Letter to Trump: make peace and rebuild America’s industrial base – Asia Times

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This article first appeared on The American Mind, a publication of the Claremount Institute think tank, and is republished with permission.

Dear President Trump:

Congratulations on your November election victory. President Joe Biden and Vice President Kamala Harris have left you with a strategic disaster and a fragile economy, but you have put forward a program to keep the peace and restore economic growth. Here are some ideas that may help in your efforts, followed by more specific proposals:

  • Inflation is closer to 8% than the official “3%” after figuring in higher interest costs to consumers. Biden started this inflation by running record budget deficits and the Federal Reserve made it worse by increasing the interest burden on consumers. You must educate the American public on this reality and get the right people in place to fix it.
  • The federal budget deficit is 6.4% of GDP, “larger than any deficit in records going back to 1930 except the years around World War II, the 2008 financial crisis, and the pandemic,” according to the Tax Foundation. Federal interest costs have doubled and now cost as much as defense. Get people on the Fed board who understand your economic agenda.
  • Our woke education system is a disaster and has betrayed working-class kids. We can’t fill skilled jobs in manufacturing because high school graduates lack basic math skills. In the short term, state community college systems and work-study apprenticeship programs can help. Create a federal-state initiative for public-private partnerships in manufacturing skills, and ask Governor Ron DeSantis to head it.
  • Vice President-elect J D Vance offered a workable peace plan in September to end the Russo-Ukrainian war. Give him a big role in handling the Ukraine problem. Leftovers from the foreign policy establishment in your first administration did nothing but sandbag you. Don’t listen to them and put a smart outsider in charge instead.
  • The US military-industrial complex is a hopeless morass of corruption and incompetence that can’t make enough artillery shells to supply Ukraine, let alone enough submarines. Bypass the Pentagon brass and the defense contractors and choose a secretary of defense who understands new defense technologies.
  • Your proposal to put high tariffs on Chinese EV imports but allow Chinese companies to build plants in the US is brilliant—and very much like Ronald Reagan’s response to Japanese auto imports in the 1980s.

An America First Economic Policy

Biden and Harris left you with record debts and deficits, and a dangerous household debt burden. Their reckless spending on handouts to their favored constituencies caused this inflation, not monetary policy, as David Malpass observed.

The Federal Reserve kept interest rates too low for too long and then raised them too much. Former Treasury Secretary Lawrence Summers showed that the real inflation rate is double the official number after including higher interest rates. Ask him to help the Bureau of Labor Statistics publish the real inflation rate.

You need a stable monetary policy instead of the Fed’s boom-and-bust whipsaw. Put people on the Federal Reserve Board who understand how monetary policy actually works instead of the ideologues who run the Fed today.

The biggest obstacle to industrial revival is the lack of skilled labor, thanks to the liberals who control US education. Summon the CEOs of our biggest manufacturing companies, and they’ll tell you the same thing: less than a quarter of US high school students are proficient in math. That puts high-end jobs in computer-controlled manufacturing out of their reach.

We can fix the problem by enlisting state community college systems in partnership with corporations. Florida already has the ball rolling. Ask Governor Ron DeSantis to head an emergency effort to train skilled workers.

For the first time in American history, America imports more capital goods than we produce for domestic consumption. The downside of tariffs is that they will increase costs for manufacturers who rely on foreign inputs, and domestic substitutes will take time and money to provide. You might propose a tariff rebate for American manufacturers who buy Chinese capital goods to expand production in the US.

The tax system is rigged against capital-intensive investment, raising the after-tax cost of capital for manufacturing. America’s stock of manufacturing equipment hasn’t risen in 20 years according to the Federal Reserve.

To return to a long-term growth trend, we need about $1 trillion in capital spending. GOP leaders in Congress should propose emergency legislation to allow immediate tax write-offs of capital equipment.

The 2017 corporate tax cut, which increased the number of years required to expense capital equipment, should be revised to allow immediate expensing of capital equipment. That may be a bigger stimulus for domestic manufacturing than tariffs.

Countering the National Security Establishment

You outraged the foreign policy swamp when you denounced endless wars, and they spent four years trying to remove you from office. The swamp bet the farm on endless war in Ukraine, and your refusal to play along makes you their irreconcilable enemy.

Don’t underestimate how determined they are to stop you. You hired establishment types in your first administration and had cause to regret it every time. Now, there’s no room for compromise with the swamp.

The Deep State entrapped your first National Security Adviser, General Mike Flynn, and his successors H R McMaster and John Bolton repaid your trust by turning on you. You can’t trust the failed, feckless foreign policy establishment.

It knows nothing but forever wars and meddling in other countries’ affairs. The problem is that the establishment has controlled promotion in government service and academia for three generations, so any candidate with a big resume got it the wrong way.

Vance may not have a lot of foreign policy experience, but common sense is a better qualification than years of pushing incompetent policies. Ask Victor Davis Hanson to run foreign policy and national security recruitment for the transition team.

And continue to seek the advice of Hungary’s Prime Minister Viktor Orban, your strongest supporter overseas and the smartest politician in Europe. Vance’s plan to end the war in Ukraine—establishing a ceasefire, a buffer zone, and Ukrainian neutrality—will do the job.

David Friedman did a brilliant job crafting the Abraham Accords as Ambassador to Israel in your first term. Persuade him to return to the job. The Biden administration treats Saudi Arabia like a pariah and cozies up to Qatar, the host and paymaster to Hamas.

That’s an outrage, especially after the October 7, 2023 massacre. Reach out to the Saudis and the UAE. Otherwise, US influence in the region may dissolve in the face of China’s diplomatic initiatives.

You rightly proposed a missile shield to protect the United States. Reviving Reagan’s Strategic Defense Initiative is the best defense policy anyone has put forward in years.

You will get bad advice from the uniforms. They wasted trillions building the wrong kind of military and will try to justify their previous blunders by demanding more of the same. We don’t need nearly a quarter million troops deployed overseas.

The Navy’s expeditionary forces are obsolete. Surface ships are sitting ducks for anti-ship missiles—and China has thousands of them. Meanwhile, our depleted industrial base can barely build one submarine a year.

The Pentagon brass will feed you phony scenarios to justify more obsolete legacy systems. Hire experts who see through flummery like Air Force officer and Stanford Professor Oriana Skylar Mastro.

You can’t trust the US Intelligence Community. Fifty-one senior intelligence officials signed a statement in 2020 claiming that the Hunter Biden laptop story was a Russian hoax. That might have cost you the election. Their appointees hold all the senior jobs today.

Seventy percent of the US intel budget goes to private contractors, opening the system to cronyism and corruption. It will take years to clean up this mess. In the meantime, create a “Team B,” a small group of people you can trust at the National Security Council to keep you informed on world affairs and double-check the CIA’s daily briefing.

Don’t trust the “process people” at the White House. Your Deputy Chief of Staff Chris Liddell told a Republican luncheon not long ago that by picking the people who would attend meetings at the Oval Office and assigning their roles, he could predetermine your decisions 90% of the time. Bring in outsiders who work for you, not the swamp.

We’re in a situation like 1973, when Soviet air defense ruled the skies. In less than ten years we invented smart warfare, turned the tables on Russia, and began winning the Cold War. We invented the Digital Age as a byproduct of our revolution in defense technology.

Don’t put a flag officer or defense contractor lobbyist in charge of the Pentagon. Appoint a defense secretary with deep knowledge of new military technologies, someone like Michael Griffin, your Under Secretary of Defense for Research and Engineering and the former head of NASA.

Under fiscal constraints, we can’t expand defense spending across the board. Focus on missile defense for the American homeland and American military assets. Cut legacy spending on forever wars, like the 230,000 US troops deployed overseas, and legacy systems like aircraft carriers.

Your first two defense secretaries came respectively from the Marines and the defense industry—and both of them tried to stop you from winning in 2024. You would be better served by a scientist who understands high tech in defense of the American homeland. Chips for defense and critical infrastructure should be produced at home under secure conditions.

Biden’s CHIPS Act is a disaster. It gave $8.5 billion to Intel just before it laid off 10% of its workforce. Worst of all, it left out R&D for chips based on new technologies. We’ve played Whack-a-Mole with China’s chip industry for five years. The battle for semiconductor dominance will be won by chips using interaction at the molecular or atomic level, with speeds orders of magnitude faster than silicon.

Finally, the swamp bet the future of NATO on the Ukraine misadventure. That disaster will cripple, if not destroy, NATO in its present form.

How to Deal with China

We’ve spent $7 trillion on forever wars. China spent $1 trillion on its Belt and Road Initiative. We lost influence and power, whereas China gained both. China’s exports to the US, Europe, and Japan are stagnating, but its exports to the Global South have doubled since you left office. China now exports more to the Global South than to all developed markets combined.

A lot of Chinese exports to the Global South are indirect exports to the US: China builds, plans, and ships components to Vietnam, India, and Mexico, and they export in turn to the US. This translates into a jump in Chinese influence in Asia, Europe, the Middle East, and Latin America, and more US dependence on Chinese supply chains.

