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Can China Dethrone the US Dollar as Global Reserve

Can China Dethrone the US Dollar as Global Reserve

As a result of this ‘trade war’ China has let the yuan slide versus the USD which is a warning to Trump, specifically Mnuchin.

On the US dollar as reserve currency, that is a tough thing to break especially for China since the yuan is not freely convertible. China has renminbi and yuan; one they peg to the dollar and the other is circulated in China. Try converting USD to yuan in Paypal for example?  The option is not there. Payments from the west to china sellers by Paypal (for example) are only in dollars.

It is a complex subject since China is the only foreign nation with a direct link into the US Treasury for purchase of US debt instruments, bypassing the Fed’s crooked relationship with its crooked primary dealers. This is done to manage China’s global trade relationships via the value of its currency which is somewhat pegged to the dollar (even if China and Trump claim otherwise) thus evading Federal Reserve gamesmanship. That’s why Trump messing with China is so dangerous, even if China has few options right now.

As a result of this ‘trade war’ China has let the yuan slide versus the USD which is a warning to Trump, specifically Mnuchin, popularly known as one of the most slippery dealers (IndyMAC and One West) to ever walk the earth (and China knows that). China is hoping that a lower yuan will offset tariffs just as the US has ‘weaponized’ the dollar and has imposed sanctions and tariffs on China. Because the sums are so vast with China holding so much US debt, and because China depends on exports to the west, China is somewhat boxed in.

…click on the above link to read the rest of the article…

The Masses Are Being Conditioned to Ignore the Economic Bubble

The Masses Are Being Conditioned to Ignore the Economic Bubble

economic crash trade war

In the second week of October, after the “partial” U.S.-China trade deal was announced to much fanfare, I made this prediction:

US and Chinese officials rarely waste an opportunity to use trade talk headlines to head-fake markets with false hope. Rumors of a “partial” or tentative trade deal are circulating today, with MORE trade talks in a month or two. In other words, “more trade talks” means there is no deal of any substance and there’s plenty of time for the whole thing to fall apart once again. I give it less than a month. In the meantime, there will be plenty of other distractions for the general public, including the impeachment circus, tariffs against Europe, tensions in Syria, the Brexit mess, etc, etc.

My estimate was incorrect; it took a little over one month for the whole thing to fall apart. That said, I think the primary point remains the same. The trade war is not going to end anytime soon and there is a very good reason why this is the case: It serves the globalist agenda as a perfect distraction for the collapse of the “Everything Bubble” and the launch of the global economic reset into a what the elites call a “new world order”.

But let’s go back for a moment to understand what just happened. A month ago, the trade deal was treated as essentially done. China had partially folded on most of Trump’s demands and Trump was going to pull off a major economic victory just in time for the 2020 election season. The Dow was going to rocket past 30,000 and Trump’s second term was now assured. This was the narrative in the majority of the alternative media, and I have to say, it is sad to see so many otherwise intelligent analysts make such a huge blunder.

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America’s trade policy will end up destroying the dollar

America’s trade policy will end up destroying the dollar 

America’s tariffs against China are already showing signs of undermining the global economy and will create a funding crisis for the Federal Government when it leads to foreigners no longer buying US Treasury debt and selling down their existing dollar holdings. A subversive attempt by America to divert global portfolio investment from China by destabilising Hong Kong will force China into a Plan B to fund its infrastructure plans, which could involve actively selling down her dollar reserves and hastening the introduction of a new crypto-based trade settlement currency.

The US budget deficit will then be financed entirely by monetary inflation. Furthermore, the turn of the credit cycle, made more destructive by trade tariffs, is driving the global and US economy into a slump, further accelerating all indebted governments’ dependency on inflationary financing. The end result is America’s trade policies have been instrumental in hastening the end of the dollar as the world’s reserve currency, ultimately leading to its destruction.

Introduction

For almost two years President Trump has imposed various tariffs on imported Chinese goods. He advertised his tactics as hardball from a tough president who knows the art of the deal, taking his business acumen and applying it to foreign affairs. He even proudly described himself as a tariff man.

His opening gambit was to impose tariffs on some goods to get leverage over the Chinese, with the threat that if they didn’t cooperate, then further tariffs would be introduced. The Chinese declined to be cowed by threats, introducing tariffs themselves on US imports, particularly agricultural products, to bring pressure to bear in turn on President Trump. 

