Aug162019

Ok, It’s Getting Serious

The news cycle is getting hot and it’s not all good news. Protests in Hong Kong are heating up and the Chinese military might be preparing to stifle it. The stock market plummets on Tuesday and the reason why might be very bad news for President Trump. And the heated Rhetoric about ICE has prompted another attack on an ICE facility in San Antonio.

We are fighting a war on two fronts: a civil war pitting two unyielding ideologies and a cold war against China. Not good.

 

The True China is Beginning to Show Itself

Here’s the story. Hong Kong started as a British settlement for 150 years. In 1997, Britain handed Hong Kong back over to China. Since then, Hong Kong has maintained its own legal system, based on the British system, its own currency and Constitution which is called Basic Law. China said that they would allow Hong Kong to run their own government’s basic law for fifty years after the transfer. But China has begun to infringe on Hong Kong sovereignty twenty years before China’s fifty year promise. One of the ways that China has infringed, and one of the main reasons for the protests, is China’s assertion that China has “complete jurisdiction” over Hong Kong. This means that laws would be settled in Chinese courts and not courts in Hong Kong. Because China has been known to be a little short on human rights, Hong Kong does not want its people tried for crimes, including political crimes, in China.

That was declared by China a few months ago and that’s when the protests began. To this point the protests have been huge but peaceful and it did not interfere with the day-to-day life of its citizens. But on Sunday, the protests intensified. Protesters decided to shutdown the Hong Kong airport, one of the busiest and most profitable in Asia. The Hong Kong airport makes up about 5% of Hong Kong’s GDP. And they got violent. Windows were broken and police clashed with protesters.

Both the governments of China and Hong Kong condemn the protests along with the business elite in Hong Kong. The protests are disrupting business. China is Hong Kong’s biggest trade partner and trade has been significantly affected. That probably explains why the government and the wealthy businessman are condemning the protests: because they are risking very little. The average citizen in Hong Kong sees what is happening and do not want to lose what they have. And what they have is freedom. The ability to make something of themselves. That’s probably why a lot of them are waving the flag of the freest country in the world. That’s right, they’re waving the flag of the United States. And they’re not even burning it.

China, who is already struggling economically because of the Trump tariffs, does not need this crap. They’ve decided, “OK, we own this place. It’s time to put them in line.” That’s not a quote. I made that up. I’m pretty sure the entire country of China said this.

That’s right! China is deploying their military on the border of Hong Kong. There are major fears, right now, that China is going to suppress this protest by the only way they know: through force. There are many memories of the Tienanmen Square massacre invading the memories of those who were alive. Hong Kong police are sympathetic to their citizens protest to the point that one officer was attacked and all he did was pull his gun and threaten the protesters until he could be pulled away. Good for him. I suspect the Chinese military will not be so sympathetic.

Of course, President Trump weighed in, as he should. His first Tweet was kind of annoying but I understand it. The president of China, Xi Jinping, blamed the United States for these protests. Well, he’s actually the dictator of China. And he’s right. The Unites States is to blame.

We have free markets, defined human rights in our Constitution and freedom. The Hong Kongers, as they refer to themselves, see this and want this to continue. They don’t want a totalitarian government controlling their every movement as China does to their own people. So that was a message to the Chinese “President” and not necessarily the leftist press in this country.

But later he gave Xi Jinping another message. And this one could be taken as a little more of a threat.

This might be more of a threat. It could be Trump’s way of drawing a red line. The key word in that statement is “should.” Trump is clumsy with his language, but this might be directed to Xi telling him not to challenge the United States.

I have a feeling not a lot is going to happen here. But, if one person does, things could go south very quickly.

 

Welcome to the New Cold War

The stock market dropped 800 point yesterday. This happened because the bond yield was projected to invert in the near future. What does that mean? It means that the return from binds is expected to drop after two years on a ten year bond. So if I buy a ten-year bond at a 10% yield, that 10% may drop to 9% in the future. That’s bad. The last time the bond yield inverted was in 2007, right before the Great Recession. So this is not good news ahead of the 2020 election.Let’s take a look at what could be causing this.

I was born in 1968. At the time, at least a decade before I was born, the United States was in a cold war with the Soviet Union. For those who don’t know, a cold war is defined as “a state of political hostility between countries characterized by threats, propaganda, and other measures short of open warfare” (Google Dictionary). The Cold War started between 1945 to 1949 and ended in 1989. It was terrible. We worried about nuclear war and a ground war. It never happened. But I remember diving under my desk during nuclear attack drills. It was something we did a few times a year. I remember reading Time and Newsweek articles that compared Soviet nuclear weapons with the of the United States. I also remember debating in high school that we couldn’t give up our weapons due to “mutual assured destruction.” What that means is that they won’t launch their missiles because we will launch ours and both countries will be in shambles. I won the debate. Everyone said I won the debate. But my teacher was an anti-war paciest who believed in disarmament. I got a “D” on the debate. Sound familiar?

