Billionaires Who Don’t Understand Money or Economics – The Trump Plan – Elon’s Cuts – Marginal Impact- China Rising – China Stocks Rising – China Inflation Low – The Best Auto Co Ever? - [02-25-25]

Direct from BOOM Finance and Economics

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BOOM EDITORIAL THIS WEEK

BILLIONAIRES WHO DON’T UNDERSTAND MONEY! ELON’S CUTS ARE NOT REVOLUTIONARY – TRUMP’S ECONOMIC PLAN WILL HAVE MARGINAL IMPACT – IS THIS A LIMITED HANG OUT? – OR IS IT DESIGNED TO LOOK GOOD BUT FAIL?

Last week, BOOM explained that Trump’s economic plan cannot succeed in revolutionising the US economy. This is because the American economy is overwhelmingly based on the provision of services and not on the provision of goods. Increased tariffs on imported goods and lower energy prices will have a marginal impact on the economy as a whole. And any transition to increased domestic manufacturing will take too long to have significant effect. This is no economic revolution.

Tariffs are not (generally) charged on services and Trump has only announced tariff increases on some imported goods. Also, the energy component of services provision is relatively low. So, the plan to increase tariffs on imported goods and to lower energy costs through increased energy production sounds good but it will not, and cannot have a huge effect on the US economy as a whole during Trump’s second term.

ENERGY USE. Energy Use per Person has been falling since 1975. That’s HALF A CENTURY of falling energy usage while the US economy has grown substantially from the expansion of services. This is a very large economy. Any structural change will take a lot of time. It cannot be done overnight.

TARIFFS. US exports annually amount to around US$3tn. US imports annually are almost US $4tn. So the US Trade Deficit is about $1tn and steadily worsening over time (as seen in the Balance of Trade chart over 10 years). The US economy is $27.7tn annually in total goods and services transacted (GDP). Thus, the Trade Deficit is just 3.6% of the total. Fiddling with it simply cannot have a big effect on the total economy.

If increased US tariffs are equally reflected by increased tariffs from other nations, then the overall impact will only have an effect on the Net Trade Deficit of $1tn. Let’s assume a universal/average increased US tariff of 10% on the Trade Deficit (imports). The US Total annual GDP for 2024 was approximately $27.7tn. Thus, that would result in a $100bn effect on the economy as a whole which is equivalent to just 0.36% of the annual GDP.

MANUFACTURING. The other part of the plan is to turn around manufacturing inside the US and “become self-sufficient” in many goods, including oil and gas. It sounds good, but currently, only 1-in-12 American jobs are in manufacturing. If Trump doubled that number to 2-in-12 in a Herculean effort, it would have only a marginal impact on the economy as a whole.

In 2023, manufacturing contributed $2.3tn to the US GDP amounting to 10.2% of total US GDP, measured in chained 2017 dollars, according to BEA data. Let’s put this a different way: 90% of US GDP was NOT involved in manufacturing. This is a staggering fact by itself but increased tariffs on imported goods will increase CPI inflation inside the US, thus reducing Real GDP. So, imported goods may fall, domestically manufactured goods may rise, but the Real GDP (after CPI inflation) may actually FALL. Welcome to the complex world of economics, Donald.

NOW let’s look at the jobs involved. According to the 'Current Population Survey', there were 15.6 million employees in US manufacturing in 2023, representing 9.7% of total US employment. Let’s put this a different way again; 90% of US jobs are NOT involved in manufacturing. There is no way that Trump can double the jobs involved in manufacturing inside the US within his 4-year term. That would take at least 10 years in BOOM’s estimation.

IS THIS A 'LIMITED HANGOUT'? OR IS IT DESIGNED TO FAIL? So, if the Trump economic plan cannot transform the US economy in any dramatic way, then what is the plan’s real purpose? Is it a 'Limited Hangout,' designed to fool the US voters into thinking that their economy will suddenly morph into a better one? A Limited Hangout is where some good news is exposed while still managing to withhold the key and damaging facts of the matter.

Or perhaps the plan has been (nefariously) designed to fail? That would be the most unkind accusation of all and would suggest that what is known as the “Deep State” has had a hand in its design.

