In Part 1, I described how organic growth is losing its steam, leaving artificial growth as the only method available to stimulate the economy. In Part 2, I discussed how this was not some short term situation, but a return to a historical norm. But how does this affect things today? (Talk about burying the lede!)
The point of the diatribe is that an administration has a strong… nay, a very strong… incentive to create growth. Economies with low growth house restive populations.
Organic growth has begun to creep toward its historic level of zero – once accounting for things like inflation. That is why worker’s wages in many of these countries are stagnant. That is why people are leaving the workforce to accept government programs. That is why the United States as consumer is starting to lose its allure. Other countries are catching up and beginning to stall too.
In steps a President who, from the day he announced his candidacy has been underestimated by a majority of people. President Trump knows nothing if not the importance of self-promotion… of which his is a Master class.
Which leads to the stories coming out today… The Huffington Post (an actual liberal rag if there ever was one… Seriously, both the HuffPo and Fox make me gag if I try to ingest too much of either) calls President Trump’s stance on Iran a “reckless slide towards war”.
Is it? Is it really?
Let us look at the President’s stances so far. He is: 1. Strengthening ties with Russia; 2. Warning our allies about the dangers of contradicting our policies; 3. Rattling sabers in the Middle East.
What do these things have in common?
Quite a bit, actually…
Iran, while generally considered a bunch of a-holes by its allies, is also a member of OPEC. Should we tangle with them, the precedent is that OPEC countries will respond by sanctioning the United States’ supply of oil. Oil is an important part of conflict… hopefully this is an unassailable assertion. For confirmation of this fact, just look to the lengths Axis powers went during World War II to get the stuff.
The #1 non-OPEC producer of oil in the world is… Russia. As you may recall, Russia has a complicated relationship with Middle Eastern countries. The second highest non-OPEC producer of oil in the world is… the United States. The United States consumes, according to the EIA, 19.4 million barrels per day. The United States has the capability to produce almost 10 million barrels per day. Russia has the ability to produce… 10 million barrels per day. Thus, by maintaining social ties with Russia, President Trump keeps the taps open and secures an oil supply sufficient to maintain our current consumption – while at the same time diminishing our need to rely on OPEC countries.
One may argue that this does not help, since there is bound to be an up-tick in demand if Trump goes to war in the Middle East. This is where the second factor comes into play.
By playing hardball with a known ally in Mexico, Trump has fired a shot across the bow to all Latin American and South American nations. You think I’m kidding? See the reaction of those countries here. These countries absolutely feel like the hard line stance taken by the President in Mexico is directed at them all.
Why is this important? Because the largest known oil reserves in the world outside of Saudi Arabia can be found in Venezuela. Venezuela is an often-reluctant member of OPEC. While they will toe the line put down by the offices in Vienna, it is often not happy about doing so. Additionally, that government is thousands of miles away from the other OPEC members, meaning that their support is necessarily limited. It is also heavily reliant on Russia to keep what economy it has functioning. Venezuela also has to have continued investment from the United States of all places to keep order in the country stable. Without it, the country would fall apart within a matter of weeks.
Putting an allied country on notice that the United States will not take any shenanigans in the future, indirectly, is what a master persuader would do to make sure that Venezuela had a strong incentive (if necessary) to break with OPEC and continue to supply the United States with oil. It also puts Mexico on notice, directly, that they need to recapitulate their commitment to our alliance. Two birds, one stone.
But why war? For the same reason as argued in the prior post… War is a method by which a country can artificially create growth… A big enough war will artificially stimulate growth for a remarkably long period of time. Growth is the engine of the United States economy for the last, oh, 160 years or so. Without it, people become disaffected and large swaths of the country become irrelevant.
With growth, especially wartime growth, this all changes. It is only smart to place wartime industries (like car manufacturers) as far from the coast as possible. That makes it tougher for bombers to get them. With those factories come workers. With those workers come dollars. Etc.
Wartime growth also provides a host of jobs… One can never have enough engineers, right? What about computer programmers? Reporters, typists, mechanics, you name the job and a country needs more of them when it’s at war.
What does this do for President Trump? Two things:
- Americans unify in times of crisis… and they unify behind their President. You might have voted for the other guy (or gal)… but screw that, this is war!
- Growth disincentives discontent. You might have been mad before, but now you’re too busy working to read the news much.
I’ll take a moment to say that I am not (yet) a member of the tinfoil hat brigade. I’m not saying that this is what’s happening… I’ll only say that it would be the most compelling use of persuasion imaginable if it were.
But, as I said in the previous post… I’ve been wrong before.