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The US & China Trade War is Nothing, Worry About Business and Bank Failures in 2019

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An economics professor at Long Island University has warned that the greatest headwinds the global economy will face in 2019 will be massive business failures and not the US-China trade war.

According to Panos Mourdoukoutas, Professor at the Department of Economics chair at Long Island University’s LIU Post campus, the trade war between China and the United States was a major issue in 2018 due to the fact that it raised fears of heightened nationalism and protectionist policies across the globe. However, this will change in 2019 with global corporations and financial markets expected to pressurize the two countries into inking a deal.


‘Big Progress being made’ – Donald Trump on the US-China Trade War
As earlier reported by CCN, a trade agreement is expected by March 1, 2019. After holding a telephone conversation with his Chinese counterpart, US President Donald Trump signaled over the weekend that there is a reason to be hopeful for a deal to be reached.

    Just had a long and very good call with President Xi of China. Deal is moving along very well. If made, it will be very comprehensive, covering all subjects, areas and points of dispute. Big progress being made!

    — Donald J. Trump (@realDonaldTrump) December 29, 2018

In Mourdoukoutas’ view, the massive business failures in 2019 will be a result of easy money drying up following the increase of interest rates by central banks worldwide.

    The explanation is simple and straightforward. Easy money acted as a tsunami, lifting up both the demand and the supply side of the global economy to higher levels. On the demand side, it encouraged consumers to resume taking on more debt… On the supply side, it encouraged corporations and entrepreneurs to pursue low-profit businesses opportunities.

Noting that bank failures are likely to be experienced in emerging markets, Mourdoukoutas pointed out that the household debt to GDP ratio of China rose from 18% ten years ago to over 50% at present time (China’s corporate debt is largely unknown but may be a bigger problem than the household debt).


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China’s Household Debt to GDP Ration (Courtesy of KOYFIN)


Less Debt, Less Consumption
With the raising of interest rates by central banks and the FED, consumers are expected to reduce their uptake of debt.  This will result in less spending. Reduced spending by consumers will see low-profit businesses shutting down and the era of a slower growth in the world economy will arrive. Mourdoukoutas wrote that this will be like 2008/2009 all over again when the same scenario played out in the United States:

    That’s what happened in 2008-9, shortly after the Federal Reserve raise interest rates and the US economy slid into a recession. US Business failures soared to 6,000 per quarter, while bank failures reached 157.

Other factors that are likely to weigh in on global economic prospects include slower growth in China and Japan, the world’s second and third biggest economies respectively. The pessimism occasioned by the ‘rise of anti-globalization ideologies’ all over the world, will be another concern.


Reference: https://www.ccn.com/the-us-china-trade-war-is-nothing-worry-about-business-and-bank-failures-in-2019/

I've came to the same conclusion as this guy a few months ago.The fiat money priniting bubble is about to implode,due to the high levels of debt.This implosion might reduce the prices of all assets(including cryptocurrenices).China debt is a huge risk factor.It's a time bomb.A major crisis in China might trigger a US debt crisis,because China owns lots of US government bonds,and they might want to sell them.

Very serious topic, trade war is nothing compared to what can happen in near future. The US debt to China is $1.138 trillion of October 2018. What if China decides to "take/collect" that money......I guess the real war is in sight. most probably nuclear. Americans will go for a war instead of giving up money.

"easy money" here is not the type of money you make of trading or something, the "easy money" talked about is the banknotes and the like that lose value over time. Hard money is what bitcoin and gold type of stuff that gains value over time. Hence easy money here plays a big important role.

USA needs to make a deal with china no matter what because USA has a huge debt (last I remember it was something like 15 TRILLION dollars if I am not wrong) and it is still run by an idiot who doesn't know what he should do to fix it hence its getting worse. China doesn't need to make the deal but the more they keep doing this the more they will keep USA in their back pockets for another while.

After a certain point China will have so much USA debt in their possession that they will be capable of selling American Debt bonds for pennies on the dollar and every country will try to get it and ask america for payments. USA should be careful about what they are doing with China.

