The Road to War: China vs the US

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In 2016 Steve Bannon, President Donald Trump’s former chief strategist, declared that there was no doubt, in his mind, that the US would go to war with China in the South China Sea in the next five to 10 years.

A US-Chinese military conflict would be on top of a vow by Trump in his inaugural presidential address, to not only take on radical Islamic terrorism but to “eradicate it from the face of the Earth.” This would be done by building up America’s already supreme military. “Our military dominance must be unquestioned,” the billionaire businessman, who now controlled the most powerful political office in the world, declared in his first address to the nation.

A year and a half after that speech, the United States is not at war with China, but its economic saber-rattling is arguably the beginning of a confrontation between the world’s largest and second-largest economies. Trump’s tariff threats against not only China but Europe, Canada, Mexico and its other trade partners, are also symbolic of a shift in US foreign policy towards a more isolationist stance – one that may not strictly be due to Trump’s belligerent personality. This article will get into the antecedents of this economic and military showdown and point the way to some possible future scenarios, including a war in space. Continue reading

Leaked Chinese Memo Warns Of “Thucydides Trap” With US, “War Is Unavoidable”

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A series of leaked internal documents reveal that China’s military reforms are aimed at allowing Beijing to “manage a crisis, contain a conflict, win a war” and overtake the United States in military strength, according to the Express.

The leaked documents were published by the Central Military Commission in February for the purpose of spreading President Xi Jinping’s “thought on strengthening the armed forces”.

If the reforms go ahead, they will lead to heightened tensions with China’s neighbouring countries, including Japan, in the East and South China Seas and the US. –Express Continue reading

Trade war threats get real as US and China impose tariffs

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Donald Trump has turned his threats of a trade war into reality. (Photo: AP)

 

US President Donald Trump fired the biggest shot yet in the global trade war by imposing tariffs on $US34 billion ($46 billion) of Chinese imports. China immediately said it would be forced to retaliate.

The duties on Chinese goods started at 12:01 am Friday in Washington (2:01 pm AEST), which was just after midday in China. Another $US16 billion of goods could follow in two weeks, Trump earlier told reporters, before suggesting the final total could eventually reach $US550 billion, a figure that exceeds all of US goods imports from China in 2017.

US customs officials will begin collecting an additional 25 per cent tariff on imports from China of goods ranging from farming plows to semiconductors and airplane parts. China’s officials have previously said they would respond by imposing higher levies on goods ranging from American soybeans to pork, which may in turn prompt Trump to raise trade barriers even higher.

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Eurocracy

All roads continue to lead to Berlin, the powerhouse that runs and dictates Europe’s future. In this case, Berlin is spearheading an effort to keep Italy subjugated before an economic crisis (it’s already capitalizing off of) gets politically out of hand as it did in Greece, which is now a German vassal state. It’s Germany’s goal to create a United States of Europe and economic levers are but one tactic in harmonizing Europe how it sees fit in achieving that end.

 

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ROME/BERLIN (Own report) – Following massive complaints from Germany, Italy’s President Sergio Mattarella blocked a euroskeptic from becoming his country’s finance minister, appointing an IMF man – favored by Berlin – to be prime minister. The democratically elected 5-Star Movement (M5S) and the far-right Lega Nord majority’s opportunity to form a government was thereby denied. Euroskeptic Paolo Savona, a renowned career economist, was rejected because he could not have insured the maintenance of the EU’s common currency. Under his administration, resistance to Berlin’s austerity dictate could have been expected, whereas the newly appointed Prime Minster Carlo Cottarelli passed the test a few years ago as the Rome government’s austerity commissioner (“Mr. Scissors”). Savona’s nomination is the result of Italy’s growing euroskepticism, which, in the meantime, is also shared by other economists. “Germany profits, Italy loses” through the introduction of the euro, concludes Savona’s alternative candidate to the post of finance minister.

