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Listen to my view on meaning of ‘currency manipulation’ by China vs. emerging currency war, global economic slowdown, and Trump trade policy. Why Trump, not China, is manipulating currencies and provoking a currency war as latest stage in evolving US-China ‘economic’ war’. China’s ‘shot across the bow’ to Trump tariff hikes. Trump tariff war driving business investment collapse, pushing US and global economies into recession. For 20 minute discussion and debate,

GO TO:

https://drive.google.com/file/d/1CoKgJea10HBUDZVoqGjmdbhhRz9C1TdN/view

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Listen to my August 2 ‘Alternative Visions’ radio show discussion of last week’s Fed rate cut and Trump tariff hike announcements and their fall out. The show also addresses my prediction that both fiscal and monetary policies will have little effect at stimulus in the next recession, and why. (Check out my tweets daily for updates to the trade and Fed, and other, economic events at @drjackrasmus.)

    TO Listen Go To:

http://alternativevisions.podbean.com

    SHOW ANNOUNCEMENT

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Dr. Rasmus reviews the two major events of this past week: the Fed’s first rate cut since 2009 and Trump’s announcement of 10% more (maybe 25%) on remaining $300B of China imports to US. How the two announcements are related. The response of markets and investors to the Fed cut + the response of China to Trump’s latest trade tantrum. Why the Fed cut will have little to no effect on the real economy and investment and won’t stop the US economic slowdown. Why it also has had a negative effect on financial markets. Trump’s next moves vs. Powell and the Fed. The likely responses of China, as the US and China continue to slip from a tariff spat to a full blow economic war. No trade deal in 2019 but possible in 2020 as US and global economy slip toward recession. The bigger consequences: why fiscal and monetary policy were once tools used to stabilize the economy (per mainstream economics) but now have been neutralized after having been used since 2008 as means to redistribute income to corporations, investors and wealthy 1%. What are consequences for next recession around the corner?

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Over this weekend, China’s Yuan currency broke out of its band and devalued to more than 7 to $1. At the same time China announced it would not purchase more US agricultural goods. The Trump-US Neocon trade strategy has just imploded. As this writer has been predicting, the threshold has now been passed, from a tariff-trade war to a broader economic war between the US and China where other tactics and measures are now being implemented.

Trump will no doubt declare that China is manipulating its currency. A devaluation of the Yuan has the effect of negating Trump tariffs imposed on China. But China isn’t manipulating its currency. Manipulation is defined as entering global money markets to buy and/or sell one’s currency in exchange for dollars (the global trading currency) in order to influence the price (exchange rate) of one’s currency in relation to the dollar. But China is not doing that, so it’s not manipulating. What’s happening is the US dollar is rising in value (or expected to) and that rise in effect lowers the value of the Yuan. The same is happening to other currencies as well,as the dollar rises. Why is the dollar then rising? There’s a global stampede to safety and that means buying US Treasuries–which are now in freefall in terms of interest rates (and escalating in terms of price). Prices from one year or even less, to 10 and 30 year Treasuries are accelerating. But to buy Treasuries, foreign investors must sell their currencies and buy dollars before buying Treasuries. That escalating demand for dollars is what drives up the value of the dollar, which in turn drives down the value–i.e. devalues-the Yuan in relation to the dollar.

In other words, the slowing global economy which is being driven by the Trump trade wars is what is causing the flight to the dollar and to the safe haven of US Treasuries. Trump’s policies are at the heart of the global slowdown (already in progress due to fundamental forces stalling investment and growth). That slowdown is what’s driving the dollar and in turn lowering the Yuan. Trump policies are ‘manipulating’ the Yuan.

China is of course allowing the devaluation to occur. Previously, it was entering money markets to buy Yuan in order to keep it from devaluing. Now it’s just allowing the process to occur. This is China’s response to Trump’s imposing an additional 10% tariffs on $300 billion of China imports last week. It signals that the ‘trade’ war (now becoming an economic war) has moved beyond tariffs.

With Trump’s recent actions, and China’s now response, the potential for a trade agreement in 2019 looks even more unlikely than before.

What will Trump now do? If he remains true to his past behavior when bargaining partners stand up to him, he’ll try to find a way to ‘up the ante’ as they say, and take additional action. He could step up his attack on Huawei and on other China corporations’ partnerships and investments in the US. China will in turn impose restrictions on US corporations doing business in China (i.e. more licensing, more customs inspections, and imposing more non-tariff barriers). It could unleash an anti-American goods boycott in China. It could reduce the export supply of critical ‘rare earths’ it has. It could suspend its previous decision to allow US corporations doing business in China to have a 51% ownership of those operations. And then it has its ‘nuclear options’, as they say: to cut back sharply or cease purchasing US Treasuries and thus recycling US dollars back to the US. Should that happen, the US government would have to borrow more from other sources to offset its annual budget deficit. That would raise the national debt annually even faster than it has been growing–now more than $22 trillion and projected now to rise more than $1 trillion this year. Should recession occur, the deficits and debt could rise as much as $1.7 trillion, according to the US Congressional Budget Office, CBO, research arm.

