It's a national security issue.
From The National Interest, April 26:
The United States has carried the load of global consumption for a long time. As the world’s largest importer, issuer of the world’s reserve currency, and market of last resort, the United States has absorbed the world’s excess capital for generations, boosting global growth, helping to lift 700 million Chinese citizens out of poverty, and taking on an astronomical amount of debt. What would life be like for America if it were not the leader of the free-market economy and the dominant player in the global monetary system?
The Trump administration’s tariff assault aims to wake Americans from decades of driving on economic autopilot. As we have slumbered, China has overtly orchestrated a systematic, multi-decade exchange rate devaluation to finance an unprofitable, forced, and militarized industrial boom. It is time to address this manipulation.
Their commission of such tactics has distorted global trade and capital imbalances at the expense and repression of Chinese households. For Americans, abundant capital inflows have inflated asset values for the wealthy while imposing financial repression on average workers, who struggle to keep up with the rising cost of living. We now find our national economic security in peril. If we do not address this disequilibrium, free market economies risk the very real prospect of flatlining and fading out.
The moment of global economic confrontation has arrived, and not a moment too soon. For all the delicate tiptoeing around the issue of “de-risking,” we now face the inevitable; we must decouple from China. Japan has blinked first in raising rates, selling foreign sovereign bonds, and reinvesting domestically.
Make no mistake. This is not going to be a comfortable ride.
To meet the moment, the United States faces the dilemma of balancing re-industrialization with financial repression (keeping interest rates artificially low). Rebalancing will require the tough love of national capitalism (as elegantly phrased by Russell Napier).
Dollar hegemony is our most valuable weapon. The American republic’s prize asset is coveted by allied and adversarial nations alike. No other country offers the allure of prosperity and gratis access to capital markets. The story of the dollar’s dominance, however, is also a tale of imperial hubris that led to our current economic constraints.
In the 1970s, the Nixon administration introduced its New Economic Policy and established diplomatic relations with China. Over the next several decades, American manufacturing productivity was exchanged for low-cost Chinese production. As the Cold War faded and global trade grew, so did the circulation of and demand for the U.S. dollar.
Before the 1970s, the world still operated under the Bretton Woods Agreement, which tethered a nation’s fixed exchange rate to the full faith and credit of the dollar, thirty-five of which equated to one ounce of gold. However, unlike Bretton Woods, no body of nations ever convened to agree to the system of American backstopping of deficit-driven consumption that emerged in its wake. Moreover, no group of nations has ever agreed to China’s tactical and subversive devaluation of its currency, which distorts trade and capital account balances, leading the world to today’s massive trade imbalances.
The United States and its allies sacrificed a generation of innovation and intellectual property to China, giving rise to a weakened American middle class, social instability, and populism. As Americans fought distant wars in Iraq and Afghanistan over resources and terrorism, our adversaries built up their military-industrial complexes with stolen intellectual property and slave labor....
....MUCH MORE
The people who benefited the most from globalization and the accession of China to the World Trade Organization in 2001 are now the ones making the most noise about the changes we will be seeing.
And it is not just noise, they and those they employ are willing to smear and destroy anyone who gets between them and the spoils they think are rightfully theirs.
Related:
"America Begins To See The Consequences Of The Past Policy Errors That Helped China's Rise"The last twenty years of U.S.- China relations prove up the the line in Anne Stuart's historical romance (got a problem with that? huh, got a problem with that?) Lord of Danger:She was a spoiled brat and he knew it. She had spent her short young life getting her own way by dint of her beautiful face and her wheedling charm. Someone should have spanked her lovely little arse when she was a child but he suspected no one had had the heart to.
It was too late for that now....
"Western Greed Fuels China's Domination"
It's good to name names. Unfortunately Dalio, Dimon, Fink and Cook sounds like the law firm from hell....
"Microsoft helped build AI in China. Chinese AI helped build Microsoft." (MSFT)
"In His First Trip Abroad Since The Start Of The Pandemic, China's Xi Will Visit Producer Of Half The World's Uranium"
Priorities. The Xi-man is not playing around....
"Xi Jinping Wanted Global Dominance. He Overshot"
"The deal that the American elite chose to make with China...."
