One of the strongest ASEAN geopolitical alliances exists between the U.S. and Japan.  President Trump and Prime Minister Shinzo Abe are not only good friends, but also work well together toward regional goals for a denuclearized Korean peninsula.

Additionally, the U.S-Japan alliance is bolstered by a respectful economic partnership; and the appearance of Secretary Pompeo arriving in Japan to brief Prime Minister Abe on his discussions with the DPRK also highlights the importance of the relationship.

On Tuesday June 12th, 2018, South Carolina MAGA congressional candidate Katie Arrington defeated incumbent Mark Sanford.  On Friday night June 22nd, Mrs Arrington survived a deadly head-on collision in her vehicle; sustaining serious injuries and requiring multiple surgeries.  On July 1st, Katie Arrington sent thanks and prayers from her hospital recovery room.

Incredibly, yesterday candidate Katie Arrington held a news conference in Charleston, her first public appearance since she was critically injured in the auto accident.  She was discharged from the hospital following brief remarks to the media, and will continue her recovery at home.  Many prayers answered.

White House Office of Trade and Manufacturing Policy Director Peter Navarro appeared on Fox Business last night to outline the U.S. position in the ongoing trade reset against communist China.  Almost all of the financial media and economic punditry are intentionally obfuscating the underlying nature of China’s economic model.

China is a communist central government controlled economic system.  Free-market principles do not apply when dealing with China; therefore trade strategies based on ‘free markets’ cannot succeed against the centralized planning of a communist regime.

Secretary of State Mike Pompeo visited North Korea amid the backdrop of the U.S. -vs- China trade confrontation.  The geopolitical economic issues form the structural disconnect between the ongoing U.S. negotiations and the responses from China through their proxy province in North Korea.

Secretary Pompeo debriefs the media shortly before departing the DPRK; and expresses a generally positive disposition about the ongoing talks:

.

However, unnamed officials, likely elements within the central North Korean government who are control agents for Beijing, send a more confrontational message at the conclusion of the meetings:

(AP) North Korea says high-level talks with a U.S. delegation led by Secretary of State Mike Pompeo were “regrettable” and has accused Washington of trying to unilaterally pressure the country into abandoning its nukes.

The statement by an unnamed North Korean Foreign Ministry spokesman on Saturday came hours after Pompeo concluded two days of talks with North Korean officials led by Kim Yong Chol.

The statement says that the United States betrayed the spirit of last month’s summit between President Donald Trump and North Korean leader Kim Jong Un by making unilateral demands on “CVID,” or the complete, verifiable and irreversible denuclearization of North Korea.

It says the outcome of the follow-up talks was “very concerning” because it has led to a “dangerous phase that might rattle our willingness for denuclearization that had been firm.” (AP Link 9:55pm)

How do these different takeaways reconcile?

Keep in mind that Secretary Pompeo was not permitted to meet with Kim Jong-un.  If our ongoing thesis is accurate it is likely Red Dragon (Chairman Xi) is positioning the DPRK for maximum trade and economic leverage.  It would be against Chinese Chairman Xi Jinping’s interests for Pompeo and Kim Jong-un to have a public display of agreement.

Until there is an empirical or factual reason to counter what seems like an obvious geopolitical strategy, we should consider all events through the prism that the primary leadership within the DPRK, the officials controlling Kim, are under the control of China.

The trade confrontation is China’s biggest geopolitical risk.  The primary weapon China holds toward demanding terms from the U.S. would be their ability to change the dynamic in North Korea at any given moment.  From this frame-of-reference things begin to make more sense.

On the surface it appears the U.S. is negotiating terms for a denuclearized North Korea; however, under the surface the bigger issue is the ongoing economic confrontation between the U.S. and China.   The DPRK is Red Dragon leverage.

As we previously shared:

[…]  Consider that Chairman Kim was/is likely put into power not as a linear out-cropping of his familial relationship, but more as a strategy of ongoing Chinese duplicity. Kim Jong-un was seen as easier to control.  Consider the possibility that all of the DPRK officials who carry out the objectives of the ruling North Korean government are factually operating according to the dictates of the hidden Chinese authority.

