All earthly empires die. Is this the end? Only God knows.
– St. Augustine, 413 AD
POITOU, FRANCE – Yesterday, in advance of the G7 pow-wow this weekend, Donald Trump tweeted his position on trade:
If we charge a country ZERO to sell their goods, and they charge us 25, 50 or even 100 percent to sell ours, it is UNFAIR and can no longer be tolerated. That is not Free or Fair Trade, it is Stupid Trade!
He’s got that nearly right. Trade barriers are certainly not free. And fairness has nothing to do with it. They are just stupid.
We’re not going to tolerate this anymore, said the American president. If the foreigners do stupid things… well, by golly… we will, too! If they tax our stuff, we’ll tax theirs.
We are sneaking up on our prey, hiding in the tall grass until we get a good, clean shot.
Our target: the U.S. government and how it has changed. Since when, we wonder, did it care about how other nations abuse their citizens or mangle their economies?
Since when did the U.S. president – on his own say-so – get to decide how much we pay for our cars or our spaghetti?
We’ve been trying to understand how the federal government could be one thing – on paper – and an entirely different thing in reality.
Not that we have any particular fascination with government. But the feds now have immense powers that are nowhere granted in the Constitution… and they’re using them to wreck the economy… and put the U.S. into a nightmare of debt, inflation, depression, repression, war, and revolution.
Those are the kinds of things you get when an empire dies.
On paper, this Decline and Fall ought to be easily avoidable. A show of hands in Congress and you can balance the budget and bring the troops home.
But things ain’t necessarily what they seem. What is written on paper is not necessarily the same as what is.
And sometimes, people – individually and collectively – blow themselves up… and light the fuse with their own matches.
So… let’s have a look.
Borrowing and Bombing
We don’t recall when the Constitution was repealed. We don’t remember seeing any revolution or coup d’état on TV. Congress never voted on a new system of government. And as far as we know, no third party with a radical, new agenda has seized power.
And yet, the checks are gone. The balances, too. Elections are almost meaningless.
The news and the money are fake. The courts are powerless. The president and nearly every member of Congress has been captured by the Deep State. Borrowing and bombing continue to increase… with nothing to stop them.
Borrowing and bombing were not what the Founding Fathers had in mind. They designed a government of limited powers (powers not expressly given to the feds were reserved for the states and the people) that would pay its own way and mind its own business.
Their government was supposed to, as Washington put it, “avoid foreign entanglements.” Or, as John Quincy Adams described it in 1821: “She goes not abroad in search of monsters to destroy.”
She had no central bank; her money was limited, too. She insisted on “only gold or silver” money from the states and passed her own gold-backed currency act in 1792.
And debt? One hundred and fifty years after her founding, she had a national debt of only $19 billion. Jeff Bezos could have paid it off, and had $107 billion to spare.
Today, the U.S. has more than 1,000 times as much government debt as it did under Calvin Coolidge. By comparison, GDP is up only 190 times.
Coolidge came into office as an America Firster, with no intention of using U.S. troops abroad. But even he was soon drawn into the incipient empire program, and sent troops to Nicaragua to help put down a local rebellion.
Now, U.S. armed forces are looking for monsters in hundreds of different countries; where none can be found, they create them.
And, as near as we can tell, the feds can do pretty much any damned fool thing they want. The limits have long since been lifted.
How did this happen? The answer, we believe, is in the word: vernacular.
As we explained yesterday, there are formal structures – ordained by law, legislation, and official proclamation. And there are other things… that better describe how we really speak, do business, and get along with each other.
The classic win-win deal, promoted by Jesus of Nazareth two millennia ago, is not the law of the land anywhere; it is the vernacular.
It was never invented by anyone… no one got the Nobel Prize for coming up with it… and there are no legal penalties for not doing it.
Still, most people on the planet follow the rule, generally, on an everyday basis. If they want a burger, they give some money to the burger store. If they want money, they offer their time to an employer. If Ford wants to sell pickup trucks, it does its best to make people want them.