MUSK’S SAVINGS – MARGINAL IMPACT. But surely Elon Musk will revolutionise the US economy with his DOGE Department cuts in government expenditures and save the nation from bankruptcy? After all, Elon is a genius, isn’t he? Perhaps not. It’s early days but Musk’s Savings as announced to date are $55bn in the first month of Trump’s Presidency. This figure can be found at the DOGE website under the Header “Savings”. Sounds impressive? Link: https://www.doge.gov/savings

Unfortunately, $55bn is only 5.5% of One Trillion. Therefore, it's only 0.15 % of the Total US Sovereign Treasury Issuance (National “Debt”) of $36tn. If Elon keeps “cutting” at this rate for 12 months, he will have cut US $660bn. That is just 1.8% of the Total US Sovereign Treasury Issuance (“Debt”) of $36tn. To make a dramatic difference, Elon will have to progressively “cut” harder, but much harder. Let’s assume that Elon really gets the chainsaw out and manages to cut US Government Expenditures by $1tn in 12 months. One Trillion is 1,000 Billion. That is just a 2.78% reduction of the Total US Sovereign Treasury Issuance (“Debt”) of $36tn. And if, in his genius, he put the chainsaw into Super Turbo Mode and managed to cut spending by $2tn then that would result in a 5.5% reduction in the “Debt” total, Ho Hum, not very impressive.

We can watch Elon’s “Savings” result every day by looking at the DOGE website. And we can watch the impact on the Total US Sovereign Treasury Issuance (“Debt”) of $36tn by looking at the daily 'Debt-To-The-Penny' figures published at the website produced by the US Treasury Department. Links: https://www.doge.gov/savings and https://fiscaldata.treasury.gov/datasets/debt-to-the-penny/debt-to-the-penny

On January 20, 2025, when Trump was sworn in, the Total “Public Debt” was $36,218,258,403,326.35 - It is now $36,218,812,100,137.31. Despite Elon’s rather dramatic chainsaw of savings to date, the Total of US Sovereign Treasury Issuance has RISEN by more than US$554MM in the last month.

BILLIONAIRES DON’T UNDERSTAND MONEY! It sounds weird but the two billionaires, Trump and Musk, simply do not understand money creation and money destruction in an economy. And they do not understand how and why the nation uses a Budget Deficit. They are making the common mistake of thinking that they are running a household budget.

A National Budget is very different from a household budget. For a start, the US government does NOT go down to the local commercial bank to apply for a bank loan when it needs extra money above taxation revenues. Its Treasury Department Issues 'Treasuries' (i.e. Treasury Securities in the form of T-Bills, T-Notes, and T-Bonds) to willing investors in a contractual arrangement.

The investors in Treasuries do NOT use new money to buy them, they use old money that has been in circulation for some time. And the Government can keep doing this until high inflation breaks out or its currency collapses. However, currency collapse (Hyperinflation) cannot occur inside US borders because there is no alternative currency in circulation and available to switch for transactional settlements. So, the only limitation to the Budget Deficit is high CPI inflation and high Asset Price inflation.

But surely the interest costs on the bonds will crush the American economy eventually? The US government can issue more bonds to cover the cost of interest payments. Old money can then be recirculated to meet those payments. Meanwhile, the size of the economy grows and the Debt-to-GDP Ratio adjusts accordingly. Remember, no fresh new money is created in any of these activities.

BOOM supports Elon’s “efficiency cuts” wholeheartedly but they are not an economic revolution. The US economy is not a household. BOOM wishes Trump well but, as with his first Presidency, he needs better advice. BOOM is waiting for his call.

CHINA STOCKS CONTINUE MOVING UP AS PER BOOM FORECAST. In BOOM’s August 18, 2024 editorial last year, regarding the Chinese stock market, BOOM said this under the Headline; "CHINA STOCK MARKET POISED TO RISE." If BOOM’s analysis is correct, this could be one of the greatest investment opportunities ever. [Ed: Readers should watch closely over the next weeks and months. This is an historic moment. BOOM will report progress from time to time.]

It’s time for another progress report. The charts below of the Shanghai, Hong Kong, and Taiwan stock markets show what has happened. Stock prices have surged higher and appear to be consolidating their gains. BOOM’s forecast was spot on. The Shanghai Stock Composite Index, Daily Chart over 1 year.