China is gaining on us. At best, sanctions on exports of US technology to China buy time. At worst, they will backfire: Instead of keeping China dependent on our products, we have handed Chinese companies a captive domestic market for legacy chips and chip-making equipment.

We beat Russia in the Cold War by inventing the Digital Age, using NASA and the defense budget to drive breakthroughs in new technologies. We can innovate better than China. But federal support for R&D under Reagan was double its present level as a percent of GDP.

That’s why it’s critical to shift the defense budget to support new technology. To take only one example: We can’t out-produce China in missiles. The best response to China’s huge force of anti-ship missiles is directed-energy weapons (for example, lasers). But the Pentagon R&D budget for these new weapons is less than $800 million a year, or the cost of ten fighter planes.

We want to maintain the status quo over Taiwan. China won’t risk using force as long as Taiwan doesn’t move toward independence. With thousands of anti-ship missiles and hundreds of 5th-generation aircraft, China already outguns us in the South China Sea. To keep the balance of power, we need new anti-missile technology—not more sitting ducks in the form of surface ships.

Act at once on your proposal to combine steep tariffs on Chinese EV imports with an invitation to Chinese companies to build plants in the US. As Elon Musk well knows, China has a big lead in industrial automation, including AI applications and 5G communications.

Xiaomi just opened a fully automated plant that can turn out 1,000 cars a day. No US company can make an EV with a sticker price under $10,000 like BYD’s Seagull. It’s like the 1980s when Japanese automakers had better technology than Detroit. Forcing the Japanese to build plants here helped the U.S. auto industry get up to speed.

Just as we did during the Cold War, we need to harness America’s unique capacity for innovation to renew our industrial base. And if you can guide us there, Mr. President, your second administration will be remembered as a turning point in American history.

David P Goldman is deputy editor of Asia Times, a Washington fellow of the Claremont Institute and a senior writer for Law & Liberty.

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Trump win potential puts Asia on a tariff-ied edge – Asia Times

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Asia is suddenly starting to think about the “what-if” storm that will sweep Donald Trump and his Republican Party to win on November 5th. situations.

Despite the extremely close election in the US, Kamala Harris ‘ Democrats constantly had a statistical advantage. The GOP-controlled White House, Senate, and House of Representatives is currently influencing betting markets, which will force Asia to fight a” Trump business” circumstance in 2025.

Most Asian officials prefer Harris, as she would represent stability from Joe Biden’s administration. Trump’s industry policies alone had transform the world economic system, which is unusual.

The most immediate danger from Tokyo to Jakarta to the rest&nbsp, of export-oriented Asia is Trump’s supersized taxes. The Trump plan for a 60 % tax on China will stifle growth in Asia’s largest economy and stifle supply stores everywhere.

UBS&nbsp, Group thinks that tariff alone will cut China’s annual growth by more than half – chopping 2.5 percentage points off the gross domestic product ( GDP ) of the globe’s top trading nation. Due to weak retail spending, property purchase, and new home sales, China increased just 4.6 % in the third quarter year over year.

Over time, UBS&nbsp, analyst Wang Tao warns of the “risk of various nations raising tariffs on imports from China as well”, kicking off a prospective hands culture of tit-for-tat trade restrictions.

It’s not the end of the world, of training. As Tianchen Xu, senior analyst at The Economist Intelligence Unit, information, China’s full-year GDP target of around 5 % &nbsp, “is presently within approach with more stimulus in the third fourth”.

Despite the magnitude of these” challenges”, Xu notes,” China’s economy is not incurable as some would suggest”. However, Trump’s return to the height of massive trade wars was quickly alter that situation.

Trump has threatened to impose taxes of between 100 % and 20 % on imported cars from Mexico, and he has threatened to increase Biden’s new punitive tariffs on Chinese electric vehicles even further. But how long will it be before Chinese, South Asian and Indian-made cars face comparable Trump levies?

For maneuvers did put Thailand and other Southeast Asian export-oriented economies in harm’s way. Trump 2.0 may aggravate Thailand’s” Detroit of Asia” styles on being the leading China fence for international automakers.

According to Capital Economics ‘ chief economist, Neil Shearing, Asia is anticipating a “universal tariff on all imports to the US” as well as higher Trump taxes.

Additionally, Eastern policymakers must figure out how much more stringent the restrictions on US immigration will cost. Additionally, Trump has promised fresh tax breaks, which will only help the US’s$ 35 trillion national debt grow.

” While it’s reasonable to assume that many of Trump ‘s&nbsp, campaign pledges will be diluted&nbsp, when faced with the reality of government, the common thread running through each of these proposals is that they will end in higher inflation”, Shearing says.

By the middle of 2026, according to Capital Economics, Trump 2.0 plans could increase prices by two percentage points over recent levels. Real GDP may be roughly 0. 75 % lower while the federal funds rate would be roughly 50 basis points higher. ” Used up”, Shearing says,” this would be bad for both US bonds&nbsp, and&nbsp, stocks”.

The comments effects may be felt worldwide. Shearing notes that “emerging markets with higher levels of additional debt or northern banks that are especially vulnerable to movements in the exchange rate – somewhat Turkey, Indonesia, and, given its latest inflation problems, Brazil – would probably dial up the pace of monetary easing.”

Shearing adds that” the risk of higher tariffs, if implemented, could also have a significant impact on countries that trade with the US – Mexico, Korea, Vietnam and, of course, China— especially if Trump imposes a general tariff, which would be much harder to avoid through trans-shipment”.

Trump’s policies may have an impact on emerging markets and investment. ” Tariff concerns have been a drag on EU equities”, says Emmanuel Cau, a strategist at Barclays.

Emre Peker, an analyst at Eurasia Group, notes that&nbsp,” Trump’s threat of at least 60 % tariffs on all Chinese goods and a 10 % levy on US imports from the rest of the world, as well as his potential suspension of China’s most-favored-nation trading status under World Trade Organization rules, would stoke EU-China&nbsp, trade&nbsp, tensions as more Chinese overcapacity flows to Europe. It could also increase the pressure on European industries, which are already struggling against US and Chinese rivals, from metals to automotive, green energy, and technology.

This, Peker adds,” could put pressure on Brussels to be more forward-leaning on its own duty or tariff posture toward Beijing. Furthermore, a&nbsp, Trump&nbsp, administration would likely monitor third countries for possible trans-shipment of Chinese goods and/or circumvention of US tariffs against Chinese overcapacity, threatening additional duties on the EU and others to close any backdoors into the US market”.

One of the bigger wildcards about a Trump presidency is that the US dollar will increase, putting downward pressure on China’s exchange rate. Carie Li, a global market strategist at DBS Bank, says “markets are watching if the Trump trade is heating up and pushing the yuan back to 7.15 against the dollar.”

Some people believe there is a reason to worry about Trump. According to Bilal Hafeez, CEO and head of research at Macro Hive,” The fixed income selloff accompanying rising odds of a Republican sweep could be overdone because Trumponomics is likely to be more rational than the media conveys.”

Hafeez goes on to say that” the impact of the tariffs on inflation has been greatly exaggerated. The US is a domestic-driven economy. Consumer goods imports, excluding cars, represent only about 5 % of total consumer spending, with imports from China accounting for about 40 %”.

A 60 % tariff increase on imports from China and a 10 % tariff increase on imports from other countries could increase consumer price indices by about 150 basis points, according to Hafeez.

However, crypto bets and other assets are all being negatively impacted by Trump’s re-election specter. ” Elections remain hard to call, but if you are long crypto here, you are likely taking a Trump trade”, says Bernstein analyst Gautam Chhugani.

Most troubling about Trump 2.0 is what Asia does n’t know. Imponderables abound. Trump’s first act as president in 2017, remember, was pulling out of the Trans-Pacific Partnership ( TPP ). A President Harris, by sharp contrast, will almost certainly attend next year’s Asia Pacific Economic Cooperation ( APEC ) summit and as she did in Bangkok in 2022 declare the US a” Pacific nation”.

But it’s easy to count the ways Trump might shake up Asia’s 2025 and beyond. He would undoubtedly act to lower the dollar in order to boost US manufacturers ‘ competitiveness, for instance. That could worsen the negative effects China’s current headwinds and undermine confidence in the dollar as a global reserve currency.

Trump will undoubtedly pounce on the Federal Reserve during a second term. Trump will browbeat Fed Chairman Jerome Powell to lower rates in 2019. Trump also considered firing Powell, along with criticizing the Fed on social media. Thus, Powell injected unneeded liquidity into a struggling economy.

Recently, Trump argued that&nbsp,” the president should have at least a say in” Fed interest rate decisions. Meanwhile, the” Project 2025″ scheme that the Heritage Foundation right-wing think tank devised for Trump 2.0 favors meddling with the Fed’s mandate.

Then there’s the default risk. &nbsp, As a businessman in decades past, Trump was a serial bankruptcy filer. Trump made hints about US debt default while campaigning in 2016 and spooked Wall Street.

” I would borrow, knowing that if the economy crashed, you could make a deal”, Trump told CNBC when asked about his fiscal plans. ” And if the economy was good, it was good. So, therefore, you ca n’t lose”.

