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26 August 2019

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John Minehan

"Be extremely subtle, even to the point of formlessness. Be extremely mysterious, even to the point of soundlessness. Thereby you can be the director of the opponent's fate." Sun Tzu

"All men can see these tactics whereby I conquer, but what none can see is the strategy out of which victory is evolved." Sun Tzu

"Pretend inferiority and encourage his arrogance." Sun Tzu

"Empty your mind, be formless, shapeless — like water. Now you put water in a cup, it becomes the cup; You put water into a bottle it becomes the bottle; You put it in a teapot it becomes the teapot. Now water can flow or it can crash." Bruce Lee

On the other hand, Trump may just be a incompetent that other leaders are just getting the range on. We will know soon which it is.

Jack
China bubble so huge, already TOO BIG TO FAIL, will implode via large Yuan deval. Trump is right, Trade Wars "check mate" for China as neutralises "beggar thy neighbour" benefits and leaves inflation. Damage already done. Watch out for geopolitical miscalculations. Anti-bubble

https://twitter.com/parrilladiego/status/1166144889253507072?s=21

As Bannon has noted the IR department for CCP - the Party of Davos are doing everything to hobble Trump but his either balanced trade or de-coupling is the first step in taking on the CCP. What will CCP do with the massive overcapacity in China and what will they do when their annual $600 billion in USD from the US shrinks, when their companies need USD desperately and Yuan continues to weaken? What will they do as capital flight pressure intensifies further?

Jack

A quarter of the Chinese production capacity used by global sportswear brands is lying idle, according to an industry executive, as the trade war pushes the biggest labels out of the Asian nation’s factories.

https://www.bloomberg.com/news/articles/2019-08-23/nike-challenger-says-quarter-of-china-sportswear-factories-idled

This is how supply chains reorient. CCP will have to continue devaluing Yuan to blunt the effect of tariffs. Note that Treasury has already labeled them a currency manipulator which now gives them the ability to enforce penalties.

Mathias Alexander

Is he planning to consult the population of Greenland?

Fred

Monday's WSJ says the U.S. is isolated and how dare Trump say Russia should be invited back to the G7; oh and wasn't it great Macron invited the Iranian foreign minister to Biarritz. Sadly the press is uniformly dishonest with their "second thoughts" clickbait line. No wonder he gets results since you actually have to talk with him directly to achieve anything and all the expert gatekeepers are left flapping their lips with vapid commentary.

Barbara Ann

I can't wait to see the reaction at next summer's G7 when Putin turns up at Mar-a-Lago.

CK

Sun Tzu babbled a lot of nonsense, but not all of his pontifications were oriental bs:
“If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.”
So far in a career of over 50 years, President Trump is as winner by old Tzu's metric.

EEngineer

I won't comment on the wisdom of Trump's goals, but his tactics are expressly designed to prevent his opponents from clearing their minds. By doing so they focus on his tactics and not their own strategy. That particular Jedi mind trick only works on the weak minded, which is to say most people in the median and politics. At least here in the US.

As for any agreement with the Chinese, his goal appears to be decoupling the US and Chinese economies and chaos serves that goal. A messy and clumsy way to go about it, but given that he's not in full control of the ship of state, possibly the only one open to him.

His stated objective of re-industrializing the US will require planning, so I don't see that happening.

ambrit

Finally the treasury twiggs to China's policy of currency manipulation? After years of their doing that as basic policy?
Someone correct me if I'm wrong, but I thought that the first policy of the CCP was to keep themselves in power. To do that, Pekin has to keep the people quiet, which means housed and fed. China has the usual human history of periods of centralized governance intersperced with times of chaos and competing mini-states. I hope that Trump has at least one dedicated aide who knows his or her history.

David Solomon

Incompetent is my bet.

MP98

It's funny:
Journalists, think-tank denizens and academics who have never negotiated for a used car are "experts" on Trump's methods.
These are the same people who have never managed anything bigger than a cubicle but are "experts" on management.

Mark Logan

John,

I think he is a competent developer, but it remains to be seen if negotiations at this level can be successfully conducted as they are with drywallers and other subcontractors, who certainly can be worn down with an avalanche of BS. No deal is long term in that world. Everything lasts only as long as that job does. Construction people really, really want it to be OVER. Their agendas are very simple: "Make a buck."

John Minehan

Trump has managed not to lose the fortune he inherited.

That is better than many (perhaps most) Second Generation Family Businesses ("SGFBs").

If you compare him results to other successful people in the SGFB slice, he has not done as well as the most successful, for example, compared to Fred Pressman of NYC's Barneys. (It is worth noting that in the Third Generation, the Pressman family ceased to be involved.)

People tend not to take Trump's business career in context.

Barbara Ann

Chess analogies are fine if both players think they are playing the same game. If not, don't be surprised if check mate results in your opponent getting up and punching you in the face.

Is the trade war really about getting a better deal or about getting China to "implode" - what does the leadership of the CCP think it is about? I think we could be in for the mother of "geopolitical miscalculations".

John Minehan

Decoupling Nial Fergusson's Chimerica is also the PRC's goal. It will benefit the PRC far more than the US.

Given the level of industrial overcapacity that exists in the World, lots of luck with re-industrialization.

John Minehan

I'm not unimpressed by Trump due to his track record of repeated failures. That is how entrepreneurs learn.

