No time! Biden has only one month left in this China strategy!

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Author: Rong ping source: official account: Rong Ping (id:rongping898) has been authorized to reprint

The US government has been scratching its head over inflation these two days. No, Biden called treasury secretary Yellen and Federal Reserve Chairman Powell to the White House for a closed door meeting a few days ago. We don’t know what the specific content was, but after the meeting, treasury Yellen tried to take the pot of inflation on herself. She said:

My view on where inflation will go is wrong. The US economy has suffered an unexpected huge impact, which has pushed up energy and food prices. Supply chain bottlenecks have seriously affected our economy. I didn’t fully understand this at that time.

Last November, faced with the inflation data rising at the fastest rate in 31 years, Yellen vowed that inflation should be eased in the second half of 2022. However, after entering 2022, the US inflation data still reached new highs every month, 7.5% in January, 7.9% in February, 8.5% in March and 8.3% in April. If the inflation continues like this, the US prices will explode before the mid-term elections.

But the question is, is inflation really Yellen’s pot?

No!

I have already said that it is impossible to cure the inflation in the United States in the short term. Can I see that Yellen, the former chairman of the Federal Reserve and the current treasury secretary, can’t see it?

In fact, the Federal Reserve realized that inflation began to rise as early as 2021, so in the second month after Biden took office, some people proposed to stop the monetary stimulus policy and lower the CPI, but Biden had his own calculation in mind at this time.

First of all, there is the issue of US stocks: the US epidemic is Schrodinger’s cat. You don’t know when it will break out and when it will stop. If there is a new round of epidemic after the monetary stimulus policy is stopped, will US stocks not fall thousands of miles every minute?

Neither the Democratic Party nor Biden himself can accept the collapse of the US stock market just after taking office.

The second is the problem of Finance: when the government needed money to make big moves in the past, the process was not only cumbersome, but also easy to be choked by Congress. However, today’s loose monetary policy has created a loose fiscal environment for the White House, and the new Biden official has a package in urgent need of financial support, which means that keeping the loose monetary policy is equal to keeping the low threshold for the new government to ask for money.

Therefore, inflation is not so much Yellen’s pot as the whole Biden administration’s pot!

But even so, they still pushed Yellen out of the pot, which can only illustrate one problem: the negative situation caused by inflation has been very serious for the Democratic Party, and the lid can’t be covered!

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US inflation rate over the years

The lid really won’t cover! If nothing unexpected happens, in the second half of this year, a new force will push up US inflation again.

Let’s take a look at the news: the climate prediction center of the National Oceanic and Atmospheric Administration recently said that there will be extreme high temperature weather in the United States this summer, but there will not be too much rainfall. The agency further stressed that the temperature in almost the whole United States will be higher than the normal level from June to August. Before that, more than 98% of the southwest of the United States has been in a state of drought.

The first impact of drought is on food production. According to the latest estimate of the U.S. Department of agriculture, due to the drought in the southwest and the extreme high temperature in summer, the output of U.S. winter wheat is expected to decline by more than 25%. In other words, grain prices in the United States will rise slightly by the end of this year.

Next is the power system!

There is no doubt that the continuous high temperature weather will lead to a huge demand for electricity in a short period of time from the corporate side to the residential side. After all, most cities can’t stand it without air conditioning in summer. Anyway, I am in Wuhan.

We all know what the U.S. power grid looks like. Demand erupts on a large scale at the same time, and the possibility of power grid collapse is very high. NERC, the regulator responsible for monitoring the health of power infrastructure, pointed out in the 2022 report that extreme high temperature weather and continuous drought this summer may lead to power grid paralysis or even collapse in most parts of the United States, including Texas, the west coast and the southwest.

Once the U.S. power grid broke out of a large-scale collapse crisis, it would be impossible to clean up. On the one hand, the transmission of the contradiction between power supply and demand to the downstream will infinitely increase the electricity cost of American residents. Last year, the electricity price at the residential end soared 200 times in the Texas power crisis, which made the ordinary people in Texas miserable.