But with demand for dollars to buy Treasuries surging, the US Treasury and Fed would have more difficulty selling Treasuries, equal to China’s decline of purchases, given that Treasury prices are escalating and interest rates falling.

In short, the US-China trade war, the slowing global economy (now about to spill over to the US economy), the US budget deficit, and Fed interest rates are all inter-related. Trump policies are creating economic havoc on all these fronts.

What are some of the likely responses therefore to the China responses to Trump’s hardball strategy-driven by US neocons since May?

The neocons will have attained their goal, which has always been to scuttle negotiations with China unless the latter capitulated on the technology issue. Behind the tariffs, behind the trade war, has always been the war over next generation technologies (cybersecurity, 5G, and AI). It’s now clear that China will not capitulate, so no trade deal is possible so long as the US neocons remain in control of the trade negotiations which, at this point, they still do. The neocons will now use China’s strong response to Trump’s latest tariffs to convince Trump to take an even harder line against China corporations in the US and abroad with obsequious US allies like the UK and Canada.

Trump’s campaign re-election staff will see this as an opportunity to start blaming China for the slowing US economy. Themes of ‘China the currency manipulator’ and ‘China the source of US opioids’ may become the mantra from the White House.

US big business and multinational corporations will be further motivated to put pressure on Trump to go back to the negotiating table and settle. To date, however, they’ve been largely unsuccessful with influencing Trump and the trade negotiations. The Pentagon, military industrial complex, and US war industries have Trump’s ear and they’re shouting ‘technology capitulation’ or no deal’.

The US Farm sector will be in dire straits now. It’s almost certain that within the next six months Trump will have to provide them a third bailout, costing $20 billion or more. That will mean a total of $50 billion cost in farm subsidies due to the China-US trade war.

Globally, emerging market economies are likely to be big losers from the worsening trade relations between Trump and China. Their currencies will decline like the Yuan. But they have far fewer resources than China has to weather the crisis. Declining currency values in emerging market economies (EMEs) will mean more capital flight from their economies, seeking ‘safe haven’ in US Treasuries, in other currencies (Japan’s Yen as ‘carrying trade’), or in gold. That capital flight will slow their domestic investment. Their central banks will then raise interest rates to slow the flight, but that will slow their domestic economies further. The declining currencies will also mean rising import goods inflation and drive their domestic inflation levels higher, as their economies simultaneously slow. EMEs will face both more recession amidst rising inflation.

The China-US trade deterioration will also likely exacerbate inter-capitalist conflicts, as is already beginning to appear in the current South Korea-Japan trade dispute.

The worsening US-China situation will also have a negative effect on Europe’s economy, already about to slip into recession soon. More dependent on exports, especially Germany, the deterioration of global trade will accelerate Europe’s slowdown. The growing likelihood of a ‘hard’ Brexit coming at the same time in October, will almost certainly plunge Europe into another major recession as well, even before the US.

As the global economy slows and contracts, financial markets–already declining sharply from record highs–can be expected to become increasingly unstable. High on the list of ‘fragile’ financial markets are the non-performing bank loans in Europe, Japan, and especially in India. India’s ‘shadow banks’ are especially unstable. Corporate dollar based bond markets in Latin America are another locus of fragility. And in the US, junk bond, triple B investment grade corporate bonds (also junk), and leveraged loans (i.e. junk loans) are candidates for financial instability events following the next US recession.

In short, Trump has been making a mess of US economic policy. And the Fed and monetary policy of lower interest rates cannot ‘save’ him. Recent (and future) cuts in interest rates will have virtually no effect on the real US economy in coming months as it slows. And Trump has essentially negated fiscal policy as a source of stimulus. His massive 2018 tax cuts ($4 trillion over the next decade) has played a primary role in the US annual $1 trillion budget deficits now baked into the US economy every year for another decade. US national debt will go to $34 trillion and, according to the CBO, interest on the debt alone will rise to $900 billion a year by 2027. So fiscal policy as tax policy is now painted into a corner along with central bank interest rate policy. And massive deficits and debt mitigate against political action to increase government spending as a way out of Trump’s crisis.

