China/US Trade Deal Might Change The World!

Economies are complex emergent systems, fundamentally unpredictable. Patterns, however, emerge in between unpredictable events.

Economic fundamentals in the United States are currently strong. Equity markets are at historic highs, the currency is reasonably stable, unemployment is low, and yet inflation seems tame. Good things could continue to unfold.

Negative forecasters are always present. Eventually they will be correct. Economies go up and down. If you constantly predict a downturn, one day you will be right. The question is where is the US economy in the current cycle? Near the end of an upward cycle?

Not according to Larry Kudlow. Mr. Kudlow is Director of The US Economic Council advising President Trump. Mr. Kudlow is also a negotiator in the trade talks currently taking place between The United States and China. While reserved, saying there is still much work to be done, Mr. Kudlow expressed optimism with NEC’s Kudlow on Jobs Report, U.S.-China Trade Talks. In answer to a question about the US economy perhaps being at the end of an upward cycle, Kudlow suggested the strong increase in positive economic metrics beginning in 2017, less than two years ago, could have been the beginning of a cycle.

He could very well be right. Larry also suggested something startling, startling in a good way.

The Trump administration is pressing for changes in some fundamental structures in the way China does business: protection against theft of intellectual property and theft of technical property. The US is also requiring ways to enforce any such agreements. Mr. Kudlow pointed out hijacking technical and intellectual property is an internal problem for China as well, gumming up Chinese productivity. It is also an issue with Chinese trading partners in Asia such as Japan, Korea, Singapore etc. A resolution of such issues opens the possibility of vigorous economic growth within China and with Asian partners as well. A sound trade agreement between the two largest economies in the history of the world invites optimistic visions of an unprecedented world economy.

Could it all go south? Sure! Complex systems are unpredictable and it does not get more complex than this. But I draw my feelings from events I can experience and understand.

I have posted two well-read articles on Quora about the market for condominiums where I now live in Bangkok:

Charlie Hubbard’s answer to Is purchasing a condo in Bangkok a good ivestment idea?

Charlie Hubbard’s answer to Is a condo in Bangkok a good investment?

You do not have to read them. Basically they say there are lots of condo construction projects happening in what looks like an oversold market. I was confused as to why the building boom persists. Recently, I found out.

The Chinese!

Well, that’s an over simplified answer but it’s a big part of my slowly growing, intuitive grasp of economics in South East Asia. I’ve lived in Asia for eight years.

I have coffee most mornings a Kaizan Coffee shop near my home in Wattana, Bangkok. Bo, the coffee shop guy is a very pleasant, hard working Thai man. We’ve become friends. Bo is moving, expanding his shop into the lobby of a large, recently completed, high-rise condominium nearby. This morning I asked Bo if the condo units were selling.

Forty percent have been sold to Chinese investors. Property investors come to Thailand from Singapore and Hong Kong as well. In many of these countries, property values in their large cities are high. Bangkok property represents growth for flight capital, from China especially.

When I was ten years old, twenty-five million Chinese were starving to death in the worst famine in history. Now, a large portion of the Chinese population is seeking foreign investment property. There’s no going back.

I would smile whenever I would hear President Trump refer to Chinese President Xi Jinping as “my good friend”. Trump hyperbole, I thought. Well, apparently The General Secretary of The Communist Party of China; President of The People’s Republic of China, Xi Jinping, shares Mr. Trump’s feelings. In an extraordinary expression of political affection from the typically stoic Mr Jinping, a translator read a letter to Mr. Trump and the American People from the Chinese President on CHINA TRADE DEAL: President Trump Meets With China Vice Premier To Negotiate .

I’m optimistic.