Nah, instead of going to war directly, Americans will just fund a war somewhere else and exploit all the natural resources they can get to cover up for the costs, and dig an even deeper debt with China and not pay-up. If, however, the Chinese wants to get their money (which they wouldn't as they are certainly doing well on their own economy in the mean time), there'd be no war but rather a global economic crisis as the USA would struggle to cover up the debts and fuck ups they made due to a ludicrous amount of debt they have. Idk, all outcomes lead to USA in a very bad shape after all, and even if that agreement proves positive on all sides of the deal, that debt would still remain.

I don't think it is going to implode. It is a vicious cycle. If banks are going to face a debt issue then more money is going to be printed for their bailout. And guess who is gonna pay for that. I hope that more people are going to believe in crypto after noticing events like this one. These bailouts make rich people richer and poor society poorer. The world has taken its lesson with Leahman Brothers and now they are more cautious of avoiding the same event.

The US and China Trade War is indeed nothing. In fact, let it get worst and let the world see how stupidly proud, stubborn, and narcissistic these two countries are, their leaders as well. Let their fiat value suffer out of this so that people will finally realize how the fiat system works and how it will crumble due to these childish bickering. This will enlighten the many that cryptocurrency is the better choice, independent from the eccentric attitudes of world leaders.  

I had no idea that there is a parameter that measures number of business failures. Is that like a real macroeconomic parameter? The entrepreneurial streak in capitalist USA makes everyone run after a "successful business". Everyone wants their own gig/ side-hustle to succeed.
This pursuit of financial independence has been so explicitly linked with the pursuit of happiness in that culture that "growth" has become a liability for every individual and community.

The formula of getting a stable job, paying your taxes, raising a family has been overtaken by the need to be successful as well as grow. Who does it benefit at the end? Does it benefit the general populace or those big industries and the state in whose best favor it is to have a hardworking workforce? Depending on an individual's inclination, some people are naturally good at this cut-throat, on-your-feet competition. Then there are those who just don't get it and fall for the mind numbing effects of drugs, sedatives etc.

This constant pursuit of growth irrespective of needs has brought about a lot of winners and relegated a whole bigger lot of losers. I think Gandhi had a point when he said "The world has enough for everyone's needs, not everyone's greed".

It does make sense, to an extent. The obvious economic pathway, where there are fewer loans given out, and then that results in less spending, which results in businesses losing their profits and possible market share. It all sounds, well, sound.

The only problem though is that this is getting blown out of proportion unless there are drastic moves that are made in the next year, which doesn't look like it's going to happen, we will only see smaller cuts in profits.

Considering an economic perspective, I suppose so. But in the end, China and US are still directly related to how Business and Bank Failures occur, with US being the most concerned one most of the time. Besides, if the US and China Trade war happened, remember that both of their economies would surely take a hit. And both of these countries are one of the biggest in the western and eastern side of the map, if not the biggest. Resolving both of their problems while trying to repair the mess ups of the banks of US should be a priority instead, not one being above the other in terms of importance

If the things gets more worse then many businesses, investors and individuals will look for a good alternative to fiat money and they will see the importance of a decentralized market and cryptocurrency should be their choice to stay for good. The US and China are both acting like a Child and if they didn’t get what they want they’ll implement something that might embarrassed you. Let the flow goes on, banks will fail and crypto will prevail.

Understanding the increase in interest rates must be seen from three sides, namely behavior changes from the consumer side, the business side, and the investor side. From the consumer side, when interest rates are low many apply for loans, especially property loans. but when interest rates rise, they will be faced with difficulties of payment and even bad credit.

For business people, their business continuity cannot be separated from the role of the Bank starting from the production activities to the guarantee of export-import activities. When interest rates are low, entrepreneurs in the real sector will be motivated to apply for loans to expand their business scale. This has an impact on the low production costs that can be allocated to employment. Conversely, high-interest rates can encourage an increase in operating expenses, so businesspeople can be "more stingy" They will also tend to be reluctant to expand their business due to the increased risk posed by the increase in interest.