I'm dubious about Trump because he always seems to fail in the same ways.

different clue

Can endless noise become a form of silence . . . endless tweets become the inky clouds which hide the squid?

John Minehan

That might mean something if the PRC were not consciously trying to get beyond low skill manufacturing of this type as Japan did in the 1970s.

OBOR is (perhaps) an attempt by the PRC to retain an interest in such things once they off-shore it. Let's see if it works.

different clue

Naked Capitalism ran an article advancing just exactly that theory: that "pursuit of The Deal" is a cover under which to advance the Real Mission of "De-Couple China and America from eachother".
It is titled: Trump's China Trade War Gaslighting: Will There Evah Be A Deal? Here is the link:
https://www.nakedcapitalism.com/2019/08/trumps-china-trade-war-gaslighting-will-there-evah-be-a-deal.html

If this really is the goal, could Trump-dislikers decide that it may well be worth Four! More! Years! of pain in order to make de-coupling China from America complete and irreversible? If Trump could tear down and destroy the whole International Free Trade World Order, would that make it all worthwhile? Questions to ponder . . .

different clue

And what will they do when the Masses and the Rulers both discover that China has more Masses than the Communists have bullets?

different clue

As an Honored Personal Guest if not as a member of the reconstituted G8 . . .

blue peacock

This is one of the most arrogant op-eds I have read recently. Former NY Fed President Bill Dudley, one of the architects of the $25+ trillion bailout of Wall St, opining that the Fed should become political and take on another mandate to defeat Trump in 2020. Instead, what he's done is ensure that Trump can blame the Fed for any weakness in the stock market and the economy. Trump can now add the Fed to his "enemy of the people" rhetoric and banishes any argument for the Fed's independence.


https://www.bloomberg.com/opinion/articles/2019-08-27/the-fed-shouldn-t-enable-donald-trump

"There’s even an argument that the election itself falls within the Fed’s purview. After all, Trump’s reelection arguably presents a threat to the U.S. and global economy, to the Fed’s independence and its ability to achieve its employment and inflation objectives. If the goal of monetary policy is to achieve the best long-term economic outcome, then Fed officials should consider how their decisions will affect the political outcome in 2020."
Jack

blue peacock,

This should not be surprising. Dudley who was the Chief Economist at Goldman Sachs and came to the NY Fed when Geithner ran the place and took over when John Podesta “chose” Geithner as Treasury Secretary in the first Obama administration.

Dudley in this op-ed is giving voice to the same mindset that gave us the Russia Collusion investigation. Unelected top government officials who believe they are the “guardians” of the country and know better than anyone else. Back in the old days the Fed Open Market Committee had a cross-section of people. Folks who were businessmen, farmers, commercial bankers and sometimes economists. Now we have the Cult of Ph.Ds. People who have never had to meet a payroll. Thousands of these Ph.D economists who put multiple decimal points to their forecasts and lay out their analysis in arcane language. Of course they’ve never got a forecast right and are always blindsided and for whom every problem is a nail to be hammered with the only tool they know - easy money.

I’ve never seen this level of derangement in the Acela Corridor that Trump has generated in these people.


Jack

John

I’m sure they’d like to escape the middle income trap. However the debt burden of the current excess capacity in low skill manufacturing is real as that has to serviced. A sudden decline in orders rendering a quarter of their sportswear capacity idle doesn’t help cash flow.

Macro analyst Jeff Snider penned a provocative note today. China’s economic and financial challenges in the current cycle pre-date the trade conflict.

https://www.alhambrapartners.com/2019/08/27/china-throws-more-stimulus-at-the-wall/

Yet, time and again we find that it’s precisely domestic Chinese consumption which is the source of weakness. Auto sales are merely the most extreme face of the issue since China’s car manufacturing sector accounts for a huge chunk of overall activity. ........

China’s industrial and manufacturing base has been on the downswing since late 2017 and it has reached lows comparable to some of the worst conditions in the country’s modern economic history. This isn’t trade wars (though those restrictions aren’t helping). Stimulus and trade wars actually trivialize the matter and improperly make it seem like there is space for some kind of determined resolution. It is the Eastern equivalent of “transitory” factors, especially since overlaying all this is a master plan the Communists are supposedly patiently waiting to unveil.

Jack

Barbara,

In my view Trump wants a balanced trade deal not the implosion of China. Lighthizer had negotiated one with his interlocutor with a few outstanding issues remaining. However when Xi and the CCP politburo came to the realization that the deal on the table would end what Diego Parrilla calls “beggar thy neighbor benefits”, they balked. And the deal unraveled.

Lighthizer’s testimony in 2010 before the US-China Economic and Security Review Commission is very instructive. In the current negotiation he wanted an agreement with real enforcement mechanisms not just a feel good document that he knew that the CCP would flout even before the ink was dry.

https://www.uscc.gov/sites/default/files/6.9.10Lighthizer.pdf

My own position on this matter is different. I believe that the time has come to fight and defeat the totalitarian CCP and I believe that can be achieved solely by economic and financial means and if necessary a financial decoupling. I don’t advocate a military conflict. I believe the Chinese people deserve an opportunity for self-determination without the jackboot of CCP authoritarianism. I am sympathetic to the people of Hong Kong, the Tibetans and the Uighurs, many of whom would like to be free of CCP repression.

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