For All SNS Members:

We have been providing accurate views and predictions to our SNS members on the China / US economic conflict since we first discovered China's national business model and briefed world leaders on its threat to open market countries.

More recently, we have succeeded in providing very early guidance on the contraction of China's domestic economy, beginning in January, 2015, and the subsequent effects on its internal policies and international behavior. Our cabinet-level briefing book, Theft Nation, has become the backbone for the Trump administration's tariffs and other dealings with China.

This week saw two new steps in the process of using tariffs, the only response which has historically worked with the InfoMerc model China espouses (see FiReBooks' 'Stealth Japan').  The first was a failed attempt by the Goldman Sachs lobby in the Treasury Dept. to hold renewed, low-level talks with a similar Chinese delegation, in hopes of ending the tariffs before they had had much effect.  Bad idea.  The second was the approval of 25% tariffs on an additional $200B in Chinese goods. 

While the current US tariffs have had a strong and important psychological effect on China (including re-directing global investment away, and toward the US), the real domestic economic effects will now come into play. 

For its part, China has responded in a number of predictable ways, including massive propaganda campaigns against the US, pushing US companies to lobby on its behalf, and manipulating its currency.  At first, the clear intent was to cheapen the Yuan to almost eliminate the effect of the 10% tariffs being imposed.  The result was an extreme drop in its value.  At the same time, and probably counter to Communist Party expectations, investment capital, both foreign and domestic, fled China, further cheapening its currency, creating a free-fall in the dollar/yuan ratio.  The Party finally panicked, and manipulated the ratio back up over the last few days.  Here is the  picture:

The Yuan / Dollar Ratio

And the same ratio, starting back in the era of ultimate manipulation (the flat line):

Currency manipulation has long been the central lever used by the Party to gain advantage in trade, and to control wealth at home.  The massive devaluation of its currency by the Party since imposition of tariffs is a strong indicator of their fear of the results - and therefore, of their efficacy against the InfoMerc model espoused by China.  

The sudden reversal in the last few days looks, to us, as a form of capitulation, as the Party realized that money was fleeing the country.  

What happens next?  We think the Party has lost control of the ratio, and that the recent strengthening in the Yuan cannot be maintained.  If this is so, we will see a return to the drop in Yuan value vs the dollar, to levels perhaps never seen before.  While making exports cheaper, this also now is the result of a strongly contracting domestic economy, something no one in the Party wants known.  

We have entered the next era in the tariffs battle for the fair and honest treatment of inventions, and inventing nations. 

Your comments are always welcome,

Mark Anderson

CEO
Strategic News Service