U.S.-China ‘cold war’ threatens global recession and financial crisis by 2020, says Roubini

Dr. Doom lives up to his moniker

.. Roubini pointed to the ongoing U.S.-China trade conflict as the likeliest trigger of the next crisis. “There is a cold war between the U.S. and China,” he said. “We have a global rivalry . . . about who is going to be controlling the industries of the future: artificial intelligence, automation, and 5G.”

Because the standoff has evolved into a one about national security and geopolitics, Roubini predicted that “there will be a trade and tech war between the U.S. and China that’s going to get worse.”

Roubini dismissed the trade truce declared by U.S. President Trump and Chinese President Xi Jinpeng over the weekend as mere talk, though stock market investors appeared to think otherwise this week. The S&P 500 index SPX, -0.05%  closed at a record high Monday, while the Dow Jones Industrial AverageDJIA, -0.09%   and Nasdaq Composite index COMP, -0.11%   also gained to be within 1% of their record closes.

The uncertainty that the standoff has created is forcing businesses to delay or cancel plans to make additional investments, Roubini added. “There’s already been, in the data, a collapse in [capital expenditures] and once capex is down, industrial production is down, and then you have the beginning of a global recession that starts in

  • tech, then spreads to
  • manufacturing, then to
  • industry and then it goes to
  • services,” he said.

The Sino-American trade dispute will have even further consequences than just triggering the next recession, as it will cause “a complete decoupling of the global economy” as private entities and countries will have to choose whether to do business with China or the U.S., and it will lead to a reconstruction of “the entire global tech supply chain,” which will be a drag on economic growth going forward.

He compared the predicted U.S.-China “cold war” with that between the Soviet Union and the U.S. during the last century, arguing that the coming war will be more disruptive. “This divorce is going to get ugly compared to the divorce with the U.S. and the Soviet Union,” because there was little economic integration between America and Russia prior to the conflict.

Secretive Bilderberg Meeting Draws Pompeo and Kushner

BERN, Switzerland — Secretary of State Mike Pompeo is on a weeklong trip to Europe where he is raising sensitive issues with national leaders — from Iranian missiles to Chinese technology to the economic collapse of Venezuela — but the most colorful conversations could take place this weekend out of public earshot in a secretive conclave at a Swiss lakeside resort.

In Montreux, on the eastern shore of Lake Geneva, political and business leaders from Western nations are gathering for the 67th Bilderberg Meeting, an annual forum in which participants agree not to reveal exactly what was said or who said it. It is a shadow version of Davos, the elite annual winter conference in the Swiss Alps that President Trump has attended once but has also criticized.

The State Department has not even put the Bilderberg Meeting on Mr. Pompeo’s public schedule, though a senior official confirmed he was attending Saturday.

.. No doubt those culinary treats will be on hand at venues in Montreux, to fuel discussion on 11 central topics now hotly debated in countries around the globe:

  1. the future of capitalism,
  2. the weaponization of social media,
  3. artificial intelligence,
  4. Brexit,
  5. China,
  6. Russia and so on.

Jared Kushner, Mr. Trump’s son-in-law and Middle East adviser, is another top administration official planning to attend. The 130 or so participants also include King Willem-Alexander of the Netherlands; Stacey Abrams, the American politician; Henry Kissinger, the former senior American foreign policy official; Eric Schmidt, the former chief executive of Google; and David H. Petraeus, the retired general. Some top bank executives are on the list, too.

On at least one subject, climate change, many of the participants are expected to have radically different views than Mr. Pompeo. In early May, the American secretary, speaking at a meeting of the Arctic Council in Finland, praised the changes caused by the melting of ice in the Arctic Circle.

Steady reductions in sea ice are opening new passageways and new opportunities for trade,” Mr. Pompeo said, while noting the abundance of undiscovered oil and gas, uranium, rare-earth minerals, coal, diamonds and fisheries in the Arctic.

What Mr. Pompeo, Mr. Kushner and the other Bilderberg attendees actually say to each other will be a mystery to most of the public, thanks to the meeting’s use of the Chatham House Rule, which states that although attendees can tell the public what was discussed, generally, participants must not reveal who said what.

Who is that guy? Andrew Yang’s presidential campaign draws crowds, money and an expected spot on the Democratic debate stage.

A two-hour podcast interview in February with Joe Rogan, a stand-up comedian, television host and mixed martial arts commentator, put Yang on the map. Rogan boasts an audience of millions — particularly young men — and has a devoted following on Twitter and Reddit, where some fans have half-jokingly referred to his show as “Oprah for Dudes.”

After the Rogan podcast, Yang’s Twitter followers jumped eightfold — going from roughly 34,000 to 287,000 in a little over a month. Online fans started creating thousands of memes and videos on Facebook, Instagram and other social media, spreading his campaign further.