In 2020, the Washington Post reported that Trump officials, looking to punish China, mulled canceling debt held by Beijing. It’s not difficult to comprehend how catastrophic a catastrophe would be because the US national debt is now twice the size of the Chinese GDP.

Trump is not going away, even if Harris wins on November 5. There is only a slim chance that Trump will graciously concede defeat and go back to his golf courses. Trump’s legal team is already working on the election results, which could incite a 2021-like insurrection that will be staged at locations across the country.

Washington’s political polarization could lead to unexpected risks that would cause the laws of financial gravity to resurface. The last insurrection&nbsp, Trump fomented dragged Washington’s credit&nbsp, rating&nbsp, down with it. When&nbsp, Fitch&nbsp, Ratings&nbsp, yanked away Washington’s AAA status last year, it cited the insurrection as a key factor.

As&nbsp, Fitch&nbsp, put it, the chaos on&nbsp, January&nbsp, 6, 2021, was a “reflection of the deterioration in governance” imperiling US finances. The US national debt is now twice the size of&nbsp, China’s GDP, threatening Washington’s last remaining AAA&nbsp, rating&nbsp, from Moody’s Investors Service.

Here, it’s worth noting how a Trump 2.0 presidency would play into Beijing’s hands. Surely, Team Xi is n’t looking forward to Trump’s coming onslaught of tariffs. However, the ways that nations like Japan and Korea could end up as collateral damage may make China appear more appealing as a trading partner.

At the same time, the more Trump 2.0 blocks Asia’s access to US markets, the more governments in Bangkok, Jakarta, Manila, Putrajaya and Singapore might be incentivized to draw closer to Beijing.

Hence Asia’s worries about a “red wave” 11 days from now that makes economic paranoia great again. Policymakers in the region are already weighing how hard their economies would be hit by tariff-sealed US markets and how to respond as the odds of Trump’s return rise.

Follow William Pesek on X at @WilliamPesek

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Washington yawns as interest payments surpass military spending – Asia Times

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Cassandra, the lady, cautioned her brother Troy that the wooden animal outside the wall of Troy was full of Greek warriors in Greek mythology. No single questioned her. The horses was brought into the town by the Trojans. Catastrophe ensued.

The national president’s rising debt has had many Cassandras. For centuries they’ve been predicting that the repayments continued growth may lead to disaster. Obviously, no one in Washington believes them.

Congress keeps passing gap costs that increase the amount of loan. It does n’t matter which party controls Congress, both yawn when the Cassandras issue their warnings.

In the just-ended fiscal year, the federal government – Democrats in control of the House, Democrats the Senate – spent$ 1.83 trillion more than it took in. That brought Uncle Sam’s accumulated debt to around$ 35 trillion.

If the nation had a gross domestic product in the neighborhood of$ 75 trillion, or even$ 50 trillion, the lips of the Debt Cassandras would be sealed. A sizeable market may result in more taxes than enough to allow the government to give its interest payments and possibly even lower the primary.

Alas, the US GDP is simply$ 25 trillion.

Federal debt held by the public is close to 100% of Gross Domestic Product and forecast to hit at least 125% by 2034. At what point will Uncle Sam's creditors start worrying about being repaid? (Federal Reserve Bank of St. Louis chart)
Nearly 100 % of the GDP is held by the public, and it is anticipated to rise to at least 125 % by 2034. When will the lenders of Uncle Sam begin to worry about getting paid? Chart: Federal Reserve Bank of St. Louis

Some experts say a government-debt-to-GDP ratios above 60 % begins to raise red flags. Some say 77 %. Uncle Sam’s amount is above 130 %. In other words, simply counting the debt held by the government leaves out debts that one portion of the government owes another, the ratio is about 100 %.

By 2034, the public’s projected bill under current rules will increase to 125 %. If Kamala Harris is elected, the nonpartisan Committee for a Responsible Federal Budget projects a 133 % increase in GDP by 2034 and a 142 % increase if Donald Trump wins.

Throw away the difference between the two, there’s bounce place in these quotations. Both applicants are making promises about tax breaks and handouts that will force the bill like jet fuel.

Since the Bill Cassandras started predicting crisis, it has been many years since crisis has not occurred. The debt-to-GDP percentage has soared past the red flags, yet investors keep buying the US Treasury’s report. The Cassandras might remain mistaken. Had a significantly higher debt-to-GDP ratio get the real danger point than experts had predicted? Sometimes there’s nothing to fret about.

Cassandra had predicted Troy would get destroyed if the Trojans had stolen Helen, the most attractive woman in the world, from her Greek father Menelaus earlier in the story. No single took that revelation really, either.

It did n’t help that 10 years elapsed before it came true. As day passed and Troy continued to live unhurt, the Trojans were lulled into confidence. Cassandra’s like a cynic! Why consider her?

The passage of time, combined with confusion about the repayments threat level, has also lulled Washington into confidence. Uncle Sam keeps borrowing and borrowing.

Sure enough, the government is also able to make its curiosity payment. However, those bills are consuming an increasing portion of the national budget. Debt-related attention now exceeds military spending. Interest payments may surpass Social Security as the national budget’s single largest line never in a long time.

Bill Cassandras point to an even more serious issue, aside from the snowballing effect of higher interest rates on the national budget. Investors in the administration’s bonds and notes will eventually be really concerned about getting the principal repaid as the bill mounts.

When that happens, need for the government’s sheet will fall. The government will need to offer significantly higher interest rates in order to buy it. These higher interest rates may only serve to further exacerbate the loan issue.

The economy will also be affected by those rates, and Congress wo n’t be able to reinvigorate it with deficit spending and tax cuts this time. Quite the opposite: The soaring interest rates on the government’s individual bill will force Congress to increase taxes and cut spending, more depressing the economy. In that dreadful situation, farm program expenditures are likely to be minimized.

Truth is, no one knows the debt-to-GDP amount that may make lenders stress. Optimists point out that Japan’s debt-to-GDP amount is 250 %. But that number is false, an study from the Federal Reserve Bank of St. Louis concludes. The balance sheets of both countries ‘ institutions show the same net duty of 119 % of GDP, taking into account things like intra-governmental payments and supply money. ( https ://www .stlouisfed .org/… )

Japan’s uniqueness comes in part because of the country’s great national savings rate and the fact that comparatively few foreigners own the country’s debt.

Governments like the US that borrow in their own money can simply write cash to repay it, according to the small minority of economists who adhere to the so-called modern economic theory. That’s correct, and the government perhaps had print money in a turmoil. But the resulting prices would be awful.

We do n’t know how long the debt can continue to grow before creditors start to panic and flee to safety. The more years go by without it taking place, the greater the desire for optimists, including almost everyone in the nation’s capital, to believe it might never take place.

We must hope that the country is caught up in their wagon and that the realists are correct. However, there is a real chance that the Bill Cassandras will turn out to be Cassandra of Troy, their prophecies being fulfilled but unheeded, leading to their fellow citizens’ great misfortune.

Previous lifelong Wall Street Journal Asia journalist and editor&nbsp, Urban Lehner&nbsp, is writer professor of DTN/The Progressive Farmer.

This&nbsp, content, &nbsp, previously published on&nbsp, March 8&nbsp, by the latter news business and then republished by Asia Times with authority, is © Copyright 2024 DTN/The Progressive Farmer. All rights reserved. Follow&nbsp, Urban Lehner&nbsp, on&nbsp, X @urbanize&nbsp,

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Spiraling US debt a golden opportunity for China – Asia Times

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China is steadily establishing itself as a significant participant in the recently-named Global South, which was formerly known as the Non-Aligned Motion. Over the last few years, China has become the country’s biggest bank of developing countries. Many people are concerned about using the debt trap to subdue partners and create a “hegemonic sphere of influence” as a result.

China’s financial standing is such that it is now viewed as the biggest risk to the US dollar. It is an important part of the BRICS party ( which also includes Brazil, Russia, India and South Africa ). This team is attempting to create a unipolar world that challenges the West’s identity, particularly the United States ‘ management.

Without using the name” threat”, the US leadership now sees China as the “most major long-term concern” to the global order. Given that China’s corporate goal is to stop the dominance of the US dollar, the foundation of US hegemony, it is simple to understand why.

I am studying the role China is playing in the de-dollarization of the world as a scientist in global political economy at the Université Laval.

Money stronghold

The power of the US dollar supports American identity in the current international order, as French scholar Denis Durand explains in his content” Guerre monétaire militaire: l’hégémonie du money contestée”? ( International forex war: the economy’s identity challenged? ).

American currency is used in many Third World and Eastern European nations, where it enjoys a much higher level of public trust than local currencies, in addition to the point that some currencies are linked to the money by a fixed connection or group of variation. The only nation in the world that is levy foreign bill in its own currency is the United States.

The US dollar’s overrepresentation in the country’s central bankers ‘ foreign exchange reserves reflects its hegemony over the world market. Even though this has weakened, the dollar continues to outperform another assets.

The promote of the US dollar in the standard property of the country’s central banks is still roughly steady at around 58-59 % despite a 12 percent point decline between 1999 and 2021.