…click on the above link to read the rest of the article…

Central Bankers Are Starting To Lose Control

Central Bankers Are Starting To Lose Control

All is good. The trade war between China and the United States comes to an end, the global economy has weathered the worst, and central banks are making sure that markets continue to go up. This is the scenario currently shaping the consensus.

Kevin Duffy is a battle-proven veteran in the risky business of short selling. He co-founded Bearing Asset Management in 2002. He and his partner were vocal critics of the 2007 credit bubble, successfully shorting many of its most aggressive players including Countrywide Financial and Bear Stearns. Prior to Bearing, Kevin co-founded Lighthouse Capital Management and served as Director of Research from 1988 to 1999. He chronicled the excesses of the Japan and technology bubbles of the late 1980s and the late 1990s. Kevin Duffy bought his first stock at the age of 13. He has a passion for Austrian economics and is the author of the popular Notable and Quotable blog.

Kevin Duffy remains skeptical. The experienced short seller warns that the super easy monetary policy is getting less and less effective. «This year, we’ve had this big sea change in terms of the central banks going back to easing and being more accommodative. Yet, the bond market is basically saying: no more! Easy monetary policy is not having the same stimulative effect as it had in the past», says Duffy.

Although it’s been a brutal year for short sellers, Duffy is convinced his time will come soon. In this in-depth conversation with The Market, he explains why he’s betting against stocks like BlackRock and MSCI – and which names are on his buy list.

Mr. Duffy, investors are in «risk on» mood again: concerns about a global recession are waning, the S&P 500 is at record levels. What’s your take on financial markets?

 …click on the above link to read the rest of the article…

Global Supply Chains Imploding As Quarter Of German Firms Plan To Leave China

Global Supply Chains Imploding As Quarter Of German Firms Plan To Leave China 

The Bussiness Confidence Survey 2019/20 published by the German Chamber of Commerce in China, in cooperation with KPMG in Germany, finds that almost a quarter of German companies operating in China are preparing to relocate production facilities. 

The survey was conducted from late July through mid-September and had 526 member companies out of 2300 respond. Out of the 526 member companies, 23% of the respondents said their factories will be transferred out of China or are contemplating the move.

Among the German companies leaving or actively planning to leave China, about 71% blame increasing labor costs; 33% cited unfavorable policy environment; 25% said the US-China trade war, and 22% said market access barriers. 

Of the respondents who’ve resorted to relocation, 52% have chosen Southeast Asia, 25% India, 19% Central/Eastern Europe, and 17% Western Europe. Only 5% of respondents said they were going to move operations to the US, contrary to President Trump’s claim that companies exiting China will be rushing to the US. 

Respondents said the US-China trade war had created a toxic and “gloomy” business outlook that has contributed to the global synchronized slowdown. 

About 83% of German companies said the trade war has directly or indirectly affected their operations. “Business expectations have dropped to their lowest level in years with only 27% of surveyed German companies expecting to reach or exceed their business targets in 2019,” the survey warned.

Jens Hildebrandt, Executive Director of the German Chamber of Commerce in China, said: “2020 is likely to be characterized by uncertainty, stemming from an unresolved US-China trade dispute related with a decelerating Chinese and global economy.”

German firms also said market access barriers and regulatory hurdles stunted their growth in China, with 66% of firms saying they’ve encountered either direct or indirect market access restrictions.

 …click on the above link to read the rest of the article…

U.S.-China Relations in the Years Ahead: The Trade War Is a Sideshow

U.S.-China Relations in the Years Ahead: The Trade War Is a Sideshow

As President Trump has said many times, we rebuilt China over the past 25 years. No truer words were spoken, but those days are over.

The United States now recognizes China as a strategic and economic rival.

– Vice President Mike Pence during a speech last week at the Woodrow Wilson International Center for Scholars

The truth is that China is a strategic competitor at best that uses coercion and corruption as its tools of statecraft. (Applause.) 

We’ve reconvened “the Quad” – the security talks between Japan, Australia, India and the Untied States that had been dormant for nine years. This will prove very important in the efforts ahead, ensuring that China retains only its proper place in the world.

– Secretary of State Mike Pompeo in a speech last week to the Heritage Foundation

I don’t take the U.S.-China trade war seriously, because I don’t expect a transformative deal to come of it. Specifically, I see the current trade charade as little more than a warmup to a far more serious, unpredictable and dangerous conflict between the U.S. and China in the years ahead.

