Monday, February 8, 2016

China’s President Xi Jinping Channels His Inner Mao Zedong

In the February 2, 2016, edition of The Wall Street Journal, Andrew Browne published a very interesting article on current political trends in China entitled “Self-Criticism Makes a Comeback in Xi Jinping’s China.”  Contrition, practiced in Mao’s time, has returned as a humiliation ritual, broadcast on national television—even including foreigners accused of various crimes against the state.  These shows are known as jiantao (political theater), a joint production of China Central Television and the security police.

Since his ascension to the presidency of China, Xi has mounted a national campaign against corruption (especially among his political opponents) and dissent against the Communist Party.  Browne writes about Xi’s campaign, that, “it goes hand-in-hand with his efforts to purify modern Chinese society by infusing it with old-fashioned socialist values (rejecting Western values) and Confucian ethics.”

Other relics of Mao’s socialist era have made a comeback, among them the iconic Lei Feng, “a selfless soldier who darned socks and carried manure” until his death.

It so happens that I was a Chinese language student at Hong Kong University from March 1, 1963, through January 16, 1964.  My arrival in Hong Kong was six months after Lei Feng died (August 15, 1962), after supposedly being hit by a falling wooden pole.

My focus was on contemporary Chinese politics.  My principal texts were People’s Daily and Red Flag (the Chinese Communist Party theoretical magazine, which was renamed Seeking Truth, to focus on current developments, in 1988).

In July I decided to translate several poems to get a first hand impression of Chinese realist literature.  The following is my translation a poem in the spirit of Lei Feng, which appeared in People’s Daily on July 16, 1963.  (I verified the translation with several of my teachers.  I left Chinese punctuation intact.)  I have no knowledge of the poet’s whereabouts or if he is still alive.

Ode to a Manure Basket:  Dedicated to the Commune Leader

Oh manure basket,
Is it worthwhile reflecting on your virtues?
Your manure basket on the contrary,
Is unusual!

Its bottom has often been changed,
And its sides repaired so frequently?
That everyone cannot but know
That the handle has been worn slick?

When you were an ordinary commune member,
It always followed you,
Every day winding through the big streets and small alleys,
Every hour reaching the village and riverside.

When you became a commune leader,
Whether busy in the wind or rain,
The manure basket, however, never left your hands,
Accompanying you to meetings, joining you in the harvest.

You need not waste talk,
Urging the accumulation of manure like the collection of grain;
The manure basket is your link with the masses,
Erecting a bridge of corresponding will!

Times have changed in the past 53 years.  Confucius had made a full recovery.  Is the manure basket just over the horizon?

(WSJ article is gated)

Thursday, February 4, 2016

The Pharaoh Dreams Anew in 2016. Thoughtful Ideas Interprets His Dreams

Bear with me.  This will be a long and high-powered post.

Genesis 41 tells the story of Pharaoh’s dreams and Joseph’s interpretation of them.  Updated for 2016, Pharaoh dreamt that he stood by the river and suddenly there came out of the river seven fine looking and fat bulls, and they fed in the meadow.  Then seven ugly and gaunt bears came out of the river and ate the seven fat bulls.  He had a second dream with seven weak stalks of grain eating seven healthy stalks.

So Pharaoh summoned your friendly proprietor (me) to interpret his dreams.  I told him that seven fine looking and fat bulls represented the gain in equities following the financial crisis of 2008.  The DJIA increased from a low of 6,594 on March 5, 2009, to a high of 18,312 on May 19, 2015, a gain of 178%; the S & P 500 increased from 735 on February 25, 2009, to a 2,131 on May 21, 2015, a gain of 190%.  This was the great bull market in the seven inclusive years 2009-2015.  Pharaoh’s 2016 dream portends seven lean years in equities.

In Genesis 41, Pharaoh put Joseph in charge of economic policy.  He collected a fifth (a 20% flat tax) of the harvest in the seven years of plenty that was used in the following seven years of famine to save Egypt from ruin.  Instead, in 2016, President Obama has piled up another $7 trillion in debt since 2009.  Instead of saving 20% of revenue during the bull market to meet public expenditures in bear market years, he squandered it all.

Why will seven years of a bear market in equities follow seven years of a bull market?

The central bank, the Federal Reserve System, is at sixes and sevens.  Its members do not know what to do.  They are lost at sea.  They disagree on what works and what doesn’t.  Monetary economists disagree on what strategy and tactics the Fed can and should now employ.  The massive expansion of the Fed’s balance sheet through purchases of a variety of securities to expand bank reserves has not restored growth to the pre-crisis rate.

The steady growth of regulations over the decades weighs on the economy like a heavy anchor.  Federal regulatory authorities are incorrigible and recalcitrant bureaucracies, constantly adding new rules and rarely discarding old ones.

