Trump's goal to keep China from using 'nuclear option' of dumping US debt – Max Keiser
23 June, 2018
President Donald Trump is cutting US military spending to be less exposed to the skyrocketing interest rates that would become unavoidable when China opts to dump US Treasury bonds, Max Keiser has told RT.
“To understand US trade policies – and in particular Trump’s policies on China – from Trump’s point of view you have to think like Trump,” the host of RT's Keiser Report explained. “When Trump took office, he inherited the biggest debt load that any country had ever accumulated. He also inherited a military budget that eats up 50 percent of America’s annual tax revenues of $1.5 trillion.”
According to Keiser, after taking the helm as president, Donald Trump realized it was vital to reduce defense spending to pare the huge US debt.
“He looked at the geo-political chess board and saw that – the low hanging fruit, in terms of saving money – is America’s huge military spending in South Korea,” said Keiser, stressing that after the historic summit with North Korean leader Kim Jing-un the US would start pulling military presence out of the region.
The US president is currently arranging deals with Saudi Arabia and Israel, in preparation for the US pulling out of the Middle East as well, Keiser added, highlighting that Trump had previously signaled to Germany that the US would to cut its military presence in NATO there too.
“That brings us to China, and the ‘nuclear option’ they have of dumping US treasuries to financially attack America. This is their one big play. Trump knows it, and he’s been protecting the US against it,” the financial commentator said.
Downsizing the Pentagon, according to Keiser, will shrink US debt, diminishing the possibility of a Chinese financial attack via the dumping of US bonds.
The Central Bank of Russia (CBR) commonly factors in all kinds of risks when allocating the country's reserves, said the CBR chief, commenting on a major sell-off of US Treasury bonds.
“By reducing its debt load, the US becomes a smaller target, and less exposed to the skyrocketing interest rates that would accompany a Chinese multi-trillion Treasury bond dump,” Keiser said. “Additionally, China’s internal debts are harder to cut without causing a more generalized, across-the-board economic wipeout – giving rise to severe, unpredictable social unrest.”
The commentator said that cutting the Pentagon budget in half will cut the stock market in half and cause a short and sharp recession in the US. However, the economy can rapidly recover if Trump “allocates part of the defense-spending-cut dividend to stimulus programs, pushing credit opportunities for small and medium-sized enterprises and infrastructure spending.”
China cuts US investments by 92 percent this year amid escalating trade war
According to Keiser, China’s stock market will also be cut in half. However, the country’s government, in the absence of a fully-developed consumer economy, will have to “fall back on its tried and true Mercantilist policies of exporting its way to growth by pegging its currency at below market rates – which means holding, not selling US dollars.”
“In the end, Trump wins. China’s growth rate is cut sharply, (but it keeps going without a revolution). Germany is free to partner with Russia in a post-NATO world (long overdue, IMO) and over in the mid-East, the oil is running out – so they’re transitioning to solar,” said Keiser.
- Chinese acquisitions and investments in the U.S. fell 92 percent to just $1.8 billion in the first five months of this year, consulting and research firm Rhodium Group says.
- Counting divestitures, net Chinese deal flow to the U.S. during that time was a negative $7.8 billion, the report says.
- Beijing is trying to limit capital outflows and excessive leverage, while the Trump administration is increasing scrutiny of Chinese investments in the U.S. amid concerns about intellectual property protection.
Chinese acquisitions and investments in the U.S. fell 92 percent to just $1.8 billion in the first five months of this year, consulting and research firm Rhodium Group said Tuesday.
Counting divestitures, net Chinese deal flow to the U.S. during that time was a negative $7.8 billion, the report said.
The decline follows a sharp drop in the second half of last year as pressure from both Beijing and the Trump administration curbed a recent surge in cross-border investment. Completed Chinese deals in the U.S. hit a record $46 billion in 2016, and dropped to $29 billion in 2017, according to Rhodium.
Despite signing a "digital truce" with the US in 2015 that banned the hacking of private companies, China has been green-lighting plenty of cyberattacks on US defense contractors, along with other targets, lately. And given the rising trade tensions with the US, these types of attacks are only expected to increase,
according to Wired. To wit, one state-funded group recently infiltrated a Navy contractor and stole hundreds of gigabytes of information about submarines and undersea weapons, that have by now likely been handed over to the Chinese military.
"China’s actually backed off quite a bit on intellectual property theft, but when it comes to military trade secrets, military preparedness, military readiness, satellite communications, anything that involves the US’s ability to keep a cyber or military edge, China has been very heavily focused on those targets," says David Kennedy, CEO of the threat tracking firm Binary Defense Systems, who formerly worked at the NSA and with the Marine Corps' signal intelligence unit. "And the US does the same thing, by the way."
The researchers found evidence of intrusions at some southeast Asian telecom firms, a US geospatial imagery company, a couple of private satellite companies including one from the US, and a US defense contractor. The breaches were all deliberate and targeted, and in the case of the satellite firms the hackers moved all the way through to reach the control systems of actual orbiting satellites, where they could have impacted a satellite's trajectory or disrupted data flow.
"It is scary," says Jon DiMaggio, a senior threat intelligence analyst at Symantec who leads the research into Thrip.
"We looked at which systems they were interested in, where they spent the most time, and on the satellites it was command and control. And then they were also on the operational side for both the geospatial imagery and the telecom attacks."
"Hacking can be used as a sign of force in a lot of cases to say 'hey, we’re not happy and we’re going to make you feel some pain,'" Kennedy notes. "They'll use that as a first step instead of having to send fighter jets or something."
"All of these pieces fit together," Symantec's DiMaggio says of Thrip. "It’s not targets of opportunity; it’s definitely a planned operation."