For the past decade or more, US policy has been to use both monetary policy and tax policy to subsidize capital incomes to the tune of trillions of dollars a year, every year. It used to be that monetary (Fed) and fiscal policy were used to ‘stabilize’ the economy in the event of recession or inflation. No longer. A decade and more of using these policies to subsidize capital incomes has led to the negation of the effectiveness of these policies for purposes of economic stabilization.

The US is now headed for a major recession, with neither ‘monetary ammunition’ nor fiscal ammunition at its disposal with which to try to stimulate the economy as it enters recession. This has never happened before. But its consequences could be enormous–for the depth and duration of any recession to come.

Dr. Jack Rasmus is author of the forthcoming book, ‘The Scourge of Neoliberalism: US Policy from Reagan to Trump’, Clarity Press, September 30, 2019. Dr. Rasmus blogs at jackrasmus.com. His website is kyklosproductions.com. His twitter handle @drjackrasmus.

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Check out some of the data points in my recent tweets on the economy for July and June–including deficits, debt, trade, tax, interest rates, global slowdown, US GDP, etc. These are short term data points and observations that supplement my longer blog posts and analyses. (To get my tweets as they are made go to @drjackrasmus.

Jul 30

    #tradewar

Trump talks tough on China today as trade deal likelihood wanes for 2019. Tough talk designed to give cover for imminent failed deal, and to prepare US investors and public for what’s coming (i.e. no deal in 2019, which means highly unlikely in 2020 as well).
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Jul 29

    #Fed

Rate cut July. Why? Slowing US real investment, Manuf., & Construction? Stock Mkt. boost from 2018 US tax cuts fading? Other central banks cutting rates to devalue currency to grow exports? Answer: all above. Will Fed 0.25% cut work? No. Rate cuts at zero bound=little effect
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Jul 28

    #tradewar

US-China trade deal slipping away, as I predicted. Trump today admits no deal likely soon, even 2020. His offer to allow some Huawei sales for big China US farm purchases not accepted. For my analysis of negotiations, see my recent article at (link: http://www.kyklosproductions.com/posts/index.php?p=391) kyklosproductions.com/posts/index.ph…
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Jul 25

    #ECB

ECB chair Draghi signals more rate cuts. Will wait for Fed first. Markets yawn. So much for ‘forward guidance’ nonsense. EU govt neg. bond rates to fall to -0.5. Rapid German econ slowdown+Brexit will mean more QE. Watch for ECB eventual buying stock ETFs (like Japan).
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Jul 24

    #Mueller

3 questions Dems didn’t ask Mueller today: 1.why didn’t you depose (interview) Trump? 2.why didn’t you depose Trump Jr.? 3.Why were you only a ‘special counsel’ and not an ‘independent counsel’–which have enabled you to make a recommendation to impeach for obstruction?
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Jul 24

    #USbudget

Dem leaders agree $320B more spending 2 yrs. $150B 2019-20. Split roughly $75B defense-$75B nondefense. But wait! Deal includes $77B in cuts. Mostly non-defense. So Pelosi agrees to zero net non-defense, in exchange for $75B more defense? More ‘smoke&mirror’ politics.
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Jul 19

    #BigPharma

has been at war with American people for 2 decades. Prescription drugs account for 53,000 of 68,557 overdose deaths last year. That’s more in 1 yr than the 8 yr. long Vietnam war. Irony: it charges us more to pay for the murders. (& politicians give them the bullets).
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Jul 19

    #BigPharma

Why does US spend $333b/yr on retail prescription drugs(+hospitals more)=>$500 billion? Cuz Pharma needs Wall St. money for $400B M&A this year & Wall St. demands higher prices & profits for its lending. Meanwhile 68,557 died last yr from opioid & other drug overdoses
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Jul 18

    #USdollar

Why is Trump pushing Treasury to intervene to lower the $? Because slowing global economy mean investors buying $ as hedge, raising value of $. That lowers China Yuan, threatening Yuan devaluation that offsets US tariffs. Also, rising $=less profits of US corps offshore
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Jul 18

    #Big Banks

Latest report shows Big 5 US banks’ tax rates fall to 15%-17%, from 35% before Trump 2018 tax cuts. Fed stress tests last month let them now buyback stocks. Big 4 alone plan $135 billion in buybacks in 2019.
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Jul 16

    #Income Inequality

Here’s more on primary cause of Income Inequality in US: Combined stock buybacks + dividends in 2005: $500B; In 2007: $800B; in 2014-2016: $1T per yr.; 2018: $1.3 trillion. Est. 2019? $1.5 trillion. Causes? Fed cheap money and Congress investor-corporate tax cuts
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Jul 16

    #Debt

Emerging market economies (30 largest) now total $69.1 trillion, per Institute of Intl Finance report. 216.4% of their GDP. Up 50% since before 2008 crash. Mostly concentrated in corporate sector.
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Jul 14