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US cannot stop China’s innovation advancements

It would appear that the US is seriously worried about China’s technological advancements. Fearing the loss of the last comparative advantage over the Asian superpower has caused a genuine concern over national defense and competitiveness among America’s ruling elite.

The US using every possible means to curb Asia’s technological rise, including the banning of sales of essential chips to ZTE for seven years, invoking Section 301 of the Trade Act to investigate China’s “unfair trade practices” and barring investment in the information-technology sector. The Donald Trump administration’s target might be the Asian power’s “Made in China 2025”, a strategy meant to make China self-sufficient in an array of technologies.

The 301 investigation was meant to slow down China’s technological advancements by imposing stiff tariffs on a host of Chinese imports and barring the sales of US technology to Chinese firms. In addition, the anti-China faction of the US Congress and the Trump administration have barred Chinese investment in technology sectors. Continue reading

U.S. Hints at China Truce as World Warns of Trade-War Threat

Mnuchin speaks during a briefing at the IMF spring meetings April 21. Photographer: Andrew Harrer/Bloomberg

 

  • Treasury’s Mnuchin considers China trip amid trade dispute
  • China’s Commerce Ministry confirms U.S. has requested visit

U.S. Treasury Secretary Steven Mnuchin said he’s considering a trip to China amid a trade dispute with Beijing that finance chiefs warn could derail the global economic upswing.

Mnuchin said he’s “cautiously optimistic” of reaching an agreement with China that bridges their differences over trade. Continue reading

Turkey Will Repatriate All Gold From The US In Attempt To Ditch The Dollar

 

After VenezuelaGermanyAustria and the Netherlands prudently repatriated a substantial portion (if not all) of their physical gold held at the NY Fed or other western central banks in recent years, this morning Turkey also announced that it has decided to repatriate all its gold stored in the US Federal Reserve and deliver it to the Istanbul Stock Exchange, according to reports in Turkey’s Yeni Safak. It won’t be the first time Turkey has asked the NY Fed to ship the country’s gold back: in recent years, Turkey repatriated 220 tons of gold from abroad, of which 28.7 tons was brought back from the US last year.

According to the latest IMF data, Turkey’s gold reserves are estimated at 591 tons, worth just over $23 billion. This makes Ankara the 11th largest gold holder, behind the Netherlands and ahead of India. Continue reading

America’s “Actual” GDP: The Shocking Truth

 

Saturday last we offended the pieties.

We reckoned that democracies — being shortsighted — tend toward vast accumulations of debt.

In response, reader Tom B. dealt with us as follows:

The committed ignorance of pseudointellectual arrogance and their refusal to take an economics class on the uses of the FIAT dollar is stunning! It’s the reason Warren Buffet [sic] smiles every time “financial experts” demagogue debt!

Congrats, Daily Reckoning, you’re consistently ignorant!

It is with high honor that we accept Tom’s congratulations.

True consistency is a rare feat in this world… even if consistently ignorant. Continue reading

Turkey Will Be Ground Zero in the Next Global Debt Crisis

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Turkey is a beautiful country with a rich history including Greek, Roman and Muslim influences that make it one of the most fascinating places on Earth. It is literally a bridge between East and West: The mile-long Bosporus Bridge just north of Istanbul connects Europe and Asia across the Bosporus Strait.

Turkey has been a magnet for direct foreign investment from abroad and dollar-denominated loans by international banks to local enterprises. This investment enthusiasm is understandable given Turkey’s well-educated population of 83 million and its rank as the 17th-largest economy in the world, with a GDP of just under $1 trillion. Continue reading

Here Is The IMF’s Global Financial Crash Scenario

 

Hidden almost all the way in the end of the first chapter of the IMF’s latest Financial Stability Report, is a surprisingly candid discussion on the topic of whether “Rising Medium-Term Vulnerabilities Could Derail the Global Recovery”, which is a politically correct way of saying is the financial system on the verge of crashing.