 .. In substance and in style, Yang presents himself as a candidate relentlessly of the future. He warns that the United States is on the brink of a major job apocalypse, spurred by an increasing use of robots and artificial intelligence in the workplace that ultimately will eliminate the need for human employees.

“What we did to the manufacturing workers we are now going to do to the retail workers, the call center workers, the fast-food workers, the truck drivers, and on and on through the economy,” Yang declared at a rally in Chicago in March. “This is a crisis.”

.. Yang has particularly fixated on the plight of truckers. Speaking at a recent rural issues forum in Stuart, a tiny town in western Iowa, a state where the trucking industry employs an estimated 98,000 drivers, Yang pointed to an incident in February in which scores of truck drivers snarled traffic on Indianapolis-area highways in protest of mandated electronic monitoring devices that track their hours.

What are the truck drivers going to do when the robot trucks come and start driving themselves?” Yang asked.

A murmur went through the audience of about 200 people. An older man in jeans and a trucker cap shook his head at the thought. “Chaos,” the man said.

This is where Yang’s “Freedom Dividend” comes in. The $12,000 given annually to every U.S. adult up to age 64 would be funded in part by a 10 percent “value added tax” on technology companies such as Amazon, Google and Facebook, which he estimates would generate roughly $800 billion a year. (Amazon’s founder, Jeff Bezos, owns The Washington Post.)

.. “You could call this the tech check,” Yang said. He has dismissed critics who say the money, paid out regardless of an individual’s income or employment status, would encourage people not to work. He argues that the added financial security will spur people to create businesses or go back to school, or take risks they might not otherwise take. “This isn’t about people being lazy,” he said.

He has also pitched the concept, for which he has not stipulated an overall cost, as a pro-business, pro-economic development idea that could potentially revive dying small towns.

“Some of [that money] would float up to Amazon. You’d buy an extra toaster or something, but most of it would stay right here because you would be investing in car repairs you had put off, and then tutoring for your kids, the occasional night out, trips to the hardware store,” Yang said in Iowa.

To prove his point, Yang decided to use his own money to give $1,000 a month to two people for a year — someone in New Hampshire, the other in Iowa, the first voting states. In late December, Yang began sending a monthly check to the Fassi family in Goffstown, N.H.

In 2017, just as his daughter Janelle was beginning her freshman year at Saint Anselm College in Manchester, N.H., Charles Fassi was laid off from his job as a manager at a small chemical services company. Fassi, 49, said he felt suicidal, wondering how he could support his family.

While Fassi is now back at work, the family still struggled financially. Janelle met Yang at a Young Democrats of New Hampshire event and submitted an application for her family to be a test case for the monthly payments. After interviewing the family, Yang presented the first $1,000 check on New Year’s Eve. Fassi said the money has been mainly used to help pay for Janelle’s tuition, but Fassi said he and his wife are thinking of starting their own business.

“One thing I like about Andrew is that throughout all of this, he’s never asked us to vote for him. He’s never asked us to do anything for his campaign. He’s never tried to tell us what we can tell the media or anybody about this,” Fassi said. “When he came to our house, he said he was just trying to start a conversation. It wasn’t about him becoming president.”

That was enough to land Yang in the “top tier” of 2020 candidates that Fassi is considering voting for, though he is wary of the idea that people might think Yang is trying to buy his support. “I want to see how far he can go,” Fassi said, adding that he wasn’t comfortable backing a “fringe candidate.” He added that he likes Sen. Elizabeth Warren of neighboring Massachusetts, and soon he and his family will house a staffer working for another Democratic candidate, Sen. Kamala D. Harris of California. “I was like, ‘Why not? I like Kamala Harris,’ ” he said.

Yang has yet to pick the Iowa recipient — his campaign is taking applications — but after the Des Moines Register questioned the legality of his spending, Yang’s campaign told the paper he would amend his Federal Election Commission report to list the $4,000 in checks he had written so far as gifts.

A native of Schenectady, N.Y., Yang is the son of Taiwanese immigrants who came to America in the 1960s. Yang recalled that he and his older brother were two of the only Asian American students at the local public school and were picked on. Later, as a student at Phillips Exeter Academy, the prestigious boarding school in New Hampshire, he was a self-described nerd and goth kid.

He studied political science and economics at Brown University before graduating from Columbia Law School. After briefly working at a big law firm, Yang joined a test-prep start-up, which was later sold and earned him “some number in the millions” that gave him enough to quit his job and launch his White House bid.

The fact that Yang is unabashedly noting his Asian ancestry makes it all the more strange that his candidacy has found fans in the alt-right, many of whom have reframed his pitch on universal basic income as a quest to save white America. White nationalist Richard Spencer has tweeted approvingly of Yang, describing him as “the most grounded presidential candidate of my lifetime.”

