Op-Ed: USA vs EU, China, UK, and the world in general

Traders are keeping an eye on Beijing as officials huddle to hammer out a stimulus package for the world’s number two economy – Copyright AFP STR

There’s a slight problem with the hype and spin about US trade and other issues. What the incoming US administration is saying it’s going to do economically and politically won’t work on any level. The stated policies so far certainly won’t work long term.

The rest of the world knows that. Before the new administration even arrives, there are already moves to fix differences between the EU and China. The UK, now in the unenviable position of having a choice between the US and the EU, may be stuck with a US free trade deal on US terms. That idea wasn’t popular even at the height of the Brexit lunacy, and certainly not now.

Politically, the US is expected to be the undignified monkey to Putin’s organ grinder. The Kremlin actually went to the extent of denying that Trump spoke to Putin recently and distributed that information worldwide.

It’s anyone’s guess what’s happening back in the 12^th century where Trump and Russian policies dwell, but that response doesn’t look too sympathetic.  If Trump believes he has leverage over Putin, this is where he has to prove it. Failure to do so will demote the overall US position on so many issues to mere babble.

China is a different and far more difficult matter. The world’s second-largest economy can do deals with the world on its own terms. China can afford to make deals. The US-centric view of the world means nothing outside the US. Despite the various issues affecting China, a $1 trillion dollar trade surplus was achieved this year.

There are many US domestic issues that will automatically undermine the new US administration, too. Way back when most Americans weren’t under severe financial stress and the skies were not cloudy all day, these badly outdated isolationist policies might have been credible. Now, they’re dead before they start.

In the real world of budgets, big financial US black holes are the norm. Prices are grim. Costs are rising regardless of interest rates. America needs fixing, and the revenue money’s not really there to fix it. You’re not going to raise trillions of dollars through tariffs anytime soon.

Bluntly, America isn’t the invincible economic juggernaut it used to be 40 years ago. A lot of US assets, notably land and debt, are foreign-owned. China and Canada in particular own a lot of rural land.

It’s not like Canada is about to invade, but the core equity situation in foreign-owned assets tells a tale. A house of cards doesn’t need to be divided to fall over. The local American focus on capital investment hasn’t been interested in these markets.

Worse – The slow rot of governance in economic fundamentals is now a gigantic unavoidable liability. If you check out foreign holdings of US Treasury securities, aka debt, that’s not looking too peachy keen either.

Not paying that debt, a US credit default, is not an option. The global credit market would crash, and down would come baby, cradle and all. Interest rates would go to double digits in seconds.

Squeaking and flag-waving about foreign investment paying for US government operations is just absurd. Without that debt, America would be in a very serious, almost fatal, situation.

The bottom line here is that someone has to pay for all this ridiculous talk. You’re not going to sell gold sneakers to multibillion-dollar creditors, foreign or American. This is not a grift-able situation. Small-time backroom bozos are not the guys who can fix any of this.

It’s “survival of the fittest”, not “survival of the fatuous.”

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Disclaimer
The opinions expressed in this Op-Ed are those of the author. They do not purport to reflect the opinions or views of the Digital Journal or its members.