Speaking of skepticism, I’d like to register a skeptical opinion of my own about the tide of recent stories about China that are painting the future global role of that country in apocalyptic terms.
I’m thinking specifically about one story that trumpeted “The Coming Trade War with China!” Another looked at the recent riots in Xinjiang province (and elsewhere) and wrote about the Chinese communist regime’s lack of legitimacy and how China was going to fall apart and degenerate into chaos. Other stories have addressed the attempt by the Chinese to replace the U.S. dollar with the Chinese renminbi as the world’s favored reserve currency and how the Chinese were going to bring the U.S. to its knees by selling off their enormous reserves of U.S. Treasuries. Oh, and did I mention that they were trying to buy up all the world’s oil, iron ore, aluminum and strontium 90?
Part of the motivation behind these stories is just to sell papers or magazines, or to attract visitors to a Website. These screamers are about as substantial as the tabloid headline I saw the other day: “Who Killed Michael?” Words fail me.
Of course there will be crises and conflicts involving the U.S. and China ahead (and probably every other player in the global market). When nations compete for limited resources, for access to markets and for investment dollars, the competition will always be hard-nosed. The winners will use all the weapons in their arsenal–including bribes, subsidies, dumping, currency manipulation and tariffs–and the losers will cry “foul!”
One of the benefits of free trade (and I’m well aware that there are drawbacks, as well) is that countries that trade together have a harder time escalating conflicts out of proportion. So the kind of slap-fights that involves threats of tariffs and trips to the World Trade Organization are just par for the course. But a “trade war?” Please.
I’m not going to go ballistic and accuse the writers of these inflammatory and misleading stories and headlines of being inflammatory and misleading. Well, maybe I am.
My point really is that investors should take these stories as the kind of hysterical background noise that they are. Always stick to what’s actually happening in the markets, which are the best news-discounting system in the world.