The US dollar continues to inspire a lot of confidence around the world, strengthening its position as the world’s dominant reserve currency. On the US investment industry, the country’s central bankers ‘ US dollars resources are invested in US Treasury bills, which lower the cost of financing both government loan and personal expenditure in the country.

However, the US economy may lose money if the identity of the dollar did. When Durand asserts that” the economic hegemony of the United States is held up only by the assurance of financial agents around the world in the American money,” he makes this point.

There are two possible causes of a decline in the nation’s confidence in the US dollars.

First of all, as US Treasury Secretary Janet Yellen stated in an interview in April 2023, the US is firmly using its dollars as a tool to manipulate both its own enemies and some rebellious allies. This was eventually destroy the dollar’s hegemony.

On the other hand, the US loan situation, especially its unsustainability, is a source of concern that could change the economy’s attractiveness as a global reserve currency.

Unsustainable bill

Since 1944, and even more so since the Bretton Woods Agreement‘s enactment in 1959, the US dollars has been at the center of the global financial system.

The Bretton Woods system was based on both the metal and the franc, which was the only money that could be converted into gold. This conversionibility was set at a rate of US$ 35 per gram.

That changed on August 15, 1971, when Richard Nixon announced the close of the economy’s conversionibility into gold as a result of inflation and the growing disparities in the United States ‘ global economic ties.

The ability of the United States to accept debt to meet people expenditures was constrained by the dollar’s gold price. The United States could only lend in accordance with the volume of dollars in liquidity and its gold reserves under the gold-based system, where silver was the surety of the US dollar.

The US had free rein over its debt after abandoning the gold-based system. In 2023, the US public debt reached more than$ 33.4 trillion, nine times the country’s debt in 1990.

This astronomical figure continues to raise concerns about its long-term sustainability. As US Federal Reserve Chairman Jerome Powell has pointed out US debt is growing faster than the economy, &nbsp, making it unsustainable&nbsp, in the long term.

Opportunity for China

China is obviously aware of this reality because it recently sold off all of its US debt. Between 2016 and 2023, China sold$ 600 billion worth of US bonds.

However, in August 2017 China was the United States ‘ largest creditor, ahead of Japan. It held more than$ 1.146 billion in US Treasuries, almost 20 % of the amount held by all foreign governments. Beijing is now the second-largest foreign holder of US debt, with a claim of around$ 816 billion.

It is undoubtedly no coincidence that Beijing first instituted its own gold pricing system in the yuan before delving into US bonds. In fact, on April 19, 2016, the Shanghai Gold Exchange, China’s operator for precious metals, unveiled on its website its first “fixed” daily benchmark for gold at 256.92 yuan per gram.

China’s plan to make gold a tangible guarantee of its currency includes this policy.

Gold for dollars

China is also selling its US bonds. According to the US Treasury, between March 2023 and March 2024, China sold off$ 100 billion in US Treasuries, on top of the$ 300 billion it had already sold off over the past decade.

The Middle Kingdom is now the top producer and consumer of gold, which has replaced roughly a quarter of the US Treasuries sold in ten years. Other central banks in emerging markets continue to buy gold, just like China’s central bank.

China’s appetite for gold was confirmed in 2010, when its gold reserves rose to 1, 054 tonnes, from around 600 tonnes in 2005. Ten years later, in 2020, its stock of gold had almost doubled again to nearly 2, 000 tonnes. By the end of 2023, with a gold reserve of 2, 235 tonnes, China will be the country with the sixth-largest gold reserve.

Gold allows China to store the profits from its enormous trade surpluses in its place of the dollar. Beijing is attempting to increase its currency’s use abroad with the help of the Shanghai Gold Exchange, which provides contracts for gold trading contracts in yuan. This will help establish the yuan as the world economy’s benchmark currency.

Zakaria Sorgho is senior fellow at FERDI &amp, ACET-Africa and research associate at CREATE, Université Laval

This article was republished from The Conversation under a Creative Commons license. Read the original article.

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BRICS summit gives IMF gang a run for their money – Asia Times

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In: Asia, World

It’s going to be a active, anxious and challenge-laden International Monetary Fund meeting in Washington this month.

There, the financial glitterati will fight a bewildering range of hot-button issues ranging from China’s decline to Germany’s crisis to geopolitical risks everywhere to a toss-up US election that’s screening nerves everyday. Put in the IMF’s instructions about a US$ 100 trillion people loan timebomb.

Amazingly, Washington may become hosting this week’s next most effective economic gathering. The more enthralling function will be in Moscow, where the BRICS countries are holding their annual conference.

Some observers predicted that the grouping, which combines Brazil, Russia, India, and South Africa, would eventually have been a sideshow. In 2001, then-Goldman Sachs analyst Jim O’Neill coined the BRIC acronym. In 2010, the four original users added South Africa.

In the decades since, the BRICS seemed to reduce forward thrust. In a 2019 review, Standard &amp, Poor’s said the union had lost impact. &nbsp, Around that same day, O’Neill himself took some photos at his design.

O’Neill recently wrote that” the divergent long-term financial direction of the five states weakens the scientific value of viewing the BRICS as a clear economic grouping.” According to some people, I’ve made jokes about how appropriate it would have been to call the name “IC”&nbsp, given the obvious debacle of the Portuguese and Soviet economies in the last decade since 2011, both of which have obviously performed significantly worse than &nbsp, what the 2050 scenario path laid out.

However, the BRICS have since recovered some of their momentum and are now adding five more users. This year, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates may join the slide.

Mariel Ferragamo, an analyst at the Council on Foreign Relations, information that” the addition of Egypt and Ethiopia will intensify tones from the African continent. Egypt likewise had close business ties with China and India, and social ties&nbsp, with Russia”.

As a fresh BRICS part, &nbsp, Egypt” seeks to&nbsp, get more investment&nbsp, and increase its damaged economy”, Ferragamo information. ” China has long courted Ethiopia, the third-biggest business in sub-Saharan Africa, with&nbsp, billions of dollars of investment&nbsp, to make the region a hub of its Belt and Road Initiative. The addition of Saudi Arabia and the UAE would send in the&nbsp, two biggest economies&nbsp, in the Muslim world and the next and eighth major oil producers internationally”.

The schedule of this growth dovetails with a major BRICS plan: de-dollarization.

The BRICS announced plans to create a “multilateral online lawsuit and pay system” called BRICS Bridge in February, which “would help bridge the gap between the financial markets of BRICS member countries and promote joint trade.”

According to reports, the gathering this week will use a new strategy to make efforts to replace the US dollar more quickly. Udith Sikand, an analyst at Gavekal Dragonomics, notes that one idea is for a gold-backed BRICS monetary unit.

According to Sikand, it seems unlikely that any single currency could get past this compulsion to completely replace the US dollar’s central role.

” A wide range of currencies could, in a more multipolar world, theoretically chip away at their enormous role. The logical consequence of a change would be that while the dollar is still important to global trade and capital flows, its ability to serve as a safe haven when stress is diminished as investors weigh their options from a myriad of alternatives.

The West needs to understand how much it makes the BRICS more comfortable. After all, this opening for the Global South is largely attributable to the Bretton Woods gang messing up their individual economies and, consequently, the global system.

Take the US, which is rife with political chaos at a time when the nation’s debt is over$ 35 trillion. The risks posed by the upcoming&nbsp, November 5 election alone have credit rating companies on edge, particularly Moody’s Investors Service, which is the last to assign Washington a AAA grade.

Germany is flatlining, highlighting headwinds bearing down on the broader continent. As Germany’s Economy Ministry puts it, “economic weakness likely continued in the second half of 2024, before growth momentum gradually increases again next year”, adding that “technical recession” risks abound.

The European Central Bank’s decision to cut rates for the third time this year last week highlights the level of concern.

Allianz Global Investors ‘ global chief investment officer, Michael Krautzberger, claims that” this increase in the speed of rate cuts is justified because the combination of sub-trend euro growth and target inflation supports a much less restrictive monetary policy than is currently the case.”

Krautzberger adds that” there are some hopes that recent Chinese policy support will help trade-sensitive markets like Germany, but we doubt that will be sufficient to offset the region’s weak domestic demand picture.” There is also a chance that trade disputes will return to the policy agenda after the upcoming US elections in November, adding to the risk of negative growth.

Making matters worse, according to the US and China’s combined borrowing patterns, public debt levels are projected to reach$ 100 trillion this year.

” Our forecasts point to an unforgiving combination of low growth and high debt – a difficult future”, says IMF managing director&nbsp, Kristalina Georgieva. ” Governments must work to reduce debt and rebuild buffers for the upcoming shock, which will undoubtedly occur, and perhaps sooner than we anticipate.”

Such unthinkable debt levels pose a serious and immediate threat to the world financial system. In a recent report, IMF analysts wrote that “higher debt levels and uncertainty surrounding fiscal policy in systemically important countries, such as China and the United States, can lead to significant spillovers in the form of higher borrowing costs and debt-related risks in other economies.”

These spillovers could make monetary policy decisions in both Asia and the world more difficult.