    #USdeficits

US Treasury reports budget deficit up 23% first 9 months, at $747b. (not counting est. $75b more in ‘offbudget’ military). Full yr =>$1 trillion. Causes? Trump tax cuts +$100b more Military spending + interest on national debt (to rise to $900b/yr. by 2028 per CBO)
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Jul 13

    #tradewar

Who’s ‘winning’ the US-China trade war? Trump says he is. But China’s goods trade surplus with US rising: from $27B in May to $30B June. China exports to US -7.8% over the last 12 months; but China imports from US -31% over past year, falling 4 times faster.
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Jul 10

    #Fed

Powell signals today certain 0.25% rate cut this month. Thus Fed rates peaked at 2.375% this cycle, compared to 5.25% in 2007, 6.5% in 2000, and 8% in 1990 prior recessions. Next recession, watch for more QE, corporate bond buying, and even ‘bail ins’ if recession severe
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Jul 7

    #DeutscheBank

Announces 18,000 layoffs and creation of a ‘bad bank’ unit to dispose of 74 billion euros of bad loans and assets, as it plans to largely shut down its NY and London operations. Will it be enough? No. Its crisis has just begun
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Jul 5

    #Deutschebank

Is Deutschebank headed for a ‘Lehman Brothers’ event? For my analysis of its current condition and potential role in causing financial contagion through its $45 trillion derivatives contracts, read my blog piece today at
Jack Rasmus
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Jul 4

    #USDollar

Europe launches alternative intl payments system, INSTEX, in challenge to US$ global hegemony. More countries start to trade outside dollar. For my view watch the attached video at:
How EU is ditching dollar to evade Iran sanctions Brazil, India, Russia, China and South Africa are moving to integrate their payment systems and bypass the …
youtube.com
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Jul 2

    #Income Inequality

. Here’s 2018-19 data that tell much of the cause of income inequality in US: Stock buybacks+ dividends = $1 trillion a year since 2011. Last year $1.3T. This year forecast $1.5T. Compare to Labor’s share of US natl income, now 56%, down from 65%. That’s -$1.5T.
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Jun 30

    #tradewar

For my analysis of the G20 meeting in Japan and the status of the US-China trade war, check out my latest blog post, ‘China vs. US: From Trade War to Economic War’. Go to
Jack Rasmus
Predicting the Global Economic Crisis
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Jun 29

    #stockmarkets

Buybacks + dividend payouts 2018= $1.3 trillion; 2011-17 ave.=$1T/year. 2019 to be $1.5T, as Fed gives big banks OK re. buybacks. Big 4 banks est. $102-$136B + big 31 + 2nd tier more =$200B at minimum. Buyback totals 2019 thus easily $1T. Add dividends = $1.5T 2019
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Jun 28

    #gerrymandering

US Sup. Court decision today to allow gerrymandering turns democracy on its head: instead of voters in voting booths selecting their representatives, now representatives meet in back rooms to select their voters.
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Jun 27

    #Supreme Court

Republican/Trump’s US Supreme Court rules 5-4 to allow Republican red state gerrymandering to go untouched. One more blow to democracy; one big leg up for Trump’s political base. Watch for even more egregious gerrymandering now.
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Jun 27

    #US GDP

Fed’s Powell agrees with my analysis that 1QGDP boosted by temporary inventory-trade effects, now fading. Adjusted for both & inflation, 1Q19 GDP grew 1%. Consumer spending revised down to 0.9%. Bus. spending neg. 1%. Income revised down to 1%. Current 2Q19 will be worse.

Jun 21

    #Wages

How accurate is official US figure of wages rising 3.2% last year? (It’s an average, covers full time workers only, unadjusted for cost of living). Check out (link: http://Payscale.com) Payscale.com recent survey showing only a -0.8% adjusted wage gain last 12 mos. and -9.0% since 2006.
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Jun 19

    #Central banks

Both Fed & Europe ECB growing worried re. global economy: ECB says more stimulus coming as Germany, Italy & other economies enter recession. Fed’s Powell today signals rate cuts soon (July?)due to new ‘uncertainties’ in US mfg., investment, trade wars, brexit, etc.
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Jun 18

    #ECB

Draghi action to lower EU rates& resurrect QE to create even more negative rates (now $12T). EXB driving Euro lower to protect EU exports before Fed moves. ECB & China now replying to Trump tariff war with currency war as Euro & Yuan devalue. Watch Trump now settle with Xi.
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Jun 18

