Trade Wars

mmm....shiney! said:
What about when it monetizes debt ie buys Treasury bonds (including from foreign countries) and mortgage-backed securities and lends this credit to other banks?
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To my understanding when say China buys US bonds, it uses its USD reserves to make the transaction. So they first need USD from trade to buy the bonds. Chinese company will sell goods for USD, Chinese will then convert USD for Yuan. Central bank normally prints new Yuan to keep currency low and hold USD as reserves or use those USD to buy bonds.

But yes, there are other ways to get USD out to the world, debt/foreign investment is one of them. Though it leaves you more vulnerable.
 
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leo25 said:
Yes i think gold will be some part of the next global reserve currency.
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It may even be some silver or gold backed crypto - something which can be traded, used as a currency, and even earn interest.

By the way, the US trade deficit only really started after the US abandoned the gold standard. It may not be a coincidence that not long after property prices throughout the world boomed as interest rates kept dropping for more than 30 years until it bottomed last year.

Property was very cheap before 1980 everywhere in the world.

Warren buffett bought his California beachfront home for $150,000 in 1971 and it's now up for sale for $11 million.
https://www.cnbc.com/2018/07/05/warren-buffetts-california-beach-house-is-still-for-sale.html

Jim Rogers paid $107,300 for his NYC townhouse in 1977 which he later sold for $15.75 million in 2008, a gain of almost 20% a year!
https://www.nytimes.com/2008/01/13/realestate/13deal2.html

As you can see, many billionaires and hundred millionaires really made their real wealth off property, for being at the right place at the right time, even if all of them attribute their success to stock trading. ;)

If the result of the trade war means the dollar loses its printing power as a reserve currency, will we see higher interest rates and the end of the property market? And how will this affect gold?

We might be reaching an important turning point in terms of the world monetary system and this will have trememdous impact on our future.
 
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1) the economic gain to Americans from foreign trade is what we import from countries like China, Japan and Mexico, and 2) what we export is the cost of getting those imports. And the proper objective for a nation as Adam Smith put it, is to arrange things, so we get as large a volume of imports as possible from China, Japan and Mexico, for as small a volume of our exports as possible.
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https://fee.org/articles/trade-deficits-dont-matter-understanding-deficits-do/
 
mmm....shiney! said:
https://fee.org/articles/trade-deficits-dont-matter-understanding-deficits-do/
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This article is interesting and is valid today, but doesn't consider the future.

Assumption:
1. China needs to import from the US forever.
2. China needs to export to the US forever.

Reality:
1. China is starting to make stuff that they need to import - from chips to planes, they don't need to import from the US within 10-15 years.
2. China doesn't have to export to the US as the RMB transforms into a reserve currency that can buy oil.
 
sgbuyer said:
Reality:
1. China is starting to make stuff that they need to import - from chips to planes, they don't need to import from the US within 10-15 years.
2. China doesn't have to export to the US as the RMB transforms into a reserve currency that can buy oil.
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True, but your assumed reality ignores comparative advantage. It may well be in China’s best interest to not manufacture/grow everything it needs but to import it instead.

As far as the US goes, when China doesn’t need to export goods to the US in order to satisfy the needs of domestic consumers in its own borders, then another market for Cheap plastic toys, iPhones and fireworks will fill the void for the US, the same as what has happened to Britain’s reliance on the Americas, Australia, India, Japan etc. The only reason a nation exports goods is in order to get money to buy the goods it can’t produce as well/cheaply as another.
 
mmm....shiney! said:
True, but your assumed reality ignores comparative advantage. It may well be in China’s best interest to not manufacture/grow everything it needs but to import it instead.
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This is true, but it is also true that China (or rather the CCP) is already planning a conflict with the US over Taiwan so if there's a conflict, they won't be able to buy from the US either, and vice versa. Conflicts do happen whenever there's an emerging military power that suddenly comes into the picture challenging the dominant power. Just like what happened during WWII.

Since the conflict cannot be prevented, being prepared for it is the best strategy.
 
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JulieW said:
From The Age

Views?
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How do you think this trade war will effect the global markets and US markets specifically? Because so far US markets look good and I though they would take a hit due to these new tariffs being set now.
 
Rocco said:
How do you think this trade war will effect the global markets and US markets specifically? Because so far US markets look good and I though they would take a hit due to these new tariffs being set now.
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'cause it's FAKE NEWS!
 
Rocco said:
How do you think this trade war will effect the global markets and US markets specifically? Because so far US markets look good and I though they would take a hit due to these new tariffs being set now.
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as a percentage, this number is small...but the use of USD in petrol trade will further diminished by another 20% (Iran)
US market is looking good but it can not be denied, that the trend will break soon, as in 6 months
the crisis is on, why the people are paying attention to earning, the business would no longer be there in months to come
 
2018.07.09moodys.JPG
 
war on Gas against Germany ?

Germany is a captive of Russia – Trump https://www.rt.com/news/432627-germany-captive-russia-trump/

Russia uses gas supplies to control Germany, said US President Donald Trump on Wednesday. Trump says it’s unacceptable that Berlin is paying billions of dollars to Moscow instead of its NATO dues, which protect it from Russia.


