“Under
the gold standard, a free banking system stands as the protector of an
economy's stability and balanced growth... The abandonment of the gold standard
made it possible for the welfare statists to use the banking system as a means
to an unlimited expansion of credit... In the absence of the gold standard,
there is no way to protect savings from confiscation through inflation”
Alan
Greenspan
First, I must thank a
reader in North America for his most kind and unexpected donation this week. I
assure all LIR readers that in our summer GB heatwave, it will be put to
appropriate, and very good use. One must stay hydrated at all times. My thanks
also to all who donate over the year, although, sadly, I can’t compete with the
Clinton Foundation. If I ever do, you will all be invited to join me and Rosie,
for a weekend at London’s hidden gem, the five star Stafford Hotel.
It is not often that
John Bull finds himself allied in a war alongside China, Germany and France
against the United States of America, but in Trump’s new developing global
trade war, that’s the peculiar situation that’s developed this weekend.
We could also add
allied to Canada, Mexico, Brazil, India and Australia too, such is the bizarre
world we now live in. Will Trump now ally himself with Putin’s Russia, Monday
week?
To the best of my
knowledge, President Trump hasn’t yet started a trade war with Bhutan or Benin
but give it time, there must be something both export that can be tariffed. We
might be allied to them as well soon, though both are hard to find on a map,
which might be why Trump’s bumbling team missed them.
We open this weekend
Trade War update with complacency ruling (for now.) The imposed tariffs so far
are tiny in the overall scheme of things. But for how long? How long before the
trade wars and currency wars smash open our fragile global recovery from the
Great Recession? Does anyone in Washington District of Crooks care?
Will the Great Global
Trump Trade War on the Rest of the World, and tearing up treaties, and the Pax
Americana rule book, finally bring down the Great Nixonian Error of Fiat Money?
I suspect that we have just entered the last act of dollar supremacy. The shock
to the ROW has been too great, trust has been totally shattered. I suspect that 2018 is America’s 1914, the
year that forever changed the last century. I wonder what Christmas 2018 will
look like?
“The problem with fiat money is that it rewards the minority that can handle money, but fools the generation that has worked and saved money.”
“Adam Smith” aka George Goodman.
July 6, 2018 / 11:01 PM
Trade worries fester, even as Wall Street shrugs off latest tariffs
SAN
FRANCISCO (Reuters) - Wall Street has taken the China-U.S. tariffs enacted on
Friday in stride so far, but investors are on alert for a ramp-up in the trade
conflict.
Stock
investors had been bracing for weeks for Washington and Beijing to place the
tariffs on $34 billion of each other’s goods, and share prices were
occasionally hurt by escalations in rhetoric along the way, with certain
sectors taking a bigger hit than others as traders avoided companies seen
taking the heaviest blows.
Another
round of sweeping tariffs could knock Wall Street off track. U.S. President
Donald Trump on Thursday upped the ante on his country’s largest trading
partner, warning the United States may ultimately target more than $500 billion
worth of Chinese goods, roughly the total amount of U.S. imports from China
last year. [L1N1TY1VC]
“The real question is, how long do we stay in the trade war?” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. “If we got to that point (of escalation), all bets are off for any continuation of the bull market.
The S&P 500 .SPX rose nearly 1 percent on Friday, with traders saying they had priced in the United States and China enacting tit-for-tat duties.
The S&P 500 is still up 3 percent year to date and the Nasdaq .IXIC is up 11 percent, near record highs.
The specter of a full-blown trade war also risks sinking China’s markets deeper into bear territory. Six months of wrangling over tariffs with the United States has wiped out about a fifth of China’s stock market value.
More
July 6, 2018 / 2:47 AM
As tariffs strike, China blames U.S. for 'largest-scale trade war'
BEIJING/WASHINGTON
(Reuters) - The United States and China slapped tit-for-tat duties on $34
billion worth of the other’s imports on Friday, with Beijing accusing
Washington of triggering the “largest-scale trade war” ever in a sharp
escalation of their months-long conflict.
----China’s commerce ministry,
in a statement shortly after the U.S. deadline passed at 0401 GMT on Friday,
said that it was forced to retaliate, meaning $34 billion worth of imported
U.S. goods including autos and agricultural products also faced 25 percent
tariffs.
However, an ensuing three-plus
hour delay before Beijing confirmed that it had implemented retaliatory tariffs
sowed confusion in markets.
----China’s soymeal futures fell more
than 2 percent on Friday afternoon before recovering most of those losses, amid
market uncertainty over whether China had implemented tariffs on a list of U.S.
goods, including soybeans.
Some Chinese ports had delayed
clearing goods from the United States, four sources said on Friday. There did
not appear to be any direct instructions to hold up cargoes, but some customs departments
were waiting for official guidance on imposing added tariffs, the sources said.
Ford Motor Co said on Thursday
that for now, it will not hike prices of imported Ford and higher-margin luxury
Lincoln models in China.
An analysis of over four dozen
imported U.S products facing higher duties showed that prices were little
changed on Friday afternoon versus earlier in the week. The products, all sold
on Chinese e-commerce platforms, ranged from pet food to mixed nuts and
whiskey.
----In the run-up to
Friday’s tariff implementation, there was no sign of renewed negotiations
between U.S. and Chinese officials, business sources in Washington and Beijing
said.
----“If this ends at
$34 billion, it will have a marginal effect on both economies, but if it
escalates to $500 billion like Trump said then it’s going to have a big impact
for both countries,” Chen said.