    #Cryptocurrency

Will FB’s Libra lead to more regulatory oversight of cryptos? You bet. Fed & other central banks won’t tolerate independent money supply creation, when they’re already losing control of it: ditto big banks with the competition. Big lobbyists battle now to follow.
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Jun 18

    #Cryptocurrency

Facebook’s Libra plan is to enter Fintech and become a ‘shadow’ bank, with new profit center & revenue stream. Forex transactions now will lead to financial services, to compete with Tencent in Asia & Telegram. Global financial system restructuring accelerates.
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Jun 16

    #Jobs

US labor stats count jobs, not workers finding new work. Could jobs data be counting 2nd- 3rd jobs? Govt data says no. But Bankrate survey shows 2018 part time work pay up, from $686 to $1,122/mo. in 1 yr. Either pt wages rose 69% last yr. or pay rose due to added 2nd jobs
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Jun 13

    US Deficits

& Debt: $739B for 8 mos. So run rate on 2019 total deficit & debt more like $1.1-$1.2T. Not counting the $75b minimum in ‘black budget/off budget’ (Defense secret projects) that doesn’t get into print.
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Jun 6

    #Fed

Central banks worldwide have begun lowering their rates in anticipation of Fed action soon. Are ‘Central Banks at the End of Their Ropes’ (title of my 2017 book)? To listen to my interview why they are, go to (link: http://jackrasmus.com) jackrasmus.com for my 2-part interview by ‘Radio4All’
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Jun 5

    #Jobs

Watch for possible shocker US jobs report on friday. If happens, big stock correction and further surge in bond prices as investors rush to safety accelerates.
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Jun 5

    #mexico

What’s behind Trump’s 25% more tariffs? Not economics. Not just immigration. It’s election 2020 & Trump’s wall. Trump to use tariff revenues to fund wall. That’s why he says he’ll keep tariffs even if agreement. Tariffs are independent revenue source to bypass Congress.
Dr. Jack Rasmus
@drjackrasmus
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Listen to my 17 minute radio interview this past week on Trump’s negotiating strategy and its role in the collapse of US-China trade negotiations. How Trump runs US foreign policy like he ran his businesses, and why he failed repeatedly in business and now his trade-foreign policy strategy is failing as well.

TO Listen GO TO:

https://drive.google.com/file/d/1Ti88gA8W_hQfCQUQjZALuFrw-Arex0PI/view

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This week, July 28-Aug 2, marks the escalation of trade conflict between China and US. US trade envoys met in Shanghai and negotiations went nowhere. In response, Trump announced today, August 1, another 10% additional tariffs on $300 billion of China imports to the US. Stock markets worldwide swooned and a global rush to bond safe havens followed. What might China do in response to Trump’s escalation? The US and China may have crossed the ‘trade rubicon’ and headed for a transformation of what has been a ‘tariff fight’ thus far into a broader economic war, where currencies, buying of US treasuries, national boycotts of US goods in China, allowing a de facto devaluation of the Yuan, and other measures now become the ground on which the US-China continue the conflict. An economic war between US and China will all but guarantee the global economy slipping into recession within the next 12 months–and the US as well.

Last month I predicted this potential scenario of a failed trade deal. Read my article of June 30, reposted from this, and other public, blogs at the time.

The Following Original Post:

This past weekend, June 29, 2019 Trump and China president, Xi, met again at the G20 in Japan in the midst of a potential further escalating trade war. But the outcome looks eerily similar to that of the prior G20 meeting in Buenos Aires on December 2, 2018, when Trump and Xi also met.

Once more, the same post-G20 ‘spin is in’: i.e. Trump declares publicly he has such a great relationship with Xi. There’s a great trade deal soon forthcoming between the two countries. US and China trade teams will now begin to thrash out the details on the remaining 10% or so of US-China trade differences. In the interim, once again, Trump announced he will withhold imposing more tariffs (this time on an additional $325 billion of China imports to the US). In other words, coming out of the latest G20 it’s almost an exact déjà vu all over again to the outcome which occurred at last December 2, 2018’s G20 meeting between Trump and Xi in Buenos Aires.

Will it be different this time? Will there by an agreement? Or will Trump once again just be buying time—i.e. until just before the 2020 elections? Until he sees China’s economy softening further and he raises US demands further again? Or maybe Trump and his neocon trade advisers—Lighthizer, Navarro, Bolton who are now driving US trade (and most of US foreign) policy—don’t want to compromise and will accept nothing less than China’s capitulation on the nextgen technology issue that was at the core of the blow up of negotiations in May 2019?

It’s probably becoming increasingly clear to the Chinese that the US did not just launch a ‘tariff war’ back in March 2018. US policy is driving toward a bonafide economic war between the US and China longer term.