Officials from the Bank of Japan are declaring their intention to keep raising rates in Tokyo. Yet that’s despite data showing renewed weakness in retail sales, exports, industrial production and private machinery orders. and concerns among ministry of finance officials about the potential return of deflationary forces in the months to come.

Even though inflation is easing in Japan,” the central bank has made clear that it will raise interest rates”, says Danny Kim, an economist at Moody’s Analytics. ” At best, this will slow growth. At worst, it could trigger a wider economic decline”.

All of this raises the question of whether the world’s top economies are complacent about potential dangers. &nbsp,

As officials arrive in Washington, there’s considerable relief that the US has n’t experienced the recession that the vast majority of economists predicted. Or that China’s downshift had n’t pushed mainland growth too far below this year’s 5 % target.

However, there is reason to believe that this is the last sigh before the storm. The geopolitical path is as dangerous as they can get. Middle East tensions are rising as Russia’s war against Ukraine drags on, aside from the ominous debt milestone that the IMF has flagged. And then there’s the return of the” Trump trade”.

Polls indicate a close race between Kamala Harris and former US President Trump. The betting markets, though, suggest Trump might prevail. If so, Asia could quickly find itself in harm’s way.

Trump’s threat to slap 60 % tariffs on all Chinese goods is just the beginning. Many people predict that a Trump 2.0 administration will impose much higher taxes and trade restrictions, wreaking havoc on Asia in 2025.

Even if Trump loses to Harris, he’s hardly going to accept defeat and move on peacefully. Many people are already concerned that their supporters may launch an attack on the US capital to protest his demise because the election was stolen. That’s likely to imperil Washington’s credit rating anew and spook investors pushing Wall Street stocks to all-time highs.

The fallout from the Trump-inspired January 6, 2021 insurrection was among the reasons Fitch Ratings revoked its AAA rating on US debt, joining Standard &amp, Poor’s. The question now is whether Moody’s downgrades the US, too.

This uncertainty favors the BRICS. Southwest Asia is also clearly orienting its attention toward the BRICS countries. &nbsp, All this is a global game-changer that few in the West saw coming.

Earlier this year, Malaysia detailed its ambitions to join the intergovernmental organization. Thailand and Vietnam are also interested in joining the Association of Southeast Asian Nations, which is a group of nations. In Indonesia, an increasing number of lawmakers are BRICS curious, too.

Joe Biden, the president of the United States, may be dealt a particularly bad blow by Southeast Asia’s involvement. Since 2021, a regional bulwark has been a hallmark of the Biden era in opposition to China’s growing influence and attempts to replace the US dollar in trade and finance.

The BRICS phenomenon demonstrates a growing stutter in relations between the US and many ASEAN members. This, at a time when&nbsp, Saudi Arabia&nbsp, is looking to phase out the “petrodollar”. As China, Russia, and Iran square off against old alliances, Riyadh is making more efforts to de-dollarize.

” A gradual democratization of the global financial landscape may be underway, giving way to a world in which more local currencies can be used for international transactions”, says analyst&nbsp, Hung Tran at the Atlantic Council’s Geoeconomics Center.

” In&nbsp, such a world, the dollar would remain prominent but without its outsized clout, complemented by currencies such as the Chinese renminbi, the euro, and the Japanese yen in a way that’s commensurate with the international footprint of their economies”, Tran says.

According to Tran, “how Saudi Arabia approaches the petrodollar continues to be a significant predictor of the financial future as its creation occurred fifty years ago.”

This week in Moscow, that potential future is on full display. Officials in Washington ignore those machinations at their own risk, 800 kilometers away.

Follow William Pesek on X using the hashtag# WilliamPesek

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BRICS summit gives IMF gang a run for its money – Asia Times

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In: Asia, World

It’s going to be a active, anxious and challenge-laden International Monetary Fund meeting in Washington this month.

There, the financial glitterati will fight a bewildering range of hot-button issues ranging from China’s decline to Germany’s crisis to geopolitical risks everywhere to a toss-up US election that’s screening nerves everyday. Put in the IMF’s instructions about a US$ 100 trillion people loan timebomb.

Amazingly, Washington may become hosting this week’s following most powerful economic gathering. Moscow, home of the BRICS countries ‘ yearly mountain, will host the more enthralling event.

Some experts predicted that the gathering that gathered Brazil, Russia, India, and South Africa would end up being a show just a few decades ago. In 2001, then-Goldman Sachs scholar Jim O’Neill coined the BRIC acronym. In 2010, the four original users added South Africa.

In the decades since, the BRICS seemed to reduce forward thrust. In a 2019 review, Standard &amp, Poor’s said the union had lost importance. &nbsp, Around that same day, O’Neill himself took some photos at his design.

O’Neill recently wrote that” the divergent long-term financial direction of the five states weakens the scientific value of viewing the BRICS as a clear economic grouping.” Based on the obvious debacle of the Portuguese and Soviet economies in the current century since 2011, where both have plainly performed significantly under-perform compared to what the 2050 scenario route laid out, I have often joked that I should have called the acronym “IC”&nbsp.

However, the BRICS have since recovered some of their momentum and are now adding five more people. This year, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates may join the slide.

Mariel Ferragamo, an scientist at the Council on Foreign Relations, information that” the addition of Egypt and Ethiopia will intensify voices from the African continent. Egypt even had close business ties with China and India, and social ties&nbsp, with Russia”.

As a fresh BRICS part, &nbsp, Egypt” seeks to&nbsp, get more investment&nbsp, and increase its damaged economy”, Ferragamo information. ” China has long courted Ethiopia, the third-biggest business in sub-Saharan Africa, with&nbsp, billions of dollars of investment&nbsp, to make the region a hub of its Belt and Road Initiative. The addition of Saudi Arabia and the UAE would send in the&nbsp, two biggest economies&nbsp, in the Muslim world and the next and eighth major oil producers internationally”.

The schedule of this growth dovetails with a major BRICS plan: de-dollarization.

The BRICS announced plans to create a “multilateral online lawsuit and pay system” called BRICS Bridge in February, which “would help bridge the gap between the financial markets of BRICS member countries and promote joint trade.”

According to reports, the gathering this week will use a new strategy to make efforts to replace the US dollar more quickly. Udith Sikand, an analyst at Gavekal Dragonomics, notes that one idea is for a gold-backed BRICS monetary unit.

According to Sikand, it seems unlikely that any single currency could get past this compulsion to completely replace the US dollar’s central role.

However, it is possible that a wide range of currencies could collectively chip away at their outsized role in an increasingly multipolar world. The logical consequence of a change would be that while the dollar is still important to global trade and capital flows, its ability to serve as a safe haven in stressful times would be diminished as investors weigh up their options among a myriad of alternatives.

And for that, the West needs to understand how much it makes things easier for the BRICS. After all, the Bretton Woods gang’s messing up their individual economies and, consequently, the global system contributes to this opening for the Global South countries.

Take the US, which is rife with political chaos at a time when the nation’s debt is over$ 35 trillion. The risks posed by the upcoming&nbsp, November 5 election alone have credit rating companies on edge, particularly Moody’s Investors Service, which is the last to assign Washington a AAA grade.

Germany is flatlining, highlighting headwinds bearing down on the broader continent. As Germany’s Economy Ministry puts it, “economic weakness likely continued in the second half of 2024, before growth momentum gradually increases again next year”, adding that “technical recession” risks abound.

The European Central Bank’s decision last week to slash rates for the third time this year can be seen as a sign of the level of concern.

This increase in the rate of rate cuts is justified, according to Michael Krautzberger, global chief investment officer at Allianz Global Investors, because the combination of sub-trend euro growth and target inflation supports a much less restrictive monetary policy than is currently the case.

Krautzberger adds that” there are some hopes that recent Chinese policy support will help trade-sensitive markets like Germany, but we doubt that will be sufficient to offset the region’s weak domestic demand picture.” There is also a chance that trade disputes will return to the policy agenda after the upcoming US elections in November, adding to the risk of negative growth.

Making matters worse, according to the US and China’s public debt levels are projected to reach$ 100 trillion this year, in large part due to the country’s borrowing patterns.

” Our forecasts point to an unforgiving combination of low growth and high debt – a difficult future”, says IMF managing director&nbsp, Kristalina Georgieva. Governments must work to reduce debt and rebuild buffers in anticipation of the upcoming shock, which may occur sooner than anticipated.

The world financial system is in immediate danger of such unthinkable debt levels. In a recent report, IMF analysts wrote that “higher debt levels and uncertainty surrounding fiscal policy in systemically important countries, such as China and the United States, can lead to significant spillovers in the form of higher borrowing costs and debt-related risks in other economies.”

These spillovers could make monetary policy decisions in both Asia and the world more difficult.

Officials from the Bank of Japan are declaring their intention to keep raising rates in Tokyo. Yet that’s despite data showing renewed weakness in retail sales, exports, industrial production and private machinery orders. and concerns among Ministry of Finance officials that deflationary forces might return in the months to come.

Even though inflation is easing in Japan,” the central bank has made clear that it will raise interest rates”, says Danny Kim, an economist at Moody’s Analytics. ” At best, this will slow growth. At worst, it could trigger a wider economic decline”.

