Gave: "Today The US Is Telling The World We Don't Want To Give You US Dollars Any More"

Via Evergreen Gavekal blog,

“Dear America, appreciate your allies – after all, you don’t have that many.”

-DONALD TUSK, European Union (EU) Council President on Tuesday


In March, Evergreen outlined our near- and long-term concern for an escalating trade war in The Trump Trade Tirade. Well, ladies and gentlemen, it seems as if the worst has come is coming to fruition.

Last Friday, no more than 48 hours after 4th of July fireworks stopped ringing, duties on $34bn of Chinese goods took effect. China promised to immediately impose retaliatory tariffs on a comparable size of US goods. In a move that some see as mere political posturing, President Trump suggested that the total number could eventually reach to the hundreds of billions – or exceeding the annual value of all Chinese goods exported to the US.

While we feel it’s unlikely Trump’s tariffs will be implemented to the degree shown above, all the back-and-forth and political jockeying is enough to make even the most level-headed individual question their sanity.

For those anticipating the impact of these tariffs will come further down the pipeline (i.e. when the numbers shown above reach the higher end of the spectrum), quantitative and qualitative indicators are already showing signs of weakening confidence in an economy who’s at war with its heavy-hitting trade partner. For example, as the Fed outlined last week, several industry contacts from around the country indicated that the war is already hurting US investment. And those in the good ole’ American heartland and coastal cities alike have already experienced direct business impact.

In this week’s EVA, readers have the opportunity to hear from Louis-Vincent Gave, a man with the unique pedigree of being raised in Europe, educated in the United States and China, and spending many of his working years in Hong Kong. As you will read below, Louis – who has also been dubbed the “Smartest Man in Asia”– has reason to be bearish on the economy and US dollar. Please enjoy hearing from Louis, a good friend and partner of Evergreen Gavekal.

*  *  *


By Louis-Vincent Gave

Depending on commodity prices, in any given year China spends between US$250bn and US$400bn on imports of the “big five” commodities it needs to continue growing: oil, iron ore, coal, copper and soybeans. Before it can do that, it must first “earn” those US$250-400bn. Only then can it can turn around and buy the stuff the country needs to ensure its long-term growth.

Today, however, the US president is busy signaling that China’s massive trade surplus with the US must drastically shrink, which means that China will no longer be able to earn the US dollars it needs through trade with the US. This leaves China in a quandary: on one hand, it needs a lot of US dollars, on the other, the US president wants to implement policies that prevent China from earning these dollars. What should China do? It has a number of options:

  1. China can choose to ignore all the noise as mere political posturing. This would be reckless of the Chinese leadership. In essence, it would be akin to embracing hope as a strategy. And little in the Politburo’s recent track record points to hope as a strategy.

  2. China can try and apply pressure on the US to change its rhetoric, at the risk of making a bad situation worse. This could be done in any number of ways: foot-dragging on corporate mergers (e.g. NXP-Qualcomm), applying pressure on individual US companies (e.g. Micron), trying to team up with other countries and complaining to the WTO (as China is trying to do across Europe, with little success), or perhaps even by signaling that a renminbi* devaluation is possible (since mid-June, the renminbi has weakened steeply, even as other emerging market currencies including the Mexican peso and the Turkish lira have held their own).

  3. China can work to cut back its purchases of commodities. This would be akin to accepting a much weaker rate of economic growth. Obviously, this would also trigger lower commodity prices. Such a course would be very tough for global growth and emerging markets would be hard hit.

  4. If China can’t get access to new US dollars through trade, it would have to get them by selling assets to US investors. This is a distinct possibility. Clearly China is continuing to open up its bond and equity markets to foreigners. But over time this is not a great strategy for China, as in effect it means selling prized assets at undervalued prices. Why else would foreign investors be interested? In essence, this would be pawning the family jewels.

  5. If the US will no longer allow China to earn the US dollars it needs through trade, China can press ahead with plans to price commodities in renminbi. It was always in China’s national interest to try and switch the pricing of some of its key commodity imports away from the US dollar and into renminbi. After all, why would China want to remain dependent on the ability and willingness of US banks to fund its trade? This simple truth explains why over recent years China has started to internationalize the renminbi and open its domestic bond market to foreign investors. It also explains why in March China launched a renminbi-denominated oil future out of Shanghai.

The only questions remaining are: Will the recent aggressive rhetoric from Washington, and the damage it has inflicted on the WTO’s foundations, now push China’s “de-dollarization” quest into hyper-drive? Or will China back off to avoid triggering an even angrier response from the US? In short, does Donald Trump’s protectionism now make the internationalization of the renminbi a national security imperative for China?