The Hong Kong Hang Seng Stock Index — Daily Chart over 1 year. BOOM’s forecast NAILED the Bottom in August last year. Also in Taiwan.

CHINA TRADE SURPLUS IS GROWING

China has a Positive Balance of Trade. Its exports grow faster than its imports and have done so for some years.

BOOM’S SECRET CHINA ECONOMIC INDICATOR. PLEASE NOTE that BOOM’s secret, but highly accurate indicator for the strength of China’s economy, has been climbing steadily since last year.

WESTERN MEDIA KEEPS SAYING THAT CHINA’S ECONOMY IS FRAGILE AND FALSE. The Western mainstream media and the alternative finance “gurus” on the Net are all pushing a “China’s economy is fragile” narrative. Sometimes they throw in the myth that “China depends upon foreign capital”. ALL of these stories are lies at best and, at worst, deliberate propaganda. Or maybe the authors are just fools.

The Western economic “experts” simply cannot rationalise an economy that continues to grow while CPI inflation continues to fall and reach such low levels. Why? Because they simply don’t understand money creation and money supply management in the West, let alone in China. Money supply is the water for the economic garden. It must be carefully managed and the Chinese certainly know how to do that. [AP: inscrutable is an understatement.]

CHINESE BOND PRICES HAVE BEEN RISING FOR SEVEN YEARS WITH VERY LOW CPI INFLATION. Over the last 12 months, China’s Sovereign Bond Yield Curve has fallen right across all maturities but has maintained a positive curve from one-year Maturity Bonds out to 30-year Maturity. Currently, the market derived 10-Year Bond Yield is 1.722%. It hit a low on January 3, at 1.58%. This is an extraordinarily low interest rate.

Yields have risen since then but only marginally. Prices appear trapped in a trading range over the last two months. But it is important to note that the 10-Year Yield has been falling since the January 1, 2018. That is seven straight years of falls that began on the first day of 2018. Coincidence? BOOM does not think so. This is clearly engineered to fall since that date.

In January 2020, China’s annual inflation rate hit a high of 5.4% and has been falling ever since. The rate climbed to 0.5% in January 2025 from 0.1% in December. 0.1% is an extraordinarily low annual CPI inflation rate. The Chinese economy expanded by 5.4% YoY (Year-on-Year) in the 4^th quarter of 2024, accelerating from 4.6% in the third quarter. The Annual GDP Growth rate has averaged around 5% for the last 10 years while CPI inflation has been falling for the last five years. Note that this is a central command economy.

BOOM now expects to see China’s sovereign bond prices (and interest rates) to begin a period of steady consolidation at current levels in a persistent sideways trading range. Economic growth should continue at around 5% and stock prices should continue to rise.

IS THIS THE BEST CAR COMPANY IN THE WORLD, BYD a Chinese miracle? BOOM suggested some time ago that BYD, the Chinese car company, was a force to be reckoned with in the global car industry and that it is a company worth watching closely. Readers who hah bought BYD shares would have been well rewarded if they bought anytime in the last five years.

This is the weekly Share Price chart over three years. Followed by the five Year Chart.

BYDDY — Over 3 Years:

AND - BYDDY — Over 5 Years

Founded in November 1994, BYD is a high-tech company devoted to leveraging technological innovations. After more than 30 years of growth, BYD has played a significant role in a broad range of industries related to electronics, auto, renewable energy, and rail transit. With a focus on energy acquisition, storage, and application, BYD offers comprehensive new energy solutions.

The company is listed on both the Hong Kong Stock Exchange and Shenzhen Stock Exchange and can be bought OTC inside the USA. Its annual revenue in 2023 exceeded RMB 602 billion. That is equivalent to US $83bn. By comparison, Tesla’s annual revenue for 2024 was US$97.7bn.

BYD cars are offered in over 80 countries and in over 400 cities. BYD has developed the Blade Battery and dual-mode hybrid power technology. They boast that the Blade Battery is the only power battery that has safely passed the nail penetration test. The Blade Battery allows BYD HAN EV a range capacity of almost 600km (372 miles), which is to be extended to 800km (434 - 497 miles) in the future. BYD has developed Plug-In Hybrid cars with a range of over 2,000km. The Blade battery carries an ultra-long warranty of eight years or longer, up to one million kilometres (621,371 miles!). It only takes 33 minutes to charge the battery from 10% to 80%, with a maximum instantaneous discharge power of 363kW.