Yang has repeatedly disavowed the support, even as his campaign has found it difficult to eradicate the racist memes spread by some of his fringe backers in chat rooms where Yang’s campaign has tried to mobilize supporters. “I honestly don’t get it,” Yang said. “I don’t look like a white nationalist, so I am sort of surprised that anyone who’s in that camp would be like, ‘Ooh, that’s my candidate.’ ”

Indeed, Yang’s crowds are notable for their diversity. Darrin Lowery, a 51-year-old social worker from Chicago, turned out after hearing Yang make his pitch to black voters on “The Breakfast Club” radio show. His warning about the dangers of automation had hit home with Lowery.

The Kmart is closed, the Sears is closed. All these different businesses are closing, and I wonder what these people who don’t have advanced degrees are going to do?” said Lowery, who is black. “I do think he’s a long shot, but the more people hear him, I wonder.”

Angie Shindelar, a 53-year-old math teacher from Greenfield, Iowa, came to hear Yang speak in Stuart at the behest of her children. “Everything feels like it’s about bashing Trump or reacting to Trump instead offering some vision looking forward,” Shindelar said. “He’s the first person I’ve really heard that is looking forward and has vision in a way that can maybe overcome some of that division.”

Andy Stern, a former president of the Service Employees International Union who is friendly with Yang, cautioned that Yang needs “a breakout moment.”

“I don’t think people are looking at Andrew yet and say he’s someone who can win,” said Stern, who, like Yang, is an evangelist for a universal basic income.

Yang believes his moment could be the debates, and he’s already thinking of how much time he’ll have to make an impression.

“I’ve done the math, and I’ll have approximately 12 minutes of airtime . . . 10 to 12 minutes to introduce myself to the American people,” Yang said, probably exaggerating the time any candidate onstage is likely to have. “They are going to say, ‘Who’s that person standing next to Joe Biden?’ And hundreds of thousands of people are going to go Google ‘Andrew Yang’ or ‘Asian presidential candidate’ or whatever. . . . And then they’ll say, ‘Oh, that’s Andrew Yang.’ ”

U.S.-China Trade Standoff May Be Initial Skirmish in Broader Economic War

The United States is increasingly wary of China’s emerging role in the global economy and the tactics it uses to get ahead, including state-sponsored hacking, acquisitions of high-tech companies in the United States and Europe, subsidies to crucial industries and discrimination against foreign companies.

The Trump administration has begun trying to limit China’s economic influence in the United States and abroad, warning about China’s ambitions in increasingly stark terms. Mike Pompeo, the secretary of state, compared China’s ambitions to Russia and Iran in a speech in London last Wednesday, saying Beijing poses “a new kind of challenge; an authoritarian regime that’s integrated economically into the West in ways that the Soviet Union never was.”

China, whose ambition is to dominate industries of the future, is pushing back. A column on Saturday in the Communist Party’s People’s Daily newspaper stated, “The United States is again waving the club of tariffs after misjudging China’s strength, capacity and will, further escalating trade friction between our two countries.”

The piece was written under the pen name Zhong Sheng — the “voice of China” — a name used when the paper publishes comments on foreign affairs that are authoritative.

Restraining China’s ambitions and methods is a tricky task — and there is concern that the Trump administration’s effort is creating a new red scare, fueling discrimination against China and its citizens that could ultimately hurt the United States. As many as 30 Chinese professors have had their visas to the United States canceled in the past year, or been put on administrative review, according to Chinese academics and their American counterparts.

“We’ve got decades of painful negotiating with China ahead,” said David Lampton, a China scholar at Stanford University. Mr. Lampton said a trade deal, if reached, would do little to resolve the bigger conflict. “It’s just a skirmish in an ongoing battle.”

.. While a trade deal could calm some tensions and establish more good will between the two nations, it is unlikely to achieve many of the ambitious goals that the administration has set for itself. Mr. Trump’s advisers, in particular the United States trade representative, Robert Lighthizer, have been focused on what the administration calls China’s practices of “economic aggression.”

But the administration has struggled to address the immensity of the problems in the text of a trade deal. People close to the talks say that the negotiators appear powerless to force any changes that aren’t in China’s interest.

Mr. Liu, who is leading China’s team in the trade negotiations, hinted at that uphill battle in a video statement released by the official Xinhua news agency.

Instead, a trade deal between the two countries seems more likely to bring change around the margins — tens of billions of dollars of soybean purchases, some tariffs lifted and changes to the text of Chinese laws or regulations that the country might ultimately disregard, particularly once another administration occupies the White House.

This is a decades-long endeavor,” said Robert Daly, the director of the Wilson Center’s Kissinger Institute on China and the United States. “This can’t be waved away over cake at Mar-a-Lago.”