Last December, in a piece titled Is U.S. Geopolitical Strategy Experiencing a Monumental Shift?, I explained how the U.S. was repositioning its foreign policy to focus on China, and how this would set off a long-lasting and enormously consequential feud between the dominant empire and the emerging power. The post concluded with the following thought:

I’ve now seen enough to seriously consider that we may be entering an entirely new geopolitical environment dominated by vastly increased tensions between the U.S. and China. If so, it will likely last a lot longer than you think as leaders in both China in the U.S. will be looking for a scapegoat as their crony, financialized economies struggle under unpayable debt and unimaginable levels of corruption.

 …click on the above link to read the rest of the article…

Here’s How the New U.S.-China Trade Talks May End

Trade talk
Photo by Flickr.com Kremlin.ru | CC BY | Photoshopped

Here’s How the New U.S.-China Trade Talks May End

With the U.S. and China in the midst of a new round of high level trade talks, this Thursday marks 22 months since tariffs were launched and the trade war began. Far from being “easy to win”, the trade war has lasted far longer than most analysts in the mainstream and alternative media predicted. In past articles, I have warned that the trade war itself is probably not meant to be won at all; rather, it is a massive distraction and a convenient scapegoat as global banks set the implosion of the Everything Bubble in motion. I continue to stand by this assessment, which is why I think it is unlikely that the current talks with China will accomplish much of anything.

This conclusion runs in stark contrast to all the hype we heard in the investment community in September. The way stock markets levitated, one would have thought a deal was assured. Never underestimate the power of blind optimism, I suppose. I believe there are a very limited number of end games to the meeting, none of which will result in an actual “deal”. However, it’s important to understand the dynamics at play here.

First and foremost, if we are to approach the trade war from a mere surface examination, there is really no incentive for China to capitulate to Trump’s demands. There is only one year left until the 2020 elections, and while BOTH economies are certainly seeing a downward plunge, China is hardly crippled by tariffs on exports to the U.S. China can simply bide its time, waiting to see how the U.S. election unfolds. The more unstable the U.S. economy is in 2020, the less likely it will be that Trump will win a second term.

 …click on the above link to read the rest of the article…

Geopolitical Signals Of Global Economic Crisis Abound

Geopolitical Signals Of Global Economic Crisis Abound

As I write this, news feeds are buzzing with questions and confusion over the October US/China trade talks. In September there was a massive propaganda campaign within the mainstream media to push the notion that a deal with China was imminent, which boosted markets otherwise on the verge of a plunge due to a hailstorm of bad financial news. This media campaign also indicated to me that there would be no deal in October – best case, there will be an announcement of “progress” and a temporary pause in tariffs, which will fall apart once again in a month’s time. Worst case scenario, the talks will falter before they ever really begin. Either way, the trade war will continue well into next year.

As I predicted in my article ‘The Ugly Truth About The Trade War’ in September:

“…Every couple of months the trade war deal hype is recycled and every couple of months the markets are hit with renewed disappointment. The latest trade talks are set for Octoberand if they happen at all, it is unlikely they will result in anything of significance. At most, they will be heralded as the “start of a great deal” and both sides will claim “progress was made”, and then, once again, nothing will happen and the conflict will accelerate. You would think people would have figured it out by now, but the investment world learns very slowly and functions solely on blind hope. At the very least, economic analysts are starting to realize that no deal is coming and that the situation is only going to get more tense. In fact, it is designed to get more tense…”

 …click on the above link to read the rest of the article…

The Ugly Truth About The Trade War

The Ugly Truth About The Trade War

This past week was an interesting exercise in false expectations and assumptions. Once again, trade war theatrics were used to stall a stock market plunge as insinuations of a possible “deal” were made by Donald Trump, followed by China’s claim that maybe, just maybe, they would not immediately issue a new round of tariffs right now, but possibly tomorrow, or in a month…

Then, all hell broke loose again when only a few days later both sides jumped into a new round of tariffs leaving markets confused and algo trading computers bewildered, so much so that sometimes they even buy on bad news thinking it’s good news. This is the problem with the Pavlovian response mechanism – You train a dog to salivate at the sound of a bell because he thinks he’s going to get a treat, but then what if you change the bell, or the treat, or the entire dynamic of the process? The dog’s whole world is turned upside down and he curls up in a ball in the corner of the room to make the mental anguish stop.

This is exactly the kind of reaction the globalists are looking for, hence the stop/start insanity of trade discussions, not to mention the dove/hawk behavior of the Federal Reserve. Everything people once thought predictable is being deliberately discombobulated.