RECORD CAR SALES IN CHINA – 85% DOMESTIC SALES. Car sales in China are at record levels. In the month of December 2024, almost 3.5 million units were sold. This is a 10.5% increase on the sales recorded in the previous December of 2023. At that rate of increase, total production will double in seven years. On January 13, 2025 the China Association of Automobile Manufacturers (CAAM) announced that China produced and sold 31.282 million cars and 31.436 million vehicles in 2024, respectively, a year-on-year increase of 3.7% and 4.5%. In particular, the export volume was 5.859 million vehicles, a year-on-year increase of 19.3%. That is a staggering increase; 15% of the car sales in China go to export markets. This means that 85% are retained for the Chinese domestic market.

THE CHINESE GOVERMENT MUST ENCOURAGE THE CHINESE PEOPLE TO INVEST IN STOCKS. On a number of previous occasions, BOOM has stated that the Chinese Government MUST encourage citizens to buy shares in their companies. Why? The reason is to prevent the ownership of China’s industrial capacity falling into fewer and fewer ownership hands (which would be anathema to Communist ideals).

They should also encourage company Share Buy-back plans. Readers should watch closely for any evidence of this actvity. The Volume of shares traded in BYD have increased significantly over the last 12 months. Volumes have almost doubled in the last month.

LESSONS FOR ELON AND DONALD — THE FUTURE OF CHINA’S ECONOMY. The lessons of good economic management can be learned by looking at China. Governments (in cooperation with their central banks) must manage the supply and distribution of FRESH NEW MONEY into their economy very carefully and with great knowledge, insight and discipline. They must educate and incentivise their workforce. They must ensure good healthcare for all. If these four items are the focus of economic management, then the outcome will be a robust economy.

China has a central bank that understands money supply better than most of the capitalist Western economies. The banking sector has been managed very carefully, especially over the last five years. They have strict capital controls which prevent capital from leaving China. They have a committed and incentivised workforce. The education system is focussed on group achievement and it churns out good engineers.

The Programme for International Student Assessment (PISA) is a global program whereby around 600,000 15-year old students from different countries are put under a two-hour test to gauge their skills and knowledge, mainly in science, reading, and mathematics. PISA test questions don’t gauge memorisation of facts but demand that students draw on real-world problem-solving skills and knowledge.

Since a high ranking on PISA corresponds to economic success, researchers have concluded that PISA is one of the indicators of whether school systems are preparing students for the 21st-century global knowledge economy. US maths scores on PISA have fallen from 483 in 2003 to 465 in 2022, while China’s scores rose from 550 to 591. Even more alarming: only 7% of US students reach advanced maths proficiency, compared to 44% in Singapore and 45% in China. No OECD nation has ever reversed a PISA decline once entrenched, this is a grim omen for America.

The standard of living in China has improved dramatically over the last 20 years. BOOM cannot see anything but a hopeful economic future for China.

AMERICA PLEASE TAKE NOTE

COMING NEXT:

• The Financial Jigsaw, Part 2 (40) Chapter 9 - NWO - The US War Machine (MIC) - Saturday March 1, 2025

• BOOM Global Financial Review, Tuesday, March 4, 2025

In economics, things work until they don’t. Make your conclusions and do research. BOOM does not offer investment advice.

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BANKS DON’T TAKE DEPOSITS, THEY BORROW YOUR MONEY: LOANS CREATE DEPOSITS — this is how almost all new money is created in the economy (by commercial banks making loans). https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy. Watch the short 15-minute video and see Professor Richard Werner brilliantly explaining how global banking systems work.

In 2014, Richard Werner provided the first empirical evidence that banks create credit out of thin air. They do this whenever they issue a loan or, more specifically, purchase a promissory note. This is a walk-through of exactly how they do it.

Many economists are unaware of this and even ignore the banking & finance sectors in their econometric models. Prof Richard Werner explains how things are going now with CBDCs:

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