Peter Schiff’s Trade war blow back view argues that Trump’s protectionist stance will produce no winners and will alienate US trade partners and friends.
“Earlier this year when President Trump began beating the drums loudly, causing fear of a trade war (and assuring us that such a conflict could be easily won), I cautioned that he had no idea the trouble he was courting”, said Peter Schiff.
“Earlier this year when President Trump began beating the drums loudly, causing fear of a trade war (and assuring us that such a conflict could be easily won), I cautioned that he had no idea the trouble he was courting”
Peter Schiff’s Trade war blow back is based on a spectacular misunderstanding of the “power dynamic built into international trade”.
The crux of Peter Schiff’s Trade war blow back view is based on the fact that international trade between nations has two sides. One is the goods trade, the other is the trade in capital, which has far-reaching consequences for interest rates and exchange rates.
When international trade is viewed through this prism then you can see how the books have balanced out. So the US has financed its huge import deficit in goods with another massive export in capital exports.
Put another way, Peter Schiff’s Trade war blow back will play out when US’s largest trading partner, namely China decides to no longer buy the US’s largest export in capital goods (treasuries).
“Peter Schiff’s Trade war blow back is based on a spectacular misunderstanding of the power dynamic built into international trade”
Simply put, the US buys tangible goods with US treasuries (US paper). But this model of international trade, whereby the US goes further into debt to accelerate its de-industrialization and then trades its debt for more imported goods has led to an unsustainable twin deficit, (the budget account deficit and the balance of payment deficit).
In short, the current model of international trade has resulted in 21 trillion USD deficit, converted industrial towns into rust belt states and put 40 plus million Americans on food stamps. A tiny few financial professionals in Wall Street and the City got rich auctioning the debt, but it was at the cost of the many. Greed can also be self-destructive.
How long can any economy continue along this trajectory without creating a collapse in its fiat currency?
So dollar hegemony fight back could be about the re-industrialization of America with the latest advancement in robotics.
“Trump is in danger of bringing a knife to a gunfight” – Peter Schiff
Peter Schiff’s Trade war blow back is about China being able to retaliate with a strike to the US’s most vulnerable spot, the exponentially growing US deficit which has surpassed 21 trillion dollars.
“Trump is in danger of bringing a knife to a gunfight” said Peter Schiff.
So let’s define the gun. China holds 1.2 trillion USD (April 2018) of US Treasuries, which is approximately 8% of all US treasuries (based on April data).
But Trump is fighting with more than a knife, US owns SWIFT, the USD world’s reserve currency, and a God-fearing military.
“Americans Have the Most to Lose in a Trade War” – Peter Schiff
But Peter Schiff’s Trade war blow back could tell a story of another crisis brewing as Emerging markets dive, capital fleas and a wave of humanity cross the border in search of work, food. But tomorrows factories won’t need low skilled workers. Faced with a humanitarian crisis, what will the Trump administration then do?
So But Peter Schiff’s Trade war blow back might be less about a dollar crisis and more about the rise of economic migration into the US and political instability in Europe (the rise of fascism).
Perhaps it is the calm before the storm, but for other reasons.
Listen to Peter Schiff talk about how ‘Americans Have the Most to Lose in a Trade War‘.