Opiates – Tariffs & The South China Sea


Several political and economic forces could be catastrophic.

Tariffs and trade wars create more risk in our globalized era that we might imagine, especially if China and the West relive history.

Can they even lead to an apocalypse and war?

To find an answer to this question we have to look back about approximately 121 years.

quora

This 1899 cartoon shows the American eagle, German vulture, British lion, Austro-Hungarian double-headed eagle, Italian wolf, Japanese leopard, French rooster, and Russian bear, all attacking  a sick dragon representing China, during the opium wars.

We’ll look at how that war links to opiates, the current trade war and our lives in the hear and now.

First let’s look at the present because the trade wars is already hurting us.  We need to know, how far it will go and will the trade be dropped from the trade war and just become war.

Tariffs do no one good, except governments.  One way governments collect more money is with tariffs.   Tariffs are the equivalent of a federal sales tax that not only increase inflation but also increases the cost of living, slows the economy and destabilizes the world.

We can see an example of how tariffs hurt economically right now in the article “As Elkhart, Ind., Goes, So Goes the Nation, and Elkhart Is Nervous” (1),

Elkhart calls itself the “RV Capital of the World” — more than 80 percent of the vehicles sold in the United States are made in Elkhart and the surrounding area, according to the RV Industry Association — and tariffs on imported steel and aluminum are increasing costs, diminishing demand and causing concern that a 10-year boom cycle could be waning.

The article says: This city near the Michigan border has long been used as a political prop — first by President Barack Obama, then by President Trump — to express concern for the downtrodden and to make a claim on newfound prosperity.

Shipments of motor homes were down 18.7 percent in June compared with a year ago, and shipments of smaller trailers and campers were down 10.5 percent, according to the RV Industry Association.  Some companies have cut back to four-day workweeks. Amid strong job gains nationally, hints of rising wages and solid overall economic growth, Elkhart’s health is decidedly ambiguous.

“I think it’s a yellow light,” said Richard Curtin, a University of Michigan economist who is a consultant to the R.V. industry. “Depending on how things evolve in six months, it could be a red light, getting to the end of the expansion.”

The tariffs will create higher inflation, increased tax and the potential of a weaker US dollar.

The tariffs are compounding problems in social and economic order.

Take for example the New York Times article “Tariffs to Raise Cost of Rebuilding After Hurricane Florence” (2):

Home builders and contractors say the administration’s trade policy will add to the price increases that usually follow natural disasters. In addition to materials like lumber, steel and aluminum, the United States will impose tariffs on $200 billion in Chinese imports next week, including countertops, furniture and gypsum, a key ingredient in drywall. All told, some builders estimate that construction costs could be 20 to 30 percent higher than they would have been without these tariffs.

Perhaps the biggest impact will come from wood prices, which are up 40 percent from a year ago.  20 percent tariff on Canadian softwood lumber late last year, and supply shortages have also driven up prices.

The problem is not likely to end soon either.

The Wall Street Journal article “China Cancels Trade Talks With U.S. Amid Escalation in Tariff Threats” (3) shows one reason why the US and China are digging in.

China scotched trade talks with the U.S. that were planned for the coming days, according to people briefed on the matter, further dimming prospects for resolving a trade battle between the world’s two largest economies.

The latest exchange of tariffs, which take effect this coming Monday, brings China and the U.S. closer to a full-blown trade war.

Many claim that China cannot win a trade war.   An article “What can be the consequences of a trade war between the US and China” by professor Patrick Law (4) explains why the US should not be so sure of a trade victory.  In fact long term… the West should bet the China will not cave in.

Part of the problem goes back 121 years when there was a huge trade imbalance between China and Great Britain.   The wealthiest in Europe, and England, were using a lot of Chinese luxury goods, silk, lacquer and porcelain. Tea was popular with the middle class symbol.

So much money was flowing from England to China that the British resorted to smuggling opium through its East India Company into China, to reverse the trade deficit.  Huge numbers of Chinese became drug addicts.

China made opium imports illegal, confiscated and burned millions of pounds of opium from the British merchants.  This led to the Opium War where and the Chinese swords and spears could not defeat British rifles and canons.

This led to an era called “China’s hundred years of humiliation”. This era did not end until 1949.

This history will not have been forgotten in China!

In addition to China’s long term plans, globalization has been with us for quite a while.  The utilization of world resources is more efficient, but a trade war, especially between the US and China, no longer just hurts the country where tariffs are imposed.

In our recent era, China, with one sixth of world GDP, contributed  the most to global economic growth, as much as a third of the growth.  This has helped  consumers everywhere enjoy more than two decades low inflation.

A trade war between the US and China will impact everyone.  The catastrophe could exceed the Great Depression, because the global economy is so much more linked than it was during the 30’s.  The impact could be huge and take decades to recover.

Even worse, the trade war could lead to war.

China’s economy has grown so much that the huge middle class there expects and demands a better life.

Will they be willing to tighten their belts, and for how long?

If unfulfilled expectations in the Chinese middle class puts too much pressure on the Chinese government, the Chinese leaders may heighten the tensions with military action in the South China Sea.

nyt.com

The image above from article “China’s South Sea control, a done deal; short of war with the US” (5) shows how the Chinese have created seven military bases, complete with radar domes, shelters for surface-to-air missiles and a runway long enough for fighter jets. Six other nearby shoals have been similarly transformed by Chinese dredging.