The federal government continues to spend more, not less, money, borrowing trillions to make up what it does not collect in taxes.  The rate of annual increase varies, but the amount never falls.

Barring an indictment, Hillary Clinton will be the Democrat nominee for president.  If she wins the general election in November 2016, she will increase taxes and impose new regulations, further choking growth.  Her emphasis on redistribution of income and wealth will reduce incentives to work, save, and invest.  If a Republican wins, who knows?  The last Republican president led the U.S. into two costly Middle East wars and presided over the onset of the Great Recession.  Tea Party-elected Congresses in 2010 and 2014 failed to reverse the direction of economic policy.

The era of supercharged growth in China is over.  Nine–ten percent growth a year for three decades is slowing to 4-6% growth, reducing demand for commodities and other imports.  Growth will slow in countries that prospered selling raw materials, agricultural products and other inputs to China.  Slowing growth will reduce profits and equity prices of private enterprises around the world.

Oil is likely to remain below $50 a barrel for the seven bear years.  Whenever the price of oil rises much above $40 a barrel, shale producers will immediately expand output.  In addition, wind and solar are rapidly becoming cost competitive.  Hybrid and electric cars are using less fuel.  Driverless cars available on call will reduce the purchase of privately owned vehicles and petroleum products.

Investors will stop searching for positive yield.  Instead, they will pay banks and governments a percentage of their deposits and purchases of bonds just to preserve capital.  Negative interest will be routine in the new financial order.   Free money will fuel unproductive speculation—can you hear the sound of bubbles popping?

Free money will encourage more government borrowing.  Whoever wins the presidency has promised to take a leadership role in the world in defeating ISIS, protecting Eastern Europe’s NATO members from Russian aggression, expanding U.S. military presence in East and Southeast Asia, and venturing deeper into African’s ethnic and religious wars.  In seven years, Americans will look back to the good old Obama days of merely trillion dollar annual deficits.

Why only seven years of bear markets?  By 2023, every institution (e.g., universities, operas, museums, etc.) will suffer a marked decline in the value of their assets and difficulty in paying operating expenses from withdrawals of endowment.  Donors will reduce giving.  American industry will be less competitive than it is today.  The labor force participation rate will continue to fall while dependency on government handouts will rise.  Technology will enrich the few, but not the many, and won’t be able to prevent the fiscal and economic decline, or at best, stagnation.

In 2023, the people will say “Allons enfants de la Patrie” (Arise, children of our Nation) and this time the entire political establishment will run for its life.  The U.S. will realize a turning point.  America’s new leaders will do the right thing in restoring economic freedom and opportunity and ending disastrous military adventures abroad.  The bear market will end after seven hungry years.

In 2023 we will know if your friendly proprietor’s interpretation of the Pharaoh’s 2016 dream is correct.

Wednesday, February 3, 2016

Suspending My Campaign

Fill in the name:  Rand Paul, Mike Huckabee, and all the others that have dropped out, and will soon drop out, of the race for their party's presidential nomination.

But why can't they be more precise?  Suspend means to TEMPORARILY prevent from continuing or being in force or effect.  Are the "suspenders" keeping their options open to reenter the race at some later date?

What they really mean is "end,""terminate," "done," "finished," "kaput," or other words that state "it's over!"

How about "I am ending my campaign because I have run out of money," or because "the voters don't want me."

While we are at it, how about one other change in language?  Have you noticed that every candidate says "our campaign," never "my campaign." Who is the political "we?"  All those who expect to get real or psychological rewards from choosing the winner?  Or is just too embarrassing and egocentric to say "me?"  The only time the "me" or "my" word appears is when the candidates is suspending "my" campaign.


Tuesday, January 26, 2016

The Best Way To Win Trade Deals With China

A major complaint in Trump's speeches is the massive $505 billion dollar trade deficit with China, and large deficits with other countries.  "We lose jobs," he says, "and they get cash."  Trump blames these deficits on incompetent negotiators.  Trump would use such shrewd businessmen as Carl Icahn to get better deals.

Why do U.S. firms manufacture overseas?  One reason is lower cost of production.  What can be done to encourage manufacturers to shift or keep their production in the U.S.?

First, reform the tax code.  Lower tax rates on all forms of business and individuals, eliminate taxation of dividends and capital gains and end worldwide taxation of income.

Second, eliminate unnecessary regulations that hamper investment and increase production costs in the U.S.

Third, continue to emphasize domestic energy production to maintain low prices that are an important input into U.S. manufacturing.

Fourth, reform medical insurance/health care to promote greater reliance on market forces.

These and other measures would dramatically improve the global competitiveness of American enterprises.

