China, Us, and Gold…..

For those who wonder how we got into this economic mess, this disaster that seems so hopeless, here is the one thing it is all attributed to:

It was back in 2000 and Bill Clinton, the man who rid america of it’s deficite, lobbied hard to strike a deal with congress to get passage of a bill that would allow China to sell us cheap goods. In turn, they would stockpile our currency while keeping the value of their own artificially low. Then, they loaned our dollars back to us at super cheap rates, causing an economic bubble from 2005 until it burst a short time later.

If America hadn’t been dealt a super low blow already by having to compete with cheap labor from abroad, the Clinton administration fought hard with Congress in backroom deals that now have us in the most hopeless and desperate situation we have faced since the Great Depression in the 30’s.

Recently, Obama has signed a bill that will allow America to tax goods from china to offset their price so Americans can compete with their low currency, low wages. Is it the right move? I think it is not. Now that we are  addicted and dependant upon these cheap products, it essentially keeps inflation at bay in our miserable economy. At the end of the day too, alot of American super companies are utilizing the cheap and skilled labor of China to manufacture it’s products.

The lates round of trade war talks occured in Washington this past week between China & the USA. China expects us to raise interest rates so they can get a bigger return on all of the greenbacks they have loaned back to us. We expect them to raise the value of their currency so that we can compete by selling our overpriced goods to them. With their currency so low, our merchandise is not affordable in most cases.

The reaction China had taken was to use monetary policy to lower the value of their currency even more. So what have we done, we have announced that we are going to print another 50 billion in greenbacks to fund a huge infrastructure project. I have to say that for once, I am glad that the money is going back to serve us. It may also put alot of construction workers and labor unions back to work.

As much as people are complaining about the government printing dollars and spending like crazy, it is really the only way to combat the chinese in this currency/trade war. I think that we are allowing China to believe it has the upper hand while we are really setting them up for a disastrous economic bubble. Then, we will use their vulnerable position to overthrow their communist government and push for a democracy. My concern is that we are lacking the fundamentals to help us through this tough economy we are in by not training our labor force to provide very high quality goods. While the chinese and other cheap labor markets are not capable of producing high end goods, similar to Germany, they are pacing better than us at reaching that status.

America needs to get off the couch and back to engineering school and science class and pave the way with new environmentally friendly technologies to power and transport us safely into the future so we can outlast the trade war with China and hope it does not lead to a major World War.

In the meantime, Gold and Commodoties should fair well in the coming years as both currencies will bottom out and get so low in this game of chicken. The key to rising gold prices will be in China’s resistance to inflate the value of their currency. As long as we are consuming their cheap goods, then gold is to remain high. Once the tide turns and Chinese begin buying our products, then gold prices will fall. I’m looking at that as a key indicator for now, but as with all financial situations, there are many other factors driving prices as well…….


About CT Gold Buyer
Owner of CT Gold Buyers in Wallingford, CT. and USA Gold Refiners.....

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