Sino-American trade war brewing?

Everything was looking so awesome this morning, until Commerce Secretary Wilbur Ross told a group in Davis that China's 2025 Technology Plan was a "direct threat" to the US, sparking another round of protectionist-fear-driven selling in stocks….

Zero Hedge
US Equities Tumble On Ross' China "Direct Threat" Comments

Tyler Durden

Also

It appears the rhetoric coming out of Davos is slowly but surely catching up to markets - after initially just impacting the dollar - as former fund manager and FX trader Richard Breslow details below, the market is not priced at all for a "hot trade war" and Ross/Mnuchin's rhetoric suggests we are closer to that that not.

One Trader Warns "A Hot Trade War Is Not Priced-In"

Reuters — Treasury's Mnuchin: China may face new sanctions on North Korea

“If China doesn’t follow these sanctions, we will put additional sanctions on them and prevent them from accessing the U.S. and international dollar system, and that’s quite meaningful,” Mnuchin said.

This comes immediately after Russia and China signed on to new sanctions on North Korea.

You think the Chinese leadership is not planning how to teach the US a lesson immediatey after hearing this on the news? Or that US businesses going to sit quietly while their Chinese operations go down the tubes?

Pass the popcorn, but it's probably advisalbe to be eating in the Southern Hemisphere.

Reuters
Treasury's Mnuchin: China may face new sanctions on North Korea

Of course, whether the US would be willing to go so far as to use the nuclear option, and pull the dollar plug on its biggest trade partner, in the process immediately unleashing an economic depression domestically and globally is a different matter. So far Washington has been reluctant to impose economic sanctions on China over concerns of possible retaliatory measures from Beijing and the potentially catastrophic consequences for the global economy.…'

Predictably, North Korea's Foreign Ministry slammed the sanctions saying it “condemns in the strongest terms and categorically rejects” the United Nations adding more sanctions, North Korea’s state-run KCNA reported on Wednesday morning. Instead, North Korea warned it “will redouble efforts to increase its strength” as it seeks to establish “practical equilibrium” with U.S.

And so, not only is the entire geopolitical circle jerk back at square one, but the ball is again back in North Korea's court, while the decision on whether or not to launch another ICBM really depends on whether China will give it the quiet go ahead; a China which responds notoriously poorly to being threatened in the global financial arena, like for example when the US threatens to kick it out of the global dollar system...

Zero Hedge
US Threatens To Cut Off China From SWIFT If It Violates North Korea Sanctions
Tyler Durden

Not just NK.

UPDATE:

Didn't take Russia and China long to answer.

Having both agreed to sign off on a watered-down version of the North Korea sanctions bill at the UN Security Council, Russia and China have issued a joint statement on the matter warning the US against pushing any further measures.

The two nations set out what they called “four nos.” This including ruling out efforts to impose regime change in North Korea, or collapse the regime there, or pushing “accelerated reunification,” or any military deployments into North Korean territory.
In addition to reiterating their opposition to the US attacking North Korea, these comments appear intended to push back against President Trump’s call to do much more against North Korea after the UN resolution, which he complained was “nothing” compared to what is to come....

AntiWar
China and Russia Warn US Not to Seek North Korea Regime Change
Jason Ditz
Related:

Apparently DJT has received his orders from Bibi.

Oh, and you knew that DJT offered the position of secretary of state to Nikki Haley but she turned it down for US ambasador to the UN.

“The main issue for us was to get the president not to discard the JCPOA. But he had very strong feelings, backed by (U.S. Ambassador to the United Nations) Nikki Haley, that they should be more aggressive with Iran,” one of the two U.S. officials said.

Reuters
Trump to weigh more aggressive U.S. strategy on Iran
Jonathan Landay, Arshad Mohammed, Steve Holland

Global markerts are discounting this. So far.

Pam and Russ Martens — Trump & Company Channel Ayn Rand

Ayn Rand made her mark by writing and lecturing on a philosophy called Objectivism. It’s a philosophy that flips upside down everything that most Americans hold dear. Under Objectivism, greed is good, selfishness is noble, helping one’s fellow human beings is for suckers and an outright evil. The philosophy also holds that big government is bad and obscenely rich corporate titans are the real heroes of society. (See related articles below.) The Koch brothers’ network of billionaires has been financing the proliferation of Rand’s books into high schools and colleges for decades.

