China Has Quietly Implemented A 6% Across The Board 'Tariff' On All US Imports

Trump and Xi have spent much of the last few weeks tossing tariff grenades across the Pacific Ocean as retaliatory retaliations grow ever stronger in rhetoric and potential escalations.

Then this week, Trump seemed to back away from his most serious threats (direct Chinese investment restrictions).

We wonder if this is why...

Since Trump started to rattle his trade war sabre, the last three months have seen the offshore Chinese Yuan tumble over 6% (crashing almost 4% in the last two weeks alone)...

Nothing happens by accident in China and this massive drop in the value of the Yuan mirrors the violent devaluation, snap in 2015...

All of which suddenly makes US imports to China 6% more expensive than they were in Q1 - a stealth tariff that no one is talking about.

And before this is dismissed as just the mirror of USD strength, we suggest the following chart shows very clearly the PBOC allowing the Yuan to weaken notably against just the dollar while - until the last few days - maintaining Yuan's buying power against the rest of the world.

However, as Capital Economics points out, if the PBOC is using the exchange rate to fight back against the US, it is pulling its punches: the PBOC's daily reference exchange rate has in the past few days been stronger than market rates might have suggested, not weaker.

It is of course still notable that the PBOC has done relatively little to stand in the way of the currency slide, even if it isn't directly responsible for it. It always argues that the exchange rate is driven by market forces.

But its tolerance will probably only go so far, given the painful experiences of 2015 and 2016: any benefit to exporters would be swamped if depreciation triggered economic and financial instability.

Still, as a wise market participant noted, while all the bellicose language is coming from Trump, perhaps the biggest factor right now is that Beijing has "weaponized" the Yuan...

Mark It On Your Calendars

It's that time again. At the end of this month, the Federal Reserve has over $30 billion of notes maturing. I won't rehash what this might mean for the market.

Let's do a quick recap at what happened at the previous big QT day - last month end - May 31st, 2018:

Another large QT maturity day, and another down day in spooz.

Let's update the table with the recent QT maturity days to have a peek at what it looks like now:

The streak is alive and well. QT days have been rather large down days for the S&P 500.

And this month's maturity is another big one - over $30 billion.

I was surprised to find that government bonds can mature on a weekend. I don't trade a lot of cash US treasuries and didn't realize they can mature on a non-business day.

This means that this month's QT maturity day effect will occur on Monday - not Friday's month end.

So mark it in your calendars - Monday July 2nd spooz should trade heavy if this QT theory holds true.

Michael Pento: When The Yield Curve Inverts Soon, The Next Recession Will Start

Collectively, the world's major central banks have pumped $1.1 trillion into the markets over the past year.

The result of all this money printing is now well known: massively inflated real estate, stock and bond asset price bubbles, as well as extraordinary wealth and income gaps across society.

Some day all of this insanity will end. But how? Will it unwind in an orderly and polite way, as the world's central planners hope? Or will be disorderly, resulting in painful portfolio losses and mass layoffs?

Michael Pento, fund manager and author of The Coming Bond Bubble Collapse returns to the podcast this week to offer his prediction that events will most likely take the latter route. In fact, he sees the developing inversion of the yield curve as a dependable precursor to the US economy entering recession as soon as this Fall:

The Fed is now raising rates. They raised rates from 0% up to 2%. They're supposed to do it again in September/October. And again in December. That will be four hikes this year. 

They are also selling assets, aka 'draining their balance sheet'. I say 'selling' because that's exactly what they have to do. Let's say the Fed is holding a 10-year note that's due: if they want to destroy that money, they say "OK, Treasury, give me the principal". The Treasury doesn't have any money so it has to go the public and raise money. Well, the Treasury will have to do that to the tune of $50 billion per month come October. Right now it's $30, it has to go in July to $40 billion a month then it goes to $50 billion. That's $600 billion a year added to the public supply of Treasurys they have to actually finance at a market rate. That's on top of the $1.2 trillion debt we're going to have in fiscal 2019.

So the Fed is tightening. But here's the problem: the spread between long-term rates and short-term rates is about as narrow as it can be without being inverted.

Right now, as we record this interview the spread between the 2 and 10-year Treasury note is just 34 basis points. That means when the Fed tightens rates in September, which they've pretty much promised to do, assuming the 2 and 10-year note stays at that same spread above the Fed funds rate, we're going to have a yield curve that is almost completely flat. And will be inverted when they go again in December.