In the nearer term, the current differences may well transform the ‘tariff’ war into a ‘currency war’ that will spread contagion and reverberate globally across other economies—at a time at which the global capitalist economy is slowing fast and approaching as well a new financial instability. All China has to do is allow its currency, the Yuan-Renminbi, to devalue naturally in response to US policy and the slowing global economy. That devaluation would more than offset US tariffs. Thus far, China has intervened in global money exchange markets to prevent this. But all it needs to do is allow it to occur according to prevailing economic and market forces and just not intervene in global money markets further to prop up the Yuan. That will become inevitable as the China, US, and global economy weaken further in coming months. China doesn’t have to manipulate its currency. It only has to allow global market forces, unleased in large part by Trump policies, to naturally devalue the Yuan.

Then there’s China’s $1.3 trillion of US assets, mostly US Treasuries. It could slow its purchase of new US government debt, which it appears it may now be doing. Should the tariff-currency war intensify, if necessary it could stop or even sell off its dollar hoard of US Treasuries. It’s been moving toward that since September 2018, as its purchases of US securities first slowed and then declined in March 2019. That reduction of purchases, if not offset by other economies buying more, would drive up long term interest rates in the US and in turn the value of the US dollar still more—all of which further slows global growth.

Rising US rates and the dollar will likely precipitate another US stock and junk bond sell-off, similar to that which occurred late 2018. And we know Trump doesn’t like stock market declines.

There are numerous other ‘actions’ the Chinese could take in response to US neocons intensifying or prolonging the US-China tariff-trade war, further driving the differences into a broader economic war. Various bureaucratic obstacles to US corporations’ majority ownership of operations in China, ‘buy China’ not America in China movements, restrictions on the sale of what’s called ‘rare earths’ minerals key to technology and military production would likely be imposed. Even if US neocons don’t understand this, or don’t care, widespread business and banking interests do and could intervene more forcefully should Trump’s drift toward economic war continue.

Economic Slowdown & Recession ‘Wild Card’

And there’s a wild card in the trade war deck that may check the neocons influence perhaps. That’s the current softening of the US and China economies. That could force both sides to an agreement. Trump may grab the major concessions on China purchases and US majority ownership rights in China and announce a big victory—just before the 2020 US elections.

China’s economy is clearly slowing, growing likely no more than 4%-5%, not the official 6.5%. But so too is the US economy as well, which will start to become more obvious once the data for the 2nd quarter US GDP start to come in by late July.

The US 1st Quarter GDP numbers were propped up by temporary factors associated with inventory over-investment and net exports, both of which are fading rapidly this quarter. Moreover, US household consumer spending is barely growing, most recently at less than 1%. The housing sector has slowed for the past 17 months. Manufacturing orders and production is now stagnant and business investment has turned negative. Lagging indicators, like jobs, are now beginning to turn down as well. The US Central bank’s lowering of interest rates in the second half of 2019, which is helping to drive the massive $1.5 trillion in stock buybacks and dividend payouts scheduled for this year, may succeed in putting a temporary floor under stock markets. But the real side of the US economy is being driven to slowdown, or even worse by year end. More bank research departments, big finance capitalists, and even some economists, a notorious conservative and timid forecasting lot, have begun to predict recession by year end 2019.

A more rapidly slowing US economy, now clearly beginning, may thus change the trade negotiations dynamic, forcing both sides to some kind of a deal. And if the US slips into recession by winter 2019-20, which this writer has also been predicting the past year, the pressure to cut a deal will grow.

Trump may yet be convinced to take the China concessions already on the table—and temporarily suspend the US demand for China’s capitulation on the technology issue. Trump could yet take what’s been offered by China—i.e. to buy $1 trillion more US farm goods and allow US corporations majority ownership of operations in China—and declare a major victory in the trade negotiations in 2020 just before the elections. The nextgen tech-military confrontation—the real core of the US-China dispute—could be re-raised and revisited thereafter later. That’s one possible scenario. Because for Trump a ‘deal is never a deal’, it’s never concluded, but subject to reopening whenever he so chooses.

Breaking an agreement is standard practice for Trump. Just ask the Mexicans, where Trump recently threatened to levy 25% more tariffs even after US concluding a new NAFTA 2.0 deal last year. Or ask the Iranians, who thought they had an agreement with the US. Or the Europeans who thought they had a Climate deal. For Trump, negotiations are a continuing process, punctuated by happy talk events stroking foreign leaders, followed by more threats of sanctions, and personal insults and intimidations, to force a reopening of deals once thought concluded by trading partners—allied and challengers alike.

