July 10, 2018

As you read this, I’m off to the 11th annual “Freedom Fest” in Las Vegas. I’ve attended all of them as a speaker and panel moderator. Among the most interesting panels I’ll moderate this year is one entitled, “The Assassination of Western Civilization: What’s Causing our Society to Decline?” There are two downbeat assumptions in that title, that society is in decline, and some “assassin” is responsible! It’s not that the conference organizer, Dr Mark Skousen, believes either assumption, but he knows “bad news sells,” so he dreams up these titles to attract large crowds, and I’m sure we’ll have a packed audience.

I’ll let you know how it all goes down in next week’s Growth Mail, but I’ve already heard from one panelist, the renowned economist Deirdre McCloskey, who wrote me, in part: “I reckon I’m going to say that Western Civilization is not declining. Rather the contrary. It is massively successful and spreading.” Having read her latest masterpiece, “Bourgeois Equality,” I know she has evidence to back up her claims.

Every week, friends and associates from college and business send me the latest Doomsday articles and wonder what my answer might be. After 40 years of this, I get tired of trying to talk people off their metaphorical suicidal cliffs, because I know (in musical terms) they’d “rather have the blues” than listen to any peppy song I might offer. Somehow, reading about the world’s troubles sounds serious, thoughtful, academic and “caring,” while looking at the positive realities sounds complacent, superficial, ignorant and “uncaring” for all the suffering that still remains in this imperfect world. I understand those concerns.

Last week, a college friend sent me a June 22 article from The Financial Times, by Edward Luce, entitled, “Donald Trump and the 1930s playbook.” He reminded me that many articles comparing the current malaise to the 1930s have come out recently. I reminded him (since he is my age and knows my history) that I was writing these doomsday articles before Edward Luce was born (in 1968) and that books and articles comparing current events to the 1930s have been going on since the 1960s. For instance, I read books by Doug Casey, Howard Ruff and others in the 1970s predicting another 1930s in the 1980s. Instead, we had “another 1950s” in the 1980s. NOBODY predicted another 1950s coming in the 1980s.

Then, at the end of the 1980s, we had Dr. Ravi Batra’s best-selling “The Great Depression of 1990” and then “The Great Reckoning” (in 1991) about the Depression of the 1990s by James Dale Davidson and William Rees-Mogg, a respected British journalist (like Edward Luce). Instead, we had the most explosive growth decade of the century in the 1990s. Nobody predicted Great Prosperity for the 1990s. Nope, predicting “another 1929” or a “Greater Depression” always sells more books than selling hope.

These books were first published in 1985, 1991 and 1992, respectively, right before a huge bull market surge:

On Friday, somebody sent me a review of “Tailspin,” a new book about “America’s Fifty-Year Fall” and “How to Reverse it,” by Steven Brill, reviewed in the Sunday, July 2, 2018 edition of The New York Times. My first thought was, “Hmmm! A man who thinks America has “fallen” from 1968 ($1 trillion GDP, or $4.5 billion in current dollars) to 2018 ($20 trillion GDP) should probably not be trusted to tell us how to reverse it. (That’s a 50-year 170% increase in real per-capita GDP during America’s “decline.”)

As the reviewer cleverly wrote, “We are living in a golden age of authors telling Americans that we no longer live in a golden age.” I’ve read most of these sour books and can pick them apart, line by line, but who’s listening to me? Most people believe the Doomsday Chorus. According to Gallup, fewer than 40% of surveyed Americans have been “satisfied with the direction of the country” in the last decade. Most Americans (in Pew surveys) think their children will be worse off than them, even though every previous generation of Americans has become better off. We believe what we see, and we mostly see bad news.

Case in Point: Trump’s Tariffs are Not “Smoot Hawley II”

One of the biggest parallels painted by the “this is the 1930s all over again” crowd is that Trump’s new tariffs are like “Smoot-Hawley” all over again, referring to the 1930 tariffs signed by President Herbert Hoover. First off, these tariffs were drafted in 1928 by Congress, hence the bill’s name. Hoover didn’t like them. He called them “vicious, extortionate and obnoxious,” but gave into party pressure to sign it.

Second, and more importantly, when President Trump raises tariffs on China, protecting jobs or lowering our trade deficits is not the end game. President Trump may be even more concerned about China’s long-term record of product piracy and counterfeiting. In 1996, when I was part of an investment newsletter group co-leading 32 subscribers in a tour of “the real China” (primitive and rural one week, in transition to modernity the second week and industrial-coastal the third week), all the way down the Yangtze River from Chongqing to Wuhan and Shanghai, we would see street merchants selling “Disney” or “Apple” products that featured perfect artistic replicas of the brand name but as phony as a bootleg copy of a copy.

Now, 20 years later, fake products with a fake company label are still on the streets of China, but China is also shipping counterfeit products overseas for sale via the Internet. Craig Crosby, founder and editor of The Counterfeit Report, has detected over two million knockoffs on eBay alone. Counterfeit products are now the largest criminal enterprise in the world, netting $1.7 trillion per year, greater than either illicit drugs or human trafficking. The volume is expected to grow to $2.8 trillion by 2022. China and Hong Kong produce almost 90% of these fakes. The Chinese also steal technological secrets from U.S. companies doing business there, with impunity – until now. President Trump is the first President to strike back, after Presidents Clinton, Bush and Obama basically turned a blind eye to this product piracy.

As for tariffs on our allies in the G7 (Canada, Europe and Japan), there have been some severely uneven tariffs, particularly in automobiles, that need addressing. When the President raises tariffs, he is merely raising the subject in a way our allies will hear and respond. Diplomatic discourse has its time and place, but when it comes to money, Trump is a “wartime consigliore” (in Godfather terms) making them an “offer they can’t refuse.” My prediction all along is that this gutsy tariff strategy will bring about fewer and lower tariffs in the end – as measured in this case by the end of Donald Trump’s first term in 2020.

About The Author

Gary Alexander
SENIOR EDITOR

Gary Alexander has been Senior Writer at Navellier since 2009.  He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks.  For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.

Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s.  He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division.  Before that, he covered the economics beat for news magazines. *All content of “Growth Mail” represents the opinion of Gary Alexander*

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