In the section also called “Global Financial Dislocation Scenario” because “crash” sounds just a little too pedestrian, the IMF uses a DSGE model to project the current global financial sitution, and ominously admits that “concerns about a continuing buildup in debt loads and overstretched asset valuations could have global economic repercussions” and – in modeling out the next crash, pardon “dislocation” – the IMF conducts a “scenario analysis” to illustrate how a repricing of risks could “lead to a rise in credit spreads and a fall in capital market and housing prices, derailing the economic recovery and undermining financial stability.” Continue reading

China Takes Aim At The Petrodollar

 

China continues to pursue its ambitious plan to make its currency—the yuan—more international.

The world’s top crude oil importer and key oil demand growth driver is now determined to get as many oil exporters as possible on board with accepting yuan payments for their oil.

China is now trying to persuade OPEC’s kingpin and biggest exporter, Saudi Arabia, to start accepting yuan for its crude oil. If the Chinese succeed, other oil exporters could follow suit and abandon the U.S. dollar as the world’s reserve currency. Pulling oil trade out of U.S. dollars would lead to decreased demand for U.S. securities across the board, Carl Weinberg, chief economist and managing director at High Frequency Economics, tells CNBC. Weinberg believes that the Chinese will “compel” the Saudis to accept to trade oil in yuan.

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Schäuble Warns of Coming Economic Crisis

 

In his farewell interview for the Financial Times, Federal Minister of Finance Wolfgang Schäuble warned of a new global financial crisis predicated upon the Quantity of Money theory that the central banks had pumped trillions of dollars into the financial system that is creating a risk of “new bubbles”.  Indeed, many just do not comprehend what is going on and are blaming the new highs in share markets on concerns about the increased risks from the accumulation of more and more liquidity and the growth of public and private debt. Continue reading

Dutch Central Bank Warns Of Market Calm Before The Storm

 

With one foot out of the door of Germany’s finance ministry, the former head of the German economy, Wolfgang Schäuble, 75, delivered a fire and brimstone warning over the weekend, telling the FT in an interview that there was a danger of “new bubbles” forming due to the trillions of dollars that central banks have pumped into markets. Schäuble also warned of risks to stability in the eurozone, particularly those posed by bank balance sheets burdened by the post-crisis legacy of non-performing loans, something we warned about since 2012, and an issue which remains largely unresolved.

Taking a broad swipe at the current financial regime – which he helped design – Schauble warned that the world was in danger of “encouraging new bubbles to form”. Continue reading

Austerity and Secession

BERLIN/MADRID (Own report) – The escalating Catalan secessionist conflict is upsetting Spain, a country hard hit by Berlin’s austerity dictate. Spain – occasionally praised in German media as a showcase for an alleged successful austerity policy – is still confronted with enormous social and economic problems, in spite of a modest economic growth. Unemployment and poverty remain at high levels. Crisis policies over the past few years have also increased the economic gap between Spain and the euro zone’s centers of prosperity. One still cannot speak of debt reduction – the official objective of Germany’s austerity policy within the EU. The poor economic situation, the high debt burden level and the distribution of federal and regional debts are fueling Catalonia’s secessionist conflict.

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Fresh Wind Down the Silk Road (I)

BERLIN/TASHKENT (Own report) – To secure its influence in Central Asia in rivalry to Russia and China, Berlin is taking new initiatives toward Uzbekistan, the most populous country in the region. Among the five post-Soviet Central Asian countries, Uzbekistan has been Germany’s key partner for the past 25 years, even hosting a Bundeswehr base over an extended period of time. Now the German government seeks to reinforce it position in Uzbekistan by expanding economic relations. Uzbek President Shavkat Mirziyoyev, in office since one year, is initiating a neo-liberal policy in his country. At the same time, Russia’s rise in influence in the economic and military sectors, alongside China’s greatly enhanced economic advances has put Germany under pressure. If Germany does not want to lose ground in Central Asia, it must act quickly.

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