Trump is the personification of the Ayn Rand creed and his elevation from reality TV host to the Oval Office is valid proof that the Kochs and their ilk have spent their money wisely....

Wall Street On Parade
Trump & Company Channel Ayn Rand
Pam Martens and Russ Martens

David Dayen — Treasury Secretary Steve Mnuchin Allegedly Lied Under Oath. Will the Justice Department Investigate?

On three separate occasions, both in written testimony and in live hearings, Mnuchin has denied that OneWest engaged in robo-signing of foreclosure documents, when copious evidence exists to the contrary. Most recently, Mnuchin appears to have lied about robo-signing while under oath last week in testimony before the House Financial Services Committee.

The Intercept
Treasury Secretary Steve Mnuchin Allegedly Lied Under Oath. Will the Justice Department Investigate?
David Dayen

Edward Harrison — Supply-side economics likely to dominate Trump’s economic agenda

Same old trickle down.

Overall though, I see Trump as having been elected due to voters angry about declining income growth and job security, particularly in the rust belt states that had voted for Obama in 2008 and 2012. That means Trump needs to appeal to this group in some discernible way to be successful. He even said so himself on election night, talking of having only two years to make his mark. He might be able to appeal to them on cultural grounds the way Republicans have done in the past. I don’t see that being effective though given the angst still evident after seven years of recovery. But supply side isn’t going to do it either unless Trump can create enough growth that it reaches deep into the rust belt where all the manufacturing jobs have been lost. His interventions against individual companies like Carrier can only go so far. At the end of the day, he has to deliver jobs and income.

Credit Writedowns
Supply-side economics likely to dominate Trump’s economic agenda
Edward Harrison

Pam and Russ Martens — Still Unprosecuted for its Frauds in the Crash, Goldman Sachs to Be the Financial Brains of the Trump Era

Steve Bannon, who at one time worked in Mergers and Acquisitions at Goldman, will be Trump’s Senior Counselor and Chief White House Strategist.

 Although a Goldman alumnus, Bannon did not play a decisive role there and he was long gone by the time of the financial crisis. His association with Goldman is probably not much of a matter for eyebrow raising. However, Steve Mnuchin and Gary Cohn are another matter, and Cohn especially since he was at ground zero when the GFC almost blew up the world.

Steve Mnuchin, who joined Goldman in 1985 and worked there for the next 17 years, has been nominated by Trump to serve as U.S. Treasury Secretary. That post also entitles Mnuchin to Chair the Financial Stability Oversight Council, a body that frequently meets in secret to deliberate if the U.S. could be looking at another 2008-style meltdown. Yesterday, an article at Bloomberg News raised questions about Mnuchin’s qualifications to serve in one of the most important cabinet posts in government, writing that shortly after Mnuchin had made a windfall last year from the sale of OneWest Bank, problems emerged: “The U.S. Department of Housing and Urban Development opened an investigation into foreclosure practices in a division that handles loans to senior citizens. Accountants determined the unit’s books were a mess. Eventually, the bank’s new owner, CIT Group Inc., discovered a shortfall of more than $230 million.”

Mnuchin, at least, was not at Goldman Sachs in the leadup to the greatest financial crash since the Great Depression. He left in 2002. The same cannot be said for Gary Cohn, the current President and Chief Operating Officer of Goldman, whom Trump has picked to lead the National Economic Council and be his chief strategist in developing his economic policy. It’s convenient that Cohn’s new position does not require Senate confirmation since exactly what he knew about Goldman selling bogus investments to its clients while the firm made billions of dollars betting the instruments would fail might be raised in Senate questioning of Cohn’s fitness to serve.

In the two years leading up to the epic 2008 financial crash on Wall Street, Cohn was Co-President of Goldman. Cohn became a multi-millionaire from the business done in those years, earning $27.5 million in restricted stock and options just in the year 2006. However, as Greg Gordon of McClatchy Newspapers would report in 2009, a key part of Goldman’s business in the years before the crash operated like this: “In 2006 and 2007, Goldman Sachs Group peddled more than $40 billion in securities backed by at least 200,000 risky home mortgages, but never told the buyers it was secretly betting that a sharp drop in U.S. housing prices would send the value of those securities plummeting.”

It was a foregone conclusion that Goldman or Citi would have been in the driver's seat if HRC had won. As Sen. Dick Durban said, "The banks own the place."

