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Trade War with China Begins

Sep 14, 2009

On November 29, 1994 the US House of Representatives passed the GATT Treaty with the idea of establishing "free trade." (General Agreement on Tariffs and Trade) This was precisely 12 months after our Jubilee Prayer Campaign, according to the pattern of Daniel 4:29. It was the day Washington was De-Foley-ated, if you recall from chapter 12 of my book, The Wars of the Lord.

Well, we are now nearing the 15-year mark this November, which is the "extension" given to King Hezekiah, as I explained a month ago in my weblogs.

So it is hardly surprising that we would see "free trade" begin to crumble under the pressures of widespread unemployment. On September 11, 2009 President Obama slapped a 35% tariff on tire imports from China. This came on the 8th anniversary of the War on Terror that began with the demolition of the Twin Towers. How appropriate! Great move, Mr. President.

http://www.reuters.com/article/politicsNews/idUSTRE58B08G20090912?pageNumber=2&virtualBrandChannel=0

Now China is deciding how to retaliate in kind and is considering tariffs on chicken and auto imports.

http://247wallst.com/2009/09/14/china-and-the-us-a-good-old-fashion-trade-war/

The above article was obviously written by a supporter of free trade, even though such a policy would inevitably move most manufacturing to countries having "cheap labor." Here is the argument used in the article above:

China has a large advantage over the US on the trade issue. Large American companies like Wal-Mart (WMT) source so many good[s] from China that the supply chain could not be replaced by getting manufactured goods elsewhere. China does not rely as much on American imports as the balance of trade shows every month.

The temptation to take actions against China for instances where it ships goods to America at what appear to be below market prices will increase as unemployment moves to 10% and beyond. But, it is a sucker’s game for the US. China has the factories and America has the consumers.  All locking out China’s products does is drive up consumer prices and drive down consumer spending which is still the engine of US GDP.

Yes, this is truly bad news for Wal-Mart, which signed a huge agreement with China in 1996 to become that country's largest customer for cheap goods. Up to now, Wal-Mart has enjoyed beating its competition to a pulp. But now they have the most to lose in a trade war.

The author of this article disagrees with President Obama's new tariff, because "it is a sucker’s game for the US. China has the factories and America has the consumers."

Now there's a fair trade if I ever saw one! That's like the two brothers sledding down the hill. They each get half the distance. One gets the sled going up the hill, and the other going down.

But as long as we have "free trade," we'll get Wal-Mart's low low prices! Isn't that great for keeping down the rate of inflation? Yes, of course, as long as you don't mind high unemployment here. And once we use up our bank accounts and max out our credit cards, no one will have any money to be a consumer.

So far, the natural solution has been to look for bargains to save money. Those bargains are largely at Wal-Mart and any other company that imports goods made in foreign factories. So more US companies downsize and order even more goods from other countries. Which puts more Americans out of work, which gives them less money to spend. Which packs the aisles at Wal-Mart, which sends more jobs overseas--but which keeps down the rate of inflation!

This mini-trade war over tires is just the opening salvo in a much bigger financial/trade war that was all but inevitable. I have written about this day since 1994. It was not hard to foresee. There are always consequences to every action, and this one was a no-brainer. It takes years of financial training at the universities to blind the experts to these consequences.

At any rate, the Tire War comes just as China is encouraging its banks and big corporations to default on the toxic mortgages and derivatives that Goldman Sachs and J.P Morgan and Citibank sold them in past years. They are equating those sales of toxic sludge to a "financial war," implying that China was attacked financially and therefore has a right to defend itself by defaulting.

Likewise, after decades of refusing to allow the Chinese people to own gold or silver, they are now actively encouraging the people to buy gold and silver. This is a seismic change in policy and should not be overlooked. Its reasons are discussed here:

http://seekingalpha.com/article/159962-china-urges-citizens-to-buy-gold-and-silver

The same reasons apply to Americans, but even moreso.

September 15 is a watch date for us, and the next day the new China policy kicks in that encourages defaults on all the toxic sludge that still permeates the foundation stones of the US economy.

September 28 is our World Day of Prayer for a Jubilee. I will have more to say about this soon.

September 30 is the last day of the US fiscal year, and many new rule changes are effective the next day, October 1. It appears that the Fed itself is going to be a pariah, as the rest of the world moves onto a new system that has actually some gold backing. The Fed has none at all and knows that its currency cannot survive in this new setting.

Within a couple of days (Oct. 2/3) we could see some interesting events. And keep in mind that November 29 is 15 years from the GATT treaty.


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Dr. Stephen Jones


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