China doubles down on its path to economic doom, and Trump has all the leverage.
Trump understands finance and economics. Trump knows that China is doubling down on their path to economic doom. I’ve come to believe that he is humoring the Chinese to get good trade deals for America, knowing that China is struggling to stave off their coming financial crash.
We have read about China building, and sustaining, its rapidly growing economy with huge spending on government financed projects. These projects are often large infrastructure and urban housing projects.
All governments do this. China’s mistake is doing it on a gigantic scale by continuing to print money it doesn’t have. This creates a vast public debt that becomes progressively more dangerous. This is perhaps an inevitable mistake made by leaders of socialist economies. Russia is doing the same thing to keep paying for its failing Ukraine gambit.
Socialists avoid the natural controls of capitalist economies that let businesses fail, rather than continue to cover their failure to make a profit. This leads to ever more government debt to avoid economic collapse, thus making the problem ever larger, and making the inevitable collapse ever worse.
This article from the Financial Times describes it well.
How China enables American domination
Normally after an empire gains economic might, its currency takes an increasing share of reserves held by central banks. With a 17 per cent share of global GDP, but only 2 per cent of central bank reserves, China is trailing 30 to 40 years behind previous superpowers at a similar stage of their ascents.
Britain at its peak accounted for 40 per cent of trade, but 60 per cent of trade payments were in sterling. China by contrast has a leading 15 per cent share of global trade, but only 2 per cent of trade bills are invoiced in renminbi.
The dollar’s omnipresence lets America run the show in more than one way. High demand for dollars lowers US borrowing costs and allows it to run persistently large twin deficits.
China’s] money supply has multiplied sixfold since 1980 to 230 per cent of GDP, among the highest in the world. This liquidity sloshes around inside the walled economy, much of it in the domestic debt market, battered lately by a property bust. Beijing is wary of easing controls, lest it unleash capital flight.
So, China does have the world’s second largest economy. It does have a large external trade volume. It does have decently impressive technological capabilities.
But, it is built upon huge government financed internal debt from funding socialistic style projects. Its currency is shunned by the world’s financial markets, and used mostly when China can pressure other nations into accepting their crappy currency.
Trump needn’t do anything to pressure China. He can easily smile, nod, and flatter them to get deals good for America. He knows China’s economy is due to collapse. He knows it will take years for them to recover. He knows the present communist government may well collapse. He knows the USA will effectively win the economic struggle, and, that China will need a few decades to recover.
At worst, China’s leaders may attempt to capture Taiwan in the desperation of their failure. But, given what’s going to happen to China, negotiating anything about Taiwan now is useless.
Remember the old adage, “the Emperor has no clothes”?
In China’s case, the Emperor has no currency.