Why is that so important? Well, when the yield curve inverts it almost always brings about a recession. In fact, I can say pretty distinctly that in modern times, in this fiat currency regime, given the conditions today, it will definitely cause a recession. The reason is because the fuel for asset bubbles is monetary creation, a boosting booming money supply which we don't have any more. And the reason why the money supply gets shut off when the yield curve inverts is because banks' loans are earning less than their liabilities, which are deposits. So when your assets are earning less than your liabilities, you don't make any more loans. You don't want any more assets. That's a great way to make your bank insolvent.

So what happens is that the money supply gets completely shut off. You're not going to make a loan against a deposit -- you don't even want these deposits anymore. By the way, when there's a recession and there's a withdrawal of asset prices, a contraction in those prices usually results in a run on the bank as well. So asset prices get stumped because there's a run on the bank and these deposits get withdrawn. That is what usually causes causes a recession. And that's exactly where we are going to be come the fall, and even closer towards the end of this year.

Lynn: "There Will Be A Financial Crash... And Trump Will Be Blamed"

In these sentiments, sir, I agree to this Constitution, with all its faults, if they are such; because I think a General Government necessary for us, and there is no form of government, but what may be a blessing to the people if well administered; and believe further, that this is likely to be well administered for a course of years, and can only end in despotism, as other forms have done before it, when the people shall become so corrupted as to need despotic government, being incapable of any other.

– Benjamin Franklin

Our Constitution was made only for a moral and religious people. It is wholly inadequate to the government of any other.

– John Adams

I'm of the opinion that many today are throwing the "baby out with the bathwater" when they claim the conservative versus liberal (right vs. left) construct is phony, or bogus.

Conservatives have lost political ground because they have accepted the moral premises of the Political Left. However, liberals use deception to hide their real motives while, simultaneously, blackmailing conservatives by means of conservative values.

How typical was the mainstream media's "poor immigrant children" narrative that played the emotional heartstrings of dummies everywhere, like violins.

In the immigration debate, as in the gun control polemic, liberals don't actually care for the children; at least not in the ways they profess.  They instead callously use the "children" as a means to consolidate their political power.

This explains why liberals never rejoiced for the offspring of lawless invaders when Trump signed the executive order to keep illegal immigrant families together. Instead, they claimed Trump "caved" before the [manufactured] "humanitarian and political crisis".It's also why children still attend schools in gun-free zones, while anti-gun protester David Hogg is protected by armed guards; because he's more important than the other children now.

The Political Left consistently weaponizes the morality of conservatives against said conservatives; and whenever those on the right of the political spectrum accept the moral premises of the deceptive left, the progressive agenda moves "forward".

Nevertheless, the value systems of conservatives and liberals are separate. This is why words like "freedom" and "rights" hold different meanings for each group.

In the example of the former, freedom and rights manifest as an outgrowth of natural law as defined in the whispers of John Locke. In the latter, these are processed according to the [Machiavellian] totalitarian's interpretation of Nietzsche's Will to Power.

The commonality of globalists, neocons, corrupt government officials, and tyrannical collectivists is demonstrated when they profess the moral superiority of their ideological positions and, simultaneously, abrogate timeless moral principles for their own benefit while telling us it's for ours.

This is the heart of the matter.  It is why decent Americans voted for Trump, flaws and all.  He was elected in protest.

I had a friend text me the following rant that he saw on Facebook:

I still haven't figured out why Hillary lost. Was it the Russian uranium deal? Was it Wikileaks? Was it Podesta? Was it her sexual predator husband? Was it her staff's husband's immoral pictures? Was it her subpoena violation? Was it the corrupt foundation? Was it the congressional lies? Was it the Benghazi scandal? Was it the pay for play? Was it the Travel Gate scandal? Was it the Haiti scandal? Was it the Whitewater scandal? Was it the Cattle Gate scandal? Was it the $15 million for Chelsea's apartment bought with foundation money? Was it Comey's investigation? Was it her husband's interference with Loretta Lynch and the investigation? Was it stealing debate questions? Was it forensically deleting 33,000 emails? Was it the secret server in her house? Was it the Seth Rich murder? Was it calling half of the USA population deplorable? Was it the underhanded treatment of Bernie Sanders? Was it the Vince Foster murder? Was it the Jennifer Flowers assault? Was it the $800,000 Paula Jones settlement? Was it the lie about taking on sniper fire in Bosnia? Was it her husband's impeachment for lying under oath? Was it the 6 billion $ she "lost" when in charge of the state department? Was it the 10 million she took for the pardon of Marc Rich? Or was it because she was the worst presidential candidate our country has ever had to choose from?