All of this raises the question of whether the world’s leading economies are complacent about potential dangers. &nbsp,

As officials arrive in Washington, there’s considerable relief that the US has n’t experienced the recession that the vast majority of economists predicted. Or that China’s downshift had n’t pushed mainland growth too far below this year’s 5 % target.

However, one might assume that this is the last blip before the storm. The geopolitical path is as dangerous as they can get. Middle East tensions are rising as Russia’s war against Ukraine drags on, aside from the ominous debt milestone that the IMF has flagged. And then there’s the return of the” Trump trade”.

Polls indicate that Kamala Harris and former US President Trump are in a very close race. The betting markets, though, suggest Trump might prevail. If so, Asia could quickly find itself in harm’s way.

Trump’s threat to slap 60 % tariffs on all Chinese goods is just the beginning. Many people predict that a Trump 2.0 administration will impose much higher taxes and trade restrictions, wreaking havoc on Asia in 2025.

Even if Trump loses to Harris, he’s hardly going to accept defeat and move on peacefully. Many people are already concerned that their candidates ‘ supporters may stage a second invasion of the US capital to protest their election defeat. That’s likely to imperil Washington’s credit rating anew and spook investors pushing Wall Street stocks to all-time highs.

The fallout from the Trump-inspired January 6, 2021 insurrection was among the reasons Fitch Ratings revoked its AAA rating on US debt, joining Standard &amp, Poor’s. The question now is whether Moody’s downgrades the US, too.

This uncertainty is influencing the BRICS’ positions. Southwest Asia is also clearly orienting itself toward the BRICS countries. &nbsp, All this is a global game-changer that few in the West saw coming.

Earlier this year, Malaysia detailed its ambitions to join the intergovernmental organization. Thailand and Vietnam are also interested in joining the Association of Southeast Asian Nations, which is a group of nations. In Indonesia, an increasing number of lawmakers are BRICS curious, too.

The involvement of Southeast Asia could have a significant impact on Joe Biden, the president of the United States. Since the Biden era, a regional bulwark has been built to counteract China’s growing influence and attempts to replace the US dollar in trade and finance.

The BRICS phenomenon demonstrates a growing stutter in relations between the US and many ASEAN members. This, at a time when&nbsp, Saudi Arabia&nbsp, is looking to phase out the “petrodollar”. As China, Russia, and Iran square off against old alliances, Riyadh is making more efforts to de-dollarize.

” A gradual democratization of the global financial landscape may be underway, giving way to a world in which more local currencies can be used for international transactions”, says analyst&nbsp, Hung Tran at the Atlantic Council’s Geoeconomics Center.

” In&nbsp, such a world, the dollar would remain prominent but without its outsized clout, complemented by currencies such as the Chinese renminbi, the euro, and the Japanese yen in a way that’s commensurate with the international footprint of their economies”, Tran says.

Tran points out that “in this context, Saudi Arabia’s approach to the petrodollar continues to be a significant harbinger of the financial future as its creation was fifty years ago.”

This week in Moscow, that potential future is on full display. Officials in Washington choose to ignore those plots located 800 kilometers away at their own risk.

Follow William Pesek on X at @WilliamPesek

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The Prabowo era is born in Indonesia – Asia Times

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JAKARTA – Prabowo Subianto has been inaugurated as Indonesia’s seventh leader, marking the end of both cheerful President Joko Widodo’s ten years in office and Prabowo’s personal multi-decade search for the best work.

In his inaugural address to Indonesia’s parliament, Prabowo urged lawmakers and the country to be courageous in the face of difficulties and prioritize the needs of the Indian people over those of their own interests, including their own personal interests.

But, what can we truly expect for the next five times? On the campaign trail, Prabowo, when Widodo’s bitter enemy, vowed to be a devout heirs to his counterpart’s policies.

However, some people believe that the renowned former common will have his own plan on a number of fronts. A few key themes emerged in his inaugural address and afterwards cabinet picks, including the need for a strong international policy, an economics lean, a poverty-relief focus, and a potential shift to authoritarian rule.

European legislation

” In facing the global world, Indonesia chooses a free and effective way, non-aligned”, declared Prabowo, speaking to congress. ” So, we want to be associates with all nations, but we have principles, especially anti-colonialism because we have experienced conquest”.

In light of this, he continued to appoint Indonesia’s support for Arab independence, which the parliament greeted with loud cheers.

Indonesia’s theory of non-alignment paired loosely with a Fourth Worldist arrangement is regular fare, suggesting consistency with Widodo, and, indeed, the plans that have guided Indonesia since 1998. However, there are also indications that Prabowo may flame his own road.

Widodo generally let the foreign ministry run its own for ten years, leaving little interest in foreign affairs aside from their economic impact. Jokowi, however, takes a little closer individual interest and will probably seem to perform an active part on the world stage.

This is reflected in the recently appointed foreign secretary, Sugiono, a somewhat little-known secretary to Prabowo. In choosing Sugiono, Prabowo has broken with the post-1998 law of appointing a job minister to mind the government.

Prabowo appears to want a foreign minister with few, if any, ties to the strong government civil service.

Jokowi has urged people to play the role of an honest seller in international issues in his speeches. Most notably, at the Shangri La Dialogue in 2023, he surprised many with a proposed peace prepare for the Russia-Ukraine battle.

Defense geopolitics may also increase. In his capacity as Indonesia’s defence minister from 2019 to 2024, Prabowo oversaw the expansion of Garuda Shield drills with the US and the filing of a new military assistance deal with Australia.

Considerably, his views of the Quad and AUKUS, both seen as aimed at counterbalancing China in the Indo-Pacific, are considerably more comfortable than many in the Indonesian creation.

However, this should n’t be taken as Prabowo leaning toward the US and its allies in its purest form. However, Prabowo’s first overseas visit after his election this year was to China, a representation of both China’s need to judge Indonesia and Indonesia’s needed for Chinese funding to grow its business. His China trip was finally balanced out by subsequent trips to Malaysia and Japan.

Revisionist is anticipated to adopt a careful position on the Israel-Palestine debate. Unlike some in Indonesia, he declined to condemn techniques like Australia’s shift of its embassy from Tel Aviv to Jerusalem.

The Indonesian army has long had silent ties with Israeli rivals, giving the military a more amiable outlook on the nation than many in the foreign government. Public opinion may also give Prabowo a limited amount of room to maneuver.

Governmental development

Are we conscious that Indonesians also suffer from excessive hunger? In his annual conversation, Prabowoo asked the legislature. Prabowo made the main component of his plan to be fighting poverty and its effects.

His name promises in this case include free school meals for children and diet assistance for pregnant women. Additionally, he has pledged to construct three million fresh homes.

Some investors and economists are concerned about the potential value of these programs. There have been suggestions that the school meals program alone could end up costing some 400 trillion rupiah ($ 25.8 billion ) annually.

And according to comments made by various figures in the Prabowo camp, his government would be willing to allow the national debt to rise from 39 % to 50 % right now.

But, Prabowo has moved to try and alleviate those worries. Most notable is the request to keep Indonesia’s symbolic finance secretary, Sri Mulyani Indrawati, who excelled under Widodo and his succeeding President Susilo Bambang Yudhoyono, in her position.

Her reinstatement defied expectations that Prabowo may fire her because, according to reports, the two were at odds with one another over the defence budget.

But, if tensions between Prabowo and Sri Mulyani reappear, it is questionable how they will be handled. Widodo apparently played a vital role in persuading Prabowo to maintain her on. But as Widodo’s control wanes, but does Prabowo’s patience with a strong financing minister with a penchant for fiscal prudence.

Importantly, Prabowo’s brother – Thomas Djiwandono – is also staying on as assistant finance minister, a position he was appointed to in July 2024 to help ease the transition to Prabowo’s state. This ostensibly suggests that Prabowo may ultimately want his devoted associate in the finance department.

However, making room for extra saving on social programs may require cuts elsewhere. There have already been indications that Widodo may reduce his name infrastructure spending. And the government’s willingness to commit money to Widodo’s last megaproject, the new investment Nusantara, which is being constructed from scratch in Borneo, is a question mark.

Autarky and isolationism

” Brothers and sisters, I have made the declaration that Indonesia has eat a lot of food within the shortest amount of time. We ca n’t rely on external food sources. In a crisis, in a crucial position no one will help their items for us to buy”, Prabowo told congress.

” We also have to be self-sufficient in power. In a state of tension, in a state of possible battle everyday, we have to be prepared for the worst possible outcome”, he added.

Throughout the course of Prabowo’s presidential campaign, self-sufficiency in food and fuel were important elements. Prabowo’s military service has given him a different perspective on the world than Widodo, who had an entrepreneurial background as a furniture supplier and was more favorable to the development of global trade.

Jokowi has set incredibly ambitious goals, nevertheless with serious query marks about their achievability. In his statement, he suggested Indonesia could obtain food self-sufficiency in 4-5 times. Additionally, Indonesia has plans to increase its percentage of biodiesel blended with regular fuel from 35 % to 50 % or even 60 %.