That is the commonly accepted way to get what you want and need in life. If you want a wife, you have to offer her something that makes it worth her while.
If you want a loaf of bread, you have to give something of equal value to the baker. No matter what you are after, whether it is love, respect, a fortune, or a bag of Frito-Lay corn chips, our advice is to earn it.
Only crooks, cads, and governments operate on a different model. And as the Republic evolved into an Empire, they proliferated.
They get, but they don’t want to give. They take, but they don’t want to make. They do unto others, but they make sure others can’t do unto them.
That model – win-lose, with trade wars, real wars, drones, fake currency, and debt – is carrying the U.S. empire to its inevitable destruction.
The only people who could stop it are Deep State insiders. And they will not, because they are on the win side of the deal.
It’s the rest of us who are on the losing side.
More on Monday…
TRADE INSIGHT: THE SECRET OF TRUMP’S TRADE STRATEGY
By Dan Denning, Coauthor, The Bill Bonner Letter
As Bill reported, Trump has been talking tough on trade. But is Donald Trump running a trade strategy from Ronald Reagan’s playbook? It sure looks that way.
The key man is U.S. Trade Representative Robert Lighthizer. That simply means that he’s responsible for developing and recommending trade policy to the president.
And the key legal provision that’s making Trump’s trade tariffs possible is an obscure section of a 1974 trade law passed by Congress.
Lighthizer was a deputy trade representative for Ronald Reagan in the 1980s. Keep in mind that this was before the World Trade Organization (WTO) rules on settling trade disputes in a multilateral way were passed in 1995.
Reagan described Japanese trade practices as anti-competitive, mostly because of the dumping of Japanese steel, car, and semiconductor products on the U.S. market.
The Japanese, Lighthizer argued, were deliberately producing goods at a loss and selling them into the U.S. market in order to put U.S. competitors out of business and gain market share.
Lighthizer countered by employing Section 301 of the 1974 trade law that gives the president discretion to slap tariffs on selected industries. Lighthizer, ostensibly a free-trading, conservative Republican, later argued for applying Section 301 to China:
The icon of modern conservatism, Ronald Reagan, imposed quotas on imported steel, protected Harley-Davidson from Japanese competition, restrained import of semiconductors and automobiles, and took myriad similar steps to keep American industry strong. How does allowing China to constantly rig trade in its favor advance the core conservative goal of making markets more efficient? Markets do not run better when manufacturing shifts to China, largely because of the actions of its government.
But I think there’s more to Trump’s trade strategy than just punishing China…
Trump and Lighthizer are applying tariffs to industries where U.S. companies are, perhaps, located in key districts for the upcoming midterm elections and the 2020 presidential election.
If they can “save” jobs in certain districts, it should lead to votes. And to be fair, it’s likely that Trump genuinely considers Chinese (and European Union) trade practices to be unfair and thus, open to unilateral revision (rejecting WTO arbitration mechanisms, which the French and the Chinese flout anyway).
This is what makes the current global trade situation so fragile and political. It was the United States that set up the current system, including the WTO. In the post-Bretton Woods world, the U.S. opened its market to foreign imports because it opened foreign markets to U.S. exports.
The U.S. – with the dominant manufacturing base in the world, undamaged by bombs from the war – shipped cars, washing machines, heavy machinery, airplanes, and more around the world. General Motors, Ford, General Electric, and Boeing were the high-fliers of the stock market.
When the Berlin Wall fell in 1989, Congress passed the North American Free Trade Agreement in 1993, and China entered the WTO in 2001, it changed the impact of “free trade” on the American economy. Goods got cheaper and more abundant. But wages began a structural decline.
And that’s where we are today with Trump trying to hold back the tide. If you’re a realist, you might argue that what’s good for the globe is no longer good for the U.S. This was the essence of Steve Bannon’s economic nationalism. It didn’t reject free trade. It argued that free trade, as it exists, isn’t really free.
