Rick Santelli Nails It: Conventional Wisdom on Trade Wars is Horse Hockey (Video)

by John Galt
June 27, 2018 05:40 ET

Due to some family considerations I missed this video yesterday, but by God Rick Santelli on CNBC just hit another home run regarding the so-called trade war (starting at 4:06 mark):

Closing Bell Exchange: Stocks recover losses from CNBC.

So why do I agree with him?

When one listens to the hysteria of the 6 a.m. and 9 a.m. so-called conservative radio talk show hosts they act like it is still 1928. That truly is 100% horse hockey as Mr. Santelli likes to say.

While there is a viable traditional argument against a trade war because of the economic disruptions it could cause, if one steps back, please think about the following:

IF “Conventional Wisdom” is correct, why has the business cycle now been extended to over 10 years, with guarantees of central bank interference to mitigate any major downturns should they begin?

IF “Conventional Wisdom” is correct, why have companies in the last 20 years relocated from the U.S. to Mexico, Mexico to China, China to Pakistan, Pakistan to Bangladesh, etc.? IF free trade is nirvana, why do manufacturers seek the cheapest labor source similar to consumers seeking the lowest prices? Conventional wisdom is 100% incorrect in this case because according to their theory, NAFTA would have ended the relocation party with plants moving to Mexico only. So much for the free traders and multi-national treaty idealists there.

IF “Conventional Wisdom” is correct, the U.S. Dollar should have collapsed in the face of a potential trade war creating a greater inflationary issue. But it has not, and in fact for now is strengthening even further, potentially bringing up comparisons to the Reagan era dollar strength of the 1980’s. This will greatly distort our capital markets but few blathering talking heads take this into consideration as they promote globalist idealism instead of economic reality.

Lastly, if “Conventional Wisdom” is correct, the assumption is that because America will sell fewer soybeans, pork, and other agricultural products to China, American farmers will suffer. This also assumes every other nation on earth will have its citizens stop eating or that there is insufficient demand for lower prices inside the U.S. Since American farmers are receiving anti-capitalist subsidies from the pork barrel known as Washington, D.C., what difference does it make if the farmers sell to African nations, South American nations, or gasp cut prices at home? Like auto manufacturing, there is a put to protect farmers provided by the taxpayer so the drama about reduced exports is total nonsense since the agricultural sector is insured against taking a massive loss.

Conventional wisdom died with the crisis in 2008-2009. Too bad there are way too many people stuck in 1929 and not paying attention to the technological and generational economic transition which is beginning in this era which will redefine the stale science of economics for decades to come. Commentators and economists alike need to quit using the economic and political thinking of the Progressive Era of the 1920’s and 1930’s and learn that this is an entirely new model which has been mistakenly identified with their traditional cut and paste method of historical analysis.

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