In other words, even if a China-US trade deal is done, perhaps next year, the trade war with China will not be over. It will have just begun, as it evolves toward a broader ‘economic’ war after the 2020 elections, perhaps even before.
The key to a China trade deal occurring sooner. rather than later, is whether Trump and US big bankers and multinational capitalists can convince the neocons and the military industrial complex to agree to a short term deal with China now that provides only token nextgen technology concessions—backed by the Trump-Neocon assurance that the US will reopen and resume the technology offensive after the 2020 elections once again.

For the US economic and political elites are in basic agreement with the neocons behind the Trump daily circus on the nextgen technology issue. Neither will allow China to challenge US global hegemony next decade by leveraging nextgen technologies that are the key to both economic and military hegemony. It’s just a question of timing by the US—elites, Trump, neocons. Take two bites of the bargaining apple from the Chinese, and come back later for the big bite: i.e. the fight over nextgen technology. Either that or Trump and the Neocons will continue to insist on three bites all at once.

This writer’s guess and prediction is that the now slowing US and global economy will result in the former, and the US will reopen any deal reached and renew its technology demands after the 2020 elections. For the current tariff-trade war is just the opening salvo in an epic struggle between the US and China. The technology war has already begun, albeit in early stages. The Trump trade war today is just the opening move today to a more fundamental technology war tomorrow.

Historical Precedents

Just as European and American imperialists jockeyed and maneuvered in the years leading up to 1914 and the first world war, with their focus on disputes over markets and global natural resource control, in the 21st century the jockeying and maneuvering has similarly begun—albeit this time with a different focus on nextgen technologies, over who controls global money flows, whose currency will continue to dominant, over who calls the shots in global institutions like the IMF, World Bank, WTO, and so on.

The 2020s decade ahead will prove a highly dangerous period. The global capitalist economy is slowing, as has always done periodically. A new restructuring of global capitalism is on the agenda, as it was in the late 1970s, in the mid-1940s, and during the years immediately leading up to 1914.
Trump’s trade wars and other policies should be understood as part of a broad reordering of US economic and political policies, and relations with other nation States allied and adversary alike, to ensure the continuation of US global economic and military hegemony for the coming decade. Nextgen technology development is at the core of that restructuring and restoration of US hegemony. Trump is just the appearance, the historic vehicle, behind the deeper global capitalist transformation in progress.

Dr. Jack Rasmus is author of the forthcoming book, ‘The Scourge of Neoliberalism: US Policy from Reagan to Trump, Clarity Press, September 2019; and the recently published ‘Alexander Hamilton and the Origins of the Fed’, Lexington books, March 2019. He blogs at jackrasmus.com and his website is http://www.kyklosproductions.com . Dr. Rasmus tweets at @drjackrasmus and hosts the Alternative Visions radio show on the Progressive Radio Network.

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The recently passed G20 meeting in Osaka, Japan witnessed the return to ‘happy talk’ by Trump, promising the US and China would again get together and continue negotiating on trade. The Osaka G20 sounds almost a repeat of the December 2018 G20 in Buenos Aires. The outcome post-Buenos Aires, however, was a blow up of US-China negotiations this past May 2019. Following Osaka this past June, once again Trump promises a return to negotiations and a deal. Will the ‘post-Osaka’ events be a repeat of post-Buenos Aires? Both negotiating teams reportedly will meet again. But it appears China won’t be playing the same game. Read my analysis of events and why there’ll be no agreement in 2019, and only possibly in 2020.

The following is an excerpt of a longer article recently published in the World Financial Review. (For the full article, go to my website at: http://www.kyklosproductions.com/posts/index.php?p=391

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G20 Buenos Aires Meeting and After

Immediately after the November 2018 elections, Trump renewed efforts to meet with Xi. They did so at the end of 2018 at the G20 in Buenos Aires. Lots of fanfare and typical Trump hyberbole followed: President Xi was such a good buddy. A great deal was in the works and would soon be announced. In the interim, Trump suspended raising tariffs to 25% on existing $200 billion of China imports as negotiations resumed February 2019. Lots of happy talk about all the progress being made at the G20, as the US stock markets recovered nicely in the first quarter of 2019.

But negotiations broke down once again, a second time, in May 2019 (as they had a year previous in May 2018). The official US line fed to the media was that the Chinese had reneged at the last minute, and added new demands and proposals—when in fact it was the US that introduced last minute demands it knew the Chinese could not accept, in the week before the China delegation was to come to Washington to finalize the deal.

