WASHINGTON, April 15, 2018: At the close of World War II, the Truman administration launched a massive economic initiative known as the Marshall Plan. By extending a significant helping hand to an utterly devastated Europe, the Marshall Plan was instrumental in relaunching that continent’s post-war economy. Unfortunately, today, the Marshall Plan Ghost still lingers, haunting America’s international trade policies in decidedly unhelpful ways.
In fact, although inadvertently, the Marshall Plan ghost helped ignite the ongoing trade war with much of the world that America has only just (re)discovered.
We’ve not seen any columnist either recognize or address this issue. That remains true even as the media savages the Trump administration for allegedly launching a dangerous, U.S.-led “trade war.”
For that reason, it’s entirely appropriate that we conclude our short, introspective series on President Trump’s real or imagined trade war against the universe by examining the bizarre Marshal Plan aftereffect we’re tentatively describing as the Marshall Plan Ghost.
America has operated on a Marshall Plan reflex since at least the 1960s. Throughout numerous administrations under both political parties, the Federal government acts as if direct competitors and third world countries still need extensive help from American taxpayers in order to survive.
In other words, in a general sense, the American economy traditionally takes it on the chin when it comes to international trade policy. That’s the real reason why, in any and all international trade agreements back as far as we can remember, the U.S. ultimately gives away more than it gets back. Why? In order to help other nations grow. After all, America is so rich and everyone else isn’t, right?
The Marshall Plan Ghost in the Trade War Machine
While this notion rang true for roughly a decade after the end of WWII, most of Europe had regained its economic vitality by the 1960s and no longer needed a helping hand. Yet American trade agreements and understandings always left this country short, as our negotiators instinctively put up with the myriad of tariffs and protectionist fees and duties European countries continued to impose to protect certain constituencies and industries.
That’s what we call the Marshall Plan Ghost.
The Marshall Plan was a spectacular success underpinning Europe’s revival. Similar treatment accorded to a defeated Japan also helped revive that devastated economy. As we now well know, that revival swiftly catapulted Japan into one of the world’s greatest economies.
Yet both Japan and Europe continue to employ treaties, agreements and outright tariffs to keep many American exports out of their countries. They also deploy direct government subsidies to certain industries for the same purpose. The U.S. has largely, and quietly, allowed this reflexive, post-Marshall Plan benevolence to continue indefinitely, even though it’s no longer needed at all.
Matters worsened when, initially for diplomatic reasons, American administrations allowed the Marshall Plan Ghost to color this country’s relatively passive approach to China’s current economic predations. A casual glance at today’s China clearly indicates that this growing economic, political and military giant no longer needs our largess. So why do we continue to put up with China’s blatantly anti-competitive trade policies, arrangements and tariffs?
Rather than point that out and drive for better trade deals, however, President Trump’s predecessors allowed themselves – and by extension, us – to get snookered by our so-called trading partners, including China.
Crying poor simply doesn’t work any more
Whether they realize it or not, administrations previous to Trump’s have all been haunted by the Marshall Plan Ghost. They still insist that America 2018 is still immorally rich. Therefore, our taxpayers can easily support tariffs and trade carve outs imposed on us by other countries. After all, they’re “disadvantaged.” We’re not. Right?
Not so fast.
Traditionally, we’ve offered our friends and allies – and even some of our enemies – “free trade” deals. But if you examine the fine-print in these agreements, you can see that other countries don’t often reciprocate.
Europe in particular has continued to act as if they’re still dependent on U.S. help for their “disadvantaged” industries. Americans must look the other way when European countries layer protective tariffs onto imported American goods. They get to protect their own industries. But what about ours?
That certainly made sense in the dark, post-WWII days when these flattened countries lacked any industries at all. But why has this attitude been allowed to continue right up through 2018?
Obviously, at some point, China’s wakening giant noted how easily the U.S. allowed itself to be gamed. Just cry poverty and disadvantage. Re-awaken that old Marshall Plan Ghost. America (and America’s taxpayers) will reflexively look the other way. They will blindly ignore protective fees and tariffs that seriously damage the ability of American goods to compete abroad. After all, as the original Marshall Plan clearly proved, we can “afford it.”
