Note this comment is not from some Steelworker's union or Democrat protectionist, it is from one of the world's best hedge fund mangers Paul Tudor. Dealbreaker.com got a hold of his letter to investors which goes through the history of trade with China and how it has destroyed the US economy, leaving it only with high rates of unemployment and trillions in debt. It is nothing but a parasitic relationship where China wins (along with multinational corporations) and the US loses. The main reason is the manipulation of China's currency. Despite what some economists say Tudor believes the Renimbi is undervalued by at least 30% and perhaps as much as 60% (and remember he is one of the best forex traders in world). The US he notes has been in a trader war for the last 20 years with China and is losing He goes on to state that free trade is nothing but a myth and that the US should introduce tariffs to protect its economy. This really is a must read. Here are the key excerpts:
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The root cause of the unemployment woes is quite obvious. In the United States alone, in the last two decades, nearly six million jobs in manufacturing have been lost overseas. This equates to nearly four percentage points of the current 9.7% US unemployment rate. As importantly, the migration of these jobs contributed to the most unsustainable economic imbalance in the world today—China’s persistent bilateral trade surplus with the United States. During the last decade, China accumulated almost $1.4 trillion of US debt and at least $2.3 trillion in global assets. These figures could grow to $3.8 trillion and $7 trillion, respectively, over the next decade if the current renminbi/US dollar (RMB/USD) exchange rate continues to be artificially suppressed from appreciating.
One entity owning this much debt of one debtor, let alone a foreign government, creates too much risk concentration, and has possibly repressed volatility for debtor and creditor alike. The risk may seem manageable now, but who knows what the nature and temperament of the Chinese and American leaders will be in ten years? Isn’t it possible that either side could weaponize financial imbalances to the detriment of domestic and global stability?