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However, in winter, if you can’t afford to pay the electricity bill, you can rely on adding clothes and firewood. But in summer, it’s not so convenient. Go to the street and ask several people who can stand the high temperature and muggy in the city. It’s necessary to buy high electricity bills and turn on the air conditioner. The cost of living is just another gold eater for no reason. Won’t residents’ inflation go up again?

On the other hand, the power crisis will also restrict the production activities of enterprises. Take the power grid collapse in Texas last year as an example. At that time, a large number of chemical enterprises including BASF, Dow Chemical, Ineos, ExxonMobil, Chevron and lyonde Bassel reduced their production and limited their production. As a result, fuel prices in the United States rose slightly in the middle of the year.

The warning given by NERC this time is that there is a risk of power grid paralysis in most parts of the United States. Therefore, the impact of this power shortage on enterprise production activities is also nationwide.

Most of the enterprises engaged in production activities in the United States are energy enterprises, and fuel is one of their core products. In the cost structure of U.S. household expenditure, transportation closely related to fuel is the second largest expenditure cost item after housing. That is to say, after this round of power crisis on the enterprise side, the final excess cost will still be transferred to U.S. residents.

The current inflation crisis has not yet been resolved, and new forces will soon be created. The key is that the mid-term elections will be held in six months. Biden must give an explanation to the people, but this explanation must not be his own. Otherwise, all kinds of natural and man-made disasters will break out in the second half of the year. That is not whether the Democratic Party can maintain a weak majority in Congress after the mid-term elections, but whether the Biden government can safely spend its first term of office.

It can not be the Federal Reserve. First of all, Powell is a Republican and will not bear the blame for the Democratic Party. Moreover, the Federal Reserve has long advised the White House to tighten monetary policy, and Biden is addicted to it; Second, the Biden administration’s subsequent economic policies need to rely on the support of the Federal Reserve.

After thinking for a while, only fiscal Yellen is the most suitable man to carry the pot. He is not only a Democrat who has given the public a certain explanation, but also a former chairman of the Federal Reserve, who can maximize his separation from the responsibilities of the Biden government, because this institution is nominally independent!

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US Federal Reserve Chairman Powell, US President Biden, US Treasury Secretary Yellen

In fact, although high inflation in the United States cannot be cured in the short term, there are two temporary solutions that can delay the crisis.

One is to end the war between Russia and Ukraine as soon as possible

The Russian Ukrainian war has made a visible impact on the inflation level of the western capitalist world. Pay attention to the following figure. The US Food CPI index and energy CPI index both have an obvious upward trend after the outbreak of the war. Although the range is not very large, it always feels worse. If the war between Russia and Ukraine can end quickly, Biden should have no problem dragging inflation until after the mid-term elections.

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To be honest, the current US attitude towards the war between Russia and Ukraine is becoming more and more ambiguous, and some people do not want to continue fighting.

At the world economic forum held in Davos on May 23, Kissinger, the senior strategist of the United States, said that Russia and Ukraine should start negotiations in the next two months to avoid insurmountable turbulence and tension. He also stressed that the border should be restored to its original state.

In this regard, the British Daily Telegraph pointed out:

This refers to the restoration of the Ukrainian border before the war began in February, which requires Ukraine to recognize Russia’s sovereign status over the southern Crimea region and the eastern Donetsk and Lugansk republics.

To put it bluntly, Kissinger wants to persuade the United States to take the default status quo as the price in exchange for Russia to stop the war!

Many people think that Kissinger is out of his mind, and ZELINSKY is even more direct, denouncing the so-called peace proposal as the Munich agreement in the new century and appeasement. However, it is strange that at the end of May, Biden, who had been shouting for the removal of Putin’s power, suddenly wrote an article in the New York Times that he would not seek Putin to step down, which obviously softened his attitude.

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Then, on June 3, CNN broke the news that the United States was meeting with Britain, the European Union and other allies to try to make plans to end the conflict.

As soon as Kissinger’s front foot put down the order to negotiate, the rear foot media heard that the United States was formulating a truce table.

Coincidence?

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It may or may not be, but this is enough to prove that there are indeed a group of people in the United States who do not want to continue the war between Russia and Ukraine.

It is not surprising that they have this idea of retreat!

