I know the media is still mired in its latest installment of, “As The Narrative Turns” when it comes to the current administration. “Russia-gate”, “West Wing Shuffle,” and on, and on. There’ isn’t enough digital ink to cover all the conspiracy theories, or the lame narrative building used to appear as if, and that is an important point, again, “to appear as if” they understand the issues at hand, along with how those situations (if there is one to begin with) may impact those consuming the drivel. And yes, I see it as just that: drivel.
Yet, in the midst of all this “Russia! Russia! Russia!” hysteria, there is another player that is quietly moving in a direction that has all the tell-tale signs of “dotting all the i’s – and crossing every t,” before they unveil their newest business plan.
And I believe that plan to be: A first strike initiative via its currency (e.g., Yuan) that may cripple the world economy in the near term, but more importantly, possibly, if not probably, damage the U.S. economy beyond repair in the long-term. Setting itself up to be the undisputed power-player of the world economy, for decades to come. If not centuries. That “player,” is of course: China.
Here’s the important point of all this: Not some time in the distant future like all the so-called “smart crowd” paraded across the business/financial media like to drone on about. But rather: Now, as in, at any moment, imminent, looming, just over the horizon, __________(fill in your descriptor of choice here.)
To reiterate: What I believe to be transpiring, at this very moment, is that China is setting up the monetary equivalent of preparing for an all out economic war, equivalent in terms for economic damage or destruction to that conjured up when imagining something on the kinetic version and scale. No hyperbole intended.
“Crazy talk!” many will argue (especially the Ph.D’d set, along with their sycophant cabal of next-in-rotation talking-heads and fund-managers) I understand the knee-jerk reaction some may have, Yet, here’s my reasoning…
I have argued ad nauseam that China dodged-a-bullet when the $Dollar suddenly began tanking at the close of 2016. Up and until that point China was at the precipice of an all-consuming, currency death-spiral.
I know its ancient history to many, but it was only August of 2015 that the “markets” received their first taste of what a Yuan currency debacle would mean to HFT (high frequency trading) liquidity providers everywhere. Hint: “The Week That Laid The Experts Bare”
Over the next 18 months China was on a “termination watch” for signs of when their intervention policies (aka the politburo’s Yuan price fix) to bolster the Yuan would finally prove unsustainable. And then, out of nowhere, the $Dollar began tumbling, alleviating the Yuan’s (along with the politburo’s) perilous course of breaking over the ultimate line-in-the-sand for outright monetary mayhem. (e.g., rising above 7.00 via the USD/CNH cross-rate.)
What caused that “out of nowhere” sudden plunge, you may be asking? Hint: The presidential election results. Conjecture of course, but far too coincidental to not allow for a significant weighting, in my opinion.
Since this period (e.g., the U.S. presidential election) the “markets” have roared higher, and yet, the $Dollar has continued its decline. So much so that the current cross-rate of the $Dollar-Yuan now sits precariously aligned with where it sat when all heck broke loose causing China’s “Black Monday.” Here’s a chart showing what I mean. To wit:
Now here is where I’m going to make an assertion, which I believe, most miss. And, is why far too many also underestimate, or miss entirely the possible, if not probable impending ramifications. And it is this:
Most see the above and will reason that if we begin to go back around, or up, or down, or just scream sideways that China will respond in ways much the same as they did prior. i.e., There’s some form of positioning to counter within a “winning” manner, or at least, the ability to remain within a controllable equilibrium.
I, am not of that viewpoint.
I see the above, along with what is currently transpiring in regards to ongoing Fed. policy and political stances such as tariff policies and more. And see China in a, No-Win situation.
Every direction the $Dollar now takes hurts China. And what is worse? Every forthcoming move in the “markets” in response to Fed. policy will hurt it even more, and that’s not all.
Tariffs, of any sort, that are directed squarely at China does one thing that for now has been avoided, and it’s this…
What if the “pin to prick the financial bubble” is actually more like a “thorn” that is suddenly stepped on by the proverbial, “Bull in a china shop” that has until now been just lethargically meandering calmly up and down the aisles? Hint: The results would be the same, only where it begins differs.
Everyone across the mainstream media, which includes the business/financial, like too argue and hypothesize China’s business structure as some form, or slightly different approach (i.e., only around the edges) of capitalism.
China, for those that have forgotten (i.e., most financial/business pundits) is a Communist nation. And, I’ll assert, is not opening itself up further into having a more westernized economy for financial, business, and political ideals. Proof?
That “proof” was made manifest with the recent declaration that its leader, Xi Jingping has just scrapped term limits clearing the way for him to be, in Mao fashion, “Dictator for life.” The timing for this “power grab” can not be made forceful enough. If, one truly looks at the proverbial “tea leaves.” Here’s why:
- If the $dollar continues lower – that’s bad for China. Why? U.S. exports get cheaper as it also makes the Yuan stronger and their exports less competitive. A double whammy.
- If the U.S. imposes tariffs on any major industry such as steel and more in China – that’s another double whammy. For these are the massive industries that China uses to hide (or make up) GDP results and employ many of its workers which causes near immediate political unrest.
And I haven’t even listed the financial ramification within its own amalgamation of shadow banking that would make Frankenstein wince.
Those are just a few, of the many. But their implications are ginormous, or said differently, “Bigly.”
This recent power-grab by Xi Jingping will allow him to do something which has not been seen since the days of Mao. i.e., Control the populous however he sees fit, by whatever controls he also, deems fit. In other words, if the populace must suffer to enable the vision – they will. i.e., Just like Mao.
If, for whatever the reasons, the “markets” or $Dollar make any sudden moves? China may not have the sure-footing everyone believes they have to deal with it. Especially, right now.
It’s quite possible if not more inline with probable that they (China) may be looking for the slightest reasoning as to covet, then release, whatever plans they may have been formulating behind the scenes.
But make no mistake about it: You don’t change what was deemed to be “a great moment in China’s global rise” by revoking what was thought to be the impetus for it. i.e., A more friendly, western political, and/or business version.
That is: Unless – you have a plan, and a mighty big one at that of your own in mind. Think about it.
The issue at hand is, “that plan” may be releasing the monetary equivalent of an all out economic war using the equivalent of a “thermonuclear” first strike devaluation. A “plan” they may now believe they can win, because control is now cemented in one mans hands. For Xi no longer needs to worry about re-election, or any other political fallout. He can/will dictate and decree how any dissention or political strife will be dealt with to reach his ultimate goals.
Just like Mao.
© 2018 Mark St.Cyr