China Threatens More Than Just the U.S. Economy

China and the interest rates are scaring investors. The U.S. economy has already started to feel the early cautionary tremors of a potentially heavy fall.

The warnings are mostly for the hyper-valued (we passed the overvaluation point long ago) technology stocks, which led the 830-point-plus Dow Jones avalanche on October 11 as the Nasdaq lost four percent.

iStock.com/Dilok Klaisataporn

The End of the U.S. Economy’s Dominance Has Begun

A new and more hostile chapter about U.S.-China relations and the cost of money (interest rates evidently) is about to be written. Investors understand that a much harsher period approaches and it won’t be easy for the U.S. economy to adapt.

Yet, adaptation will be as certain as it will be traumatic.

Americans have been spoiled by almost a decade of near-zero, or ultra-accommodative, interest rates. Their increase is merely the first salvo fired in the direction of the U.S. economy.

The European Union will soon follow suit as the European Central Bank (ECB) prepares to gradually stop buying bonds, ending the era of cheap euros and quantitative easing (QE).

Expect the financial system to suffer global shocks as the path to more “normal” rates intensifies.

As this already complex process intensifies, leaving more questions than answers as to how the hyper-financialized U.S. economy will cope, China and the United States have intensified what is shaping up to be a full-on trade war.

The Transformation of China as America’s Biggest Foe

To grasp the implications of China’s transition from friend to foe (or at least to a bigger foe) and understand the gravity of the “Chinese question,” consider what Vice President of the United States Mike Pence said at the Hudson Institute in Washington.

Pence signaled the most serious deterioration in relations between the two superpowers since 1972, when President Nixon held his famous summit with Chairman Mao, opening relations between the United States and the People’s Republic of China (PRC).