From Birch Gold Group
Stocks are faltering as they realize Trump’s economic plans could take 12 months or longer before having any effect. In fact, he may even allow for a pullback as a “necessary evil” in order for markets to reap benefits in the long-run.
It’s a bitter pill to swallow, but Trump knows things may have to get worse before they can get better. Watch for these five actions he might make that could temporarily stunt markets — but which may give gold prices ongoing support.
Trouble in Europe
1. Encouraging More Countries to Leave the European Union
Trump’s distaste for economic globalization is going to play a major role in his first term as president. He’s already announced intentions to start renegotiating NAFTA and withdrawing from the TPP as soon as he enters office, and he’s heartily congratulated the U.K. for its exit from the European Union, saying the country is “doing great” and calling the decision “so smart.”
One can only infer Trump would support further dissolution of the EU, especially given his comments expressing total indifference to it:
“Personally, I don’t think it matters much for the United States. I never thought it mattered,” he said. “Look, the EU was formed, partially, to beat the United States on trade, OK? So, I don’t really care whether it’s separate or together, to me it doesn’t matter.”
2. Aiding the UK’s “Hard Break” from the EU With a Swift Trade Treaty
The logistics of the UK’s exit from the EU have been in question since its announcement to leave the bloc last year, primarily whether or not the country would retain some kind of residual membership or pursue a “hard break” and complete severance.
The notion of a “hard break” would be more of a shock to the global economy, and in order to be plausible for the UK, it would require substantial support from the U.S.
But Trump quickly came out to reassure the UK he would back their decision for a “hard break” by offering a speedy and accommodating trade agreement. In response, new UK Prime Minister Theresa May announced on Jan. 17 that the country would indeed break entirely from the EU.
Trade Standoff With China
3. Abandoning the “One-China” Policy
Although there are technically two governments that refer to themselves as China – the People’s Republic of China (mainland China) and the Republic of China (Taiwan) – Beijing has fought hard for decades to defend what’s referred to as the “One China” policy: the principle that both governments are a single sovereign entity.
According to foreign ministry spokesperson, Geng Shuang, the policy is essential to a cooperative relationship between China and the U.S. (emphasis ours):
“The Taiwan question bears on China’s sovereignty and territorial integrity and touches our core interests. Adherence to the one China principle serves as the political foundation for the development of China-U.S. ties. If this foundation is wobbled and weakened, then there is no possibility for the two countries to grow their relations in a sound and steady way and cooperate on key areas.“
But now that Trump is putting the “One China” policy in his crosshairs, it could push China to “take off the gloves”.
4. Declaring China’s Man-Made Islands in the South China Sea Illegal
A more granular part of the “One China” issue involves China’s construction of artificial islands in the South China Sea. Though recognized as international waters, China is increasingly trying to lay claim to the region using man-made islands and a growing military presence.
Trump and several members of his cabinet are strongly opposed to China’s activity in the South China Sea, and they’ve told China in no uncertain terms they plan to stop it.
But Chinese Foreign Minister Wang Yi says, “…in the end, they are lifting a rock only to drop it on their feet.”
5. Branding China as a Currency Manipulator
Steven Mnuchin, nominee for US Treasury Secretary, announced on inauguration day that the Trump administration is prepared to officially label China as a currency manipulator. Mnuchin told the Senate that significant evidence suggests Beijing is intentionally pursuing policy to decrease the yuan’s value to maintain advantage in the global economy.
The last time the U.S. threatened to label China a currency manipulator, it was able to leverage China’s entrance to the World Trade Organization as a way to avoid trade conflict; but no such bargaining chip exists today.
As if Trump’s existing spats with China weren’t enough to provoke a trade war, a step like this could push things over the edge.
Trump is Spurring Big Inflows to Safe Havens
The outlook for Trump’s foreign policy decisions and his status as a wildcard could lead Americans to pour millions of dollars into safe-haven assets. And gold will likely be the safe haven of choice, given the fact it’s one of the only assets that people are confident will stay untouched in the midst of global economic chaos.
So, any time Trump makes a move that puts the market on edge, it could give gold a boost.
I think it is very important that the world has balance of powers between 3 or more nations. Maybe 6 nations even.
A unipower would be disastrous for the dirt people.
I had to steal the dirt people, cloud people thing.
On the one hand we have a Trump who hob nobbed with the likes of the Clintons and even gave them donations for their morally deficient causes. On the other we have a Trump who takes a stand against such corruption.
I can’t tell yet if he’s playin’ us or if he had enough of it when it was the ‘price of doing business’ and is really going to put a stop to it. I am suspicious of the former, but I am hopeful it is the latter.
If he really does try to stop China from continued ‘island building’, the policies of the former administrations have insured that we will face a much greater adversary in China than we would have before their enrichment and empowerment by those policies.
Blessings:-}