Hence, much of the international balance of trade deficit U.S. taxpayers have been funding.
Much of the world has waged a trade war against American goods for decades
The Europeans continue to fight America with a patchwork quilt of barriers. These prevent competitive American products – particularly farm products – from entering their markets at fair prices. Or from entering their markets at all.
China, the big headline grabber over the past two weeks, is a far worse problem. Over many years. they imposed substantial trade barriers hampering sales of U.S. products in China. These prevent competing U.S. products from gaining a trade advantage over Chinese companies and products. The Chinese have also stolen our technologies for years.
Now they offer, at bargain basement prices, their own competing products based on these stolen technologies. Those Chinese products are exported to the U.S. to compete with our own products – at much lower price points. “Fair” trade? “Free” trade? You’ve got to be kidding.
This has to stop. That’s what Trump is trying to do with the imposition of tariffs on China.
Europe: Bad enough. China: Even worse
.Truly fair trade with China means fair entry of our products into China. It also means an absolute end to blatant Chinese technology theft. It’s this looming battle that has terrified many traders lately, leading to massive every-other-day market crashes.
No matter how much the proletariat-hating left complains, President Trump has stepped up to the plate on behalf of America’s middle class workers. And even for the high-tech companies that hate him.
His reward is nonstop bashing in the secular and financial press. This deprives him of the support he could certainly use when bargaining with the Chinese. That’s because the so-called free press in this country is actually working for the globalist elite who couldn’t care less what China does as often as that country provides highly-skilled, but CHEAP labor.
Getting real about “free trade”
That’s all policy, politics and macroeconomics, however. Everything we’ve been reading and analyzing points to the prevailing truth Stockchart.com’s John Murphy points out in the commentary we cited in our previous article on this subject.
“[I]t seems fair to suggest that any form of rational market analysis — whether it’s economic, fundamental, or technical — takes a back seat to daily headlines. It’s hard to do business when someone has their thumb on the scale.”
Murphy’s comment is buttressed by specific advice offered by “Tyler Durden” of ZeroHedge in the article we cited in the first column of this series:
“[Given] Trump’s admission that stocks are going lower, it may be time to sit on the sidelines for a while.”
That sounds like really good advice these days.
Traders and investors: Time for a strategic retreat from the market?
That’s why we, too, noted in Friday’s column that maybe it would be a good idea to just sit tight on investing for now until some of this smoke clears. That is, “time to sit on the sidelines for awhile.”
It is actually pretty much impossible for a small investor to regularly game the system in this environment and make a lot of money.
This columnist will flat out guarantee you that with all their supercomputing resources, active traders and high-frequency computerized trading firms are loving this, and may be at least partially to blame for the market’s asinine volatility, trading on each and every economic headline as if it were the last one they’d ever read.
But that’s what’s going on. Petrified buyers and former bulls are, in the main, on strike. The sellers are having a lot of fun scaring out the longs with these every-other-day stock market beatings. Why remain long and suffer like everyone else?
Short-term strategy for NOT losing money
Best thing now is to stay heavily in cash or short term paper, have some exposure to S&P-based and sector-based ETFs (usually less volatile than individual stocks) just to stay in the game, and just wait until negative volume peters out.
True, a prudent investor should dump stocks that genuinely look down for the count. But he or she will also avoid panic selling of perfectly good issues likely to grow again in the relatively near term.
In any event, buying stocks now in this environment is more of a crapshoot every day. Each wave of new selling simply creates a slew of even better prices.
When the selling finally exhausts itself investors can safely begin to buyn some of the bargains strewn about the killing fields of Wall Street. If the S&P 500 bounces (for the third time) decisively off its recent 200-day moving average that might be a signal to get back in. Slowly.
In the meantime, our unofficial advice: Just stay out until the coast is rally clear. Clear? #
*Headline cartoon by Branco. Reproduced with permission and by arrangement with Legal Insurrection.