Things didn’t go so well at the ASEAN summit for the US, and as US-media-on-China expert Dennis Etler explains, ”Pence was sent as bad cop, not to offend China per se, but so that Trump could maintain some semblance of good cop.”
Whatever message Pence gave, it didn’t go over to well. China’s answer is simple – trade war? Alright, here’s another $14 billion dollar gash. Let’s recall that back in September we saw China dump billions of dollars of US Treasury holdings, and this move on November 19th was the largest since. This all comes as there’s an out-right trade war between China and the US. The US is nominally still the worlds biggest economy. But when we look at how that’s calculated and, moreover, how that’s projected to change, it’s no wonder that Wall Street and Washington are in a state of total havoc. After yesterday’s major announcement, they had to take counter-measures to stabilize the national economy. .
China can repeat this punitive move, many more times. China is still, after all, the biggest foreign holder of US foreign debt. Still, China holds some $1.15 trillion according to the latest data from the Treasury Department.
Washington is upside down, and its ‘fixes’ will only exacerbate the devaluation of US Treasury bonds. Rather than buy these up to shore up decreased market value, they have instead accelerated the Treasury issuance to avoid potential growth in the federal deficit. This all takes place within a US congressional fight, where Democrats and Republicans have found common cause against Trump’s push to re-orient US policy on both the foreign and domestic fronts.
In an attempt to pressure China and maintain its waning dominance in the face of growing multipolarity, the US has imposed tariffs on $200 billion of Chinese goods. Right after, Beijing pushed back with tariffs on $60 billion of US goods and stopped buying American crude oil. What further set back US designs on the middle-east and central Asia was that this placed Iran in a better position to fill part of the void created by China’s new de facto boycott on American crude.
Representatives from the US and China will meet in Argentina, where they are set to look again at these potentially destabilizing problems in ten days at the G-20 meeting of the world’s developed economies. Beijing is thinking strategically, and has already prepared a set of ‘possible concessions’, none of which will, however, change the general direction that history has taken. Trump in response also struck a tone of reasonableness, saying Friday that he would leave out “four or five” of the big items the US wants.
“China wants to make a deal. They sent a list of things they are willing to do, which is a large list and it is just not acceptable to me yet. But at some point I think that we are doing extremely well with respect to China,” Trump told reporters.
What is clear now is that the global economy has transformed tremendously in the last half-decade. Events have transpired, and the changes are of geometric proportions. The US needs to save face, and it needs to assure investment management firms, at least nominally, that assets are safe – they are not. Therefore, we can conclude that much of what we see today is a charade aimed at buying time, to slow down the collapse of the US empire, which world leaders believe will reduce the chances of war and allow
note: a previous version of this article had the figure listed as $8 billion, and was corrected to $14.