Extrapolating from this last point, it becomes clear that the two main questions confronting investors today are:

  1. How destabilizing is Donald Trump’s protectionism? This question elicits a wide array of responses, even in our own little shop. Those of us based in the broader western world tend to dismiss the Trumpian rhetoric as nothing but political posturing which will have minimal consequences for global growth. Those of us based in Asia tend to be a lot more concerned, seeing in the mere threat of protectionism a reason for businesses and policymakers to change the patterns of behavior that have helped to generate so much global prosperity over the last generation.

  2. Assuming US protectionism is for real, is it US dollar bullish or bearish? Again, this is a question on which we find little internal consensus. For my part, I struggle to see why Washington’s decision to give the rest of the world the middle finger at a time when its budget deficits are going through the roof should be bullish for the US dollar. My starting point is that the US has been the keystone of the post-World War II, post-Cold War world order. This is why the post-Cold War order was called the “Washington Consensus”. And the US reward for being the keystone of the world order was having the world’s reserve currency, even if the cost of issuing that reserve currency meant being prepared to run constant current account deficits. Now, if the US is no longer willing to run current account deficits, can we really be sure that the US dollar will retain its role as the world’s reserve currency?

In the past, we have frequently compared reserve currencies to computer operating systems: once a majority of users have adopted a given system (Microsoft Windows for PCs, the US dollar for trade and commodity settlement), then it is very hard for any new market participant to displace that system. A wannabe new system can’t just be marginally better; it needs to be massively better to replace the incumbent.

By any objective measure, the renminbi is very far from being “massively better” than the US dollar. So, the only way the renminbi can make significant strides towards reserve currency status is if the US itself goes out of its way to undermine the US dollar. Increasingly it feels as if this is exactly what is happening today.

Imagine for a second if Microsoft were to come out and say, “We don’t want to sell Windows to China anymore”, or if Bloomberg were to announce, “From now on, we will no longer sell our terminals to hedge funds”.

Clearly, the value of these companies would immediately plummet, if only because the “network effect” from which these businesses derive so much of their intrinsic worth would be massively undermined.

Today, the US is effectively saying to the rest of the world, “We don’t want to give you US dollars any more”. To my surprise, most people view this statement as inherently bullish for the dollar. Their assumption is that people have no choice but to use the US dollar, and that the US trade actions will trigger a massive shortage. However, viewed from Asia, this statement strikes me as particularly bearish for the US dollar. If anything, it will accelerate the move away from the US dollar as the region’s sole trade and reserve currency. Once that shift has occurred, reversing it will be almost impossible.


The Alarmist Sat, 07/14/2018 - 15:33 Permalink

Dear Mr. Tusk,

Fuck you very much for your letter. Remember that the EU is a vassal of the US.

From one Don to another, you can be replaced. Capiche?

Very Truly Yours, 

The Don of Dons

beemasters Looney Sat, 07/14/2018 - 15:46 Permalink

Unfortunately, it's quite likely TPTB's intention ... to lead us all to one world currency.

Trump is so brilliantly executing it for the Rothchilds that no one sees it coming. We certainly have to give him that. Furthermore, no one will be able to prove link of his actions to that true, intended outcome because he has been selling them as if for MAGA.

"After quickly expanding the reach of Resorts International to Atlantic City in the final years of the 1980’s, Donald Trump found himself in financial trouble as the real estate market in New York tanked. The three casinos in Atlantic City, like other Trump assets, were under threat from lenders. It was only with the assistance and assurance of Wilbur L. Ross Jr., senior managing director of Rothschild Inc. [now Trump administration's Secretary of Commerce] that Trump was allowed to keep the casinos and rebuild his threatened empire.

This was detailed in a Bloomberg article from March 22, 1992.

The connection between Baron Edmond de Rothschild, being one of the original principle investors of Resorts International, and Rothschild Inc. allowing Donald Trump to retain “ownership” over the Atlantic City casinos, which saved him from bankruptcy, should not be considered a coincidence." -June 2016 -…

And remember 1988 edition of The Economist magazine predicted a world currency.…
"The publication belongs to the Economist Group. It is 50% owned by the English branch of the Rothschild family " -

In reply to by Looney

FireBrander beemasters Sat, 07/14/2018 - 15:48 Permalink


China needs USA and Brazil to meet their needs. If they stop buying USA, Brazil cannot fill the gap.

There is already a premium on Brazilian beans and a discount on USA beans..

China will be forced to buy USA beans, at a higher price,  through a third-party. 