Capital flow to a country increases, so the demand for its currency also increases, so that the currency's exchange rate has the potential to strengthen. Conversely, if the flow of capital to a country decreases, the demand for its currency will decrease, so that the currency's exchange rate has the potential to weaken. While the factors that encourage investors and speculators to invest capital is the value of interest rates. If the interest rate is high, then the investor will get high returns.

America is a strong and solid country and its macroeconomic foundation is strong even though the penetration of imported products in America is also high. the increase or decrease in interest rates is natural and easily overcome by the United States, not just interest rates as a reference point, there are still many variables that are able to influence economic growth, both domestically and externally.

If the United States raises interest rates usually other countries also raise interest rates to offset US policy and aim to strengthen the exchange rate of its currency against the dollar.

Bank failures were commonly happening around the globe, this is the reflection of the economic scenario prevailing in the country. When there is down trend in the economy inflation will be experienced with the respective currency which causes the failure of bank as they're much related to the economic uplifting of a country.

One of the user mentioned in his statement, US won't directly get into war but it funds the war of another country. This means creating a economic flow. This indirectly affects the country into the war and economically helps with America who supplies war equipments and other materials required.

In the failure of businesses and banks the trade war between China and USA too has its role, because when the taxing on import has been raised automatically there is lagging and accumulation. This means the logistics and the mass transaction gets very limited. It surely causes back flip in the country's economy.

Definitely, The USA and China trade doesn't bring any positive attitude to the whole world, it's a total self-interest and the way how to show your power whenever you can. When the USA considers China as its a competitor then they have made several types of activities against China but it's not good for the other countries at all, It's nothing but a set of stupidity acts, Whatever the case is, By this war, China has chosen the blockchain system for their own interest, so we don't have enough time to pay to heed any attention to this war between the two giants.

Of course, let's take a look at companies like Huawei for example, which has lost a lot of it's market share due to the scandals facing it in the US, and basically no one being allowed to use it in the US, destroying their business.

Trade war means everyone loses, consumers have to pay more since there is less competition, businesses then lose more because they aren't allowed to operate in one of the biggest markets in the world, and the government loses because their country's GDP is definitely going to go down.

The macroeconomic parameters of USA at present are anything but strong with it 22 Trillion USD Govt debt out of which 4.1 Trillion is owed to foreign Govts (1.11 Trillion to China). The unemployment rates are high and the Govt Debt will soon come calling as more and more people retire from the workforce.

Right. The "many variables" you talk about is basically the geopolitical clout that USA has which means it can more or less have its own way in agreements and world policies, no matter what it does for climate or for instability in other countries. For example, Trump pulled out of the Paris deal without anyone batting an eye.
The only thing that stand for the USA and they continue to leach off the world is because of their national consumption and USD still being the reserve currency, they can keep printing more of it.
China on the other hand is much more methodical with increasing its own clout in Asia and pushing its currency for the de-facto currency of the world. USA under trump is basically like a drunken brawler with heavy arms while China is the stealth assassin with the right weapons. Its lights out for the assassin IF a few punches land but there is an equal chance that the brawler won't see the knife to the jugular.

China talks a lot when it comes to dominance in terms of money. It doesn't mean that being the larger state they can now control how money goes. They don't want how crypto regulates on their country, the problem is they want to create their own cryptocurrency.

It should mind their business first, the conflict in their country, the poverty and the over-population. Not the problem that they will engage with other country. China should focus on its own. Many people are focusing on how their business will soon to grow and avoid these failures and bankruptcy.

Why selling US bonds makes the US government insolvent? This sounds ridiculous. Bonds are a form of low-interest annual loan and no one can ask for money immediately. If China sells those bonds to other countries, the US government still provides a certain amount of money every year to pay interest. Everything is okay and I don't think there's a big effect.

China is not democratic as other developed nations they have strict regulations to be followed by their citizen if they born there unfortunately.China is planning to launch social scores in the near future which means no privacy for any people living in that country all of them will be under survilence of AI camera all around the country which gives scares based on their social activity in public as well as in private.

