Trade Talk Optimism: "Something Could Very Well Come Out" - But It Won't!

Stocks are up again today, allegedly on trade talk optimism.

Stocks are up today with news on trade talks. Is that the reason? Who knows. Perhaps they are up for some other reason or no reason at all.

Anyway, Reuters reports Trump: 'something could very well come out' of trade talks with China's Xi.

Trump, who is set to meet with Xi over dinner on Saturday, made the comment in an interview with Voice of America.

Deal?

If there is a deal, one thing is pretty clear: We could have gotten to this point with a lot less pain a lot longer ago.

Farmers are rightfully howling and automakers are suffering.

Whatever promises China is willing to throw the US, if any, will not be worth the pain and agony it took to get them.

China Already Lost?!

The Epoch Times claims China Has Already Lost the Trade War.

Really? OK. Who won?

Attacking Symptoms

Trade imbalances are a symptom of the problem. Attacking symptoms cannot possibly work.

The problem is we have unfettered monetary printing globally, with no controls anywhere. This all started the moment Nixon closed the gold window.​

Total; credit market debt was roughly $1.7 trillion when Nixon closed the gold window. At last report it was $68.6 trillion. The Fed discontinued the total credit market series in the fourth quarter of 2017.

It takes massive amounts of increasing credit to produce relatively trivial increases in GDP.

We have now have unfunded wars, massive deficits, and a stockpile of $21 trillion in debt. The MMT crowd wants still more debt.

If debt fixed the problem we would not have a problem. The US, Japan and Italy prove debt does not fix the problem.

Gold vs Faith in Central Banks

Everything Under Control?

If you don't think so, buy gold.

Mike "Mish" Shedlock

Comments (27)
No. 1-9
shamrock
shamrock

I would put in another turning point: in 2003 Gold ETF's were launched, making it much easier for average Joe to invest in Gold. These ETF's helped enable a rally in Gold to turn into a giant bubble.

Kinuachdrach
Kinuachdrach

"Trade imbalances are a symptom of the problem."

Agreed! But sometimes we have to treat the symptoms at the same time as seeking the real cure. If a person is bleeding severely, first thing necessary is to staunch the blood flow. Because the US has pretended for a couple of decades that other countries were not waging a trade war, the bleeding is now severe.

"The problem is we have unfettered monetary printing globally …"

That is definitely part of the problem -- but why does a global problem affect specifically US trade so badly? There are other self-defeating problems which our own US usual suspects have imposed on the US citizenry, such as excessive counter-productive regulation and a dysfunctional educational system.

channelstuffing
channelstuffing

Just give it a fancy name and pull another NAFTA pretend agreement then declare victory,problem is fiscal deficit will shatter another record this year tracking at 2 plus trillion,so big gov't desperately needs that tariff cash!

stillCJ
stillCJ

Editor

While I agree with you most of the time Mish, I am still waiting for you to present your plan to get China to stop stealing US technology. I think it is in fact one of the most important issues in the trade talks, and the last thing China wants to give up. Criticism is easy; real solutions - not so much.

hmk
hmk

I don't see how money printing and the US trade deficit are related. Japan prints a crapload of more money comparatively, has a higher fiscal deficit and always has a trade surplus. The trade imbalances are because we can't compete with the Chinese effectively, partially because they are trade and military predators. Partly because of over regulation and anti business govt policies.

RonJ
RonJ

"Everything Under Control?"

It is all an illusion. But the illusion works for a long time. In a 360 degree cycle, a waterfall decline only comes along during a brief segment of a cycle.

Long term financial system stability is an illusion, as nothing stays the same. There is a constant and inconsistent ebb and flow. Closing the gold window was an inflection point during a phase of a cycle. There has never been a permanent gold standard, as the changing financial conditions over time, prevent it. Eventually a peg is broken. A war or some other crisis occurs and the peg is tossed aside.

Realist
Realist

There is some truth in the many different comments here. Money printing, as mentioned by Mish, is indeed part of the problem. However, most are missing the “big picture”. We live in a world where trade is global. As such, the invisible hand of the market largely determines who does what, and where. The US has a large trade deficit with countries like China because they can produce things for a much lower cost. Americans gladly buy low cost products from China while complaining bitterly about the trade deficit. Trump taps into this hypocrisy by putting tariffs on Chinese imports, forcing businesses and consumer to pay more. The net result of these tariffs will make US businesses “less” competitive as it raises their costs. This will destroy far more American jobs than it will ever create. Trying to fight or disrupt these market forces is the wrong approach.

As far as Mish always saying to “buy gold”, I wonder “how much” gold he means. I would never hold more than 5% of my portfolio in gold. I prefer a broadly diversified portfolio.

sunny129
sunny129

'The US, Japan and Italy prove debt does not fix the problem.'

Yeh. But it juices up the equity mkts, that's all the investors, top1%, Wall St and Banksters want! Rest is moot for them. 2008 was caused by excess debt. But, now that DEBT is more than ever! Have you heard or read any lawmaker of either parties mentioning the issue of DEBT? Is there a collective cognitive desonance along with collective insanity prevailing out there?

sunny129
sunny129

American JOBS are being destroyed each year (by outsourcing of jobs/factories by US Multi-Nationals) since 2000. The mobile capital of Globalists seeks profit at any cost by exploiting global labor arbitrage. They care little for WAGE workers of America or any other country! Whom are you kidding?