‘We are born into this time and must bravely follow the path to the destined end. There is no other way.’
–Oswald Spengler
As recently as 1999, the US had a budget surplus…debt of only $5.6 trillion…and stocks worth more (in gold and dollar terms) than ever in history. The US was still widely admired. Its federal debt was bought as a monetary reserve all over the world. It wasn’t at war and wasn’t sponsoring major wars or paying for mass murders overseas. It encouraged free trade and, generally, favored the rule of law.
That was probably the apogee for the US…and for Western Civilization. It has been downhill ever since. At least, that’s how it looks to us.
This is not an original point of view. Oswald Spengler foresaw the peak of Western Civilization coming around the year 2000. And even Donald Trump noticed the decline and pledged to turn it around.
And now that we are a quarter of a century into the down cycle, the real questions for us remain the same: how far down will it go…and how will it get there.
Spengler guessed that the top for Western Civilization would be followed by a difficult period of ‘Caesarism’ (which we’ve described as ‘Big Man Government’). Spengler saw Benito Mussolini as an early example of the post-democratic leader.
“Democracy is beautiful in theory,” said Mussolini. “In practice it is a fallacy. You in America will see that some day.” Spengler died in 1936; he never met Donald Trump.
Yesterday, we looked at the way tariffs figure in the big scheme of things. In short, they seem to confirm the ‘declining empire hypothesis.’ Restrictions on trade slow an economy down and make people poorer. But they also nudge it away from civilization itself.
Whether trade is a cause or an effect, we don’t know. But the two seem to go together. And restrictions on trade tend to move a society backwards — making it poorer…but also, like North Korea, less free and less civilized.
Restraining trade seems to be a part of the new world order. The first pitch of the Trump team was that other countries were ‘ripping us off’ (presumably with high tariffs compared to our lower ones). As a matter of fairness, as well as encouraging domestic production, tariffs would be made ‘reciprocal.’
But reciprocity fell by the wayside and the the negotiated deals are leading to higher tariffs, not lower ones. Even countries with which the US has a trade surplus — the UK and Brazil, for example — now face higher US tariffs.
Who pays? The Washington Post:
Tariffs hit U.S. companies hard, but businesses absorb them for now
The Trump administration’s tariffs are hitting companies that do business in the United States. But prices haven’t reflected them yet in many cases.
In earnings reports, multiple companies on Monday and Tuesday blamed tariffs for hurting their bottom lines, including automakers General Motors and Stellantis.
Companies will soon raise prices to protect their margins. Then, consumers will pay.
Meanwhile, the US president continues to threaten even higher tariffs. The Hill:
President Trump recently announced his intent to impose a 200 percent tariff on pharmaceuticals to lure drug manufacturing back to the U.S. This action, if implemented, will come at great cost to millions of Americans already struggling to cover their medical bills and force them deeper into health care debt.
What to make of it? What we make of it is that tariffs have become just another sleazy way to raise taxes and give the Big Man more power. They take us further into the political world…of bullying, bombast and brute force. arms.
Regards,
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Bill Bonner,
For The Daily Reckoning Australia
