Supposed “Nuclear Option” for China in the Trade War Is Just the Common Sense Thing to Do
There is absolutely no downside for the Chinese, there is nothing "nuclear" about it for Beijing
The US media is constantly explaining why it is impossible for the Chinese to sell their dollar reserves, with their rationale usually a combination of “they don’t hold enough to collapse the dollar” and “if they collapse the dollar they will be hurting as well”.
The US regime media assumes the only possible upside for Beijing would be the hurt it could potentially trigger in the US. That simply isn’t the case. There is a huge upside for the Chinese totally independent of whether it causes a dollar apocalypse or not.
• China lets its dollar-denominated treasuries, which are almost all short-term, expire and gets 1 trillion in dollar bills.
• China uses the 1 trillion in dollar bills to buy back yuan from anywhere it can.
• With the $1 trillion worth of yuan in its reserve coffers Beijing drastically cuts taxes on its companies and consumers.
Here is what this would do:
• Chinese companies hit by the trade war would be compensated firstly by the fact they were now paying out less in taxes to Beijing.
• They would be compensated for the second time by the fact Chinese consumers who were likewise paying out less in taxes would be spending more on their products.
• They would be compensated for the third time by the fact that since every world currency appreciated to the dollar third country markets would be that much more lucrative.
So yes, the extra 1 trillion in dollar bills on the foreign currency exchange markets would cause some kind of weakening of the dollar, but for the Chinese that isn’t even the point.
The point isn’t to hurt the US, but to beef up the purchasing power of all the consumers who aren’t behind a tarrif.
China lent the US 1 trillion dollars. It’s time to bring that money home. The CNN is delusional to think asking for the repatriation of that money could be a bad thing for China.
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