Within this dynamic Chairman Kim received the scorn of the international community; but was -in reality- merely a figurehead, a false panda face – hiding the true authority behind all of the DPRK policy, and a designed strategy constructed by China.

Consider that by confronting the economic interests of China, President Trump fractured the decades-long ruse, and is now positioned to expose the nature of the Chinese ruling authority within North Korea.   This becomes a stunning paradigm shift; a reality that few could possibly fathom, unless you consider the cunning of Beijing.

Under this scenario, it is adverse to the interest of China for a united, open and democratic Korean peninsula where the North and South are together again.  It would be particularly adverse to Xi’s interests if the U.S., Japan and a united Korea formed any substantive  international alliance.

The best play for China would be to control the outcomes of any unification and position China as the control agent for any united Korea.  This would be critically important if, as I am now increasingly confident, North Korea was/is actually a proxy province of China and has been for decades under the complete -albeit hidden- rule of the Chinese authority.

Under this scenario, Chairman Xi has to play a very careful game of geopolitical cunning; and if at any moment he sees Chairman Kim accepting the rescue of President Trump, Xi will likely move to eliminate Kim and defend his interests quickly.

Imagine the internal stress upon the young Kim Jong-un who has been forced to ride this dragon for almost a decade, and knows his government is not actually his government but rather a governing body with all officials reporting to Beijing.

Imagine you are the next-door-neighbor to an abused child who lives inside the palace of the abuser.  The abuse has been psychological and manipulative upon this child for decades. How do you rescue him?  Additionally, how do you rescue him when the ultimate abuser is the king of all communities, governments, political and legal systems in/around the palace?… and only you know the nature of the dynamic…. (link)

If our overall operating thesis is correct, these are very dangerous times.  Communist China will not give up on a decades-long grand design for economic conquest.  President Trump is confronting that Chinese strategy head-on.

The DPRK officials under the influence of Beijing will use their North Korean position to assist the ruling members of Chairman Xi Jinping.

These are tenuous times, and unfortunately the vast majority of the U.S. media are cheering for President Trump to fail.

President Donald Trump took the opportunity to use the weekly address to discuss his perspective on the next supreme court nominee who is scheduled to be announced Monday July 9th, at 9:00pm.

The Bureau of Labor Statistics presents the latest snapshot of jobs and employment.  According to the BLS data, behind the 213,000 jobs added, the most significant gains all center around growth in durable goods, manufacturing, transportation/distribution and the ancillary business services directly connected to the blue collar sector.

In addition, April was revised up from +159,000 to +175,000, and the change for May was revised up from +223,000 to +244,000. With these revisions, employment gains in April and May combined were 37,000 more than previously reported.

In the macro-review things are looking great; however, when you go into the micro-review you discover things are even better, they are MAGAnificent.

To understand what is happening we must all remember the Trump MAGAnomic policies are geared toward enhancing the creation of “goods”; the production of physical “stuff”; the manufacturing and durable good sector; or put another way: Main Street/Blue Collar work.   MAGAnomic policy is geared toward expanding the production base of the U.S. economy.  Therefore all majority benefit will be necessarily attached to those workers and industries that are part of the expanding production base.

Blue-collar trade jobs are exploding bigly; and with that MAGA development the work hours and earnings of those who participate within the trade-production processes are showing significant gains.  Work hours continue expanding and the wage rates within the MAGA-trades are also showing the most substantive gains. (Table B-2, and Table B-3)

However, with 30 years of economic policy which diminished the blue-collar-trade value, the largest portion of the U.S. workforce shifted away from trades, and/or the production of durable goods.  As a consequence the non-trade driven (investment economy or service economy) is full of workers educated in pre-elizabethan poetry, arts and useless humanities (See Table B-1 and compare year-to-year).   The non-trade-skilled-workers are plentiful as bank tellers, retail workers, data entry, etc. and their abundance is keeping the macro-view of wage growth artificially skewed.

Wages, hours worked and benefits for those participating in the production economy (the minority number; ie blue collar) are gaining at a much higher rate than wages and hours worked by employees outside of the production economy (the majority number). In the aggregate this gives the artificial view that wages and hours worked are not expanding at the same rate as the overall economy.  This is a mistaken perspective confounding the majority of the economic punditry.   Remember, we are in the space between two economic engines: A Wall Street engine, and A Main Street engine.

