Not Your Grandfather's Trade War: Wall Street's Mindless Complacency, Part 3

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<< Read Part 2:  Not Your Grandfather's Trade War: The Revenge Of Bad Money

With his latest $100 billion tariff volley, it can be well and truly said that the Donald has gone stark, raving bonkers on the China trade war. And, no, he is not playing some kind of clever 5-dimensional chess or 3-dimensional chess that the talking heads were gumming about this AM. He's not even playing checkers---to say nothing of pick-up-sticks.

What the Donald's actually doing is attempting to stage an episode of "The Art of the Deal" in a venue where he is so far over his head that nary a single orange strand is visible above the water line. Indeed, there is not a shred of rationality, calculation, shrewdness or guile to it.

To the contrary, the Donald's rapidly escalating trade war reflects the glandular eruption of a monumentally bloated ego---the play acting of a mind that is bereft of knowledge about global trade and economics and which cannot manage to stay focussed on much of anything for longer than a tweet cycle.

But then our purpose here is not to chastise the Donald for his alleged "unsuitability" for the job. In fact, clumsy or not, he's now hitting on all cylinders with respect to the real purpose of his election. Namely, to bring the faux prosperity of the Bubble Finance era to a crashing end.

And that's where the stunning complacency of Wall Street comes in. The conceit down there in the canyons is that Washington everywhere and always marches to the tune of the S&P 500. Ever since the GOP rank and file folded when the first TARP vote sent the market crashing by 8% back in September 2008, the casino has assumed that the politicians are petrified of a hissy fit and will quickly back off from any action that threatens the stock averages.

That's why the casino assumes the current brinksmanship on both sides is just preliminary huffing and puffing. Eventually, there will be a practical nuts-and-bolts negotiation that will resolve the "trade" matter, thereby enabling the S&P 500 to keep on climbing.

Or as the Wall Street's go-to cheerleader, Jim Cramer, put it on bubblevision today:

"It's just another kind of negotiating style.....get used to it!"

Presumably, he was talking about not just the Donald's bombast, but that of the Chinese, too. The assumption, apparently, is that no one on the planet----not even China's new Red Emperor----dares to trifle with the stock market's heavenly ascent.

Even if Beijing now threatens to retaliate "immediately, intensively (and) without hesitation" presumably it's just China's way of adopting the Donald's vocabulary and "kind of negotiating style". So there's nothing to see here: Move along and buy-the-dip!

This latest intimidation reflects the deep arrogance of some American elites in their attitude towards China,” the state-run Global Times said in an editorial.

"The Chinese side will follow suit to the end and at any cost, and will firmly attack, using new comprehensive countermeasures, to firmly defend the interest of the nation and its people......China will “retaliate immediately, intensively, without any hesitation” if the U.S. releases new list of tariffs on $100b additional imports, Chinese Ministry of Commerce spokesman Gao Feng says, adding:

“We Chinese won’t pick fights, but if someone picks a fight, we’ll resolutely meet them head-on. We Chinese always take things seriously; we’ll act as we say."

Here's the thing, however. America's monumental trade problem is just a symptom of its failing main street economy and the destructive central banking regime of the last three decades. The rot goes a hundred times deeper than the absurdity of China's $506 billion worth of exports to the U.S. last year compared to only $130 billion worth of imports from the U.S.

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