Long Cycles and National Behavior

 

The week ended on May 5, 2024. Interesting news items to look at this week are:

Long Cycles and National Behavior: I remember when I was young and did not do well enough in my University Entrance Exams, my father encouraged me with these 5 Chinese words from Confucius “知恥近乎勇”. The interpretation of these 5 words means “knowing shame is a first step to have courage”. It allows one to decline offers before coruption, unyielding before difficulties, be humble and avoid use of force and make choices with moderation. (Fig. 1).

At University, I spent 7Eleven (7 days and 11 hours each day) in the library to catch up. At the study station, I always wrote those 5 words lightly in pencil on the desk to remind me that I have disappointed my father. I did relatively well in the University and my subsequent career also prospered. I took early retirement at the age of 48 to become a volunteer Bible teacher until now, age 72. These 5 words also characterized the prevalent Chinese culture in politics,  social norms and economics because all Chinese remembered we came out from “The Century of Humiliation”. (Fig. 2).

Why was China such an easy prey at the time ? Well, the Manchurian had successfully ruled Qing Dynasty in China for 300 years. The later Qing Emperors were arrogant, inward looking and considered Qing a superpower on a heavenly mandate without peers. Nationally Qing could not be bothered to seek technological and industrial advancements.  In the words of Winston Churchill “Those who fail to learn from history are doomed to repeat it.” (Fig. 3).

Can the lessons of history be learnt and be applied by the Anglo American Hegemon before it is too late. This is the question that is occupying my thoughts with this week’s Blog.

 (i) Economy in Transition: The Anglo American Zionists are divided as to how best to turn the economic titanic around. The old school believes protecting the Dollar Hegemony at any cost. This school is represented by Larry Summons, Robert Rubin and the boys at Goldman Sachs. They held the rein of powers between 1980 to 2010 and is willing to wage war to destroy Iraq and Libya for simply having thoughts to sell oil in currencies other than USD. As other nations grew strong and cost of wars became too much of a burden,  a school for US industrial revival came into power which began in the previous decade. Biden, Yellen, Sullivan of the current Administration and even Trump are of this school. Yet good corporate culture and work ethics takes years to form and a sudden change of Government policy direction will not necessarily have the immediate desirable results. The Trump $4 trillion corporate tax cuts turned into stock buyback and asset price inflation without domestic capital investment. Tariff war against China simply added to import cost and inflationary pressures and protectionism was simply used by US corporation as a crutch for more government dependency. Just look at Boeing, Apple, Tesla and Meta, get the picture! I venture to say imposing a 300% tariff against EV from China would directly add fuel to US inflation and then outrageous wage demand from US autoworkers without making GM or Ford a better and more competitive vehicle manufacturer. Does EV manufacturer in China care at all about all these US maneuvers? BYD has come out with an EV that will sell for a sub US$10,000 price tag in March 2024. (Fig. 4).

China’s design is to create a whole new class of low end buyers in Asean, South Asia, Mid East, Russia and Central Asia. This is something Ford and McDonald in their early years well understood but have forgotten what once made them great companies.

This is not to say China has done everything right either. China is currently undergoing a most severe self imposed property bubble bust and asset price deflation. Painful as it is for your average Chinese and cadres alike,  President Xi is keeping a steady hand not to massively reflate but orderly clearing all the excesses in the aftermath of the global QE rampage during the last 15 years. The buzzword for this is in China is “involution” (“內捲”), a process where excessive domestic competition and race to the bottom ensures only survival of the fittest. Jack Ma of Alibaba once said “in a wind tunnel, even pigs can fly” but “when the wind passes, all the pigs will fall to their deaths”. (Fig. 5).

In a sense, the pain most Chinese felt in this season is a national refinement by fire process.  As the Chinese government had publicly forewarned of this controlled burning, trust and acceptance of the current crop of Chinese Leadership remains high and growing internationally in 140 nations.

I envisage in the near future, economic transition in US will continue and the Chinese involution will become a lifestyle. From a pure Western perspective I like to quote again from Winston Churchill “Americans will always do the right thing, only after they have tried everything else” (Fig. 6).

The question is right now Americans do not have a consensus as to a correct pathway of recovery. Imagine sitting across a chess/checkers board with  the Chess player a stack of chips in gold and the opposing Checkers player a stack of IOUs. (Fig. 7).

There is no match until the Checkers player is willing to pull from his private treasury something of genuine value to tender. Privately the Checkers player is rich but unwilling to wage a real game. I will now attempt to answer just when will Americans do the right thing? Using history as a guide, I like to draw a parallel between the protest movement against Vietnam war and the US campus pro Palestinian Movement. The two period of time has remarkable similarities in terms of economics, currency crisis and Cold War. Vietnam War protest began in 1964 (2024 for Pro Palestinian protest). In August, 1971 US defaulted on Bretton Woods and my take is the powers that be in US will resist internal public demands by brute force until they are swept out of office in the 2028 election and new leadership inaugurated in January 2029. The Vietnam War Movement ended in 1973 with a US retreat. Sorry to say, we need to expect bad international tensions and a global stagflation at least for the next 5 years. On pure economics, the USD Reserve Currency System can be reset at any moment but political and anthropological process takes forever.

 

(ii) Military Transition:  The grinding and victory of Russia over NATO in Ukraine is not lost on the international community with Ukraine having lost 8000 thousand soldiers in a week. (Fig. 8).

Ukraine’s resistance front line is collapsing fast as manpower and firepower shortages is apparent to all. (Fig. 9).

In the meantime traditional US Defense Allies are turning to BRICS for armament. (Fig. 10).

US is no longer feared as her power projection in Ukraine and the Middle East failed. The multi-polar world has arrived with or without the old Colonial Powers admission.

Ecclesiates 1:9  That which has been is what will be, That which is done is what will be done, And there is nothing new under the sun. 10  Is there anything of which it may be said, "See, this is new"? It has already been in ancient times before us. 11  There is no remembrance of former things, Nor will there be any remembrance of things that are to come By those who will come after.