In the end, tariffs on USA beans will only hurt China.

In reply to by beemasters

gdpetti RafterManFMJ Sat, 07/14/2018 - 18:10 Permalink

Trump doesn't have a clue WTF is going on.... which makes him perfect for this role of the trickster.... the catalyst to 'out' the OWO, take it down, so the puppet masters in the SG can introduce us to their NWO..... global police state... but they are running out of time... a decade or less before Mother Nature arrives in force.... seems to go away, then brings in her main act.

Trump is sending the message that the USA is giving up control of the helm of the evil empire.... CHina seems to want it... though to be fair, the CHinese empires have always been rather indirect, hands off... unlike our western, 'in-your-face' crap... ours has gone into overdrive in '71 with the Nixon gold exit.... and our time with fiat dominance is about up.... our control has been based in the dollar, allowing our 'assets', colonies and 'friends' to run surpluses in order to keep them on board... if Trump choses to make the import/export game 'fair', then that's giving up the helm... which he doesn't seem to realize.. thus the stress in DC/London etc... as the game has gone into wildcard mode... with China looking to take control of the ship in her own way... Russia is playing it cool... having a history or rebuffing western empire building for the last couple of centuries or more.... especially our last attempt using our usual local front men there in the 90s.... a national 'Dark Night of the Soul', from a spiritual p.o.v.

Trump is doing what the SG expected of him... playing his "Apprentice" show on a larger scale... without realizing the consequences as he is the apprentice.... and he's been groomed for a long time... like all the rest... Carter had a shorter grooming period, but he didn't understand WTF was going on either... Trump's been around this clubhouse for decades, but never inside where the real action is... just allowed to flirt with some of the pied pipers... he's easy to manipulate... most sheeple are... eons of 'dumbing down' and doping up in one manner or another... religion, science, media/entertainment... pick your poison.. your drug of choice. The libtards are being used in the same manner... a few are paid, like those 'crisis actors'... but most are idiots that follow the leader... any authoritarian leader will do.

In reply to by RafterManFMJ

Pinto Currency gdpetti Sat, 07/14/2018 - 18:43 Permalink



A discussion of the impact of balancing trade on the USD's Reserve Currency status.

Triffin's Dilemma observes that trade deficits must be run to provide global dollar liquidity given USD reserve currency status.

Exporting US jobs is not on anymore which then by extension terminates the reserve currency status.


In the meantime, rising interest rates, rising DXY, and onset of tariffs is having a punitive impact on USD borrowers.

Severe dollars shortage killing China's domestic banks that have borrowed $2T short in the offshore interbank mkt and lent long in the domestic mkt.

In reply to by gdpetti

Dickweed Wang Pinto Currency Sat, 07/14/2018 - 19:54 Permalink

Imagine for a second if Microsoft were to come out and say, “We don’t want to sell Windows to China anymore” . . .


The guy that wrote this couldn't have picked a worse example than that and it makes me wonder if he even knows what he's talking about.  Microsoft has essentially stopped selling their Windows operating system in China because of the rampant and institutionalized piracy that goes on there.  Virtually every PC sold in China has a bootleg version of Windows on it and when MS tried to stop that from happening they eventually threw in the towel and "allowed" it to go on.  And it's not just computer operating systems that are pirated in China . . . they make virtual copies of US and European cars in China (via back engineering) and sell them for a fraction of the cost of the real thing.  I saw some videos where the guys showed that the fake body panels were an exact match for the real thing (at least in size and design, not in quality). 

At the fake car dealers they even have a service to swap out the name plates and hood ornaments with the real thing before you take delivery and when that's done you can't tell the car is fake just by looking at it.  Chevrolet filed a complaint with the Chinese authorities over a company there copying their cars and their claim went nowhere.  The list goes on and on yet you typically don't hear much about this. 

The dollar value of intellectual property that China has STOLEN from the USA by back engineering or piracy has to be in the multiple trillions of dollars.  From what I understand it's a Chinese cultural thing - they don't see anything wrong with what they've been doing.

In reply to by Pinto Currency

philipat Dickweed Wang Sat, 07/14/2018 - 22:24 Permalink

 So, the only way the renminbi can make significant strides towards reserve currency status is if the US itself goes out of its way to undermine the US dollar

Not entirely correct. China could, for instance, back the RMB with Gold, either directly or indirectly as with the oil futures contract. That WOULD represent a large incremental advantage in comparison to the USD which is backed only by the DOD. The Shanghai Gold backing of the RMB Futures contract is, incidentally, not using China's Gold but International Gold on the International exchange. Smart.