However, critical questions have been raised about the viability of these objectives. Prabowo’s push for meals property projects as defense minister was somewhat unsuccessful. In Papua, more mega-projects are undergoing intense attention in order to achieve these objectives.

Green goals may suffer as a result of the emphasis on energy independence. As sources of energy self-sufficiency, Prabowo cited volcanic, diesel and fuel. While the first has low emissions, the second may have high emissions if combined with logging to produce biodiesel fuel like sugar or hand oil. Coal, of training, is anything but natural.

Zulkifli Hasan, who has been appointed the recently appointed Coordinating Minister for Food, will be in charge of all of this. As a close social supporter of Jokowi who displayed protectionist impulses as trade minister, the pick suits Prabowo’s interests. Some may be concerned about Hasan’s uneven performance in his past post, despite the fact that it appears to be central to implementation.

However, the new secretary of trade, past civil servant Budi Santoso, is said to be linked to a certain prominent businessman with huge coal and large biodiesel interests.

It’s unknown whether these protectionist instincts will eventually manifest in other sectors of the economy. Airlangga Hartarto, the coordinator of Minister for Economic Affairs, will continue in his current capacity and may serve as a potential counterweight.

Nickel and downstreaming

” We must all have commodities downstream.” In his speech, Prabowo said that the increased economic value of all those goods must help ensure that our people can enjoy a high standard of living.

In Indonesia, the heart of “downstreaming” is the nickel industry. Indonesia is the world’s top nickel producer thanks to a combination of export bans, tax breaks, and Chinese investment. Additionally, efforts are being made and plans to incorporate this into the production of batteries and electric vehicles.

However, Luhut Panjaitan, the Coordinating Minister for Maritime Affairs and Investment ( CMA ) under Widodo, has left with him. Without direction, the policy may change, but Luhut’s centrality depended more on his personal status than his title.

Minister of Energy and Mineral Resources Bahlil Lahadalia, who is now taking the lead in the role he was given in the Widodo administration’s final months, is now the focal point. Although some have questioned how he allegedly finished his PhD dissertation on the nickel industry in just under two years while serving as minister, a title he recently obtained was recently published under his name.

Despite the PhD’s dubious origins, it could provide some indication of Bahlil’s priorities. Four flagged issues include overreliance on foreign workers, lack of opportunities for local entrepreneurs, a paucity of revenue-sharing with local governments and a lack of post-mining diversification plans.

Authoritarianism

” In the midst of such great ideals and dreams, we need an atmosphere of togetherness, unity, collaboration, not prolonged bickering”, declared Prabowo. Let us be aware that our democracy must be one that is unique to Indonesia, he continued.

While the comments may seem innocuous, they’ll put a shiver down Prabowo’s critics ‘ spines. In the past, Prabowo has criticized democracy in particular as a difficult habit to break, like smoking. He has suggested removing direct elections for president and regional leaders.

The key concept here is musyawarah, which broadly means deliberation. It is often invoked to argue Indonesia’s culture means its politics must be centered on consensus-building and not oppositional. In practice, this typically refers to a system that makes little room for criticism and dissention.

Every party that has been elected to the national parliament, aside from the Indonesian Democratic Party of Struggle ( PDI-P), is now a part of Prabowo’s governing coalition. Despite attempts to organize regional elections using nomination thresholds, the idea was pulled out due to a pending Constitutional Court ruling.

This, plus Prabowo’s tendency to blame protests on foreign agitation, has left many worried about the space for opposition under the new government.

Cabinet appointments here provide little reassurance. Attorney General ST Burhanuddin and Minister of Home Affairs Tito Karniavan, who served during Widodo’s second term when the former president increasingly used legal institutions for political purposes, will continue in their positions.

In addition, Prabowo is close to new Attorney General Supratman Andi Agtas and new State Intelligence Agency head Muhamad Herindra. New Minister of Communication and Digital Meutya Hafid, a former journalist, is a potential bright spot.

Looking ahead to Prabowo’s new era, many anticipate challenges to media freedoms, tough crackdowns on any protests, and possible changes to election rules. Constitutional changes to repeal or modify liberalizing amendments introduced post-1998, measures that effectively gave birth to Indonesia’s modern democracy, are also not inconceivable considering Prabowo’s known views.

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Now’s not the time to short the yuan – Asia Times

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As the” Trump business” returns to create fear of political upheaval great once, global hedge funds are racing to little China’s yuan money.

They are betting that Trump’s designed combination of tax and business measures will boost local rise if elected, and that China may seek to become more dynamic.

However, betting on a weaker yuan could prove to be a lot of a mistake if the last several decades of the Xi Jinping age are any link.

Let’s begin with the Trump estimate. Obviously, the November 5 US vote is a true toss-up. One time, polls suggest Kamala Harris ‘ Democrats may emerge. The second, hp emerges to telephone a Trump 2.0 White House is coming.

This year, the speed seems to be on Trump’s part. In the US$ 300 billion dollar options business, hedge funds are placing higher stakes on a weaker renminbi. Yuan uncertainty is currently at its highest level since the middle of 2022.

However, it seems as though Trump’s 2017-2021 phrase will be forgotten due to fears that he might prefer a stronger dollar. Trump was unwaveringly in favor of a lower US transfer rate to benefit American companies and stifle China.

It’s also worth remembering Trump’s abuse on the US Federal Reserve. Trump was angry that his chosen Fed chair, Jerome Powell, continued father Janet Yellen’s price hikes. He then browbeat Powell into cutting rates, adding stimulus in 2019 that the economy did n’t need.

On top of the Fed’s broken trust, the US federal debt soared under Trump and present President Joe Biden, then topping$ 35 trillion.

Include social fragmentation to the picture until January 20, 2025, when the next management will take office. Even if Trump loses, no significant journalist thinks he will go away quietly.

One of the causes of Fitch Ratings ‘ cancellation of its AAA standing on US bill, joining Standard & Poor’s, was the fallout from the uprising on January 6, 2021, which Trump fomented. The next rating agency to assess America AAA is now Moody’s Investors Service, the source of the current query.

The Beijing component of this riddle is more crucial, though. There are at least four causes why Beijing is unlikely to help the yuan to fall very little.

One, a falling yuan may make payment on onshore bill more difficult for very obliged organizations like home builders. That would boost proxy risks in Asia’s biggest market. The last thing Xi wants is to see# ChinaEvergrande trending once more in the internet.

Two, the economic easing needed to sustain the yuan’s declines — especially with the Fed cutting rates, also— could harm Xi’s deleveraging efforts. Xi’s interior group has made significant strides over the past few years in eradicating financial abuse.

This explains why Xi and Premier Li Qiang have been reluctant to permit the People’s Bank of China ( PBOC ) to cut rates more forcefully, despite China Inc.’s reputation for deflationary pressures.

Three, increasing the yuan’s global usage is probably Xi’s biggest economic transformation achievement since 2012. In&nbsp, 2016, China&nbsp, won a place for the yuan in the International Monetary Fund’s” special&nbsp, drawing&nbsp, right” box, joining the dollar, yen, euro and pound.

Since next, the stock’s apply in business and banking has soared. Increased easing then may dent trust in the yuan, slowing its headway toward reserve-currency position.

Fourth, it may produce China a more contentious and important issue during a distinctly divisive US election. Trump’s Republicans and Democrats who are close to Harris concur that they must be strong with Beijing.

Beijing’s claims that it is manipulating the renminbi lower could stoke bipartisan support in Washington. especially in light of the Trump administration’s plan to impose 60 % taxes on all products made in China.

” As well as levies, the badge of ‘ money manipulator’ may be a second red flag for an Eastern economy”, said Robert Carnell, Asia-region head of research at ING Bank.

A weaker renminbi would be used by Xi to sign a sense of anxiety and anguish. Certainly the stories Xi wants international investors to be thinking about as the year 2025 draws near.

Otherwise, Xi and Li have been ratcheting up the signal without triggering sounds of 2015, 2008 and additional past incidents of large pro-growth “bazooka” storms.

Earlier this month, Beijing cut borrowing costs, slashed businesses ‘ supply need numbers, reduced mortgage costs and unveiled market-support resources to put a floor under share costs. Bolder fiscal stimulus steps are being mulled, too.

On Thursday ( October 17 ), Team Xi raised the loan quota for unfinished housing projects to 4 trillion yuan ($ 562 billion ), nearly double the previous amount.

The bump was less than markets wanted, as evidenced by Chinese stocks falling into” correction” territory this week. The&nbsp, CSI 300 Index&nbsp, ended Tuesday down 1.1 %, bringing its declines since an October 8 high to roughly 11 %.

The bigger issue, of course, is repairing the balance sheets of giant property developers.

” They’re still trying to talk the talk, with more noise about stabilizing the property market”, said Stephen Innes, an economist at SPI Asset Management.”

As Thursday’s housing moves were” rolled on, it was clear: traders were not thrilled,” Innes said”. Let’s be honest, though – China’s property mess is n’t something that can be patched up with a few speeches and half-baked measures.”

According to Morgan Stanley economist Robin Xing, “resolving the debt issue is a crucial step in stopping a key deflationary downward spiral,” while adding that direct demand stimulus is equally crucial.

