What we are witnessing in real-time is the "controlled" demolition of Globalization. Controlled, being the operative fantasy. This never-ending corruption infotainment spectacle has served a useful purpose in diverting attention away from what is going on in the real world, back towards ad-sponsored blowhards. America's last competitive advantage being continuous bullshit.
"At the end it became a non-stop buffoon-o-rama"
History will say that extreme arrogance, greed, and abject ignorance of history combined to play a pivotal role in America's downfall on the world stage. Three decades ago, the U.S. accelerated the downfall of the Soviet Union via a Cold War arms race expressly intended to collapse the Soviet economy. The belief now is that a trade war will do the exact same to China - collapse a competitive hegemon. And win re-election.
Really, what could go wrong?
“This is not a struggle which can end up with one loser and one winner”
Yet, that’s precisely the way Trump and some of his hawkish allies have framed their confrontation with the Chinese. Talk of a “decoupling” between the world’s two biggest economies — once a fantastical notion — appears to be gaining traction."
The only decoupling taking place right now, is from reality.
Here below, we see that this existential crisis was entirely self-inflicted. Prior to Y2K and China's admission to the WTO, U.S. manufacturing employment was relatively stable and corporate profits were growing at an organic rate. However, post 2001, the decade-long outsourcing bonanza collapsed U.S. manufacturing while profits skyrocketed:
Here we see manufacturing employment (blue line) with labor share of the economy.
One and the same:
2001: Issues In China's WTO Accession
"United States trade negotiators played the lead role in negotiating China’s entry into the world economy."
"China, it is sometimes said, “has an economic vision that is fundamentally not free-market oriented but mercantilist.” Some fear China will displace Japan as our most troublesome trading partner."
This argument is fundamentally flawed for several reasons. Perhaps most importantly the U.S. global trade deficit, which reached an all time record of $330 billion in 1999, primarily reflects the extraordinarily low rate of savings in the United States. Because of meager domestic savings, a large fraction of U.S. domestic investment must be financed by borrowing from abroad."
Of course the argument that China is mercantilist was not flawed at all, it was 100% prescient. China was merely copying Japan's model. The fact that the U.S. needs to run a massive trade deficit to fund over-consumption has nothing to do with the mercantilist argument. China's stance on trade has not changed in decades. Again, the U.S. is the only country that used to believe in free trade. Still believing in trade-financed profligacy of course.
Therefore Trump must now reverse two decades of industrial arbitrage in time to win the election, while running a $trillion+ budget deficit. It's an impossible fool's errand of the highest order, hence how Trump got the job. If he amplifies tariffs as some have suggested in recent days, he faces imploding consumption and corporate profit. Or, as floated on Friday, he can target the bilateral financial linkages, which will bring about an even faster global market collapse. One that is already well underway.
Barring another "truce" or interim trade deal, the next round of tariffs goes into effect October 15th. Unfortunately, no one knows what Trump will do from one day to the next, often contradicting himself several times in the same week. Having no real strategy other than keeping a Twitter mob entertained. Nevertheless, the non-stop market manipulation is having less and less effect on markets. Historians will say that he backed himself into a corner and had no way out politically, economically, or financially.
No question, global central banks have sponsored this obligatory delusion of controlled and "easy to win" disintegration of Globalization. Which is why we are now seeing unprecedented divergences between global macro economic reality and risk asset prices. Capital managers are unwilling to accept a zero % rate of return, since it's not their money anyways. Which is why they are betting on the controlled "decoupling" hypothesis.
Global capital(ism) is at risk like never before in modern history, but one would have no way of knowing it by risk positioning and the continuous stream of bullshit.
What were home gamers doing throughout all of this?
Getting more and more stoned.
“Most patients have reported a history of using e-cigarette products containing THC"
