Trade with China

The party known as Sundance outdid themselves today in two posts explaining Trump's position with China, the realities of trading with them, and the strengths of the U.S. economy compared with the weaknesses of China.

Sundance has a favorite word. "Backdrop." This is a backdrop, that's a backdrop, here a backdrop, there a backdrop, backdrops all over the place. They can't seem to say, "this is the setting," or "these are the underlying circumstances." One of the Sundance people must have majored in drama. If we ever meet them we could test that by saying, "kisses on your opening" and see if they go, "smooch."  

A few points they wanted readers to internalize. First, China's greatest weakness is its subservient culture does not encourage innovation. They're crap at thinking outside the box. Their social system does not reward that. They cannot do it. Their students do very well in American universities by adhering to formulas and systems, but anything beyond that and they not very good. They're copiers, not innovators.

The whole time I was reading that I was thinking, I bet Chinese are great at studying Egyptology and Egyptian hieroglyphics because the written language is all about systems and formulas. The symbols and the grammar are like programming. Programmers do very well with it.

One of my closest friends owned a sales company named Industrial Hardware. They represented firms that made things like specialized coils, piano hinges, sonar welders, valves, and switches and the like. He told me at conventions when they saw a pack of Chinese approaching, and always in packs, (Asians, actually) they snapped closed their cases and shut down their booth until they passed. I asked why. "Because they copy every little thing. They buy little bits then go back and copy them. Then undersell."

Racist!

"It's true. And everyone knows it."

He's the most non-racist guy you're likely to meet. But the sales firms have been burned too many times not to notice.

He forgot he told me that. He drinks a lot too. A decade later after he sold his company, I fed the observation back to him,  his own observation, "They can copy like maniacs but they cannot think up things for themselves," and he cracked up laughing and looked at me puzzled, wondering how I managed to acquire this business-related universal truth, having never been in the business.

"Everyone knows that."

For Americans to open production in China a company must accept minority ownership there and they must turn over all their intellectual property. Trump denying them that arrangement cuts them off at the knees.

That's devastating when your whole culture cannot manage innovation.

Who will do their innovating for them?

Second, China is very good at one thing, manufacturing. They're not that good at developing their own natural resources, so, like Japan, they rely heavily on importing raw materials. They are very broad in manufacturing everything, things that other cultures think up, they're masters at copying, but they're thin in that manufacturing is their one main thing. They cannot even feed themselves. They must import a lot of their food.

Trump and his team know these weaknesses and they'll use them to get the realignments they want.

This bears on North Korea. Trump will prevail in this trade realignment with China, he will win the trade war,  and to save face China will shift blame and responsibility to North Korea resulting in policy change.

That's the plan, anyway.  

These two videos are pulled from The Last Refuge with url theconservativetreehouse here and here. You should read them because then you'd be like awesomely smart. The posts are interesting macro economic educations because it's real-life in real-time, and you're soaking in it, better than Econ 202 where they're always talking about widgets.

What's a widget?

"It's just a thing."

Professor, can't you think of an actual example?

"Sure I can. But it's just so, just so ... hard."