NAFTA, China, and the Dollar

Two pieces of news came out today that could have dramatic effects on how far you can stretch your paycheck.
First of all is the news out of Canada.

Canada is increasingly convinced that U.S. President Donald Trump will soon announce that the United States intends to pull out of the North American Free Trade Agreement, two government sources said on Wednesday.
The sources said they expected Trump would make his move at about the same time that negotiators from the United States, Canada and Mexico meet in late January for the sixth and penultimate round of talks to modernize the treaty.
...Canada and Mexico have rejected most of the U.S. proposals for NAFTA reforms, leaving officials with a big job if they are to bridge the large differences at the Jan. 23-28 talks in Montreal. Negotiations are due to wrap up at the end of March.

It could easily just be a negotiating tactic by Trump to get a better deal (funny how Obama never once used that tactic). OTOH, maybe not.

Trade relations between the two countries have taken a dramatic turn this week, with Canada escalating its trade spat with the U.S. by filing a World Trade Organization complaint over American duties against Canada and other countries. U.S. Trade Representative Robert Lighthizer responded earlier Wednesday, calling that move a “broad and ill-advised attack.”

Because...Canada?

The US Dollar is expected to take a big hit if NAFTA ends.
And the USD did indeed take a hit today, but not because of Canada.
It was news out of China that moved markets today.

Senior government officials in Beijing reviewing the nation’s foreign-exchange holdings have recommended slowing or halting purchases of U.S. Treasuries, according to people familiar with the matter. The news comes as global debt markets were already selling off amid signs that central banks are starting to step back after years of bond-buying stimulus. Yields on 10-year Treasuries rose for a fifth day, touching the highest since March.
China holds the world’s largest foreign-exchange reserves, at $3.1 trillion, and regularly assesses its strategy for investing them. It isn’t clear whether the officials’ recommendations have been adopted. The market for U.S. government bonds is becoming less attractive relative to other assets, and trade tensions with the U.S. may provide a reason to slow or stop buying American debt, the thinking of these officials goes, according to the people, who asked not to be named as they aren’t allowed to discuss the matter publicly.
...Any reduction in Chinese purchases would come just as the U.S. prepares to boost its supply of debt. The Treasury Department said in its most recent quarterly refunding announcement in November that borrowing needs will increase as the Federal Reserve reduces its balance sheet and as fiscal deficits look set to widen.

china.png
Funny how ramping up a bloated military budget, while slashing taxes for wealthy people who don't need the tax cuts, while threatening your creditors (like China), might cause people to question the wisdom of loaning you money.

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k9disc's picture

AND his army into the dirt.

You know he's only building martial culture, not worried about feeding or educating his people. That shit ain't gonna last long.

In order to be a 1st world country, your people have to be 1st world people. These guys are trying to pull a domestic colonial move and focus, solely, on the extraction of wealth. That's not how a 1st world country works.

Like they've mistaken American money for American hegemony and killed the golden goose. Without the goose, the freeflow of gold stops, you know? Things are different if you don't have an unending supply of gold.

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“Tactics without strategy is the noise before defeat.” ~ Sun Tzu

when we were all screaming about how bad NAFTA was and how we should go back to protective tarrifs.

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A PROUD Hillary hater since 1993

@doh1304
Good riddance to bad rubbish.

But because NAFTA been in place so long, getting rid of it will cause short-term pain.

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MarilynW's picture

@gjohnsit
because of tariffs on Canadian paper.

The irony here is that most of our forests are owned by US companies (INTERFOR for example). So the US hurting these industries is self-flagellation.

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dervish's picture

@MarilynW

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2 users have voted.

"Obama promised transparency, but Assange is the one who brought it."

divineorder's picture

@doh1304 @doh1304

Cannot blame Canada Or Mexico for leaving. Hate to think that there could be a converging of economic events around this time and what it would do to the lives of low income people / seniors.

Edited to replace tweet with correct one.

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A truth of the nuclear age/climate change: we can no longer have endless war and survive on this planet. Oh sh*t.

As long as the FED will.

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10 users have voted.

You know what, I will deal. Getting us out of NAFTA is a good thing.

If someone is worried about the impact on folks like me, why not lobby to get rent controls in your town or county so as us poors don't have to pay half our incomes in rent anymore?