This is the reason why they become more stronger and will become most duper powerful in the future so they want to give competition to the developed nation is not a wonder.

The war between America and China is not a trade war but an ideological war. If it involves ideology, it means totality. American ideology is democracy with a purely private role. China's ideology is state capitalism with complete control. The framework for war is economic democracy against this state-driven economy, two different ideologies which became the starting point of the war. This is a new war and the weapon is not using a gun but using a tariff war and a trade war.

America has always implemented democracy as a basis for trading and used a means of suppressing high tariffs (first). America is against state capitalism so that it uses the policy of repressive power of the government's iron fist (state authoritarian) to suppress the market. Usually, the cooperation system is business to business, the private sector works

Different from China, every country that receives OBOR funding assistance from China must be stylish "everything must be regulated and managed by the government and reduce the role of the private sector Must be government-driven. So there must be a government guarantee.

We don't know who will be the winner in this war?

Remember that these debt will be no more when there's a war. I mean, debt is debt but if a war started to clash what does this debt could act for? as you said, It will be better to go war instead of paying all the debt because it's just too immense and you need to remember how much effort the US spent to keep the countries with different ideology in check and now it's getting out of hand and I'm pretty sure in the future we will see unexpected move from each country.

Long story short, both countries are fighting for power, one is the present super power and other is the emerging or next super power. They just want to compete in every possible aspect which definitely starts from fundamentals like ideology and advances to national currencies. Both are equivalent in terms of technology too. China does not even avail technical service provided by USA tech giants.

Whatever kind of war they will try to create, they are only doing this to show to the world their power that they are superior. No one will win with these two countries war aside from this problems they created, a lot problems ahead are about to destroy us all like financial crises, climate change, growing global population etc.

 what? I don't think the failed businesses and banks are unrelated to the trade war between the US and China. You know, the constant taxation will make the business of many businesses much worse and lead to bankruptcy. Besides, banks have to adjust cash flow continuously and interest rates are always falling and many people do not want to send money to banks anymore => banks can easily go bankrupt.

Both countries China and United State have big power can make other countries allow with their asking, I hope China can have power full to promote and legal using bitcoin where other countries try to adopt and accepted bitcoin as currency payment digital and make bitcoin have higher price on the future for left with USD as payment transaction.

US does not want any country to be their rival, they want to remain the only economic power of the world even at the expense of all other countries.

The old Russia republic challenged this authorities some years back and USA used strategic policies to divide their unity and USSR was rudely cut into pieces with many countries breaking away and stand alone as an entity.

I will belief that China is strong enough if they remain as one nation in the next 10 years.

Unfortunately trade war no matter what country it is doesn't benefit anyone , it is not a good idea , the trading war affects the both counties the most and I have seen countries even rejecting the Chinese products because they are too cheap and killing their local market .
And USA doesn't wanna fight someone and be in the limelight trust me , all they want is to actually stand aside and all these things are the speculations by the people , if they was any war going on it would have been a big big news.

Since civilization has existed, money - left in the hands of governments - has always been a bubble ready to explode, and in fact it has happened countless times throughout history.
To be more relaxed, you need to have some gold assets, or ... bitcoins!

Couldn't care less about their trade war but about the actual state of their economy. There are signs of another collapse for the US. China ain't really doing great as well. Historically, these are times when society becomes turbulent.

We can only hope that this don't lead into more conflicts. The Chinese for example usually focus their attention outside as distraction whenever their economy is not doing well.

the war is already depicted  but not in  any soil of course. analyst sees Guam and Philippines  to be the war zone. obviously none of them wants their country  to  be the  battle ground and the conflict lies on whether Philippines chose sides. They've all violated international  waters in the Philippines  its just a matter of which shoots the first but thanks to Duterte he manages to  make peace with the Chinese since he doesn't want Philippines to be the  battle ground either.