The economic fuel, the MAGA policy feeding the expanding economy, is being poured into the Main Street engine; the production economy.  The majority benefit from the Trump policy shift is being felt by anyone and everyone attached to the production economy.

Those workers who are attached to the Wall Street economic are not gaining the same level of benefit; nor will they for the next two to four years.  The workers inside the production economy will continue to experience the majority of the economic and financial benefit for the foreseeable future….. we’ve got decades of diminished economic activity to make up for.

Keep in mind, at a 30,000 ft overview, all of the current MAGA investment is pouring into plants and infrastructure.  When all of those production facilities start coming on line, approximately another year or two, they start generating even more jobs toward the finished goods each plant and facility will then provide.   More workers are then pulled away from the Wall Street economy and into the Main Street economy.  See how that works?

[In that ‘on-line production phase’, the *overall* wages then begin to rise; because the production worker base is expanded.]

Right now all of the trade jobs, and transportation (truck drivers etc) attached to the trade jobs, are at capacity.  Every raw material producer, miner, logger, and/or fabrication job professional: pipe-fitter, brick-layer, mason, welder, engineer, journeyman or apprentice therein; can make buckets of money with virtually unlimited work hours and overtime for those who can work with their hands and tools.

This is the MAGA economy; knowing how to use a pair of metal snips is WAY more valuable than a degree in gender studies.  Teach a Starbucks barista how to drive a fork-lift or operate a machinist lathe and they can increase their wages exponentially.

(Via CNN) Businesses added 213,000 jobs to their payrolls in June, another strong month of gains. Employers kept hiring even as fears grew of a global trade war. The economy has added jobs every month for almost eight years, the longest streak on record.

The unemployment rate inched up to 4%, the first increase in almost a year. But even that reflected a healthy economy: It rose because more than 600,000 Americans joined the work force. The job market is so good, many people who had previously given up looking are starting again.

“It’s a good thing. There are more people coming into the labor force,” said Satyam Panday, senior economist at S&P Global Ratings. “It indicates that we have more labor market slack.”

New entrants, including blue-collar workers and teenagers, shouldn’t have much trouble finding a job. There are more openings right now than unemployed workers, leading businesses to expand hiring to historically disadvantaged groups.  (read more)

Bureau of Labor Statistics DATA here.

Total nonfarm payroll employment increased by 213,000 in June and has grown by 2.4 million over the last 12 months. Over the month, job gains occurred in professional and business services, manufacturing, and health care, while employment in retail trade declined. (See table B-1.)

Employment in professional and business services increased by 50,000 in June and has risen by 521,000 over the year.

Manufacturing added 36,000 jobs in June. Durable goods manufacturing accounted for nearly all of the increase, including job gains in fabricated metal products (+7,000), computer and electronic products (+5,000), and primary metals (+3,000). Motor vehicles and parts also added jobs over the month (+12,000), after declining by 8,000 in May. Over the past year, manufacturing has added 285,000 jobs.

Employment in health care rose by 25,000 in June and has increased by 309,000 over the year. Hospitals added 11,000 jobs over the month, and employment in ambulatory health care services continued to trend up (+14,000).

Construction employment continued to trend up in June (+13,000) and has increased by 282,000 over the year.

Mining employment continued on an upward trend in June (+5,000). The industry has added 95,000 jobs since a recent low point in October 2016, almost entirely in support activities for mining.

In June, retail trade lost 22,000 jobs, largely offsetting a gain in May (+25,000).

Employment showed little or no change over the month in other major industries, including wholesale trade, transportation and warehousing, information, financial activities, leisure and hospitality, and government.

The average workweek for all employees on private nonfarm payrolls was unchanged at 34.5 hours in June. In manufacturing, the workweek edged up by 0.1 hour to 40.9 hours, and overtime edged up by 0.1 hour to 3.5 hours. (link)

Now, let’s wait to see what Canada’s results show.   D’0h.

