More on Wal-Mart

Uncategorized

Since announcing the closure of 269 stores globally (see previous post), there have been two interesting developments in the Wal-Mart saga. The company also announced that all of its workers will get a raise this month. Meanwhile, some of the workers at the Winnsboro, SC Wal-Mart Supercenter are soliciting signatures on a petition in hopes that the corporate office will reconsider closing it later this year.

While some pundits and big labor tell the story of a corporate giant squeezing suppliers, competitors and labor, a closer look at Wal-Mart tells a different story. It is probably true that Wal-Mart executives factor in some of the negative press when making strategic decisions, but most of them are based on economic reality. Wal-Mart is struggling because of a flat economy, increased preference for online shopping, and the strength of smaller discounters like Family Dollar. Its experiment with small, concept stores hasn’t worked out, at least not yet. Meanwhile, labor costs are creeping up, forcing many stores to raise wages to retain top employees and avoid costly high turnover. Wal-Mart is refocusing its strategy to deal with the changing landscape.

These recent developments underscore two realities that are often overlooked. First, the best way—if not the only way—to increase wages over the long term is not to mandate a higher minimum, but instead to grow an economy that creates more opportunities for workers. In such an environment, companies have no choice but to increase pay.

Second, current wages at Wal-Mart and other retailers are generally in line with the market. This is by definition. Most Wal-Mart workers who are legitimately underpaid—that is, they could do better elsewhere—will find other opportunities. Those that stay need something from Wal-Mart that they cannot get elsewhere. For some, it might be better hours, attractive working conditions, or a convenient location. For others, it’s a job. Companies like Wal-Mart and McDonald’s offer excellent entry-level job opportunities. Workers who prove themselves can move up or move on. Demanding higher wages so workers can stay in their current jobs long term misses the point altogether.

It’s human nature to think you’re underpaid, but when you don’t leave, you probably aren’t. The Wal-Mart workers petitioning the company to retain its Winnsboro store demonstrate that these jobs are, for many, solid employment. It’s fair to have a debate about practices at Wal-Mart or anywhere else, but it should be an honest one.

3 Comments

Walmart Store Closings

Uncategorized

Walmart announced on Friday that it’s closing 269 stores globally, including 154 in the U.S. 102 of them are small, Walmart Express stores, but the list also includes 23 Neighborhood Markets and 12 Supercenters. This type of move isn’t uncommon for large corporations and shouldn’t be interpreted as a sign of failure. Firms should constantly search for ways to reallocate their resources to the most profitable ventures. Facing aggressive expansion by Family Dollar and others, Walmart’s Express stores never took hold. Walmart will increase its emphasis on ecommerce as part of the effort.

This move is a stark reminder that business success is difficult to sustain. In fact, 88% of the largest U.S. companies in 1955 disappeared completely by 2014. This constant churn is a healthy process entrepreneurs and economists call “creative destruction.” Just when you think a company has a corner on the market, things change and new, leaner, more focused competitors move in. I’m not saying that Walmart will go under anytime soon, but idea that large, dominant firms cannot be challenged simply isn’t true.

Of course, Walmart has been demonized in recent years. Whether it’s for grinding suppliers, underpaying employees, or running small competitors out of business, Walmart has become the poster child for everything wrong with corporate America and globalization. I don’t intend to go through all of the charges in this post. Overall, I see Walmart as a good firm that has created lots of opportunities for American workers and consumers over the years. At times it seems to drift into cronyism, but that’s a topic for another day.

My point today is that Walmart execs considered all costs and revenues when it decided to close these stores. Rising wage rates, increased healthcare costs, and burdensome regulations are part of the equation. It’s impossible to identify how much these costs affected the closings, but they did. The protestors might think they’re winning when they “force” Walmart to hike wages or meet their other demands. But when costs rise, companies have to cut back somewhere, and this often translates into jobs. It’s economic reality.

As an aside, Walmart will help most of the 10,000 U.S. employees affected by the closings transfer to nearby stores. This is still a net loss of 10,000 jobs because store transfers alleviate the need for new hires. Nonetheless, it’s good for those who are already employed.

Companies like Walmart and McDonald’s don’t have money trees and cannot be expected to solve the country’s social problems. If you’re a corporate critic, be careful when you demand that they pay higher wages and incur other costs to promote the “common good.” You might get what you ask for.

