COMMENTARY - July 14, 2020
Though you’d hardly know it from the ongoing melt-up in all manner of risk assets as we’ve moved well into summer, the situation with what I (and others) have called the “New Cold War” between the U.S. and China has demonstrably worsened.
The much-hyped Phase One trade deal between the globe’s two chief economic (and now, ominously, geostrategic and military) powers is a dead letter. Though as of this writing President Trump himself still doesn’t want to come right out and belatedly admit that, he has just said that he’s given up for now on any more deals; a “Phase Two” or otherwise. Both sides of late have traded barbs, sanctions, and more.
Throw in Hong Kong…China’s ongoing incursions into disputed areas of the western Pacific and South China Sea…Trump’s allowing the military to send U.S. forces in…repercussions over the ongoing global virus pandemic…the likelihood of a relapse of economic weakness, financial markets turmoil and more…and you have a toxic mix!
A LOT OF HISTORICAL HYPOCRISY
There is no question that China represents the most substantial economic, geopolitical and military threat to the world generally and to the U.S.A. specifically. From the F.B.I. to U.S. Intelligence services, virtually all of the present/ongoing cases involving industrial espionage against America have come from China. F.B.I. Director Christopher Wray has copiously documented and explained all of this, in his own attempt to call attention to what he knows is the Number One threat to America (to the chagrin of some Democrat Party figures and their fellow-travelers in the media, who still are attempting to keep their “The RUSSIANS are Coming!” canard alive.)
To his credit—and notwithstanding his general failure to understand a lot of the individual moving parts—President Trump has at least been honest enough on America’s part to point out that WE are largely responsible for turning China into the present-day superpower rival it now is. Just as it was the U.S. that was responsible for the life, health and longevity of the old Soviet Union (to the benefit of the Deep State and Military-Industrial Complex, which got ever fatter and richer when we thereafter had to “defend” ourselves against that home-grown enemy) so, too, can we “thank” Corporate America and banking interests for creating the present-day China.
Now, of course, we are at a point where China is flexing its own muscles—in its own right—ever more. It wants to be in the driver’s seat; and now is to a great extent. It’s no secret to any of us that have followed China’s ascendance in the half century since former President Richard Nixon opened the door of the global economy to them that the nation sees itself again someday as THE dominant global empire; just like it was in the past.
The question now is, how easily will they get there; and will America now become such a hindrance that it could one day mean war.
NOW, A NEGATIVE POLITICAL PING-PONG BALL
One of the reasons I have even more trepidation than usual where the near-term fate of the stock market and (unrealistic, in my view) expectations of economic recovery goes is that we are going to hear an increasingly shrill haranguing of and threats against China by both major U.S. presidential candidates. Being “tough on China” is a winning issue for the incumbent; and Biden knows it. Thus—together with his apparent epiphany where being “America First” is concerned (plagiarizing Trump economic priorities just recently)—“China Joe” is also suddenly a hawk on China himself.
Neither man is completely sincere, though Trump is more so on China in relative terms. Even he essentially caved in late last year in agreeing to what I said at the time was a joke of a “Phase One” deal; but it was more important to him to have a deal for its own sake so as to be able to crow about it. As for Biden, he has demonstrated himself for decades as a man with virtually NO guiding principles. He’ll admit to being a bed bug, if you’ll vote for him and AGAINST that evil orange man.
Still, though, augmenting the political “tough on China” rhetoric between these two presidential candidates is an acceleration of events that will require them to further harden their own stances, and policy positions. Contrary to some Democrat and Establishment/Fake News media claims that President Trump has failed to “lead” in having a coordinated, global answer to China, across the board one country after another IS pushing back, needing no help from Washington.
Just as I am writing this—and brushing off very public threats from China—the United Kingdom HAS decided to boot out Huawei and its 5G platform. Around the world, Tik Tok and other Chinese apps and platforms are being jettisoned. The usually-milquetoast European Union is standing its ground; defending its own economy and technology companies.
Even Australia—arguably China’s most important ally economically and the source for a great deal of its raw materials—is pushing back; among other things of late, in advising people not to travel to Hong Kong.
CAN AN OVEREXTENDED CHINA KEEP ALL THE BALLS IN THE AIR. . .
“Cargo Plane Jay” Powell at the U.S. Federal Reserve has had nothing on Chinese officials and the Peoples Bank of China in their wanton creation of ever more debt-money to keep everything afloat. But as I have pointed out numerous times, in China’s case—not having global reserve status for the yuan, as the U.S. has for the dollar—the risk of a MAJOR credit crisis and the implosion of China’s markets and economy is a relatively bigger threat.
