China vs US
Meanwhile… let us cast our minds far to the East where the real story is probably China. Lots of stuff in the press about China and debt… and much of it casting doubt on the sustainability of China’s economic miracle – including its ability to continue as the major economic partner across Asia, Africa and the Middle East.
But first, a diversion… I got taken to task by a US chum yesterday for being pro-Trump in recent comments. Harsh. Whatever I think of him is immaterial. It’s the political process that got him there, the geopolitical forces disturbed by his actions, and the real market effects he creates that matter. Loathe him or loathe him… he’s creating winds that move markets. Markets are about politics.
During the late summer we were treated to an American Aircraft Carrier (the USS Harry S Truman) moored in the Solent at the foot of our garden. A Nimitz class CVA is a great example of power projection. But, historically, the American’s don’t achieve their decisive victories through military muscle. Where they attempt to do so – in Afghanistan, Iraq and Vietnam, for instance, they proved the ineffectiveness of using a multi-billion dollar missile against an AK47, and that motivated guerrillas will win every time.
It’s very interesting to compare and contrast Trump rhetoric. In the last few days he’s pulled back from criticism of Saudi prince/thug MbS. He’s unapologetically told the American people that Saudi is a very important source of big defence contracts creating US jobs – therefore he will deal with them. Saudi is not a real threat. At the same time, he’s saying nothing about US jobs he’s willing to trade-off thru his Economic campaign against China.
Where America wins is in terms of economic muscle. The Japanese knew that before Pearl Harbour 80 years ago, the Russians learnt it in the 80’s. And now the Chinese are being treated to a similar lesson today.
The US can withstand declining energy exports to China far longer than Xi can withstand real growth tumbling from the Party’s mandated 7% to closer to 5.5% (or whatever it really is).