Sources:

http://news.walmart.com/news-archive/2016/01/15/walmart-continues-sharpened-focus-on-portfolio-management

http://www.aei.org/publication/fortune-500-firms-in-1955-vs-2014-89-are-gone-and-were-all-better-off-because-of-that-dynamic-creative-destruction/

2 Comments

An Outside View of the US

Uncategorized

I always learn a lot when I spend time outside of the US, often from unexpected sources. This week I’ve been in Nairobi meeting with business leaders and academics from Africa and other parts of the world, and also chatting for some everyday Kenyans on the street.

Kenya ranks in the middle of Africa’s 50+ nations in terms of per capita income—below $2000—but is showing some signs of development. The people are generally friendly. Infrastructure development is spotty, and the country still has a ways to go economically.

On one occasion, a local asked where I was from. I told him I was an American. He smiled and commented, “Oh, the land of Obama. He visited Kenya last summer.” I asked what Kenyans thought of our country and our president, and he replied, “We like Obama. He will do a lot for us [Kenya] and make things [fairer] around the world. We like Americans, but there is a lot of racism in your county. Why do most white people there hate black people?” I explained that most while people aren’t racist; how else would we have elected a black president? He smiled and continued, “But we hear that racism is a serious problem in the US, with lots of crime against black people. Even police are killing black people, like in Kenya in the past. Obama says he’s going to change the laws.” I spent the next few minutes trying to unravel his misperceptions, but three specific parts of his comments are worth unpacking.

First, this man said, “we hear” numerous times. I asked where he and other Kenyans get their information and he mentioned TV and the Internet. As for TV, Kenyans have access to CNN-International, the BBC, and Sky News (UK). In my view, CNN-I is largely anti-American. Whether it’s a special report of the lack of universal healthcare in the US, the spiraling gun violence “caused” by unenlightened gun-toters, or general malfeasance in corporate America, CNN-I never seems at a loss for reasons to question the American way of life and its institutions. The BBC is leftist as well, but more credible and not anti-US per se. Sky News is the only balanced alternative, but it’s clearly in third place in terms of reach. It’s no wonder why those whose view of the US is molded by American news outlets see the country in a negative light.

Second, this man compared alleged US racism to Kenya’s past. Kenya became a republic in 1963. It is true that colonialism in Kenya—like the rest of Africa—had racial overtones. The idea that law enforcement officials in the US are killing innocent African-Americans because of their race, like some Europeans did on occasion to Africans in the past, is appalling. I recall the case that Dinesh D’Souza made for Obama as an anti-colonialist, and I couldn’t help but to connect some dots here.

Finally, this man referred to Obama’s effort to change the law, specifically in terms of gun control. While the President is careful to avoid such terminology—only Congress can change the law—it is clear that he seeks to do so and that many outside of the US see through his rhetoric. Ironically, in promoting live coverage of the President’s speech on the topic, a BBC anchor actually used the same “change the law” phrase.

My conversation tells a lot about how the US is viewed outside of our borders. I try not to criticize American leaders while in other countries. I promote American ideals and counter media bias as best I can, but it’s an uphill battle. There seem to be few clear, consistent, and articulate proponents of liberty and free enterprise in the US and abroad these days. American foreign aid used to be seen an attempt to spread freedom; it’s now seen as legitimate global wealth redistribution.

I’ll close with another encounter I had. A Kenyan street vendor I met pointed to his injured hand and said that medical treatment to fix it is available in the US even if you can’t afford it. He referred to the work that Operation Smile has done with kids with a clef palate. As he put it, “You’re lucky to be born an American.” Indeed, free societies not only create wealth, but their people look for ways to share it voluntarily to make the world a better place.  Perhaps there is some hope after all.

4 Comments

PC–Part 2

Uncategorized

Shortly after Trump proposed a temporary moratorium on Muslim immigrants I received a long email from someone who read my previous post on Trump and PC. The writer (we’ll call him Bob) asked if I plan to walk back my insistence that political correctness is such a scourge in light of Trump’s “over the top” comments. Bob has fallen into the PC trap, so some additional comments are warranted.

Bob essentially argued that Trump’s proposal went too far and therefore should be censored politically. Agree or disagree with Trump, there is a serious national security issue here. His proposal is akin to Jimmy Carter’s ban of Iranians from the U.S. during the 1980 hostage crisis, but I don’t remember a public uproar at the time. Many pundits and politicians have called Trump’s proposal unconstitutional, but they apparently don’t realize that the Constitution does not grant rights to non-Americans. Others have compared his proposal to the internment of Japanese-Americans during World War II, although Trump’s proposed action would not affect U.S. citizens. White House Press Secretary Josh Earnest said that Trump’s statements disqualify him as a presidential candidate. Senator Graham told Trump to go to hell. The Philadelphia Daily News even compared Trump to Hitler.