In congressional testimony, head of the United States Indo-Pacific Command in May, Adm. Philip S. Davidson sounded a stark warning about Beijing’s power play in a sea through which roughly one-third of global maritime trade flows.

“In short, China is now capable of controlling the South China Sea in all scenarios short of war with the United States,” Admiral Davidson said, an assessment that caused some consternation in the Pentagon.

China for example could impose a levy (or at least try) on all ships passing through this area, on one-third of global maritime trade!

Would this lead to military action?

No one knows what unintended consequences the trade war will bring.  Hopefully these issues will be resolved quickly and for the benefit of all.

However it behooves us as investors to proceed with caution.  Seek safety.  The global economy, led by the US is in the mature stage of the economic cycle.  The US stock markets have been reaching all time highs.

These are conditions when we should expect a correct.  Many events could be the trigger that start a decline and the US China trade war is one very delicate trigger that is being pulled.

Gary

Live Anywhere – Earn Everywhere

How to Gain Extra Freedom – While Almost Everyone Loses Theirs.  Profit from post COVID-19 trends.

I invite you to join Merri and me in expecting the world to get better… to live and earn based on that expectation but…  to also prepare for bad times as well as good.

Just in case… the world goes sideways… we will still survive and prosper.

We do not give up anything much.  We can enjoy the good parts of the new economy, as we protect ourselves from what can be bad.

For example in my report “Live Anywhere-Earn Everywhere”,  you’ll see how to make your dining room table bring you more control, more time, more income and more freedom.  After all, what can be more accessible than a dining room table?

ecuador-banks

Dining room tables we worked from (and we also sold the tables for a profit).

You’ll even learn how to turn dining room tables into income and tax deductions as we have with these dining room tables we build out of local wood.

Let me be clear.  I expect that the world will get better, at least for the few who adapt and avoid the dangers that the changes from the COVID pandemic will bring. 

The wealth of the world, albeit with inequality, will continue to grow.  This collapse of the global economy will bring an incredible new opportunity for those who know what to do.  Thes profit making avenues offer enormous income potential and even work well in disaster scenarios.

Let me provide one simple, concrete example.  Ginseng.

This is a great health root.  The demand is growing especially in China.  At times good dried Ginseng sells for $1,000 a pound!  This is an incredible and easy crop to grow.   The less care you give it, the more valuable it can become.  Yet if everything goes south, the health qualities will be good to have and make it an excellent barter item.  Once you know what to do with ginseng, it’s easy to grow in your back yard.

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goldenseal ginseng

Ginseng we grew in our back yard.  I know about growing ginseng through experience and explain why and how in the report “Live Anywhere – Earn Everywhere”.

Loquats are another example of an easy to grow crop that help promote natural health.

loquats

Here I am by one of the many loquat trees at our Florida farm.

Loquats are a great fruit for making jam and such, but the loquat leaf has amazing medicinal qualities.  Its is a registered medicine in China and due to its anti viral and respiratory system enhancing qualities has an especially  growing demand right now.   The images below from Amazon.com show that the leaves sell for about a dollar per leaf!

I have many trees on the farm but started growing loquat seedlings last year.

loquat

Loquat leaf tea has become really important during the pandemic due to its respiratory strengthening qualities.

I have been drinking a lot of home made loquat leaf tea during the pandemic.

The report “Live Anywere-Earn Everywhere” shows specific places that reduce your living expenses, easily increases your income, makes you smarter, healthier and provides tax benefits as well. 

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Here are some of the experiences this report shares:

The report includes a tax and career plan broken into four age groups, before you finish school, from age 25 to 50 – age 50-to 65 and what to do when you reach the age where tradition wants you to re-tire.  (Another clue-you do not need to retire and probably should not).

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Fwd: gary-scott-tipis

  • See ways that small businesses like Tipi rentals can be enhanced by the pandemic but also create BIG tax savings as well as extra income.  For more than 30 years Merri and I have enjoyed a strong six figure income, some years more, in the millions.  Yet there have been very few years when we had to pay federal income tax.  The report lays out a three structure program and how it is used when you are in school (up to age 30), then from 25 to 50, 50 to 70  and beyond 70.   Learn why Chapter C corporations and pensions can be better than the normally recommended Chapter S.  See how new mileage log rules gives you a possible opportunity to increase your tax deductions using IRS Form 4562.  Using a two-vehicle strategy you can gain $12,976 in new deductions even if you do not have to drive one mile further or spend one additional penny on your car.
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gary-scott-farming

Our North Carolina greenhouse.

gary scott greenhouse

Our Florida greenhouse.

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merrily farms

This pond we created at our farm brought us pleasure but also helped create a safe, healthy food supply, extra income and a tax deduction as well.

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This may be the most important report I have written in 50 years.  The information is certainly the most urgent.  Do not delay.  The risks are upon us right now and you’ll understand how the final steps of the alliance are taking place as you read the current news.

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(1) www.nytimes.com: Elkhart Indiana rvs economy slowdown

(2) www.nytimes.com: Tariffs rebuilding hurricane Florence

(3) www.quora.com: What can be the consequences of a trade war between the US and China

(4) www.wsj.com: China cancels trade talks with the US

(5) www.nytimes.com: South China Sea Navy