or benefit our country economically; they’ll just drain us of our treasure and our unity. For the first time in a very long time, perhaps forever, it is not the intent of many immigrants to assimilate. You see this play out everywhere with highly concentrated immigrant areas all over the country.  People continue to speak their native tongue and the signage in areas where they live is printed in a plethora of foreign languages. Why don’t we demand that you learn English if you come here? It’s certainly not racist; it’s both essential and practical.Did you know that you can take the Citizenship Test without speaking English? There are many exceptions to the requirement to have to learn English.
  4. A Government that Creates the Conditions for Success.  Our government has forgotten its central purpose, which is to aid its people in the pursuit of happiness. And, in doing so, now has decided it will intervene in our system of free markets to engineer social outcomes. Does anyone truly believe that the government, based on its past actions, can create laws, policies, rules, and incentives that will do anything except distort markets and healthy behaviors?Good Government should be a cheerleader for mostly economic issues, leaving social issues to individuals, religious organizations, and private charity whenever possible. In matters of life and safety, the government must tread carefully on peoples’ lives. Too heavy a touch negatively influences behavior to the point of creating more of the hopelessness, poverty, and negative behavior that you can see oozing out of our pores today. The hundreds of thousands of government workers who dole out the billions of dollars are also ultimately unproductive and yet another drag on our society.  Not everyone can work for the government.  Someone has to work productively, pay taxes, and create new wealth that is vital to our future. Government is increasingly hostile to the creation of wealth. You see scheme after scheme all trying to figure out how to make someone who creates wealth “pay their fair share.” Never is it stated that too many of us pay little or nothing in taxes and the number of takers grows daily in an unholy cabal between those takers and an ever-growing government.
  5. A Military that Protects our Security, Especially Trade Routes. It’s a cold cruel world out there. With little in the way of brotherly goodwill, and no other democracy able to step up to the plate, our military is all that stands between us and foreign domination. It’s that simple. Warriors are a different breed. They can’t be compared to career civil servants. Those that we ask to stand watch over us as we sleep should not be subjects for social experimentation.   Keep your cotton-picking hands off our men and women who may someday be called to lay down their life for you.
  6. The Right to Practice our Religion and a requirement to be an Ethical Nation Our most fundamental right has been completely turned on its head. The Founding Fathers had it right. While our government can and must be secular, the principles that govern our every move must be founded on the Judeo-Christian origins we brought to the New World.  They gird our nation and make us stand out from so many others. A history of Morality and Ethics has been completely undercut by minority groups that seek an atheist country; God forbid that happens.  A judgment-free country is nothing more than a collection of individuals wandering in the desert. Good morals, ethics, and an abiding belief in God must continue to be our foundational bedrock.

I hope you are still reading as I bring this piece to a conclusion. America is worth fighting for and even dying for. But only if we stay true to our origin and our true mission. What mission you may ask? We are the only nation that has and still can make the world a better place. Our fundamental enemy is no longer China or Russia. It is ourselves and the ‘Imperium’ we have somehow allowed becoming our own ruthless Dictator. WE THE PEOPLE are our most sacred superpower. Never forget that truth and always believe that WE THE PEOPLE can move not just mountains, but entire worlds when we stay true to our miraculous beginnings.  There is no backstop to us. We rise or fall on what we do next.

Allan J. Feifer

Patriot

 

 

America is Thinking

The vast majority of Americans have little interest in politics, but a great deal of interest in their daily lives. The US has historically averaged one recession every twelve years. Some of those recessions have been mild, while some have had quite a sting, but none have ever been declared a Depression since the granddaddy of them all back in 1929. It’s been 93 years since the last one. Like a major California earthquake, we would seem to be overdue.

I don’t believe we are looking at another 1929, but I’m not sure. Many structural changes have been made since then that have worked well to keep us from going completely over the cliff like the FDIC and a better understanding of how to blunt or prevent a depression by the Fed. What can cause a Depression?

  • Burdensome government regulations that reduce productivity and force bad choices
  • A Labor Participation Rate that is out of balance with the needs of the country
  • High Taxes that disincentive investment
  • Financial Contractions that encourage people to spend less and save more
  • Overly tight credit puts a brake on investment
  • Trade Restrictions that discourage business
  • A lack of confidence by our citizens leads to even greater uncertainty
  • Wages demands over what the market mandates
  • Energy cost and availability are out of balance with society’s needs

Where we are now:

  • Government Regulations, after a period of decline under Trump, are now accelerating to achieve desired social outcomes of this administration.
  • The Labor Participation Rate (LPR) is currently at 62.3%. vs. a historic average of approximately 66%. The LPR has been on a downward slide since 2008. We don’t yet have a good understanding as to why people are not working as much as they used to. There is no one single answer but we need five million more workers today.
  • Biden has promoted the theme of income inequality by using the ruse of wealthy individual’s tax rates should be greater than that of their secretary. What he never says is that the top 10% pay 71% of all Federal Income Tax and that the bottom 50% essentially pays nothing.
  • The issue of energy is scary. It would be desirable to have clean, economical, and reliable renewable energy sources vs. fossil fuels. But, we’re just not there yet. $60,000 electric cars (the average) make up less than 1% of vehicles. Wind and solar make up only 7% of our power. We are 20-30 years away from any semblance of the carbon-neutral world envisioned by President Biden. But his policies strangling fossil fuels today may collapse our economy in the near term.