The notion that the United States has one last shot to change China’s behavior is held by an array of people on both sides of the political spectrum. But it is an aggressive notion of American power to upend a rival system that has delivered prosperity for its people and put China on course to be the world’s largest economy.

Many in China see the United States as a declining power bent on enforcing its will on a world that no longer cowers before its hegemonic might. The troubles in American democracy and the long economic slump after 2008 persuaded many in China that its instincts to chart its own course were correct. In the eyes of many Chinese, their country is simply reclaiming its historic status as a dominant regional power in Asia.

It has also projected power across Asia, Africa and elsewhere while the United States has, on many fronts, retreated from its post-World War II commitment to the global order. But it has done so with little application of military force, in sharp contrast to what many in China see as American militarism.

Many in China have sought to avoid a trade conflict, which could have a larger impact on their economy than the United States’. But they have long thought the United States would have a difficult time accepting a true peer in economic, technology and military power, so consider the management of conflict with the United States to be an inevitable result of their own rise.

While the Trump administration accused China of breaking a trade deal, China’s resistance to the emerging terms stemmed from its belief that the United States was asking too much and offering too little in return. Many of the changes the United States seeks would limit what Chinese officials regard as a tried-and-true approach of using tens of billions of dollars from state-owned banks and government investment funds to turn previously small industries like car production or solar panel manufacturing into the largest industries of their kind in the world.

And the Chinese view some of the Trump administration’s demands as infringing on their sovereignty and giving America too much power over their economy — including requiring the country to codify changes through legislation in the National People’s Congress. To the increasingly nationalistic public in China, the American requests are reminiscent of 19th century history of unequal treaties forced on the country by foreign powers.

Mr. Trump on Saturday suggested China was simply delaying a deal in the hopes that a Democrat would win election in 2020 and continued his pugilistic approach, saying “the deal will become far worse for them if it has to be negotiated in my second term. Would be wise for them to act now, but love collecting BIG TARIFFS!”

In the United States, China’s unwillingness to bow to America’s demands is uniting lawmakers like the Democratic Senate leader, Chuck Schumer of New York, and Senator Marco Rubio, Republican of Florida.

That is a significant shift from the prevailing view in the United States since the death of Mao Zedong in 1976 that close economic engagement with China would produce an increasingly democratic country that would be closely tied to an international economic order founded mainly on Western liberal ideals.

That has not happened.

China has indeed grown in prosperity, leaping into the ranks of what the World Bank defines as upper-middle income countries. Its economy is now bigger than any other country except the United States. Its manufacturing sector is now bigger than those of the United States, Germany and South Korea combined.

But in the last five years, China has veered toward increasingly repressive authoritarianism at home and a rapid military buildup. The State Department estimates that Beijing has put 800,000 to two million Muslims in hastily built internment camps ringed with barbed wire in northwestern China. The Chinese government has built an archipelago of air bases on artificial islands in the South China Sea in between Vietnam, Malaysia, Indonesia and the Philippines. And China now has the world’s largest navy and has conducted

China has indeed grown in prosperity, leaping into the ranks of what the World Bank defines as upper-middle income countries. Its economy is now bigger than any other country except the United States. Its manufacturing sector is now bigger than those of the United States, Germany and South Korea combined.

But in the last five years, China has veered toward increasingly repressive authoritarianism at home and a rapid military buildup. The State Department estimates that Beijing has put 800,000 to two million Muslims in hastily built internment camps ringed with barbed wire in northwestern China. The Chinese government has built an archipelago of air bases on artificial islands in the South China Sea in between Vietnam, Malaysia, Indonesia and the Philippines. And China now has the world’s largest navy and has conducted military exercises as far away as East Africa and the Baltic Sea.

On the economic front, the competition is even fiercer. Trump administration officials warn that China is trying to dominate the global 5G infrastructure that will be the basis for future mobile communications and is competing to set other technological standards that will determine which global companies win.

China is extending low-cost loans and building infrastructure around the globe through its One Belt, One Road program, which critics warn is making poorer countries beholden to China. It is out-investing the United States in some high-tech industries, and is gaining dominance in certain segments, like mobile payment, new energy vehicles and areas of artificial intelligence.

While American companies have long hankered for access to China’s growing market, their position has begun to shift as they see China’s practices and treatment of foreign companies. A survey released by the American Chamber of Commerce in China in February showed that the majority of its members favored retaining tariffs on Chinese goods while trade negotiations continued.

China’s own experts say that the Beijing leadership has been caught off guard by the pace of change in American perceptions of Sino-American relations.

“Even if there is some kind of agreement between Xi and Trump, in the long run the strategic bilateral relationship is already in trouble,” said Zhang Jian, a professor in the School of Government at Peking University. “There is no coming back, even if there is a deal.”