One of the motives for the United States to concoct the Ukrainian war was to bring down Russia. However, Putin was so well prepared that there were a group of experts behind him. In the first quarter, the current account surplus took advantage of the Russian Ukrainian war to disrupt the global energy supply market and seized $95.8 billion,

The year-on-year growth is 300%. The more the enemy fights, the more money he gets. What’s the point of fighting this war?

It is better to stop the donkey along the slope, which will not only cut off Russia’s wild way to make money, but also slow down domestic inflation. Kill two birds with one stone.

I guess the actor driver should have heard some rumors, so he jumped so high. National interests, territorial sovereignty and so on are all empty. If he really cares about national interests, he won’t provoke Russia madly. The real reason is that he is afraid that the United States will compromise and become a victim.

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The other is to abolish the imposition of tariffs on China

So far, the US has imposed tariffs on China, which has caused us companies to lose more than US $1.7 trillion. These costs are finally borne by the common people. The data show that US households have to increase additional spending of US $1300 each year.

The Peterson Institute for International Economics mentioned in a report in March that the elimination of tariffs on China could reduce US inflation by at least 1.3 percentage points. Although it is very small, Jason Forman, an economic adviser in the Obama administration, made it clear that this is the largest and most effective tool available to the White House at present. Whether it is raising interest rates or other means, the effect is not as direct as abolishing tariffs.

Now, the US government has formed two distinct camps because of the issue of whether it should abolish tariffs on China to ease inflationary pressure, which has not appeared since Biden took office.

The White House faction headed by trade representative Dai Qi is opposed to the abolition of tariffs. The main members include Secretary of agriculture Tom Vilsack and national security adviser Jack Sullivan. The reason for opposing the abolition of tariffs is that high tariffs are still an important means to protect American jobs and attract enterprises to invest in the United States. At the same time, they also play a role in regulating what we call unfair competition.

Katherine day believes that tariffs encourage investment in American industries. If these industries are not protected from China’s unfair competition, their attractiveness will be reduced. She also does not want to give up tariffs at the expense of the country’s long-term economic environment to solve the immediate inflation problem.

——Washington Post

In addition, Dai Qi also advocated that the Biden administration should restructure its economic policy towards China as a whole and continue the tariff method of Trump’s period, but this method should be strategic, that is, the targeted use of tariff weapons rather than the package bombing like trump.

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US trade representative Dai Qi

The State Council Delegation headed by finance minister Yellen supported the abolition of tariffs. The main members included commerce minister Gina Raymond and the president’s deputy assistant for national security affairs dalip Singh. The reason for supporting the abolition of tariffs is that the products imported by the United States from China are just needed. The rising trade volume between China and the United States in the past four years is the most typical proof. Since the import of goods from China cannot be reduced, the goal of protecting American jobs by preventing the import of Chinese goods through high tariffs will not be achieved.

Moreover, it is not made in China that currently affects the employment situation in the United States, but the government has paid too much money, and everyone is not in the mood to work. In March this year alone, the labor shortage in the U.S. job market exceeded 11million.

So why not abolish the tariff?

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US job vacancies exceed 10million screenshot of the US Bureau of Labor Statistics website

In fact, no matter Dai Qi sent by the White House or Yellen sent by the State Council, they are only talking about taxes around the issue of inflation. As the final decision-maker, Biden has to consider another issue: tariffs are a symbolic battlefield for the United States to compete with China and the first shot to turn China and the United States from cooperation to competition. If Biden cancels tariffs, it means that the United States has admitted defeat. How dare he back such a huge political cost, If you can’t afford it, it’s another matter.

But Biden has only one month left. The tariff will automatically expire in July. At that time, he must choose between cancellation and retention.

If it is cancelled, inflation in the United States will have a chance to survive, but Biden will bear the blame.

Keep it. Inflation plus power crisis in the second half of the year has a high probability of collapse. Let alone Biden, the Democratic Party will be finished!

But then again, no matter whether Russia and Ukraine are at war or at peace, whether the tariff is cancelled or retained, these are symptoms but not root causes. If you can delay for a while, you can’t delay for a lifetime. You don’t prepare the coffin today, you must prepare it tomorrow. We can afford to wait for the theater. Don’t worry!

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