The main lever that government uses to influence, direct, incentivize and punish is the U.S. Tax Code. As boring as the subject is, everyone should have an understanding of the importance of the Tax Code to their safety, prosperity, and freedom. I’ll try and be brief.

Ever hear someone say that you could do your taxes on a postcard if the only two lines were how much did you make and a number to multiply that to figure your taxes? The Federal Tax code is 74,608 pages. That is 187 times greater than it was 100 years ago. The primary driver of this growth in complexity is government meddling. Some meddling might be good, such as the encouragement of family-friendly tax incentives to achieve important societal purposes. However, beyond that, politics and specifically special interests have driven the tax code into something altogether different. Today, the tax code motivates or dissuades all kinds of actions and activities it has no business doing and frequently promotes anti-social values. And, once inscribed in the code, it stays forever! So, why haven’t we updated a tax code that is the brunt of jokes for its complexities and inequities for far too many? Because Congress wants it that way, that’s why!

Let’s talk about what the purpose of a well-written tax code should be. There are two major purposes as I see it:

A. Raise revenue to run the country
B. Encourage positive economic outcomes

The first is obvious, the second tends to be misunderstood. In a capitalist country, the government is largely supposed to step aside and allow a business to succeed or fail on its own merits. In attempting to achieve certain social outcomes through taxation we interfere with that primary focus. Here’s one example that bothers me at the moment. A Windfall Profits tax for the oil industry is being proposed by Biden. That’s government substituting its knowledge (or more likely, done for political gain) for that of the market. It is a distortion of the free exercise of capitalism. There are many examples of the tax code codifying advantages for some and creating barriers to entry for others.

You and I see the consequences of this not-so-subtle manipulation of free markets as artificial market volatility. This happens when people do things in finance, business, and investment primarily for its tax implications and not because it was/is good business. I used to be involved in apartment ownership. There was a time when tons of money was available to build unneeded apartments back in the 70s because of how owners could take down their losses in an accelerated manner. The law was changed and all of sudden, fewer apartments were built, leading to higher rental rates and a lot less construction of new units.

Government meddling in tax codes caused some of the worst recessions in recent memory:

“The last two recessions happened due to the bursting of two asset bubbles: first the dot-com stock market bubble in the early 2000s and then the housing bubble starting in 2006.”

Allan’s rule 19 is “that whatever you encourage or subsidize you get more of.” In the dot-com bubble tax codes favored quick write-offs which led to unwise investments:

“Capital Gains Taxes and Stock Return Volatility: Evidence from the Taxpayer Relief Act of 1997"

In the housing bubble, the apparent cause was that “debt grew quickest among borrowers with low credit scores” Why did lenders loan money to borrowers with no proven ability or means of likely paying back their mortgages? Back then it was the creation of a truly Frankenstein construct of financial derivatives called “Strips”. Here’s a great current example: Biden-⁠Harris Administration Announces Immediate Steps to Increase Affordable Housing Supply. Admirable goals, lamentable outcomes. This initiative includes no less than five tax incentives designed to get more people into homes. Great! But the result will be that quite a few of these homes will be lost due to foreclosure or will require additional public support to keep their owners in these homes. Over 11 million people spend more than 50% of their income on housing. That is unsustainable and is the norm, rather than the exception for people in so-called “affordable housing.” Nearly half of American workers cannot rent an apartment or own a home on their own. Manipulation of the tax code cannot change the calculus of housing costs outpacing income.

My conclusion is that a focus on tax codes to achieve good, but non-economic goals is a fool’s errand that invites gaming of the system and frequently never achieves the originally stated goals. Congress is ill-equipped to assess the ramifications of jiggering a system of taxation that ultimately promotes income inequality instead of fixing it.

Our inevitable conclusion is that governments cause recessions and depressions through their meddling in tax policy to achieve specific social, economic, and political goals more often than geo-political events. I don’t foresee Congress changing its stripes anytime soon. This virtually locks us into a boom-and-bust cycle that never ends. Is there a better system that would prevent this? No. But, there is one thing that could limit the meddling going forward.

Congress gets together in a truly bipartisan fashion on quite a few things. Then the horse-trading commences with various amendments tacked on that frequently have nothing to do with the bill and that’s the end of bipartisanship. You can also blame the use of omnibus legislation which was rare in the past and is now the norm and a rather stark difference in vision between the two parties, which I will characterize as Conservative vs. very Liberal. Yes, Democrats have changed the most in the last 60 years. Consider that President Kennedy today would undoubtedly be considered a Conservative Republican if he was alive today.

I think all of the foregoing as being both important to understand and to guide us as we make our political choices moving forward. Think long-term, not short-term. And, always be positive. And, vote!

God Bless America and especially Ukraine at this time of genocide and war that sees no end in sight.

Allan J. Feifer

Patriot