Adam Smith was right. Mutually beneficial trade and the division of labor are the backbones of civilization itself. They’re the bedrock of win-win relationships. Only the willfully blind cannot see that we’re already engaged in a trade/currency war that could last many years.
– Dan Denning
Why Venezuela’s Crisis Will Reshape the Continent
As Bill has reported, Venezuela is in the midst of a historic crisis. The citizens starve as inflation runs out of control. But the trouble isn’t Venezuela’s alone. It could have far-reaching implications for all of South America.
It’s Not Just Wells Fargo…
Wells Fargo became the poster child for bank fraud when it was revealed that it had created millions of “ghost accounts” to charge customers for services they never wanted. But now, reports show that this practice is not confined to just Wells Fargo…
The Truth Behind the Jobs Report
As Bill reported earlier this week, there is an impressive jobs report out from the Bureau of Labor Statistics. At 3.8%, the unemployment rate is the lowest it’s been in decades. But that’s not the whole story. Dan Denning reveals the trouble brewing below the surface of America’s economy.
In the mailbag, readers consider the fate of Social Security…
Years ago, Ross Perot warned U.S. citizens that Social Security is not broke. He stated on national TV that the federal government borrows it every year and provides an IOU. Of course, they never replace it. The IOU is a fake piece of paper. So where does it go? We should think about reducing the amount of all government employees, and their lifetime benefits. Retiring at age 55 makes no sense. Post office personnel, upon retiring at 55, go out and get a job, then receive Social Security benefits. I agree with Trump: privatize all government agencies.
– Joan B.
I don’t consider myself to be on social welfare, as I’ve never been on welfare. I have worked hard all my life and have paid into this Social Security system so that I could have a little security in my senior years. Due to the mismanagement of the U.S. government, that is now in jeopardy. And the Federal Reserve, that has nothing to do with our government and is run by the global 1%, is nothing but a giant Ponzi scheme.
– Cheryl P.
You write about the crooked books of the Social Security and Medicare accounts, but here is a bigger one: The government considers government spending to be a valid part of GNP. Huh? Government spending must always be paid for with taxes of some kind on the private economy. Always.
The more government spends, the less there is for every citizen to spend – except those at the government teat. The less government we have, the more the economy can thrive overall. That would put the politicians out of business, of course. We certainly can’t have that, can we?
– Chuck B.
My late husband worked for a large company for many years. Since he died before his time, he was not able to use the Social Security funds for his retirement, so it stayed in the Social Security pot. What I always understood was that these funds were for the retiree’s benefit if they lived long enough to use it, and not for the government to dip into whenever it saw fit.
After all, this investment was to be for our benefit after so many years of hard work through our lifetimes. But then we came to find out that even this was not enough – due to inflation – by the time we did retire. So I feel that it is so wrong for government officials to think it is the government’s money when it is not.
Money was deducted from our every paycheck into the Social Security fund. So now, to add insult to injury, we come to find that there is still another assault upon us by the government – that Social Security will probably end if they have their way!
– Maria R.
Meanwhile, a Dear Reader applauds Bill’s efforts…
As a fairly recent immigrant to the U.S., I’m delighted to finally read accurate descriptions of this country’s so-called democracy! I am so tired of hearing (and not just from the president) how we “have the best government/medical system/education/[insert anything here] in the world” – when it’s clearly not so, according to the rest of the world. Not only that, but you brought up one of my pet peeves – the ubiquitous, incorrect usage of “myself,” which goes hand-in-hand with the incorrect usage of “I” and “me.”
Honestly, it’s not rocket science, so I’m astounded at just how stupid so many people are! Thanks for a very entertaining read. I’m slightly terrified at how things will turn out… but the optimist in me keeps me from running away. And at least I’ve still got my New Zealand citizenship should it all turn to custard!
– Tracy T.
IN CASE YOU MISSED IT…
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