And aside from the overall global deflationary and economic pressures everybody is facing, China in the recent past has faced some considerable push back from the countries along the path of its dreamed-of revived “Belt and Road”; a revival/modern-day manifestation of the old Silk Road of empire past. Unlike the U.S.—which partly CAN compel foreign money to come into and/or stay in its paper—China does not have that stature and ability.
One after another, countries which have taken on debt—now owed to China—in recent years as China has built often shoddy and overpriced infrastructure and various other projects in their countries are crying foul. They are now questioning those debts and DEMANDIN “haircuts” or some other redress. Most telling—as the Financial Times reported on June 25—Pakistan is demanding renegotiation of some debts, claiming inflated costs and shoddy work on some energy projects. Most noteworthy about that—and telling about China’s increasing isolation as it finds ways to piss everybody off—is that Pakistan had been a natural ally against China.
. . .OR WILL CRISIS AND ISOLATION RESULT IN A BACKLASH AND EVEN MORE AGGRESSION?
For the most part, China’s reaction of late has been to tell everyone who has a problem of one kind or another with them to simply get lost. Indeed, many a legitimate expert on geopolitical relations and such has been pointing out with growing alarm China’s new disposition to simply not care what others think: whether over its essential overthrow of the government/order in Hong Kong, or anything else. Perhaps President Trump—or a President Biden—when it suits them wants at times to maintain the façade of peaceful, constructive relationships between America and China. China seems not to care any longer. To them, the attitude more than at any time since the pre-Nixon days is, “This is who we are. Like it, or else.”
A few particularly astute takes on China’s growing militarism and hard line stance of late I’ll commend to you for further reading:
* https://aheadoftheherd.com/Newsletter/2020/Is-China-preparing-for-war.htm -- Rick Mills’ recent article.
* Finally, this one -- http://ronpaulinstitute.org/archives/featured-articles/2020/june/30/stumbling-towards-catastrophe-the-new-cold-war-with-china – by Dave DeCamp, on the web site of the Ron Paul Institute for Peace and Prosperity.
China is also bristling over increasingly overt threats by some levels of power in the U.S. to basically push them off a cliff.The last of those articles I just gave you particularly speaks to that.
I have many a time discussed the desire of some in the Deep State—and even among Trump’s “national security” team in particular—to attempt to do to China what the Reagan Administration did to the former Soviet Union: essentially, drive them out of existence. Back in the 1980’s this involved outspending on armaments and strategically outmaneuvering in the end a decaying Soviet empire that just couldn’t hold up. Thankfully, the end result was a NET positive.
But when the former Soviet Union collapsed, the global financial and economic fallout was slight. The size of the Soviet economy hardly constituted a rounding error in comparison to the global whole. Its banking system and markets—such as they were—existed in relative isolation.
Yet China is a different kettle of fish. Its military capabilities—augmented by its vast and demonstrated cyber warfare capabilities—exceed that of the Soviet Union. And especially unlike that former world power (the one, though, some Democrat Party stalwarts continue to suggest is THE global bogeyman in their seeming attempts to be elected chairman of what remains of the old John Birch Society) China’s economy is now the world’s second largest.
AND its now-tighter appendage Hong Kong is THE most-leveraged major financial center on this planet.
On top of the tag team of U.S. Secretary of State Mike Pompeo and Commerce Secretary Wilbur Ross tightening screws in the form of all manner of suspensions of the former “special status” relationship with Hong Kong, we now have as well discussions of essentially a new front potentially being opened up in the long-simmering global currency war: a deliberate undermining of Hong Kong’s dollar-pegged currency; see https://www.bloomberg.com/news/articles/2020-07-07/trump-aides-weigh-proposals-to-undermine-hong-kong-s-dollar-peg. Further, the Trump Administration seems to be ramping up efforts to curtail U.S. funds’ ability to invest in most Chinese-listed companies; among other things, starting to warn U.S. public pension funds of the “security risks” of having some of their portfolio in Chinese stocks.
Writing in the EXCELLENT publication Geopolitical Futures on July 8, (go to https://geopoliticalfutures.com/the-thucydides-trap-and-the-rise-and-fall-of-great-powers/; a free trial, if you are not a subscriber as I am, will allow you to read the content) Jacek Bartosiak in both a somber and scholarly fashion discusses why a MUCH bigger conflict between the U.S. and China may be inevitable. I especially commend this, too, to your further reading.
America will not willingly or easily relinquish its present Global Empire; it sees itself as that proverbial “immovable object.”
China with near-religious devotion and confidence sees itself as the “irresistible force” which one day will be a renewed Global Empire.
The New Cold War, I fear, is but in its initial days.