This time the Lighthizer-Navarro-Bolton team not only demanded stronger limits on tech transfer from US corporations in China. Now the demand was China would have to sever all its companies’ relations with US tech companies in the US —and not just Huawei. A new US offensive was launched to intimidate US researchers doing joint tech research work with Chinese counterparts in US universities to end their joint cooperation; US tech companies in China were quietly told to start planning to move their supply chains out of China in the medium to long run; and the Chinese were told the US would not stop its proceedings against Huawei; moreover, it would escalate its pressure on US allies to sever 5G investment plans with Huawei as well. And that was not all. As the China delegation made final plans to come to Washington, the US team signaled publicly that the US would retain tariffs even if there were a deal. The excuse was the US needed to retain tariffs as a threat if China didn’t fully implement its concessions to the US. And then there was the especially insulting demand by the US: China would have to share even its independent technology development in 5G, cyber, and AI with the US as part of a deal.

The China delegation came over anyway, but obviously no deal was concluded. Perhaps it was to verify whether Trump really agreed with these onerous terms thrown up at the last minute by the Lighthizer-Bolton neocons. They left empty-handed. Apparently it was true.

How Trump and the US Now Negotiates

The Trump approach was predictable. This is how he did business before becoming President. And it is how he now runs the US government: Make public declarations about what a great person his negotiating partner is. Make public statements how a trade deal is imminent. Then at the last minute throw up unacceptable demands, threats, and intimidating statements. Allow negotiations to break off. When the other side does so, blame them for failing to make a deal. Then wait and see if the other side makes concessions and signals it wants to return to the bargaining table. When they do, privately or publicly, return to negotiations with more demands for concessions. If necessary, play this same game over again.

China and Xi were burned once by these maneuvers back in May 2018. Now they met again at the recent G20 in Japan and the negotiations will once again resume. Trump adviser Larry Kudlow has noted ‘phone calls’ are occurring back and forth between the US and China negotiating teams. But there’s no indication of any meetings in the works between Trump and Xi. Nor will there likely be soon. It is not likely the Chinese will be burned again. In fact, they have publicly declared no deal unless Trump at minimum withdraws his May 2019 trade team threat to retain tariffs whether a deal is reached or not. That’s likely a ‘non-starter’ until Trump takes it off the table. Positions may be hardening, not softening.

In the interim, as during the days following Buenos Aires, following the most recent Osaka G20, Trump is again repeating platitudes and praise for Xi. He’s publicly announced that China has made great concessions to buy record levels of US farm goods. But China had conceded that and put it on the bargaining table almost a year ago! It had promised to buy $1 trillion more in US goods over the next five years. So Trump’s just repeating what has already been agreed to some time ago. Nevertheless, for Trump ‘spin is in’ once again post-Osaka.

That should hold US business and farm criticisms at bay for several more months—along with the $20 billion more in farm subsidies announced by Trump—likely paid for by cuts to US food stamps, housing subsidies, education funding, etc. Should another, third round of farm subsidies follow in 2020 if no trade deal is concluded, total direct Trump farm subsidies will exceed $50 billion.
What’s Next: More Déjà vu? Or a Deal?

It should be clear that as of July 2019 there’s no imminent China-US trade deal. Trump is just buying time. No additional tariffs—i.e. $325 billion on remaining China imports—will likely be imposed in the interim. A hiatus has occurred at least for the remainder of 2019. US business pressure and growing criticism of Trump’s trade policy, and growing farm sector discontent, will prevent Trump from raising more tariffs—at least for now.

But US pressure to drive China tech companies out of the US economy and, if possible, from the economies of US allies in Europe and elsewhere, will no doubt continue. So too will continue US pressure to isolate China company and University researchers in the US and force them to leave. And longer term, the US will continue to press US corporations to relocate their supply chains from China to elsewhere in Asia (Vietnam? South Korea?) or even Mexico.

Trade Deal in 2019?

When will a China-US trade deal then be concluded? Not likely this year. Trump probably now wants to wait until closer to the 2020 election. And the neocons still have his ear and are still driving US trade policy (indeed, US foreign policy on a number of fronts as well). And they don’t want a deal…ever! Unless of course China agrees to capitulate on the central issue of nextgeneration technology development.

For the remainder of 2019, US policy will be to squeeze China tech corporations, to make operations so uncomfortable for them they will have to leave the US, as well as US allied economies. Trump will continue to collect tariffs from China imports, which he sees as a plus, while increasing his public threats that China not to allow its currency, the Yuan-Reminbi, to devalue which would negate the hikes in US tariffs. Meanwhile, domestically Trump policy ‘spin’ will try to publicly make it appear (to Trump’s farm base and US business in general) that the US and China are working in good faith toward an agreement.

Longer term, into 2020, if the US neocons retain control of negotiations and Trump’s ear, they will continue to insist the US retain tariffs, insist on China capitulating on the tech issue, and continue to go after China tech companies in the US and worldwide. That means there will be no agreement even in 2020.

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