Team Xi has made several commitments over the past few years to develop a method to remove toxic assets from property developers ‘ balance sheets.

Beijing has in fact demonstrated what is required to turn things around: a bold plan to boost the finances of high-quality developers, encouraging mergers and acquisitions, promoting property investment so that more people no longer consider real estate as their only option, and establishing social safety nets to encourage households to spend more and save less.

Indeed, over the past few decades, there have been numerous crises from which to draw lessons. They include Japan’s efforts to remove toxic loans from banks ‘ balance sheets in the early 2000s, as well as the US’s use of the Troubled Asset Relief Program, or TARP, to deal with troubled assets after 2008.

More fundamentally, Xi’s reform team must step up efforts to recalibrate growth engines away from exports toward innovation and high-niche industries.

Investors should be reassured that the brutal crackdowns on tech companies have ended in 2020. China also needs to shed its adversity toward the fundamental level of economic transparency that the world’s funds demand.

But as Xi and Li understand, a weaker yuan wo n’t bring about any of these big-picture reforms. It might give China a little more time to achieve its 5 % growth goal this year, but at a cost that Chinese leaders appear unwilling to pay.

There are myriad other reasons why, in the US, one reason is to believe that the dollar’s outlook will be more red ink than black.

One of the issues with the US national debt, which is now twice the size of China’s annual gross domestic product, is that it is two times that large. However, there are a good chance that Trump will backtrack on some of the financial planning moves he made during the first, only to have them halted by economic advisers in a second term.

One was Trump considering canceling large sums of the US owed to Beijing in order to punish Xi’s economy in the midst of trade negotiations. These considerations were hardly ever out of the blue.

In May 2016, six months before he was first elected, &nbsp, Trump, a serial bankruptcy offender as a businessman, floated reneging on US debt in a&nbsp, CNBC&nbsp, interview.

” I would borrow, knowing that if the economy crashed, you could make a deal,” &nbsp, Trump&nbsp, said”. And if the economy was good, it was good. So therefore, you ca n’t lose.”

Moody’s Analytics economist Mark Zandi spoke for many when he called the idea of reneging on US debt” complete craziness” that” would be financial Armageddon.”

Trump&nbsp, 1.0 considered a dollar-to-yuan devaluation of the kind that Argentina or Vietnam might employ. In April, for example, Politico&nbsp, reported that Trump 2.0’s inner circle is” actively debating” an Argentina-like pivot at the behest of advisors like&nbsp, Robert&nbsp, Lighthizer, Trump’s former international trade representative.

Yet, instead of” America first,” such a detour might do more to advantage China in the longer run. Buenos Aires would be operating a Group of Seven economy if devaluation were a method for prosperity. Turkey and Zimbabwe would be booming. As Asia’s largest economy, Indonesia would be giving China a run for its money.

To China’s advantage, the US trying this gambit would increase inflationary pressures and expose the dollar’s status as a reserve currency.

Investors generally believe that the policies they are proposing to promote US reindustrialization, such as steep tariffs on goods imported, will tend to result in dollar strength in comparison to other currencies, according to a note from Global Analysts.

But, they added, the” likely consequences of this disconnect include a potential conflict between the White House and Fed, and a diplomatic drive to&nbsp, weaken the US dollar, possibly involving a new version of the 1985 &nbsp, Plaza&nbsp, Accord.”

Trying such a gambit in 2024 would be extraordinarily destabilizing. The odds are very low that Xi would choose to pursue it. China recalls how Japan’s acceptance of a stronger yen ravaged its economy for decades to come, aside from the Communist Party’s aversion to being pushed around.

Even so, hedge funds that are betting on a weaker yuan in the months ahead might be ignoring the bigger picture of the Xi era.

Follow William Pesek on X at @WilliamPesek

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Will China’s epic spend be enough? – Asia Times

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China’s unrelenting monetary expansion was once known as the world’s wonder. Oh, what a remembrance.

China has been dealing with an economic downturn in the last few years as a result of colliding problems, many of which are world-class. Consumer prices have been approaching negative place, there’s an oversupply of accommodation, and children unemployment has soared.

The Taiwanese government has been forced to intervene due to increasing pressure. Beijing has approved a number of important economic stimulus measures over the past month to revive the country’s struggling business.

This stimulus may have the potential to be” the largest in story” in nominal terms, according to a study word from Deutsche Bank. But there’s still a lot we do n’t know. What kinds of actions have been included in this package so much, and has China already been there?

What’s in the item?

On September 24, Pan Gongsheng, chancellor of China’s northern lender, unveiled the government’s boldest intervention to raise its market since the pandemic.

Reduce the amount of cash commercial lenders are required to carry in reserves and lower the loan rates for existing homes were among the initiatives. By allowing the banks to lend out more money, the latter is anticipated to reinvest about 1 trillion yuan ( US$ 140. billion ) into the financial sector.

On top of this, 800 billion renminbi was announced to develop China’s money market.

A new 500 billion yuan economic policy hospital was added to this to facilitate easier access for institutions looking to purchase stocks, as well as a 300 billion yuan re-lending facility to aid in faster housing sales that were already sold.

Further evidence of financial revival became visible at a&nbsp, Politburo meeting&nbsp, of China’s top government officials two weeks after this statement.

Xi Jinping, the president of China, emphasized the need for an economical revival. Xi also encouraged officers to “go strong in helping the market” without having to fear the consequences.

A joint policy offer was released on the same day that seven government sections released a joint plan to maintain China’s 500 billion yuan cheese sector, which has experienced severe damage from milk and beef prices decline since 2023.

Business coaster

First, the market’s reaction was overwhelmingly positive. Maybe too optimistic. In the last week of September, investment areas in Shanghai, Shenzhen and Hong Kong saw their biggest regular rise in 16 years.

On October 8, the Shanghai and Shenzhen stock markets reported an extraordinary 3.43 trillion renminbi in churn following China’s National Day holiday. But, anticipation for more stimulus measures were met with sorrow.

From the funds for 2025, China’s National Development and Reform Commission approved 100 billion yuan in expenditures. That was n’t enough to sustain market optimism. The most drastic decline in Chinese securities in 27 years occurred on October 9.

This decline only gotten worse a few days later, when the Chinese Ministry of Finance made the suggestion that there was “ample place” for debt collection but did not specify any fresh stimulus measures.

Also thin on the information

The market’s opinion of China’s economic policies ‘ future way and what they might suggest for the world is still largely unknown. Hope that more information would be made over the weekend were generally squandered.

Chinese officials stated in a communiqué released in July that China “must continue to be strongly committed” to meeting this year’s 5 % economic growth goal. Compared to the government’s reform-era financial performance, that’s a reasonable goal.

But facing a consistently weak economic outlook, Xi after seemed to subtly shift the tone, changing the language from “remain strongly dedicated” to” strive to fulfill” in September.

Over the past years, China has frequently employed massive-scale trigger measures to revive its economy during recessions. Although often having unfavorable side effects, these plans have been able to significantly revive the business.

In response to the 2008 global financial crisis, China’s State Council released a 4 trillion yuan signal package. This was credited as a significant stabilizer of the world economy and helped China stay resilient throughout the issue.

However, it also contributed to the rise of” shadow banking,” or illegal economic activity, by accumulating billions of yuan in debt through regional government financing. In response to the stock market volatility and the pandemic, China also spent a lot of money to boost its business in 2015.

Following a property market collapse in 2015, China implemented extensive signal actions. &nbsp, Image: Shan he / AP via The Talk

What to expect?

What can we anticipate from this moment? How stable or healthy will any subsequent growth be? Any significant increase in Chinese financial demand will likely own” spillover” effects, but we are still awaiting some information regarding the package’s size and scope.

As we’ve discussed, many of the actions announced to date may include their most immediate impact on loans, financing and cash in China’s share markets.

That suggests we may see for what’s called the “wealth effect” in finance. This is the idea that rising commodity prices, such as those for housing or shares, cause people to feel more wealthy and therefore to invest more.

If China’s huge stimulus invest causes sustained increases in property values, it may give rise to economic enthusiasm. Foreign investors and customers may start to feel less anxious about the future.

From Australia’s point of view, that could see increases in demand in areas where our economy are interlinked – iron ore, hospitality, training and manufactured foods exports. More widely, Chinese demand may lead to development in different global economy, with a self-reinforcing effect on the world as a whole.

Beware financialization

On the other hand, China’s switch to rely on dangerous asset price increases in its capital markets to support growth may have unbalanced effects. Where property price rises benefit those at the” bottom end of town,” they can lead to their own inequities and imbalances.

China’s” Black Monday” stock market crash in 2015 raised sirens in Beijing. Primarily reflecting a wariness of excessive financialization, Xi cautioned at the time that “housing is for living in, never for debate”.

China is also working on a more sustainable growth model, trying to strike a balance between maintaining economic growth and stabilizing its social and private environment. For us all, perhaps perhaps China itself, the result is still incredibly questionable.

Wesley Widmaier is an Australian National University professor of global connections, and Wenting He is a PhD candidate for the Australian National University.

This content was republished from The Conversation under a Creative Commons license. Read the original post.

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