Gold's Rules

During the whole post-war period, America’s manufacturing base contracted. China benefited from it; it didn’t cause it. And today only one in twelve American workers works in manufacturing.

Jesus enters Jerusalem. Source: Getty Images

Monday, April 14^th, 2025

Bill Bonner, writing from Youghal, Ireland

‘Would you betray the Son of Man with a kiss?’

--Jesus, to Judas Iscariot

When we left you last week, word had just come that China responded to Trump’s ‘reciprocal’ tariff salvo, with reciprocity of its own. Reuters:

Beijing on Friday increased its tariffs on U.S. imports to 125%, hitting back against U.S. President Donald Trump's decision to hike duties on Chinese goods to 145%, raising the stakes in a trade war that threatens to up-end global supply chains.

The hike comes after the White House kept the pressure on the world's No.2 economy and second-biggest provider of U.S. imports by singling it out for an additional tariff increase, having paused most of the "reciprocal" duties imposed on dozens of other countries.

"The U.S. imposition of abnormally high tariffs on China seriously violates international and economic trade rules, basic economic laws and common sense and is completely unilateral bullying and coercion," [said China's Finance minister.]

The best tactic for trade negotiators seems to be to pucker up and kiss Donald Trump’s derriere. As unpleasant as that must be, it is worth the shekels…or so they believe. But the Chinese, so far, have shown no intention of doing it. They are also considered a threat, because they are the most likely candidate to take America’s place as the world’s leading power.

Yesterday was Palm Sunday. It commemorates Christ’s triumphal entrance into Jerusalem, riding a donkey — a sign of humility and peace. We recalled Rep. Thomas Massie’s formula for US foreign policy: just follow the ‘Golden Rule,’ he said. Do unto others as we would have them do unto us.

In the year of our Lord, 2025, the US jefe doesn’t ride on a donkey. He is our Augustus, the Big Man in Washington. And the Chinese are probably right; even a quickie look at history, shows that neither China nor trade barriers have much to do with America’s loss of domestic manufacturing.

The US was at the peak of its manufacturing glory in the days after WWII. Small wonder. Japan was in smoking cinders — and occupied by the US Army. Germany was a smoldering ruin too — occupied by the US, the UK, France, and the Soviet Union. Britain was pretty much bankrupt. And France was settling scores from years of occupation and collaboration.

It was inevitable that the US share of manufacturing would decline as these nations got back on their feet.

In 1948, approximately one of every three employed Americans was working in a factory. By 1978, only one of every five had a manufacturing job. This decline took place before China had exported a single gadget… before it took the ‘capitalist road’ and 22 years before it joined the World Trade Organization.

In this period — 1948-1978 — another reason for the decline in US manufacturing employment was probably just that fewer hands were needed. More and better machines meant less of a role for human labor. Machines became more powerful… more efficient… and more specialized.

Even in our limited experience, we went from small square bales of hay that we manually tossed onto a hay-wagon and then ricked up in the barn…to large round bales that human hands never touch. They are rolled onto the fields and then picked up by large tractors with telescopic loaders.

After the mid-‘70s came a different period. The US devalued the dollar in 1971 — refusing to pay its debts in gold. And then, it continued to devalue its currency for the next half century. A dollar in 1975 is worth only about 14 cents today — officially. In terms of gold, the decline was even greater. The price of an ounce of gold went from $160 in 1975 to more than $3,000 today. In other words, the dollar lost 94% of its purchasing power.

During the whole post-war period — roughly equal to our lifetimes — America’s manufacturing base contracted. China benefited from it; it didn’t cause it. And today only one in twelve American workers is in manufacturing.

If the US wanted to end its trade deficits…and boost domestic output… it could do so easily. It would simply go back to the ‘Golden Rule.’ An honest, gold-backed dollar would force the feds to balance its federal budget. . Thereafter, Americans couldn’t ‘print’ their way to wealth. They’d have to earn it…by producing things they could sell.

And Thomas Massie’s ‘Golden Rule’ foreign policy would go a long way to making both the trade war and the trade deficit disappear.

Regards,

Bill Bonner