We ended up winning the Cold War. Turns out Soviet communism does not do well, economically, against capitalism. The Soviet Union couldn’t afford to keep up the Cold War. And I have talked about Reagan’s awesome “tear down your wall” speech. China and the United States are now in a cold war. We are not threatening each other with war. This is an economic cold war.

Over the last year, China and the United States have been trying to negotiate a trade deal. That deal, for the most part, involved more fair trade practice on the part of China and limit China from stealing our technology. China, as they have always done, has cow-towed to our demands and continued business as usual. So Donald Trump did something he has always threatened to do and placed tariffs on $650 billion dollars on Chinese goods. Likewise, China decided to put tariffs on about $250 billion on our exports, mostly on agricultural goods like soy.

I am not a big fan of tariffs. They are just a tax on the people. When a tariff is placed on an import, that tariff raises the price of the product and that is passed on to the buyer. The idea behind tariffs is that we will collect the tariff that we can use within our economy and that raising the price of foreign goods will make US goods more competitive. All it really does is raise the cost of all goods and could lead to a recession as consumer confidence drops.

Listen, China has been hosing us for years. Something had to be done. They were never going to negotiate. Though I am not a fan of tariffs, they may have been the only way to get China to cooperate. We do have a much stronger economy than China and the tariffs are definitely having an affect. Companies are moving out of China, exports are down and they are looking like they are heading to recession. There are two incidents that indicate this. The crackdown on Hong Kong, which has one of the strongest economies in Asia, looks much like what Russia did with Crimea. They need Hong Kong to be successful and crushing the resistance might be the only way to keep it going. China also weekend their dollar. This would make their exports cheaper, countering the tariffs. Of course, this really shows the world what China thinks about their people. China basically raised the prices on their own people to allow for cheaper exports to other country. Finally, reports this week state that the Chinese GDP is the lowest it’s been in decades. I’m not sure how long China can hold out.

But the United States is also feeling the pain, though not to the extent China is. Along with bond yields being inverted, the stock market has been very unstable and we are finally seeing higher prices on goods including large goods like cars. But who’s really feeling it is agriculture. The United States exported a lot of grain and soy to China. Now, with Chinese tariffs on agriculture goods and the weakening of their currency, less is being exported. This is taking a toll on the farmers. But they are still supporting the president, for the most part and think that China will cave in the near future.

For the most part, I think this trade war is necessary. Like I said, China has been screwing us for years.I just wish President Trump would have been realistic about it instead of saying how great things are going to be. He should have said that there was going to be some pain from the beginning. He should have played up our economic strength and and extenuated the brittleness of the Chinese economy. He needed to tell us that our economy would take a hit and recession was not out of the question. He actually showed this earlier this week by delaying tariffs on products such as smart phones, televisions and video game consoles so that people would not suffer from higher prices over the holidays. That’s great and all, but it all shows what happens with tariffs. He has done a great job before. He should ride in on that and be honest about what he is doing and how it is going to affect the country.

 

The Civil War Has Begun

Another ICE facility was attacked this week in San Antonio. Some nut-job decided to shoot at a building holding ICE officials. The FBI is investigating. And the news media’s reaction. Yep, nothing. The democrats don’t seem to care or want to talk about it. Alexandria Ocasio-Cortez doubled-down on her “concentration camp” crap.

I guess we’re just going to have to wait until an ICE agent is shot and killed before anyone on the left will tone down their hateful rhetoric.

You know, I always question some of the things I have said in previous podcasts. That includes saying that we are close to a civil war. Well, let’s see. A white supremacist shoots up a Walmart in El Paso. A socialist shoots up a bar district in Dayton. An ICE facility is shot up in San Antonio. Antifa is planning to close Portland this weekend and the white nationalist Proud Boys are planning to counter protest. The left is calling everyone a racist. The right is bitching about movies.

We are a mess. The temperature is high. It is only a matter of time before something pops.

 

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https://www.dailywire.com/news/50630/trump-closely-watching-situation-hong-kong-unclear-ashe-schow
https://www.cnn.com/2019/08/13/asia/hong-kong-airport-protest-explained-hnk-intl/index.html
https://www.dailywire.com/news/50650/stock-market-plummeted-800-points-today-heres-why-adin-blumofe