Also, according to all my economics texts, for a country to operate a reserve currency, it MUST run a trade deficit to supply the currency to ROW. So if Trump wants to restrict the flow of Dollars, that is inconsistent with economic reality if he simultaneously wants to maintain the "outrageous privilege" of operating the world's reserve currency. Short term, this inconsistency will result in a stronger Dollar because of the lack of supply but longer-term as the system adjusts by using other means of trade settlement, the Dollars will come back home, causing inflation and a weaker Dollar.

It seems that the Fed is fighting one battle (and/or has a different agenda?) and Trump a different battle?

In reply to by Dickweed Wang

Dickweed Wang philipat Sat, 07/14/2018 - 22:36 Permalink

You're on to something with China and gold. Jim Willie has been saying for a couple years now about how China will eventually spearhead the creation of the "gold trade note" as an alternative to, and workaround for, the US dollar based banking system. Maybe all the crazy shit Trump has been doing with trade is really intended to precipitate that. He's been on record saying he likes the "gold system".

In reply to by philipat

Iskiab philipat Sun, 07/15/2018 - 00:27 Permalink

I agree, being bullish or bearish the USD depends on timeframe.  This year I’m bullish and see the USD continuing to climb.

Long term I’m bearish and see an upcoming free fall.  The EU is already in the dedollarization game but is being subtle to not attract Trump’s ire.  Right now all foreign banks need to follow US laws internationally if they do any business in the US.  There are already laws going into effect across Europe making it illegal to follow foreign government laws on their soil.  Countries are being low profile, trying to not attract attention/ire and making the changes in the background.

Near the end of the year I expect a nexus of an overly aggressive fed, the ending of one of the longest bull runs in history, and the starting of dedollarization to all hit at the same time.  I wouldn’t hold USD by September if you’re risk averse, November is you want to take chances.

In reply to by philipat

philipat Iskiab Sun, 07/15/2018 - 00:37 Permalink

I wonder if the timing of the Mid-terms (November) might have any relevance here? Hmmmm...

And externally, the days of the US being able to have its' cake and eat it are rapidly ending and it needs to decide if it wants to maintain the reserve currency or restrict the outward flow of Dollars via trade. It can no longer have both as the alternatives are already starting to take hold.

In reply to by Iskiab

Iskiab philipat Sun, 07/15/2018 - 10:44 Permalink

Dedollarization is not something the US can accomplish in it’s own.  The US can’t force other countries to stop using it’s currency.

If you look at all US actions since Trump came to power, they’ve all been anti-US reserve.  Who’s to say that the goal of the US isn’t to stop the USD from being the reserve currency.  The Republican Party is made up of different economic interests and maybe their goal all along is to change the system.  The USD being the reserve has made it very difficult to tax shelter/evade and they might have decided it’s time for a change.

To have a political discussion about changing the system could be problematic.  If you look at actions everything Trump has done since being elected points to the US wanting to change the system. You can’t assume the US doesn’t want a change.  

Thinking about it without the USD being the reserve multinationals will benefit because they won’t have to worry about assets being frozen in the US.  Right now they can be sued in the US system with international consequences because exchanges get cleared in the US.  The IRS will have less teeth to colllect taxes as well.  There’s a lot of upside for multinationals and the billionaires who can leave their cash in tax havens, outside the reach of any courts.

In reply to by philipat

rtb61 RafterManFMJ Sun, 07/15/2018 - 00:28 Permalink

Far more petty than that. A 25% tariff on those Chinese product basically a 25% Wallmart sales tax ie shifting taxes from the rich to the poor. Why the tariff not about jobs, it's about funding the next round of taxcuts for the rich, the poor need to pay 25% and the rich need to pay ZERO.

They did not give a rats arse beyond that, now the chaos and the whoops, well that was a fucking bad idea. Yeah most of you dumb schmucks just got hit by a 25% tax hike, the rich don't by cheap Chinese junk, you do and you'll be paying those taxes and still no jobs and of course all unions a criminal organisations and there should be no minimum wage and employers should be able to house workers in kennels on premises to ensure greater production time, paid for in food and freedom from beatings.

In reply to by RafterManFMJ

Cashboy FireBrander Sun, 07/15/2018 - 09:48 Permalink

Russia can supply the Soy Beans to the Chinese soon.

The Ukraine was the bread basket of the Soviet Union.

China has been buying its oil cheap from Iran for years in exchange for western goods that China Manufactures.

USA needs Rare Earths (batteries and high tech) that China is virtually has a monopoly on.


If the USA puts import tax on Chinese goods, then theoretically there will be inflation for Americans.



