Trade War with China

Trump steps on gas pedal and ready for $500 billion tariff. Sounds like he's getting impatient.
China side , from what I read, has tone down the rhetorics and low key, probably drawn out for a lengthy battle, it will be war of attrition, denying Trump any quick victory.

now noticed the tweet





China does not intend to stimulate exports through the currency competitive devaluation, China's foreign ministry spokesman said on Monday, adding that the yuan's exchange rate is largely determined by market forces, and it's normal to see fluctuations

Tam said:

Even if China is buy Treasuries, this can increase the strength of the Dollar --- and ironically negates the effect of the tariffs. This also adds the huge pile of interest the US pays to China.

You really don't want to be dumping Treasuries now. With the stock market low, investors are parking money on Treasuries, and this will make the value of your Treasury holdings go up. But that may also be a good time to sell some of them, bit by bit.

But its not who is going to pick up China, Japan and Russia once they sell US debt. The problem is that no one will.

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If China/Russia/Japan dump the treasuries then the US will make big money on them.

No one will buy them, it means that the discount will be huge and step.

It will make havoc for a short period time on all market, but at the end of that the US will emerge as a winner,practically writing down best part of its international debt.

If there is panic on the market then its time to make big money : )

Hendrik_2000 said:

The firs rule of investment is diversify, diversify. the second rule is is investing for the long term
The third rule is you loose some and you win some but individual lost of win is not important. As long as the agregate investment is a profit

China has wide portfolio of investment Venezuela is just small part of the overall investment.Plus it is not lost some day Venezuela will get a good government and if she can't [pay back then China will own the oil field

No There is other investment right now China is busy building connectivity in central asia . Land port need to built ,railway must be modernized, feeder road need to be built .China is planning for the long term
There is better project that can use dollar that china accumulate other than park it in treasury bill

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99% of the international debt issuance ( the opposite side of the Chinese investment ) is USA+ europe+ australia .
US on its own gives 50-60% of the debt market.

By the BIS the developed countries + offshore countries (that should be nothing else just developing) + international organisations hold 90% of all outstanding debt.

There is NO debt market for the Chinese "savings" outside of the US sphere of influence.

And actually I have a feeling about that the best part of the EU debt issuance is covered by the US debt issuance, so the net outside effect is nothing else just the US trade deficit - EU trade surplus .

If there is no US treasuries then there is nothing else to invest into.

Anlsvrthng said:

If China/Russia/Japan dump the treasuries then the US will make big money on them.

No one will buy them, it means that the discount will be huge and step.

It will make havoc for a short period time on all market, but at the end of that the US will emerge as a winner,practically writing down best part of its international debt.

If there is panic on the market then its time to make big money : )

Click to expand...

Due to tax cuts, the US government tax revenue is lower so it has to make up this up by selling Treasuries. The deficit is now close to $1 trillion each year. The deficit total of $20 trillion is now $21 trillion and growing as we speak. Trump is hoping that the economy will get boosted by the tax cuts, but for the government to actually benefit from the boosted economy, you need the benefits to pilfer down in terms of increased revenue for the middle class, since the Corporations pay LESS taxes to the government. This is why equitable distribution of wealth matters and its not happening in the US.

You have to sell bonds to make up for the deficit. The problem is when people are not buying bonds. In order to make the bonds more attractive, free market et all, you need to raise the interest rates so buyers get a bigger return from buying bonds. But guess what happens, this causes overall lending costs to go up, so businesses that have to borrow money to operate now have to pay more interest, which means less money for investment, wages and taxes. When people park their money on bonds, they are not buying up stock, which is used to generate capital growth for the businesses and the economy. This is how the government competes with the private sector in a not so beneficial way.

Because companies are not going to make money --- triple whammy from trade war, immigration which is a major source of skilled labor and FDI, along with current high costs of fuel, rising interest rates --- they will pay less taxes which means less revenue to the government, which in turns increases the deficit, which means they have to sell more bonds that no one is buying because the Chinese, the Japanese, the Russians and the Europeans are not buying.

For the companies to make money, they will raise their prices, which creates inflation which will slow down consumer spending, which creates another whammy because the companies will make even less money further down the road. Then people are starting to get laid off and businesses gets closed. People need to collect jobless benefits, Fed deficit goes up even further. And before you know it, a major recession is at hand. The recession can slide even further to an all out depression.