Two observations should be perfectly clear. First, nobody is attempting to silence Senator Graham or anyone else for their outrageous comments. This is the first rule of PC: If you’re on the politically correct side of an issue, you are free to speak your mind. Second, very few of those who reject Trump’s proposal have made any attempt at a coherent, intellectual rebuttal. This is the second rule of PC: The objective of silencing the opposition is to avoid serious debate.

On the surface, political correctness is about free speech. It should be opposed on these grounds, but at a deeper level PC is really about evading reality. By stifling open and honest debate on the grounds that an argument is offensive, PC promotes an alternate reality. Here’s a simple example in the realm of economics.

Opponents of the welfare state frequently point out that some recipients of government programs seem unwilling to work and are simply taking advantage of the system. Many on the left refer to this as “attacking the poor” while ignoring the fact that the claim is obviously true—Some beneficiaries of welfare programs are taking care of the system. In an honest debate, we would want to know how many are abusing the system, how many deserving Americans are helped, how much the programs cost taxpayers, and details of non-government alternatives to alleviating poverty. In a PC-controlled discussion, opponents of the welfare system are “haters” and these issues don’t get covered. The real debate never actually occurs.

The take-home point here is that political correctness is the veil that hinders serious discussion on lots of topics these days. It’s difficult to win a debate when you can’t put all of the facts on the table. It’s time we call PC for what it is—a scourge that’s undermining our society.

3 Comments

Trump and Political Correctness

Uncategorized

Political correctness is killing all of us, but now there’s Donald Trump.

Before I continue this post, let me clarify that I have not endorsed Trump. His candidacy clearly offers some vigor and vibrancy to the field, but we’re still early in the vetting process. I largely agree with him on a number of issues, however, including his recognition of two menaces that face our nation—illegal immigration and political correctness. I don’t want to get into the weeds of policy in this post, but suffice to say that these two issues are joined at the hip. Illegal immigration continues unabated in the U.S. and very few politicians prior to Trump have been willing to address it because of fears of political correctness.

Here’s how it works. Anyone who opposes open borders is a racist because the majority of current illegals in our nation are not of European descent. Besides, we are told that, “the U.S. is a nation of immigrants,” so anyone who seeks to explain the obvious flaws in connecting open borders today to open immigration a century ago is ignorant of history. There’s a script you have to follow on this issue lest you be scorned as a bigot.

Of course, the political movement correctness is internally inconsistent. In the immigration example, notice how justifying today’s open borders on immigration policies of the 1800s and early 1900s is legitimate and based on an understanding of history. Of course, the world has changed in many ways progressives have championed. The Federal Researve, fiat currency, Social Security, and Obamacare all represent stark departures from life in the U.S. circa 1900. The PC comeback to arguments for the gold standard claim that things have changed and you can’t live in the past. Even those who question man-induced climate change are called “flat-earthers.”

In short, PC is about stifling debate on certain issues. It leverages emotion and surface-level logic to squelch arguments that would be difficult to win in a more rational setting where all sides would be required to defend their claims in detail. It hides behind “stop the hate” and other slogans designed to portray free speech as irresponsible. The PC crowd demands that opposition speech is insensitive to certain groups of people and therefore should be controlled. Apologies are demanded from anyone who utters anything that might be offensive even if it is unintended or misunderstood. Fearing reprisal from the media and others, most politicians refrain from discussing certain topics and issue apologies whenever demanded. Of course, this only legitimizes the PC effort.

Nowhere is the PC movement more pervasive than on the college campus. They promote “safe zones” to protect students from alleged harassment. They designate certain areas on campus as “free speech zones” so as to restrict certain kinds of speech elsewhere. Oppose the safe zones and you are tagged and someone who seeks to promote intolerance. Even capitalism is a dirty word and its proponents are tagged as insensitive to the plight of those it has allegedly left to suffer.

Back to Trump. In the early stages of his campaign—when naysayers told us that he would not be taken seriously—demands for apologies were constant. A few examples include his use of the term “anchor baby,” his supposed indirect insult of Jeb Bush’s wife, and his lack to response to a statement (not a question) about President Obama’s religion. In each of these instances, Trump refused to apologize. Since then, the demands have waned, and many Americans seem to appreciate Trump as someone willing to speak his mind, even if his choice of words isn’t always perfect. His style is rubbing off on others. Even Jeb Bush mustered up the courage to use the term “anchor baby” without apology.