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Nastarana

Lookout's picture

The key to the coming petro-yuan lies in Moscow. As the world’s biggest oil producer, Russia is vital to Beijing’s project. And, in turn, China is the only country with the heft to challenge the American financial hegemony.

A more significant development was Russia settling more oil contracts in Asian currencies, especially the Chinese yuan, the Hong Kong dollar and Singapore dollar. Moreover, Russia is also making moves which could have serious implications for the petrodollar....

And if China, having built massive gold reserves in recent years, allows any trade partners to exchange their petro-yuan revenues from oil directly into gold, it would vastly reduce the interest in holding foreign exchange reserves in U.S. dollars, increasing the interest in holding gold and yuan.

https://inteldinarchronicles.blogspot.com/2018/01/petro-yuan-casts-large...

I think these issues are in part what is driving investment into bitcoin.

Thanks for the info gjohnsit.

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“Until justice rolls down like water and righteousness like a mighty stream.”

@Lookout US corporations have been successfully waging economic warfare on it's citizens for so long it forgets that trade and debt can be weaponized on a global scale against them. It will be interesting to see how the system of American capitalism, of investor profits over nationalism, will fare.

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ggersh's picture

@Snode are actually the most clueless of people.
They're just WS lackeys, they'll do anything to
increase share price, nothing more.

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“Before mass leaders seize the power to fit reality to their lies, their propaganda is marked by its extreme contempt for facts as such, for in their opinion fact depends entirely on the power of man who can fabricate it.”

Hannah Arendt

@ggersh Aye, true. They're smart enough to buy legislators and the laws they want, and arrogant enough to believe that's enough. They believe they're in control internationally and that's where they're clueless. China and Russia have so many fronts to confront the US on, and disrupt the flow of profits, while our government has nothing but the military. We can't sustain ourselves intellectually or in manufacturing. With the realignment of former US allies I could see another energy crisis bringing us to our knees.

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ggersh's picture

@Snode in today's world. Crapafication of amerika
into a 3rd world country is just about accomplished,
just a touch up here and there is needed to finish
the job.

Energy is just one of many factors that will/could be
the determining factor.

They're smart enough to buy legislators and the laws they want, and arrogant enough to believe that's enough. They believe they're in control internationally and that's where they're clueless. China and Russia have so many fronts to confront the US on, and disrupt the flow of profits, while our government has nothing but the military. We can't sustain ourselves intellectually or in manufacturing. With the realignment of former US allies I could see another energy crisis bringing us to our knees.

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9 users have voted.

“Before mass leaders seize the power to fit reality to their lies, their propaganda is marked by its extreme contempt for facts as such, for in their opinion fact depends entirely on the power of man who can fabricate it.”

Hannah Arendt

@Lookout
Russia displaced Saudi Arabia as China's number one supplier of oil. This happened, in part, because Russia is willing to trade using Yuan. Saudi Arabia is now reconsidering. Both Russia and China have been amassing large inventories of gold. This is so that they do not need the US dollar to stabilize their currencies and thus they can continue international trade sans $USD. You can be a continual, abrasive pain in the butt for so long and then the rest of the world figures out how to neuter you.

Also, consider this - We are having a very cold Winter in the Northeast and are using 30% more natural gas than normal. This has raised the price of NG and threatened inventories. Well, thank god the Russians don't hate us, although I don't know why. There are reports that an LNG tanker filled with Russian gas is on the way across the Atlantic to an LNG terminal just outside of Boston. This gas came from the Yamal Peninsula LNG terminal, located above the Arctic Circle. The irony here is that this project was targeted by US economic sanctions, to prevent capital and equipment going to the project. Partners on the project are France's Total, the China National Petroleum Corp (CNPC) and China's Silk Road Fund. I guess that France didn't get the memo. On top of this outrageous irony, the US is still issuing more sanctions against the energy sector, see the latest bill in Congress. The claim is that Russia uses energy supply for political blackmail. They never do that having a firm commitment to fulfill energy contracts despite political differences. We are the ones who try to use energy as a political tool. It's almost a joke if it weren't so nasty, that almost everything that we are accusing Russia of doing, are things that we do in spades.

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Capitalism has always been the rule of the people by the oligarchs. You only have two choices, eliminate them or restrict their power.

Lookout's picture

@The Wizard
I think that is the scene. I'm hopeful though because when you look at other collapsed empires...they treat their citizens better.

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“Until justice rolls down like water and righteousness like a mighty stream.”