Ultimately the circus and the confusion are only products of peoples biases. They want to believe they will get a treat if they act a certain way when certain indicators signal. They want to believe the trade war can be won, or at least that Trump is trying to win. They want to believe that the Fed will save them with a surge of QE.

 …click on the above link to read the rest of the article…

US Slaps New Tariffs On China; One Minute Later China Retaliates

US Slaps New Tariffs On China; One Minute Later China Retaliates

The biggest reason for last week’s torrid stock market rally was rekindled “optimism” that the escalating trade war between the US and China may be on the verge of another ceasefire following phone conversations, fake as they may have been, between the US and Chinese side. This translated into speculation that a new round of tariffs increases slated for this weekend may not take place or be delayed.

However, that did not happen, and with no trade deal in sight, at 12:00am on Sunday, the Trump administration slapped tariffs on $112 billion in Chinese imports, the latest escalation in a trade war that’s ground the global economy to a halt, sent Germany into a recession, and given the market an alibi to keep rising because, wait for it, “a trade deal is imminent.”

Only, it isn’t, and 1 minute later, at 12:01am EDT, China retaliated with higher tariffs being rolled out in stages on a total of about $75 billion of U.S. goods. The target list strikes at the heart of Trump’s political support – factories and farms across the Midwest and South at a time when the U.S. economy is showing signs of slowing down.

The 15% U.S. duty hit consumer goods ranging from footwear and apparel to home textiles and certain technology products like the Apple Watch. A separate batch of about $160 billion in Chinese goods – including laptops and cellphones – will be hit with 15% tariffs on Dec. 15.  China, meanwhile, began applying tariffs of 5 to 10% on U.S. goods ranging from frozen sweet corn and pork liver to bicycle tires on Sunday.

 …click on the above link to read the rest of the article…

Tumbling Yuan Sends Ripples Through Petrochemical Market

Tumbling Yuan Sends Ripples Through Petrochemical Market

Petrochemical industry

The trade war between China and the United States has triggered a global economic slowdown thanks to far-reaching tensions between the world’s two biggest economies. Last Friday China lobbed their most recent retaliation back at the United States by announcing tariffs on an additional $75 billion worth of goods. This is just the most recent counterattack in a now yearlong tit-for-tat spat that has seen both countries confront each other again and again with hard-hitting tariffs (you can see a detailed timeline here) and even culminated in Beijing allowing the Yuan reach its lowest value in years, making Chinese goods cheaper to export and, conversely, making U.S. goods more expensive and therefore less desirable in Chinese markets. 

Because of the far-reaching economic implications of the trade dispute, United States president Donald Trump has been put under a great deal of pressure from global leaders to de-escalate tensions with China. In response, Trump has announced that he will soon begin trade talks with Beijing in order to reach an accord and end the trade war, but the reality is not so simple, especially as the U.S. president seems to be talking out of both sides of his mouth. In a report titled “Trump sends mixed signals on China trade war as pressure mounts to de-escalate” the UK’s Independent points out that, “on Sunday, [President Trump] seemed to express regret over escalating the trade dispute, but the White House later said his only regret was that he didn’t impose even higher tariffs on China.”

Even if Trump does follow through on his public promises to make peace with China, in many sectors of the economy the damage is already done. One of the most recent casualties of the trade war is the Asian petrochemical market, which just hit its lowest profit margin in months.

 …click on the above link to read the rest of the article…

Possible Currency War Would Be A Disaster For Oil

Possible Currency War Would Be A Disaster For Oil

Yuan

Oil prices plunged on Friday after the U.S. and China both announced tariff hikes in tit-for-tat fashion. At the same time, markets opened on a positive note early Monday after President Trump struck a more conciliatory tone. But the respite could be brief.

Global financial markets are completely at the mercy of Trump’s twitter account these days. On Friday, stocks and commodities fell sharply after China announced an increase in tariffs on U.S. goods. In response, Trump announced yet another 5 percent increase in the suite of tariffs on Chinese goods, although, notably, he waited until after financial markets had closed for the week.

Over the weekend at the G-7 Conference in France, Trump sent mixed messages on the trade war, suggesting he had “second thoughts,” with his team subsequently clarifying that his second thoughts regarded his regret he hadn’t hiked tariffs by an even greater amount. Nevertheless, traders took comfort in his comments about wanting to make a deal with China, in addition to his assertion that China had called him up asking for a return to negotiations.