China does not have to sell the US Treasuries it owns. It only needs to stop buying from further on allowing the previous ones to just mature. Just not doing anything is already a weapon by itself.

Yesterday at 9:49 PM

Jura said:

now noticed the tweet

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China does not intend to stimulate exports through the currency competitive devaluation, China's foreign ministry spokesman said on Monday, adding that the yuan's exchange rate is largely determined by market forces, and it's normal to see fluctuations

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now
China refutes U.S. allegations of currency manipulation
Xinhua| 2018-07-24 00:51:30

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China on Monday said it has no intention to spur exports through competitive devaluation of its currency, rejecting the United States' accusations of manipulating the exchange rate of the yuan.

"The yuan's exchange rate is mainly determined by market supply and demand," Foreign Ministry Spokesperson Geng Shuang told a press briefing. "It floats in both ways, which means there are ups and downs."

Currently, the good fundamentals of China's economy provide strong support for the exchange rate of the yuan to remain generally stable.

U.S. Treasury Secretary Steven Mnuchin said last week the United States was monitoring the recent weakness in China's currency yuan and would review whether it had been manipulated.

"As for the United States willfully igniting a trade war, China remains resolute and clear in its stance that it does not want a trade war, but is not afraid of and will fight one when necessary," Geng said.

The U.S. has threatened to impose tariffs on more than 500 billion U.S. dollars of goods imported from China.

"Threats and intimidation will never work on China. We are capable of and confident in safeguarding the interests of the Chinese people," said the spokesperson.

He also said, "we advise the United States to remain calm and handle and solve related issues with a rational attitude."

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Fox News publishes an op-ed on the trade war and calls it "economic suicide".

Growing stores of unsold US meat a product of the trade wars.

Tam said:

When people park their money on bonds, they are not buying up stock, which is used to generate capital growth for the businesses and the economy. This is how the government competes with the private sector in a not so beneficial way.

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Just concentrate onto this single point, it showing the dynamism of the "treasury dumping".

First of all, your reasoning ( and this is the basis of the later logical construct) is that there is a finite amount of money chasing investment opportunities, and if there is a mismatch between the two then the interest rate adjust.

So, it was true during the gold backed money, and it is true for say the bitcoin, but otherwise it is a wrong interpretation of the current monetary system.
Actually ,this was the reason of the abolishment of the gold backed money.

The level of money depending solely on the amount of profitable investment. The central bank can issue as much loan as the retail/investment banks wants.

Best example is the current monetary system of USA, Japan since 1990, and generally all war economy in the past.

You have to falsify the above statement to be able to spell doom to the US if China stop to buy / dump treasuries.

So, if say China decide to sell the treasuries then the US central bank can adjust with the interest rate the inflation, and the absorption of the bonds.
The other way should be the discount on the bonds, that is defamatory, so the central bank will avoid that.

So, China will receive a lot of dollars for it bonds, that will have 0 interest, compared to the positive interest of bonds, and both of them will have negative interest compared to the inflation.

So, in short notice china will loose best part (up to 99%) of its investment value in treasuries.

Of course there will be inflation in the USA, and huge demand for workers,and so on, and the dollar will worth way less compared to the yuan than now, but the world trade and monetary system won't be the same like today. But it will be more positive than negative to the USA.

Trump is spending $12 billion in taxpayers' money to save farmers hit by tariffs. That's called not knowing what you're doing in not anticipating retaliation because of Trump's point man Peter Navarro said no country would dare retaliate against US tariffs. It's really amazing how I see so many comments where the sole basis on why people who think the US will win is because Chinese will starve to death not buying US agricultural products so Beijing will have to surrender to US demands. Yeah you can see why Americans are arrogant . They've been taught the US wields the power of life and death in the world and that's a lie by the establishment in order to keep the status quo the same that keeps them in power and make all the money in a democracy.

And don't believe that bull that foreigners selling off their US bonds and treasuries is actually good for the US. If that were the case, why does the US even bother to allow it to happen? The US needs foreigners to buy because the US doesn't have enough money to cover everything they need to spend money on government programs and pork hence why there's a debt. Foreigners holding treasuries compared to US entities is smaller but there's something called panic. If there's a major sell-off, people tend to follow. They don't want to be left with nothing when the government doesn't have the money to pay off. People complain about China buying US treasuries and then they're outraged at talk that China will sell-off because then inflation happens and that can kill the US economy more than tariffs.