Gee, I just can't quite put my finger on it, but it seems to be right in front of me.

Here was my reply:

That's a great rant.  But the reason we are likely doomed is this: After all that, she still won the popular vote.

We live in a land populated by the People of Walmart sustained by a steady diet of fake news, processed foods, electronic fairy tales, and antidepressants.

The trends (i. e. transitional revelations) are pointing towards war and global depopulation; exactly what the Technocratic Elite desire and right on schedule. Any attempt to divert from those outcomes would be akin to a flea trying to steer a dog like a horse.

– The D.C. chapter of the Democratic Socialists of America shared a video on Facebook of activists booing and yelling at Homeland Security Secretary Kirstjen Nielsen at Mexican restaurant and calling on her to "abolish" U.S. Immigration and Customs Enforcement (ICE).

–  A year after the congressional baseball shooting that almost took the life of Rep. Steve Scalise and former Hill staffer Matt Mika, members of Congress expressed concerns for their safety as threats against them have skyrocketed.

 – A plan to split California into three separate states earned a spot on the November ballot there.

 – Because she works for President Trump, Press Secretary Sarah Sanders and 7 of her family members were kicked out of a Virginia restaurant.

–  Screaming "God is on our side", California Congresswoman, Maxine Waters, implored her supporters to harass Trump administration officials in public spaces.

 – Because "there are simply not enough police in D.C. or Virginia or Maryland to protect all Trump officials at their homes and when they go out to restaurants", the president of the "influential" Crime Prevention Research Center urged officials in the Trump administration to arm themselves.

The mainstream media has engaged in an effort to turn Trump supporters into "Public Enemy # 1"; and now, even the politicians are warning of the forthcoming civil war.

Have you ever cautioned someone over inevitable consequences only to have them blaze ahead anyway? Then when you were proven right, your anger at their stupidity was righteous, was it not?  Especially if any of the consequences affected you.

The Political Left today has extreme anger at those in America who voted for Donald Trump.  It is because they believe Trump to be the reincarnation of Adolf Hitler who is currently in the process of destroying the Obama-nation.

Now imagine, if you will, how their anger will be magnified when Trump's trade wars and tax cuts are blamed for the Next Great Depression.

Today, the Congressional Budget Office announced that growing U.S. budget deficits have pushed public debt to 78% of the nation's gross domestic product.  This, even as investors grow increasingly anxious over rising interest rates and bank stocks surpass their record "longest losing streak ever".

Of course, the doubling of the national debt under Obama, or the Federal Reserve's six (6) rate hikes since Trump's election, will not be blamed.

Make no mistake:  There WILL be a financial crash and Trump WILL be blamed.  You can take that to the bank (pun intended).  It's only a matter of time.

After the crash, the support for Trump from the political right will fade like the light of day after sunset; while the vitriol of the left will rise and crash over the land like blue tsunamis under the full moon after an ocean quake.

All they have is hatred for Trump and his supporters now.  It will only grow worse.  And they are everywhere.

When The Office of the First Lady contacted the Secret Service after the actor Peter Fonda called for President Trump's son, Barron, to be kidnapped and caged with pedophiles, I was reminded of a 1980's movie, starring Tom Hanks, called "The Burbs".  The satirically comedic story told of a group of neighbors in the suburbs awakening to the actuality of satanic murderers living next door.

In "The Burbs" a clip was shown of the 1975 film, "Racing With the Devil" which, ironically, starred Peter Fonda as a vacationer who came across a secret society of Luciferian's deeply entrenched over what appeared to be the entire state of Texas.  My friends and I were underage when we snuck in through the back door of the movie theater to watch that film.  Needless to say, it was a long walk home that night in the dark.

Indeed.  The enemy is everywhere; and there can be no escape.

Therefore, the more I contemplate the concepts of morality and the future, the more I reconsider the old philosophical constructs.

Could the approaching "civil war" actually be spiritual in nature?  Like a holy war?

The ancient prophet Jeremiah, by way of King James, phrased it thusly:

…Stand ye in the ways, and see, and ask for the old paths, where is the good way, and walk therein, and ye shall find rest for your souls. But they said, 'We will not walk therein'.

– Jeremiah 6:16

There is no longer a dividing wall between hope and realism; liberty and chaos.

It is what it is. Nothing more, nothing less.

Prepare and, for those so inclined, pray.

Who said life was fair? And who was it again that promised you that rose garden?