Speaking to journalists before a meeting with the NATO secretary general in Brussels, Trump criticized bloc members that approved the construction of the Nord Stream 2 gas pipeline from Russia to Europe. The president criticized Germany in particular, calling it a hostage of Russia.



"Germany is captive of Russia because it is getting so much of its energy from Russia. They pay billions of dollars to Russia and we have to defend them against Russia,’ said Trump at a breakfast with NATO chief Jens Stoltenberg.

Germany has resisted US pressure to block Nord Stream 2, which is due to be completed in 2019. The project is an expansion of the existing Nord Stream natural gas pipeline which opened in 2011. The pipeline has been a source of contention for over a year, pitting the US and a small number of Eastern European countries, including Poland, Ukraine, Lithuania and others, on one side, against Russia and major EU members, led by Germany, on the other.

The expanded pipeline aims to ensure a reliable supply of Russian gas to central and western Europe. It includes a 759 mile (1,222km) natural gas pipeline running on the bed of the Baltic Sea from Russian gas fields to Germany. It will double the existing Nord Stream pipeline’s current annual capacity of 55 billion cubic meters and is expected to become operational by the end of next year.

https://www.facebook.com/video.php?v=2284721651543521


 
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alor said:
as a percentage, this number is small...but the use of USD in petrol trade will further diminished by another 20% (Iran)
US market is looking good but it can not be denied, that the trend will break soon, as in 6 months
the crisis is on, why the people are paying attention to earning, the business would no longer be there in months to come
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I agree the trend is definitely on thin ice here...
 
Rocco said:
I agree the trend is definitely on thin ice here...
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Trump is going to restructure America Inc. He cares only about maximizing revenue (jobs and exports), minimizing costs (imports and overseas military expenditure), interest rates and competition - China (industrial goods) and Russia (military hardware).

As you know, the way economists and businessmen work is very different. Warren Buffett said "I don't pay any attention to what economists say, frankly,".

In my opinion, the Keynesian economics is already obsolete because of scarcity of resources and AI. Silver and gold mine reserves won't even last 20 years at the current rate. Oil will be gone in 30 years. There's no use having the petroldollar when there's no oil. No matter what American presidents do, even if you have Clinton on board, the petroldollar wil be gone in a generation.
 
https://www.zerohedge.com/news/2018...-sanctions-western-investors-russian-pipeline

https://www.zerohedge.com/news/2018...ar-trump-cracks-down-chinas-rare-earth-metals

it got from bad to worse

Trump wants his protection money to be paid to the Military Industrial Complex (2-4% of OTAN members GDP), rather than allow Germany used their money to buy Russian gas (Germany is a US prison state)

China must increase prices, to challenge Trump to tariff this rare earth metals things, if you want to advance your technology - please pay with your flesh :)

Trump has build America inside a giant Iron Curtain, just like Israel building their tall concrete walls everywhere, any one seen a giant running wild lately

Tariff this product as high as possible too :D

36926099_1756753691046984_384882640848683008_n.png
 
sgbuyer said:
Trump is going to restructure America Inc. He cares only about maximizing revenue (jobs and exports), minimizing costs (imports and overseas military expenditure), interest rates and competition - China (industrial goods) and Russia (military hardware).

As you know, the way economists and businessmen work is very different. Warren Buffett said "I don't pay any attention to what economists say, frankly,".

In my opinion, the Keynesian economics is already obsolete because of scarcity of resources and AI. Silver and gold mine reserves won't even last 20 years at the current rate. Oil will be gone in 30 years. There's no use having the petroldollar when there's no oil. No matter what American presidents do, even if you have Clinton on board, the petroldollar wil be gone in a generation.
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What is your opinion on the way Trump is going to restructure America? So far all he's been doing has been growing the American economy but some economists may say it's bad since inflation is rising.. What would you say is the best thing to invest in during this time?
 
Rocco said:
What is your opinion on the way Trump is going to restructure America?
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I don't really know for sure, but from what he has been tweeting, it appears that he wants to boost hi-tech manufacturing for the US. I think it's quite common sense - the Internet and consumer based economy does not work in the long run with rising AI and robotics - I mean how much do burger flippers, amazon packers, and delivery drivers make? Never mind that these jobs won't exist in 10-20 years because such work can be done by robots.

Rocco said:
So far all he's been doing has been growing the American economy but some economists may say it's bad since inflation is rising...
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I think there's already inflation all over the world, the only issue is whether wages are rising faster or slower against inflation. The inflation in China is much higher than the US, but wages are rising even faster, so the end result is rising standard of living.

If Trump can raise wages faster than inflation, rising inflation may not be a bad thing after all I guess?

Rocco said:
What would you say is the best thing to invest in during this time?
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Investment wise, I'm very bad at timing, always entering too early (pm being the good example as I bought 1-2 months ago but is now falling, though partially offset by the rising USD for my case). Long term is easier to guess. With rising interest rates, the stock market rally can't go on forever.

Maybe we should plan what to buy after the bubble bursts?
 
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Ipv6Ready said:
even Iran doesn't want Yuan, China has cut back buying Iranian Oil to less than a third they did last year because Iran is selling to Euro/USD buyers
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that was last year, not next 3 months...
it is outdated looking at how the war developed
 
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