In reply to by FireBrander

TRN beemasters Sat, 07/14/2018 - 16:08 Permalink

Mr Gave, It’s about FAIR TRADE! FAIR TRADE is not protectionism! What is so difficult to understand? 

Edit 1: Example of NOT FAIR TRADE: who is the manufacturer par excellence of knock offs? Eg fake Rolex watches? Is the manufacturing of those fake products discouraged? ie close down the manufacturer of the fake goods? Prosecute the owner?

Edit 2: Example of NOT FAIR TRADE: when a non Chinese firm sets up shop in China are they always allowed to do so without restriction or are they in select sectors are required to have a Chinese partner? What is the purpose for the practice? What is the historical record of such partnerships?

In reply to by beemasters

snblitz TRN Sat, 07/14/2018 - 17:03 Permalink


Only Americans are foolish enough to think in terms of fair trade.

Look at the state of tariffs and trade today.  Obviously everyone else thinks in terms of advantageous trade.

Many have been taking advantage of the US and their sell out politicians for decades.

Consider that "turnabout is fair play".

In reply to by TRN

fazsha2 TRN Sat, 07/14/2018 - 17:50 Permalink

You're right - Louis Gave is an idiot. "If China can’t get access to new US dollars through trade, it would have to get them by selling assets to US investors. This is a distinct possibility. Clearly China is continuing to open up its bond and equity markets to foreigners. But over time this is not a great strategy for China, as in effect it means selling prized assets at undervalued prices. " Huh? They could sell these "valuable" US bonds and get something much more valuable to THEM: commodities. I can't stand it when Americans try to argue that the world is clamoring for more US debt.

In reply to by TRN

popeye TRN Sat, 07/14/2018 - 21:51 Permalink

No-one has to buy Chinese goods, but we all do. Fair trade is choice, and we make them every day. 

As for "fairness" - what a quaint concept, a bit like "human rights". The world is not "fair", and we have no "rights" beyond those our society chooses to bestow on us.

In reply to by TRN

Dickweed Wang TRN Sun, 07/15/2018 - 07:38 Permalink

Is the manufacturing of those fake products discouraged?


No, it's not. In fact, in China copying something that is successful is engrained in their culture . . . whether that's a new type of business or a popular foreign product. Here's a video from two Western guys that have lived in China for 7+ years (and both have Chinese wives) that explains what's going on there with piracy:

Some of that video is pretty funny also (unbelievable is more like it). If anyone is interested in seeing what really goes on in China from a westerner's perspective I highly recommend their utube channel: "AVDChina". Some of the stuff they cover is a real eye opener . . . particularly the ones about local food sources.

In reply to by TRN

sarz beemasters Sun, 07/15/2018 - 06:40 Permalink

This is in reply to beemaster's comment about Trump's obligation to the Rothschilds.

Here is an article by James Jarrett that puts those observations in a fair context.…

I wish the Tylers would change the comment rules, so that replies and further discussion of a comment are hidden, and only direct responses to an article are displayed. The current comments scene is like Raqqa after its American 'liberation'. 

In reply to by beemasters

sandman3365 The Alarmist Sat, 07/14/2018 - 15:52 Permalink

Truth hurts, isnt? We are vassals? Really? thats why when you come here as a tourist youre afraid to say that youre american, and youre saying that youre from... Canada? We are not your vassals, we are your enemies. Apart for our our politicians, but they always change... Im so proud to be alive in those wonderful changing moments in history. And hell with muricans!

In reply to by The Alarmist

Quantify sandman3365 Sat, 07/14/2018 - 16:08 Permalink

Come where? I am not afraid to say I am American. Fuck off. Spent 8 years in Europe defending Europe from Communism so they could accept something even worse, Islamic fascism. Canada is a cucked nation with a leader who was only accomplishment was as a ski instructor who married a older woman. So fuck Canada. I wouldn't claim to be from there for a thousand bucks. Maybe a million.

In reply to by sandman3365

oddjob Quantify Sat, 07/14/2018 - 17:06 Permalink

You had a homosexual Muslim President for 8 years, Bush 2 a war criminal, Clinton a habitual liar and AIDS victim, and Bush 1 the NWO fag that had a penchant for Black boys. 3 letter criminal agencies totally compromised involved in arms and drug smuggling and civilian killings. Take a fucking victory lap.

3+ wasted decades.

In reply to by Quantify

Vin Sat, 07/14/2018 - 15:36 Permalink

So the world is pissed that we won't be sending them as many dollars anymore, as they continue to de-dollarize?

What the hell are they complaining about?  We're helping them.