----“In effect, the Trump administration
is behaving like a gang of hoodlums with its shakedown of other countries,
particularly China,” the state-run China Daily newspaper said in an English
language editorial on Friday.
“Its unruliness looks set to
have a profoundly damaging impact on the global economic landscape in the
coming decades, unless countries stand together to oppose it.”
While the initial volley of
tariffs was not expected to have major immediate economic impact, the fear is
that a prolonged battle would disrupt makers and importers of affected goods in
a blow to global trade, investment and growth.
“For companies with supply
exposure to tariffs, they will move sourcing country of origin if they can; if
they can’t, they’ll pass on as much of the tariff cost as they can, or see a
cut in margins,” said Jacob Parker, vice president of China operations at the
U.S.-China Business Council in Beijing.
More
July 6, 2018 / 10:42 AM
No one gains in a trade war, China's premier says
SOFIA
(Reuters) - No one will gain from a trade war, Chinese Premier Li Keqiang said
on Friday, speaking hours after the United States and China slapped tit-for-tat
duties on $34 billion worth of the other’s imports.
“Trade
war is never a solution,” Li said at a news briefing with Bulgarian Prime
Minister Boyko Borissov in Sofia before a summit with 16 central and eastern
European countries.
“China
would never start a trade war but if any party resorts to an increase of
tariffs then China will take measures in response to protect development
interests.”
The United States’ deadline
for tariffs to take effect passed at 0401 GMT on Friday and shortly after China
said it was forced to retaliate, confirming later after some market confusion
that it had implemented retaliatory tariffs.
U.S. President Donald Trump
has warned the United States may ultimately target over $500 billion worth of
Chinese goods, or roughly the total amount of U.S. imports from China last
year.
Li said no one would emerge a
winner from a trade war.
“It benefits no one and it
would undermine the multilateral free trade process,” he said. “If one insists
on waging a trade war it would hurt others and themselves.”
July 7, 2018 / 5:05 AM
China's second half GDP growth seen easing to around 6.6 percent - official think tank
SHANGHAI
(Reuters) - China’s broad economic growth was expected to ease to around 6.6
percent in the second half of this year, the State Information Center said on
Saturday.
The official
China Securities Journal quoted the State Information Center (SIC) saying the
Chinese economy is likely to experience a mild slowdown in the second half of
the year as financial market risks become “obvious” and demand is expected to
decline.
The SIC is
an official think tank affiliated with the National Development and Reform
Commission, the country’s top economic planning agency.
The economy
has already felt the pinch from a crackdown on riskier lending that has driven
up corporate borrowing costs.
The central
bank has since pumped more cash into the economy to ease fears from the start
of a trade war with the United States by cutting reserve requirements for
banks.
“Uncertainties
in both internal and external economic developments are rising. Global trade
frictions are intensifying while a spill-over effect from major economies’
monetary policy normalisation will amplify financial market volatility,” the
think tank said.
“Downward
pressure on the Chinese economy has increased.”
-----China is due to publish second quarter GDP on July 16, along with other activity data.
The State
Information Center think tank expected dollar-denominated exports to grow
around 8 percent in the second half versus a year earlier and imports to rise
about 12 percent.
More
Founder of world’s largest hedge fund says ‘first day of the war’ with China has begun
By Mark
DeCambre Published: July 6, 2018 8:25 p.m. ET
Has a trade war started? The stock market doesn’t suggest that a full-scale
trade fight between China and the U.S. has erupted, but a tweet from Ray Dalio,
founder of hedge fund Bridgewater Associates, implies otherwise.Friday afternoon, Dalio tweeted: “Today is the first day of the war with China.”
The tweet from the founder of the world’s largest hedge fund, which manages some $160 billion, comes after the U.S. slapped levies on $34 billion of 25% on China’s exports at midnight, and President Donald Trump threatened further action.
In response, Beijing issued in-kind tariffs on 545 items, including cash crops and cars, intensifying a long-simmering dispute between the world’s largest economic superpowers, which threatens to roil global economies.
Read: Trade-war tracker: Here are the new levies, imposed and threatened
China’s Commerce Ministry said the U.S. is “launching the largest trade war in economic history to date.”
However, stock investors appeared to mostly shake off the recent developments in global trade, with the Dow Jones Industrial Average DJIA, +0.41% S&P 500 index SPX, +0.85% and the Nasdaq Composite Index COMP, +1.34% closing solidly higher on Friday.
Wall Street was fixated on labor-market data for June that showed that a better-than-expected 213,000 jobs were created last month.
Check out: Why a major trade war could mean a ‘full-blown recession’
However, some worry that average investors may be underestimating the potential for a protracted China-U.S. spat to deliver a more significant and blow to the domestic economy.
Morgan Stanley Wealth Management recently wrote in a recent report that analysis suggesting that the impact of trade clashes will be de minimus don’t fully account for the “risks associated with America’s increasingly aggressive position on trade,” Ryan Vlastelica noted in an article earlier this week.
By the looks of Dalio’s tweet, the investment professional may think investors are underplaying the potential impact as well.
"As fewer and fewer people have confidence in paper as a store of value, the price of gold will continue to rise. The history of fiat money is little more than a register of monetary follies and inflations. Our present age merely affords another entry in this dismal register."
Hans F. Sennholz
The monthly Coppock Indicators finished June.
DJIA: 24,271 +221 Down. NASDAQ:
7,610 +267 Down. SP500: 2,718 +169 Down.
All
three slow indicators moved down in March and April and May and continued down in
June. For some a new bear signal, for others a take profits and get back to
cash signal.
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