Vance said in a recent interview that the U.S. borrows and buys from “Chinese Peasants” and “that is not a recipe for economic prosperity.” I’m not sure if he’s ignorant or purposely using simplistic ignorant rhetoric to justify their actions. Seems to hide the fact that you make perfectly clear, the relationship between the strength of the dollar as a reserve currency and the building out of manufacturing abroad and cheap goods. Obviously inflation will weaken the dollar, but does this tariff war and international softening towards U.S. debt pose an existential threat to the dollar as a reserve currency globally? I would tend to think so, and that would be pretty catastrophic for the U.S. economy. The result being probable runaway inflation, and sky rocketing yields for treasuries.
I do believe none of them are ignorant. Most of the government is composed of or has close relations to multibillionaires who know what they are talking about & are used to risk-taking and entrepreneurship. They're not stupid, but they know that taking risks & preserving a narrative is important.
As for the global reserve currency, I am part of those who believe in the milkshake theory, so unless the world accepts to pass to Bitcoin or Gold, which are both impractical because of their "max" supply, I don't think the dollar will depreciate, on the contrary. It's just a phase for now as the geopolitics are reshaping, but it is too hard even for China to abandon the dollar. Not without years of preparation, and they aren't there yet.
Only my opinion. Although one thing for sure, the world is more interesting that it was a decade ago.
What a crazy time we live in… It’s hard to fathom why Trump did what he did - what kind of strategy does he have? What has transcribed makes him look like someone without a plan, which is unimaginable as he does have a group of advisors (or he only recruited loyalists). Certainly a lot of money can be made with this man made volatility, like what happened in his first term. Maybe that’s the reason for what he did and we will never know. Have to say China has less to lose at the end of the day, Chinese people can tolerate a lot more sufferings than Americans after all. Good time to stock on some gold and China exposure indeed.
My opinion is that he overestimated the strength of the U.S. at the moment. He had a plan to get the interest of debt down, tried it, it backfired. That's all... Now is about saving face. I personally wouldn't blame them for trying something. Ever. We've had decades of terrible governmental decisions which created the situation we're in today and those guys are the first ones finally trying to get things back on track. It's gonna be painful & so far isn't working wonders. But at least they are trying, it would be politically easier to do nothing and continue on the path we were in.
But you're right, they have or had a plan, and they certainly aren't stupid.
I also believe like you that China is capable of pushing this trade war further because they have more leverage & a much bigger tolerance to pain. It's in their culture, it isn't in the American one since long...
Seems they were gambling as they were treading on a needle-thin line.
- Bluffing using unusually high tariffs even on allies, hoping the allies would somehow oblige thereby setting China an example. Collecting tariffs to increase gov revenue.
- Creating a mini setback in the economy so that Fed would reduce rates, thereby reducing gov expenses.
This seems even harder to achieve than the soft landing Fed managed to pull off, with so many variables along the way, and their sloppy execution certainly didn’t help (look at the simple formula to calculate tariffs imposed by other countries). And simple human psychology - people do not respond well to bullies, caving is usually not the first response from a developed country/democracy with voters to answer to.
It’s so very strange that people around Trump didn’t talk him out of it… Yet this is the Trump people know and elected.
Kinda agree with everything yeah. It's how they behave, not sure we should have expected less from them.
I also believe things cuold have gone very differently if China responded to the threat. The rest of the world woundn't have had the balls to do anything if China didn't respond.
Thanks for the write-up! Delicate times..! Looking out how Trump's rethorics change from now on 👀
Pleasure! Very interesting times as well!
Vance said in a recent interview that the U.S. borrows and buys from “Chinese Peasants” and “that is not a recipe for economic prosperity.” I’m not sure if he’s ignorant or purposely using simplistic ignorant rhetoric to justify their actions. Seems to hide the fact that you make perfectly clear, the relationship between the strength of the dollar as a reserve currency and the building out of manufacturing abroad and cheap goods. Obviously inflation will weaken the dollar, but does this tariff war and international softening towards U.S. debt pose an existential threat to the dollar as a reserve currency globally? I would tend to think so, and that would be pretty catastrophic for the U.S. economy. The result being probable runaway inflation, and sky rocketing yields for treasuries.
I do believe none of them are ignorant. Most of the government is composed of or has close relations to multibillionaires who know what they are talking about & are used to risk-taking and entrepreneurship. They're not stupid, but they know that taking risks & preserving a narrative is important.
As for the global reserve currency, I am part of those who believe in the milkshake theory, so unless the world accepts to pass to Bitcoin or Gold, which are both impractical because of their "max" supply, I don't think the dollar will depreciate, on the contrary. It's just a phase for now as the geopolitics are reshaping, but it is too hard even for China to abandon the dollar. Not without years of preparation, and they aren't there yet.
Only my opinion. Although one thing for sure, the world is more interesting that it was a decade ago.
What a crazy time we live in… It’s hard to fathom why Trump did what he did - what kind of strategy does he have? What has transcribed makes him look like someone without a plan, which is unimaginable as he does have a group of advisors (or he only recruited loyalists). Certainly a lot of money can be made with this man made volatility, like what happened in his first term. Maybe that’s the reason for what he did and we will never know. Have to say China has less to lose at the end of the day, Chinese people can tolerate a lot more sufferings than Americans after all. Good time to stock on some gold and China exposure indeed.
It's impossible to know, but we can speculate.
My opinion is that he overestimated the strength of the U.S. at the moment. He had a plan to get the interest of debt down, tried it, it backfired. That's all... Now is about saving face. I personally wouldn't blame them for trying something. Ever. We've had decades of terrible governmental decisions which created the situation we're in today and those guys are the first ones finally trying to get things back on track. It's gonna be painful & so far isn't working wonders. But at least they are trying, it would be politically easier to do nothing and continue on the path we were in.
But you're right, they have or had a plan, and they certainly aren't stupid.
I also believe like you that China is capable of pushing this trade war further because they have more leverage & a much bigger tolerance to pain. It's in their culture, it isn't in the American one since long...
Very interesting times!
Seems they were gambling as they were treading on a needle-thin line.
- Bluffing using unusually high tariffs even on allies, hoping the allies would somehow oblige thereby setting China an example. Collecting tariffs to increase gov revenue.
- Creating a mini setback in the economy so that Fed would reduce rates, thereby reducing gov expenses.
This seems even harder to achieve than the soft landing Fed managed to pull off, with so many variables along the way, and their sloppy execution certainly didn’t help (look at the simple formula to calculate tariffs imposed by other countries). And simple human psychology - people do not respond well to bullies, caving is usually not the first response from a developed country/democracy with voters to answer to.
It’s so very strange that people around Trump didn’t talk him out of it… Yet this is the Trump people know and elected.
Kinda agree with everything yeah. It's how they behave, not sure we should have expected less from them.
I also believe things cuold have gone very differently if China responded to the threat. The rest of the world woundn't have had the balls to do anything if China didn't respond.
They tried! Let's see where it leads us now