As to China, insist that it honors WTO and other bilateral and multilateral trade agreements.  If China violates these agreements to the detriment of American firms and individuals, then appropriate measures should be taken against China to level the playing field.  But removing the impediments to more efficient production in the U.S. would be the best way to start.  Getting a better deal with China without undertaking domestic economic reforms could turn out to be a pyrrhic victory.

More On National Review's "Against Trump"

Your friendly proprietor has watched about a dozen YouTube videocasts of Donald Trump rallies in Iowa, New Hampshire, Florida, South Carolina, North Carolina, Texas, Alabama, Oklahoma, and other states.

So far, I have not seen even one person of the quarter million-plus attendees of these events give Trump a Sieg Heil (Hail Victory) Nazi-type salute, or a Mussolini-type salute.  Not one.  Not a single time.  I have not seen a single march of black or brown-clad pro-Trump storm troopers marching to these rallies, beating up residents, breaking shop windows or burning books.

Perhaps some of the 22 National Review contributors should step outside their narrow environs from time to time and take a look around. They might see that Trump supporters are intelligent and have common sense.  But if Trump becomes the next president, the members of the old political industry will need to find a new line of work.  This should be easy since there are 29 federally-funded job training programs they can attend.

Sunday, January 24, 2016

National Review Gone Wild Against Trump

“A spectre is haunting America—the spectre of Trump.”

The January 21, 2016, edition of National Review declared war against Donald Trump.  Editor Rich Lowry assembled a cast of 22 thinkers, who share a “vision of the self-anointed conservatives,” to inform America’s conservatives that Trump is not one of them.

Among the 22, one wrote that Donald Trump is “another glib egomaniac” that could succeed the current “glib egomaniac in the White House.”

It was only a matter of time until Godwin’s Law emerged in the blistering attacks against Trump.  The same intellectual warned that Trump supporters were akin to the “German crowds that were delirious at the sight of him [Hitler]…and “the ecstatic crowds that greeted Barack Obama when he burst upon the political scene in 2008.”

Trump’s followers are engaged in “emotional venting” similar to those who elected such “crowd pleasers” as “Peron, Hitler and Obama.”  “A shoot-from-the-hip, bombastic showoff is the last thing we need or can afford.”

So much for Democracy in America! As of this writing (January 24, 2016), Trump leads only in the polls.  But if Trump becomes the Republican nominee, the “venting crowds,” as this scholar call them, do not realize the potentially disastrous consequences of their support for Trump.

The “Gang of 22” might want to take a moment from their busy schedules to tour Trump Enterprises--hotels, resorts, international reality, entertainment and television, publications and merchandize—a multi-billion dollar business empire.  He has hired tens of thousands of individuals, providing them with opportunities to climb the ladder of success

As previously posted, Trump threatens the “political industry”—the pundits, handlers, ad makers, consultants and pollsters who make a comfortable living from private donors and taxpayers that fund elections.  As Frank Sinatra would sing, “He did it my [his] way.”

Trumps’ M.O. threatens to put the pundits out to pasture.  Trump is a political disruptor in the manner of Uber, Airbnb, and other sharing technologies that undermine established business practices

How many of the Gang of 22 supported George W. Bush, whose legacy is a Middle East disaster, a Great Recession, a string of Clinton surpluses transformed into deficits and, perhaps worse, the election of Barak Obama?  How many of the 22 endorsed John McCain and Mitt Romney?  How many supported the leading members of the Republican establishment before Trump arrived on the scene?  Just asking….

Is Chris Christie’s arm-in-arm walk with Barack Obama along Sandy Point a symbol of the wise, dedicated, and courageous president America needs at this time; Or Rubio, who joined ultra-liberal Senator Chuck Schumer to push amnesty for millions of immigrants who entered the country illegally; Or Kasich, who can’t wait to transfer Ohio’s generous Medicaid program to Washington; Or Huckabee, Santorum, Paul, Fiorina and Cruz?  All of these have their good and bad points, but are they likely to defeat the Democrat nominee and create a conservative, safe America that their Republican predecessors have failed to bring about?

Your friendly proprietor is willing to take a chance on Trump.  Trump is more likely to appoint successful individuals to his White House staff and cabinet positions than political retreads.  No one can predict the ebb and flow of political events.  But Trump has proven himself in the rough and tumble world of competitive business.  That is a better resume than most Republicans can produce.

Friday, January 15, 2016

A Musical Interlude

From the day he announced his candidacy for the Republican nomination for president, Donald Trump has been on the receiving end of a blistering attack from the political industry:  Democrats and Republicans alike, the mainstream media, lobbyists, interest groups, you name it!

Why are they so against him?  Because he is exposing the corruption of the political establishment.

Unlike so many Republicans, he does not court the political industry (we will see if he stays true to that conviction if he is elected).  He is, as he says, a counter-puncher.

These past months take me back to 1968 and a top-of-the-charts single that says in three minutes perhaps more than 10,000 words.  Enjoy!