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The United States will not be able to win the trade war against China
China's economy as a whole is a surplus economy based on the production of goods. The US economy as a whole is a deficit and essentially endowment economy based on the ability of the US to borrow indefinitely from the world. Having passed through the period of emission deindustrialization, the US was deprived of its own commercial product which has led to an extreme degree of dependence on the US economy and the US population, on imports of goods。
Trump's ideas and programs about America's new industrialization, are ideas and plans not for one year, but for decades. And the trade war between the United States and China has already begun and continues right now. Even if all these plans are implemented successfully and quickly, goods produced in the United States will not be able to withstand price competition against goods produced in China. To produce goods in the United States at the same low cost as in China, you need to make one of two. It is necessary either to make the US population work twice as much for the same wages. Or halve pay. The US population has long been accustomed to high living standards in debt, neither first nor second will accept. Attempts to implement such reforms in the US will inevitably lead to a social explosion and a change of power. A country whose population is accustomed to high standards of living cannot win a market competition against a country whose population eats insects.
It is not possible to replace the supply of goods from China with the supply of similar goods from other countries at the same prices. If a political decision is made in Washington to replace Chinese goods with similar goods from other countries, producers from other countries will understand it. They will not miss their star hour and will increase the prices of their goods. They will be guided by the laws of the market, not by the wishes of the authorities and the population of the United States.
With a complete break in trade relations between the US and China, each of the two countries will remain with what it produces. China will remain with its unclaimed goods, and the US will remain with its unclaimed green papers. But with goods without papers, you can live. But with papers without goods, you can't live.
The trade deficit in favor of China means that China constantly sends its goods to the US, receiving the only paper in return, with amounts written on that paper of the growing US debt to China. But any paper is not a value. Paper is only a promise of some value issued on behalf of an issuer. The beautiful word "issuer" in this phrase, as in any other phrase, can be boldly replaced by a much simpler word - "debtor."
Many Western analysts overestimate the role of trackworkers in the structure of the RRT and China 's economy. If China begins to consistently exchange its tracksuits hard for physical gold, then by the time that exchange ends, the value of gold expressed in US dollars, will grow at times. This will lead the dollar to catastrophe - to undermine faith in the dollar around the world. The world community will see gold as the ultimate means of building value. And US trifles, nominated in rapidly cheaper US dollars against gold, are only an intermediate and far less stable means of accumulating and preserving value over time. The next stage people will start talking not about the value of gold expressed in US dollars, but about the value of US dollars expressed in gold.
The worst thing for the dollar is not to refuse to use the dollar in any mutual settlements. The worst thing for the dollar is the loss of the role of a universal value measure. As a result of the loss of the value measure function, the dollar will be destroyed.
Beijing knows and understands this. China 's monetary authorities are well aware that any material assets of real value are much more stable and reliable means of accumulating and preserving value over time than enemy debt receipts under a trade war.
The idea of continuing to lend its goods to the enemy is a priori destructive. In a trade war, as in a conventional war, no one credits the enemy and owes it to their opponent, no one supplies anything. This suggests that, as long as the trade war continues, China will continue to phase out US debt obligations to replace them with others - safer real assets and debt obligations of allied countries.
This suggests that the PRC has many options for diversifying the RRT and sterilizing the budget surplus, without strengthening the renminbi against the US dollar.
Describing the trade war between America and China, Western media increasingly wonder, "Who blinks first is Donald Trump or Xi Jinping?"
No one is yet saying that the next question in this trade war will be: "Whose population will blink first, from a significant decline in living standards, is the population of China or the population of America?
Ordinary citizens of China and the United States only have to wait and hope.
To hope that two leaders - Trump and Xi - will still be able to find words. They will be able to look at each other in the eye so that without blinking, to spread ships of their economies, in different directions from the course taken for the collision.
Lead analyst at KDG Gold
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