I’m a big proponent of using choosing your words wisely, especially when discussing difficult topics. I also understand that you shouldn’t yell “fire” in a crowded theater or directly incite a riot. However, I understand that nobody is perfect, and I am willing to live with occasional utterances of ignorance or stupidity in the interest of the free exchange of ideas. We need more speech, not less. Win or lose, if Trump is able to expose PC for the effort at mind control it is, then more politicians might be willing to engage in direct conversations about the future of our country without fear of reprisal. For this reason, if for no other, I’m glad to see Trump in the race.

6 Comments

Evaluating the Republican Tax Proposals

Uncategorized

Many of the Republican candidates have been chastised because their proposed tax plans will increase the budget deficit. Pundits (and CNBC debate moderators) frequently argue that a net decrease in rates without cutting spending will increase the gap between government revenues and expenditures, thereby increasing the deficit. But this argument is problematic for one key reason.

Economies are dynamic and consist of lots of moving, integrated parts. Because each of these parts influences other parts, it’s inappropriate to assume that changing one of them will not have an effect on the others. Raising the minimum wage provides a good illustration because it prompts companies to hire fewer workers and/or raise prices, thereby increasing unemployment and inflation. Consumers who spend more on these higher-priced products and services have less money to spend elsewhere, thereby hurting other businesses. Those who claim that raising the minimum wage simply lines the pockets of minimum wage workers without considering the negative repercussions in other areas are shortsighted. They are engaging in static analysis—assuming one change will not result in other changes—which is why their conclusions are incorrect.

Economic proposals should be assessed with dynamic analysis so that their long term, multifaceted effects are evaluated. Consider the following principles that support dynamic analysis. I could list more, but these are some of the obvious ones:

  1. Simplifying a tax system improves business decision-making because it becomes easier to evaluate the financial pros and cons of each alternative.
  2. Lowering the marginal tax rate increases the incentive to produce; in some instances the increased production can more than compensate for the lower rate, and tax revenues can actually increase. This occurred during the Reagan years, as explained in part by the Laffer Curve.
  3. Tax incentives/breaks/loopholes provide incentives to individuals and companies to spend less efficiently in order to get the tax benefit. Eliminating these incentives helps all of us make better, more productive decisions. The mortgage tax deduction is a good example because it provides an incentive for each of us to spend more on housing that we otherwise would. Why not buy a bigger house when part of the higher payment can be passed along to other taxpayers?
  4. Taxes punish behavior, so they should be applied in the least punitive manner possible. Consider that taxing income punished income generation, while taxing sales punishes consumption. Given a choice, it’s better to tax sales because the alternative to spending is saving, which is also good for the economy.

There are various Republican tax proposals on the table, each of which should be evaluated through dynamic analysis.  Most of them score well along the above criteria because they lower taxes and simplify decision-making. So why do some pundits and voters fail to grasp this? Some can be excused because they don’t know any better, but others see static analysis as a useful shortcut to make a political point. Central planning works well in a static world because its unintended, negative consequences are not considered. Others take a static approach because it can be based in emotions. Responses like “We can’t give tax breaks to the rich” or “All workers deserve a living wage” illustrate the emotional folly of this type of thinking. They work well with the misinformed.

The solution to this problem is simple, but not easy. The next time your leftist friend fails argues for or against a policy without considering its intermediate and long-term economic and social effects, take the time to outline them in detail in detail. I suggest that you keep the discussion as simple as possible and avoid using technical terms like static and dynamic analysis. Remember…the argument for free enterprise solutions always strengthens when long-term effects are considered. Some won’t have the patience to endure a logical discussion that digs deeper than a sound bite. Some will exit the conversation when they begin to see their own ideas beginning to unravel. But a few will see the light, and the extra time is worth it.

3 Comments

No Social Security Increase

Uncategorized

The Social Security Administration announced that there would be no annual cost-of-living adjustment (COLA) this year for Social Security recipients because there isn’t any inflation, at least not as calculated by the SSA formula. This is widely presented as a hardship for seniors. As the USA Today put it, “Though prices on paper may have dropped, the cost of living for Social Security beneficiaries is rising, and their quality of life is falling. Social Security recipients have lost nearly a fourth of their buying power over the past 15 years, according to the Senior Citizens League.”