Philippines can be benefit  between the two if played well economically since Philippines is not going  to experience financial crash, there are more resources in the country as its an archipelago. Not going  to be affected to their  trade war.

Nah I don't see the country getting out of it undamaged even if it don't escalate to armed conflict. The trade war is going to affect it being US its #1 export market and China #4 (with HK and Japan numbers 2 and 3 respectively). If those 2 countries economies slow down, that's a huge chunk of revenue. It'll be the same for many other countries.

Despite the beef between the Philippines and China there is a very vague possibility of conflicts between the two country, In fact there are treaties on talks now.However looking on America and China, you can clearly see how the two deals with each other. America is collapsing now, they can go to war anytime with any other country just to end their problems. Seeing signs with declining economy of america makes me think of ww3. Having these things said, I don't see any huge impact of these on bitcoin, cryptocurrency space as a whole unless they say so.

They will reach a truce soon enough. There is no war that is going to continue like this,, only warmongering and the waremongerers. They are the ones who make it seem as if something bad might happen. Trade wars are bad for either countries, partnerships are needed to recover from them. Soon enough someone will allow them partner and both countries will decide what is better for each other and the rest of the world.

This does not necessarily affect the cryptocurrency market, because if it did then the market would be falling continuously. Instead it is rallying around 7k USD and not showing much degree of movement.

I still think that banks and business' can't really affect bitcoin as much as trade war, in the end when regular economy collapses bitcoin goes higher and how does the regular economy collapses? By companies going bankrupt and destroying peoples wealth overnight.

Trade wars are still difficult because it could potentially help bitcoin but it could also hurt it as well, people may use bitcoin to overcome those tariffs but also nations could ban it as well to stop that and it could hurt bitcoin, however no one would think about bitcoin when a bank goes belly up, bitcoin won't be the responsible party on that. Both of these situations are bad of course in general of public, we all want people to live a great life, even if it means bitcoin going down, it could help other parts of our lives.

The ongoing trade has not brought any effect with bitcoin yet  but I think it would still matter depends on what these two largest national economies. I'm being skeptical on what this trade war could bring to to the future of bitcoin, either positive or negative. Trade war already affected the international business operations so it is not vague to also affect the crypto space.
Increasing tariffs will surely push the masses to fulfill their needs with the help of cryptocurrency. And you're correct, these country will also put an eye on cryptocurrency being the so called protagonist during the trade war and they does not want it. Trump's policy is getting away with it.

Oh, I'm not so pessimistic like you. I think the US government knows what to do with the debt of China and other countries. In fact, public debt is available in all countries and it is like a long-term bond. no one will be able to get it back in a while, it takes time to expire. so China cannot scare the US this way. Besides, America is a very rich country, only internal war makes them scared. I think China should give in and give up the idea that it is the most developed country in the world after 10 years. That statement only brought trouble to them.

The way I see things are going I don't think the trade war is ending any time soon. Just today I saw a News on CNBC that China reportedly ordered their State offices to remove every foreign tech which could hit major firms in the United States, like Microsoft, and they have been given three years to carry out the order which came direct from the China's Communist Party.

Analysts have said that there's about 20 to 30 million of such equipment that are going to be replaced. They will start taking actions from 2020, and by 2022 all the foreign equipment will be replaced.

China shouldn't give up. I welcome any country to stand up against the USA, but unfortunately, we only have China being capable of that, so let's hope they will not bow to the USA like most other countries do.

I can agree that it unnecessarily affects the average person and the wider economy, but that's something we have to accept. We have no influence over whatever countries do in order to outcompete each other.

The pessimism that some users have is momentarily happening. It changes soon. :)

Very soon both countries will be having an internal truce. The mass media likes to keep the fire burning and so they will post manipulative media articles. I am very sure the multi-national companies working in both countries have made up their minds as to what to do in future and how to resolve trade conflicts. Its about partnerships which if denied leads to wars and if accepted leads to peace.

Everyone wants to be a part of development, dont they? Thats why these things happen. Fact that market moves a bit sideaways during this time is like an indirect effect.