For more than three decades all U.S. economic policy has been elevating Wall Street and diminishing Main Street. As a result blue-collar workers have not had wage gains keeping up with inflation for over 30 years…. Then came the era of Trump.

– “Walking in a Winner Wonderland” –

More than two years ago CTH began discussing the ramifications to a new emphasis on the economy outlined as a possibility of candidate Donald Trump’s economic policy outlook. Within the overall discussion we walked through the anticipated changes possible if A.) Trump won the election, and B.) Trump began instituting Main Street economic policy ahead of Wall Street policy (the past 30+ years).

We discussed the new dimension that would occur between two economic engines (Main Street -vs- Wall Street) as three decades of policy shifted. CTH outlined statistical and measurable KPI’s that would become visible in the space between the policy shifts.

Part of those discussions focused on energy costs, product costs (we explained how inflation would be weird), and importantly, wage rates. It takes several months of policy emphasis (actual outcomes), before the labor market wage rates would grow. We anticipated seeing that impact in Q2 of 2018, which is April-June 2018.  Well:

(Via CNBC) […] The Bureau of Labor Statistics reported that April closed with 6.7 million job openings. May ended with just over 6 million people the BLS classifies as unemployed, continuing a trend this year that has seen openings eclipse the labor pool for the first time. At some point that gap will have to close. Economists expect that employers are going to have to start doing more to entice workers, likely through pay raises, training and other incentives.

“Pressure is building for employers, and both hard data and anecdotal reports indicate that wage pressures are building,” Jim Baird, chief investment officer at Plante Moran Financial Advisors, said in a note. “With the economy still humming, employers are able to justify stronger wage increases to retain or attract talent, but it’s becoming a more challenging proposition.”

Most inflation measures are at 2 percent or more now, and are likely to continue rising. Companies are reporting record profits, but could find themselves constrained by a double-short of inflation, both from wages and rising costs due to escalating trade tensions and tariffs between the U.S. and its trading partners.

“How much might rising labor costs chew into corporate profits? How much will be passed through to customers in the form of higher prices? That remains to be seen,” Baird said. “Rising labor costs will boost take home pay, but we’re also all likely to see the effect in rising prices for goods and services.”

Those are all issues the Federal Reserve will have to weigh as well.  (read more)

What’s predictably fun to watch is how leading economists and national economic influence agents continue to be perplexed as we flow through the space between these two economic engines. Deep inside this new dimension, which will last for approximately 24 months, the control agents within the Fed cannot figure out why inflation remains low, yet the economy is heating up.

They really don’t get it.

They don’t get it because they have no reference points.

The economic models of the entire last generation+ are based on the assumptions of continuing globalist economics which advances, and has advanced, the interest of Wall Street over Main Street.  They were driving a “service-driven economy” message.

The investing class economy, ie. another name for a ‘service-driven economy’, has been the only source of historic reference for approximately three decades. These talking heads convinced themselves that a “service driven economy” was the ONLY economy ever possible for the U.S. in the future.

Back in January 2017 Deutsche Bank began thinking about it, applying new models, trying to conceptualize and quantify MAGAnomics, and trying to walk out the potential ramifications.  They began talking about Trump doubling the U.S. GDP growth rate when all U.S. investment groups couldn’t yet fathom the possibility.

It’s like waking up on Christmas morning every day to see the pontificating Fed struggling to quantify analysis of their surrounding reality based on flawed assumptions. They simply have no understanding of what happens within the new dimension.

Monetary policy, Fed control over the economy, is disconnected and will stay that way for approximately another 12-14 months, until Main Street regains full operational strength –and– economic parity is achieved.

As we have continued to share, CTH believes the paycheck-to-paycheck working middle-class are going to see a considerable rise in wages and standard of living.  How high can wages rise?… that depends on the pressure; and right now the pressure is massive.  I’m not going to dismiss the possibility we could see 10 to 20% increases in year-over-year wage growth in multiple economic sectors.

Winnamins.  We’ll need lots of them…

Forget minimum wage laws, they are inconsequential conversations when measured against the reality of how quickly wages rise in a free, fair, unregulated and growing economy.

Seriously, with full measure of optimism and appreciation – and tears of thankfulness that we are alive to experience it – these are exceptional times.