While the formula used to calculate inflation is somewhat arbitrary, it is equally true that the Senior Citizens League is a special interest group whose purpose it is to promote the plight of seniors. Setting these issues aside, I want to make 3 points:

  1. None of the reports I have heard in the mainstream media have mentioned that Social Security is on a trajectory toward insolvency by 2035. Needless to say, raising benefit levels would simply hasten this reality. Recipients can only get an increase if someone else pays for it.
  2. All of the reports assume that Social Security is the sole source of retirement income. Sadly this is true for many, but it was never intended to serve that purpose. Some of you might be thinking that those who rely completely on Social Security simply could not afford to save more prior to retirement. In general, this is not true; saving for retirement is a matter of priority. But if this is the case in some instances, it only underscores the reality that Social Security doesn’t deliver much in return for 12.4% of income during one’s working years.
  3. Completely absent from all of the reports I’ve heard is a major driver of stagnating incomes for seniors. The Fed’s artificially low interest rates have all but destroyed returns on fixed income, leaving seniors with the a choice: Accept a guaranteed return below the inflation rate or invest in stocks and bonds, a risky option for anyone with a modest nest egg. Put another way, our government has robbed seniors of an opportunity to obtain a reasonable, safe, market rate of return for retirees with funds that supplement Social Security. This has been done to stimulate investment and keep the economy going, but its collateral damage has not gone unnoticed. Anyone interested in “helping seniors” should propose an end to the Fed’s near zero rate policy.

Social Security is in distress and its time we take radical steps to fix it, including privatization and opt-out options. Anyone who complains about the lack of a COLA this year should step back and look at the big picture. It’s only going to get worse.

3 Comments

China & Venezuela

Uncategorized

I just returned from another trip to Asia. I always see some things firsthand when I’m there. I had two interesting encounters this time.

The first was at the national museum in Beijing. The modern history section tells the story from Mao to the present. The shift from Marxism to a mixed approach with some capitalism is officially presented as a natural evolution of socialism, not a departure from it. The term is they use frequently is market socialism, an oxymoron in a literal sense, but not from their perspective. As my Chinese colleague explained, socialism isn’t really about Marxism, but about income equality—nobody having more than anyone else. In other words, capitalism is fine as long as its abundance can be redistributed. In this sense, capitalism becomes the new socialism. This is a novel way of understanding the Chinese economy, but it also provides insight into the neo-socialists in the US. They are happy with capitalism to the extent that they can control most of its bounty through taxation, redistribution, and regulation.

The second encounter was with an engineer from Venezuela I met in the hotel lobby. I asked him how things were going there. He just shook is head and said, “It’s the government.” As he put it, “The government in Venezuela is just for the poor people, but it’s horrible for the professionals. They take everything the professionals and companies produce and give it to the poor, except for what they keep for themselves. Nobody who produces anything can make any money anymore. So many companies have shut down that there isn’t anything left to take from them. There’s no future.” I’ve covered the plight of Venezuela many times in my blog so there’s nothing new here, but it’s interesting to hear it firsthand from someone suffering through it.

Apparently Chavez and Maduro didn’t learn anything from the Chinese, who have figured out that some degree of free enterprise is necessary to generate the cash to finance government largesse. Of course, capitalism cannot coexist with income equality. Entrepreneurs take risks and work hard, and are only willing to do so if they get to keep what they earn. Income inequality comes with the territory. The Chinese, the Venezuelans, and the leftists in the US are all trying to figure out the same thing—how much wealth can confiscated before business leaders and other professionals quit producing.

3 Comments

Economics & China

Uncategorized

I just returned from a trip to China. While there I spoke with students considering coming to the US to study, one of which asked me a great question: The economic systems of the US and China are different, so if I study economics in the US will what I learn be useful when I return to China?

I gave her a truthful answer: Economic principles are universal, economies are global, and there are similarities and differences between the US and Chinese economies. What you learn in the US would be very useful when you return to China.

But a complete answer is much more complex. Yes, there are economic differences between the two nations, but they aren’t as great as some think. Granted, the US and Chinese economies are officially “capitalist” and “communist,” the US has two centuries of economic growth China cannot match, and the US dollar—unlike the RMB—is openly traded and respected on world markets. These differences aside, the similarities are growing.