Populism only goes so far and stops at the door of the big banks that control US financial and economic policy.

Wall Street On Parade

Still Unprosecuted for its Frauds in the Crash, Goldman Sachs to Be the Financial Brains of the Trump Era

Pam Martens and Russ Martens

Slate — Trump and the GOP Have Massively Unpopular Tax Policies

That populist revolt isn't getting off to roaring start.

There is no more unifying issue for the Republican elites than support for massive tax cuts for the rich. Three weeks after the election of Donald Trump, it might be their only defining issue. Among voters, however, support for this policy is incredibly unpopular. Not only do a clear majority of voters oppose the idea of cutting taxes for the rich, this opposition also bridges partisan divides, geographic divides, and even income levels.…

Dislike of the actual mechanisms of the Republican economic policy are not constrained to tax cuts for the rich. Closely related to tax cuts, the Republican elite, including Trump, is relatively unified in supporting cuts to government regulation. But 42 percent of all voters nationwide favor more government regulations for business, as supposed to only 33 percent in disagreement. Similarly, 51 percent of all voters nationwide favor a stronger government role in reducing income inequality, as opposed to only 26 percent in disagreement. Even among Republicans, support for a more active government role is sizable, with 47 percent out of all Republicans with a stated preference agreeing.

Even as people pin their hopes on Trump for economic growth, the actual mechanism of Republican elite economic policy is extremely unpopular. Meanwhile, the other party’s economic program remains very popular. You might not have known that from its standard-bearer’s presidential campaign, but our data is explicit on this count. On economic matters, the country leans to the left. Perhaps someone should tell the Democrats.

Slate
Trump and the GOP Have Massively Unpopular Tax Policies
Sam Corbett-Davies, Tobias Konitzer, and David Rothschild

Bloomberg — Treasury Pick Mnuchin Says Tax Cuts to Double U.S. Growth

Trumponomics = Reaganomics?

Bloomberg
Treasury Pick Mnuchin Says Tax Cuts to Double U.S. Growth
Saleha Mohsin and Michelle Jamrisko

See also

Steven Mnuchin, President-elect Trump’s nominee for Treasury Secretary, said today of Trump’s coming tax cut proposal, “Any reductions we have in upper-income taxes will be offset by less deductions so that there will be no absolute tax cut for the upper class.” But his assertion, on CNBC this morning, is completely at odds with the tax plan that Trump announced during the campaign, which would provide a massive tax cut for upper-income taxpayers.

To be sure, the plan that Trump announced would limit itemized deductions for high-income taxpayers (to $100,000 for individuals, $200,000 for joint filers). The value of the tax cuts that would disproportionately benefit the richest people, however, far outweighs the deduction limit. Among other benefits for wealthy filers, the Trump plan would cut the top income tax rate, the top tax rate for wealthy partnerships, and the capital gains and dividends tax rate, and it would eliminate the estate tax on massive inheritances.

As a result, under the current Trump tax plan, the top 1 percent of taxpayers would receive by far the largest tax cut as a share of income — a 14 percent increase in after-tax income, the Tax Policy Center finds. Meanwhile, the plan provides far less for those at the bottom or in the middle. As the chart shows, after-tax income would rise just 0.7 percent for those in the bottom fifth and 0.9 percent for those in the next fifth....

The Center on Budget and Policy Priorities
Treasury Nominee’s Claims at Odds With Trump Tax Plan
Chuck Marr | Director of Federal Tax Policy

Trump’s pick for the nation’s top financial regulator sparked rave responses from Wall Street lobbyists but a firestorm from public interest groups.

Inequality.org
‘Foreclosure King’ for Treasury
Sarah Anderson

Kevin Drum — Trump Auctions Himself Off to Wall Street

Check this out:

Donald Trump has told prospective donors that, if elected president, he plans to nominate former Goldman Sachs banker Steve Mnuchin for U.S. Treasury Secretary.That’s according to Anthony Scaramucci, a high-profile hedge fund manager and Trump fundraiser....Earlier this year, the 53-year-old Mnuchin joined Donald Trump’s campaign as national finance chairman.

Trump's message to Wall Street is: The guy calling you for donations is going to be Secretary of the Treasury in a few months. So no worries: treat him right and he'll treat you right.…

Mother Jones
Trump Auctions Himself Off to Wall Street
Kevin Drum