The Bessent Short !! Can it Break Yuan this time?
Weaponisation of Currency in its full-Glory! US-China War is already ON.
Trump: The Maverick
The 1987 book “Trump: The Art of Deal” which was co written by Trump and is considered as his life history and compendium of his philosophies. As per the available info, the book is part memoir part hagiography and reveals the basic tenets of his deal making.
Trump says that while making a deal he starts with an unachievable demand which suddenly puts the other party in a fix. Rather than thinking about any rational number the "unbelievable starting number" becomes the anchor to negotiate. Then Trump gives concession and walks away with a very good deal while the other party also feels good about having won a concession.
Something similar is at display currently, start with an absurd tariff number and then negotiate it downwards, striking a deal somewhere where both the parties feel a winner.
Scott Bessent-The Treasury Secretary
The Treasury Secretary Scott Bessent said that everything is fine and massive sell off is a short term reaction.He said that the view that many Americans are vulnerable for future post this rout is a "false narrative" and advised people not to look at their portfolios very frequently. It will be all good as it was during the Trump's first presidency. He lauded the market infrastructure and smooth functioning even during the surging volumes.
Who is Scott Bessent :
Bessent was hired to strengthen the dollar by doing the opposite of all the warning signs he saw in the British Pound. Inflated housing markets, treasury yields, etc. all pointed to the big short that the Soros fund pulled off. Bessent's obsession with the prices of homes and the interest rates on treasury bonds is very sharp. He's looking to strengthen the leading indicators of a currency.
This is what I mean by "white hat hacking" the dollar. Mapping out its vulnerabilities to protect it against future exploitation. One of the most glaring vulnerabilities was a heavily overinflated trading market. Wall Street was on a sugar high. Hedge funds were overly leveraged and if that bubble popped, it would have created an 2008 style financial crisis.
The tariff roll out , volatility and all- was a way of creating controlled detonation. Wall Street freaked out and deleveraged themselves. Now, there won't be any banks or hedge funds who can't afford to pay off their loans because they are overlevered.
The extreme tariffs are also coming at a time when Bessent sees a recession or depression happening in China. He emphasized this several times in US Channel shows. By pushing back China and shutting down their exports, he is creating the same conditions that led to the big short of the British Pound. If the Chinese Yuan collapses, then it'll cause a global flight into US Treasury bonds. Driving down interest rates even further for when they go to refinance the $9T of expiring debt.
He said that the flight to gold was coming from China making it illegal to buy most other forms of currency besides the Yuan. But gold is legal. So Chinese investors were fleeing to gold.
This is how China fights. Through money and politics. The war is happening right now, and Trump has long been the American politician uniquely equipped to fight it. But now he has his General Patton. Treasury Secretary Bessent.
See the Chart Below: ( USDCNH- Dollar vs Yuan)
(Yuan plunges after PBOC sets fixing weaker than the closely watched 7.20 level. Offshore yuan tumbles and about to hit a record low against the USD. Latest chart - 2 hours ago)
Lets just underrstand Global Financial System in the simplest terms:
China exports . Its major portion of surplus earnings goes away from China to USA and is getting investedinbuying US Bond ( Because , its most credit-worthy financial instrument in the world). Also, Chinese affluent vpeople fear their own government not knowing when The Govt makes a freeze on their savings-withdrawal. Its also the reason - Chinese Ultra Rich ( as .also Indian ) flee from their own country to US.
All these activities make US Dollar consistently strong against Yuan and INR. Whenever China thinks of withdrawing its investment in US Bond, it will be getting lower amount as Yuan is weak compared to US Dollar ( Conversion ratio gets favourable to US Dollar) .
Thrid Factor: US Tariff Sanction on China makes it pushed to the wall . How? There is over-production in China . And, US buys the maximum goods from them. If US says = I ( Meaning Americans) will lower my consumption becuase of high Prices of the goods due toTariff, It willbe affecting China in export. What will it do with over supply?? Its factories may start getting affected. China shall have only one option left - Either reduce Production ( Not viable, asCompanies start making losses due to inventory pile up or due to under-utilisation if production is reduced) ; orThey will have to lower Yuan ( weaken their currency) to remain price-competitive to the American consumer.
Here is the Catch- Further WeakendYuan may make USD appreciate again, and it will lower its Payout burden in different currencies..
Its a very smart game( We should say, War) of financial Engineering going on. Its weapoinisation of Currency (US Dollar); It is weaponisation of Trade- By US.
Can we call this— "The Bessent Short"! ( The Bessent Short to Yuan..)
( Like George Soros once Made the British Pound misterable by his Shorts in 1992 and the British Government had to request him to forgive the British Pound. He had made 8 Billion USD that Black Wednesday ( just in a weeks’ time) .
Scott Besent was part of the George Soros Team in 1992.
His next move? Break China's Economy.
China’s stock market has a new superhero: PBOC! The central bank just said it’ll back Huijin (aka China’s stock-buying machine) with re-lending support.
Market rescue or market collapse?
China says: “We’ll fight to the end” over U.S. tariffs. The Commerce Ministry just threw down a trade gauntlet. Tariff tension rising fast .
Beijing promises “necessary actions”.
U.S.–China standoff intensifies.
Markets holding their breath (again).
Trade war or just tough talk?
Its a great War of Wrestling. We are never able to know till the end- who wins. The Economists favouring China have many points for their victory; US Supporter Economists/Analysts have their own points.
Lets watch it very intently…
As far as India is concerned, Indraprastha Dialogues believes there should be multi-polar world where India could have a great say.We need to learn many things from US way and many more things from China’s way ; and create an India-Model incorporating the best of both .