Both nations manipulate their currencies. The literal and figurative printing presses in Congress and the Fed have been expanding and inflating the money supply in the US. Central planners in China do pretty much the same, pegging the value of the RMB in part to the market value of the US dollar.

Politicians in both nations routinely call for economic growth while beating down the source of that growth, the private sector. The US and China are moving in different directions, but toward the same middle ground. The Chinese government just introduced a “reform package” for its state-owned enterprises (SOEs) that allows them to make more of their own decisions and offer better compensation packages to top executives, most of whom have left the SOEs for private firms. However, the government will retain tight control over capital and key strategic decisions will always be vetted by government officials.

Meanwhile, Washington has ramped up regulations for virtually every sector in the economy. From Obamacare to Dodd-Frank to “anti-trust” persecution of successful companies to calls for a national $15 minimum wage, the US government is implementing ever-expansive controls on US industry. Like Beijing, Washington attempts to find the “balance” between economic freedom that produces growth and jobs, and state control that legitimizes the political claim that business cannot be trusted. In this respect, both nations are off course. Of course, there’s no thing as a balance between liberty and statism. The US is moving in the wrong direction, away from a successful free enterprise tradition. The Chinese are moving in the right direction, but still want the control. Both the US and China could use a heavy does of Hayek.

There is one key distinction between the US and China—political freedom. Reform in China depends on the wisdom of the current socialist regime, but citizens in the US have the opportunity to replace its socialist political leadership by means of the voting booth. Statism is well grounded in the US; our government schools, a bloated social security system, and massive deficit spending connected to an entitlement mentality won’t change overnight, even with the right leadership. But we have the power to recall our representatives and begin moving in the right direction. Many of the candidates in the Republican presidential primary offer potential for doing just that.

3 Comments

Is Trump Correct on China?

Uncategorized

Donald Trump is talking a lot about China. His central claim is that that the Chinese government continues to manipulate the value of its currency, keeping it low and enabling Chinese companies to export their products at lower costs than competitors in the US or other parts of the world. Is he correct?

When Trump made this claim as a presidential candidate several months ago, “fact checkers” rebuked him, citing economic reports that the Chinese currency (RMB) is now fairly valued relative to the US dollar. But the Chinese government pegs the value of the RMB in great part to that of the US dollar and reserves the right to inflate or deflate this value on a daily basis. If—as these economists claim—it is obvious that the RMB is not undervalued, and if the Chinese government is really committed to a market-based exchange rate, it would simply allow the value of the currency to float with the market. It’s like someone from the US Postal Service claiming that the private sector couldn’t deliver a letter for less than 49 cents. If so, then why maintain laws prohibiting the private sector from giving it a try?

There’s an interesting irony here. If the Trump critics were correct at the time when they claimed that the RMB was valued accurately, then the currency is now undervalued due to two significant devaluations made by the government during the Chinese market meltdown last week. I believe the Chinese currency is still undervalued but I am guessing. The truth is that we can’t know for sure without letting the market decide. The beauty of a market system is that prices will set automatically and will accurately reflect market value. An exchange rate is nothing more than a price for a currency. This debate would resolve itself if the Chinese government allows the RMB to trade freely on global markets.

So when it comes to currency valuation, Donald Trump is entirely correct. But he also refers to a need to “decouple” economically from the Chinese. Here I believe he is right again, but only to a point.

History, economics, and market logic tell us that free global trade benefits all partners. Artificially reducing trade between the US and China would have economic costs. If this is what Trump means by decoupling, then he’s incorrect.

But it is clear, however, that the US has mismanaged both its own economy and the US-Sino relationship. The Fed’s overbearing influence on interest rates and financial markets makes it difficult for US negotiators to argue with straight face that the Chinese government should leave its markets alone. US government subsidies also pick winners and losers, and our massive debt has given the Chinese an opportunity to invest heavily in the US dollar. US negotiators should have been clear about the currency manipulation issue years ago, but they bought the argument that a weak RMB was necessary and appropriate for Chinese development. In this respect, the relationship with China is skewed. We need to clean up our own house fiscally and then—from a position of strength—insist that the Chinese do likewise. To the extent that Trump is suggesting this type of reboot, he is correct.

For the record, I am not endorsing Donald Trump or any candidate for President at this point. Many of you know that I like Rand Paul a lot, but he has struggled to package his ideas effectively. Trump has clearly changed the rules of the game and I’m glad that he is running, however. His candor is a breath of fresh air, but there’s still a long way to go.

6 Comments
« Older Posts