China Won Big over the Last Two Decades

by | Jun 2, 2016 | Financial, Economic and Money News | 0 comments

As the 2016 U.S. presidential election approaches, America’s middle class is concerned – about jobs, earning potential, and their financial future in the U.S. economy in general. At the same time, China’s middle class is booming while the middle class in the U.S. and across the developed world is stagnating. A recent CNN Money article, China Won Big, describes the destruction of the American working class economy over the past two decades.

Back in the late 1980s, good jobs were plentiful, as the tech and telecom sector were booming and Americans were the beneficiaries.  Income growth also was very strong.  And the internet as we know it today was not available.

But something happened after the Berlin Wall fell in 1988, and George H. Bush (President Bush I) was elected as President.  The U.S. foreign policy began to emphasize, more than ever before, the concept of “Globalization.”  Simply put, this term is used to describe the processes by which people of the world are incorporated into a single world society.

President Bush I used the term “New World Order” to describe the opening of trade relations with the developing economic countries known as the BRICs – Brazil, Russia, India and China.

The “New World Order” is now rapidly turning into disorder for the U.S. economically, and Donald Trump is capitalizing on the discontent.  The “establishments” in both the Republican and Democratic parties have no intention of changing U.S. direction on this policy.  They were commenced under Bush I, the Republican establishment, and perpetuated under Clinton and Obama, the Democrat establishment.

What is the false promise of globalization? Simply put, there is no such thing as “free trade,” just as there is no “free lunch” in economics.  The whole process being undertaken by the establishment in both political parties at the expense of the American people has a cost.  And that cost has a price tag that is easily measured – it is the U.S. budget deficit of over $19.2T dollars, and a debt to GDP ratio of over 106%.  In 1988 the U.S. budget deficit was $2.4T and the debt to GDP ratio was a reasonable 49.8%.

The U.S. deficit, driven by large trade imbalances between the U.S. and China, is only possible to correct if U.S. policies structurally defend the U.S. workers who pay taxes rather than continuing to finance the false promises of “free trade” on the backs of the U.S. taxpayer.

To learn more about trade policies between the U.S. and China, contact us to discuss.