Stocks opened up on a positive note on that news. However, it should be noted that Chinese officials said that they were “not aware of” the phone call that Trump alluded to. When pressed by reporters about the nature of the phone call, Trump said: “I don’t want to talk about calls. We’ve had calls. We’ve had calls at the highest levels.”

If we’ve learned anything over the past few months, it is that these events turn on a dime. The incoherent strategy from the White House, and the complete lack of an official policymaking process, makes it impossible to predict how events will unfold. It is odd then that financial markets were so sanguine at the start of the week.

 …click on the above link to read the rest of the article…

Rabobank: “The US Will Simply Not Allow A New Reserve Currency Without A Fight”

Rabobank: “The US Will Simply Not Allow A New Reserve Currency Without A Fight”

“Peace for our time”

Despite the fact that the German IFO survey was ‘I-ful’, with the official word being that the outlook is “increasingly dire”, and that US core durable goods were -0.4% vs. flat expected, both of which confirm that the real economy is perhaps in real trouble, markets seemed to sigh with relief yesterday. The reason? We have the promise of “peace for our time”. After all, according to the press, US President Trump held out an olive branch to China on trade; and to Iran; and was there perhaps the suggestion of another brunch being offered from Boris Johnson to the EU?

Let’s focus on the US issue first. Nothing we saw or heard yesterday–nothing at all–changes any of the dynamic that we have seen for a long time now. Trump praised Chairman Xi to the skies, and repeated that China wants to make a deal very badly, so much so that they had already called to kick-start talks. Meanwhile, China stated it knew nothing about any such call, and the editor of the Global Times tweeted “Based on what I know, Chinese and US top negotiators didn’t hold phone talks in recent days. The two sides have been keeping contact at technical level, it doesn’t have significance that President Trump suggested. China didn’t change its position. China won’t cave to US pressure.” So very little chance of trade peace for our time. Nonetheless, as usual, the equity market fell for this while the smarter bond market largely didn’t – and neither did CNH.

 …click on the above link to read the rest of the article…

A Perfect Storm Is Brewing For US LNG

A Perfect Storm Is Brewing For US LNG

LNG tanker

That the U.S. energy industry would be among those hardest hit by a full-blown trade war between Washington and Beijing was a no-brainer. Yet the extent of the fallout as the war continues is only becoming evident now, as some companies find it hard to secure the funding for their ambitious LNG projects.

According to the Bank of America Merrill Lynch, a number of companies may delay their final investment decisions on new LNG capacity to next year because of U.S.-Chinese trade tensions. Bloomberg reports these include Tellurian and NextDecade, as well as other companies focused exclusively on LNG.

“We see delays as likely given current pricing headwinds, no resolution yet on the U.S.-China trade war, and minimal contract announcements in recent months,” BofA analysts wrote in a recent note to clients, referring to Tellurian’s US$28-billion Driftwood LNG project in Louisiana.

While the companies themselves are not too talkative when it comes to possible obstacles to the so-called second wave of LNG projects in the U.S., the facts are not encouraging: China has imported no U.S. LNG since March, according to data from ClipperData. Bloomberg data is even gloomier: it suggests no U.S. LNG has made its way into China since February. No wonder, since Beijing first imposed a 10-percent tariff on the commodity and then upped this to 25 percent in retaliation for U.S. tariffs. 

Yet there is another aspect of the trade war that is more damaging to U.S. LNG producers. To secure funding for these projects that typically cost billions, U.S. companies need long-term commitments to convince banks the projects are viable. Chinese buyers were the natural choice for these long-term commitments but this is no longer the case as Chinese investors shun U.S. projects amid the war.

 …click on the above link to read the rest of the article…

Lacalle: A Day Of Reckoning Looms For The Global Economy

Lacalle: A Day Of Reckoning Looms For The Global Economy

European and Asian economic data is deteriorating, says economist and author Daniel Lacalle.

“I’d call right now the day of reckoning,” Lacalle says, in this video excerpt of our soon-to-be released podcast In The Arena.

 “The entire message from mainstream consensus is ‘Yes there was a global slowdown,’ but using the trade war as an excuse.”

Lacalle argues that the global growth slowdown has absolutely nothing to do with the trade war and says the trend in economic data around the world suggests Wall Street estimates for global growth are still too high.

“We’re now in the reality check period,” Lacalle says.

“Now, the risk of recession is starting to build up.”

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