Wednesday, August 29, 2018

News Note: US - China Dispute a Threat to Stability?

It is now obvious that the US and China are in a full fledged dispute over a number of issues with tariffs and trade making the biggest headlines. When President Trump first mentioned the possible use of tariffs against China, the idea conveyed was that he hoped that it would lead to discussions to actually remove tariffs and that we would never get into a world where both sides were engaged in real live trade war. 

Clearly, those hopes were not realized. The dispute seems to be only ramping up with both sides digging in. Critics of the President will say they knew this was coming and view it as very bad. Supporters will say that the US has to be taken seriously by China to obtain a fair end result. It is not our objective here to take sides on political issues so we won't on this situation. It is our job here to try and identify situations that might be a systemic risk to the present financial and monetary system. Now we have to view this situation as at least having that potential. 

I do see some signals that the US is getting more serious about taking on China over these issues and seems to view the situation as a matter of national security. Below I have pasted in some links and information to support my conclusion on this. 

When I see these kinds of things start showing up, it suggests to me that US intelligence agencies are gearing up to try and prepare the public that the US is ready to take actions that may result in adverse reactions (like from China for example). So, we have to monitor this situation as a potential risk to system stability (although likely minimal risk). Again, I watch the key markets for signals (stock markets, US dollar, gold).


Jim Rickards announces on Twitter that he will make a classified presentation on the subject of "Financial Warfare with China" August 15, 2018 at Norfolk Naval base. This announcement follows two new articles on China that Jim releases. Both articles suggest that things between the US and China are not improving and that China can expect to pay a significant price domestically during the dispute with the US:

Here is one quote extracted from the first article:

"Will China be able to pull off this Goldilocks approach to a potential credit crisis? Of course not. Nobody’s that good or that lucky. Still, the Communists will try and may be able to keep the greatest Ponzi scheme in history afloat in China for another year or so.

The endgame is still a financial crisis that the Chinese won’t see coming. In that case, China’s only solutions are to close the capital account, devalue the currency, nationalize the financial sector and put the malefactors in jail.

This story is getting worse because of the escalating trade war that shows no signs of letting up. On top of it we now must add an emerging-markets crisis as the crisis in Turkey threatens a spillover."

Note the emphasis on how much trouble all this is going to cause for China.

Next, recently TV host Mark Levin invited long time expert on China Michael Pillsbury on his program to discuss China. Please note this from the bio information on Mr. Pillsbury:

"Major academic advisers to Pillsbury at Columbia were Zbigniew Brzezinski and Michel Oksenberg, who later played key roles in the Jimmy Carter administration on policy toward both China and Afghanistan. Pillsbury studied the art and practice of bureaucratic politics with Roger Hilsman, President John Kennedy's intelligence director at the State Department and the author of Politics Of Policy Making In Defense and Foreign Affairs. At Stanford, Pillsbury's academic mentor was Mark Mancall, author of two books on the influence of ancient traditions on Chinese foreign policy."

. . . .

"During the Reagan administration, Dr. Pillsbury was the Assistant Under Secretary of Defense for Policy Planning and responsible for implementation of the program of covert aid known as the Reagan Doctrine. In 1975-76, while an analyst at the RAND Corporation, Michael Pillsbury published articles in Foreign Policy and International Security recommending that the United States establish intelligence and military ties with China. "

The ties with US past policy on China and (most likely) US Defense and Intelligence agencies that study how the US should deal with China seem pretty evident from Mr. Pillsbury's past. Please note he has worked with people on both sides of the political aisle for many years.

Below I have embedded the full TV interview with Mark Levin where they talk in depth about the current relations between the US and China. In this interview, I was struck by the tone taken by Mr. Pillsbury. He talked about how he and others in the past had encouraged the US to adopt a policy of cooperation and trust building with China in the belief that China was opening up its society and would move towards more democracy and free markets, etc.

In this interview, he says he and others were duped by China and clearly takes a completely different view. He says the US now needs to view China as a potential enemy and take a different approach to assert a stronger US position with China.

Again, the point here is NOT to take a political position in regards to this situation (for or against US policy). The point here on this blog is to demonstrate that there are some signals showing up in public media that suggest the US is now serious about taking on China in ways that could disrupt the current financial and monetary system, so we need to watch these events and stay informed as they unfold to see what actually happens.

Here is the summary of this interview posted on YouTube:

Mark Levin sits down with Author Michael Pillsbury on Life Liberty & Levin on Fox News Sunday to discuss his book "The Hundred Year Marathon", as well as China stealing American technology over the past 40 years and more.
Added note: With the news that the US and Mexico have agreed to a new trade deal and prospects for Canada to join in, some are suggesting this means the trade dispute with China will eventually fade away with some kind of new deal there as well. That may be, but as of this writing no deal has been made and attempts to restart talks were not successful. So, the above information should still be relevant and events should be monitored.

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