American Economics Thread

broadsword

Brigadier
americans wants "la bella vita" (this is italian expression that signify being lazy and dump money in futile way) they are not hard workers ( most of them are very fat also) they are not prepared for war.

I always think it is the other way and beyond.
 

Hendrik_2000

Lieutenant General
Here is an interview with Julia Reichert
Those Indian anchor is so arrogant and keep badgering why American can't make window glasses and need to invite Chinese Well because Chinese know how to make cheap and good quality auto windshield glasses

New documentary: what happens when a Chinese company buys a GM Plant?
 
it's the SDF here, so:
Trump claims he has 'absolute right' to order US companies out of China under 1977 law
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President
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claimed he has the "absolute right" to "order" US companies to stop doing business with China that would involve using his broad executive authority in a new and unprecedented way under a 1977 law.
On Friday, China
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on about $75 billion worth of US goods, the latest escalation in an on-going trade war that's putting a strain on the world's two largest economies. In response, Trump wrote on Twitter later Friday: "Our great American companies are hereby ordered to immediately start looking for an alternative to China including bringing ...your companies HOME and making your products in the USA."
When leaving the White House for the G7 summit in France, Trump told reporters, "I have the absolute right to do that, but we'll see how it goes." He later explained that he was referring to the 1977 International Emergency Economic Powers Act (IEEPA), and in a
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wrote: "For all of the Fake News Reporters that don't have a clue as to what the law is relative to Presidential powers, China, etc., try looking at the Emergency Economic Powers Act of 1977. Case closed!"
Trump's latest comments again raise questions as to
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. In May, Trump threatened to slap Mexico with punitive tariffs unless it slowed the passage of migrants from Central America to the US. The IEEPA, according to the Congressional Research Service, has never been invoked to impose tariffs, and Trump ultimately drew back at the last minute.
The IEEPA, passed in the wake of Watergate and Vietnam, gives Trump "broad authority to regulate a variety of economic transactions following a declaration of national emergency," according to an
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Those presidential powers can be used "to deal with any unusual and extraordinary threat....to the national security, foreign policy, or economy of the United States."
Under the IEEPA, the President has to consult with Congress before invoking his authority and, after declaring a national emergency, send a report to Congress explaining why.
This authority has been used frequently; there have been 54 national emergencies, 29 of which are ongoing. In the first use of the IEEPA, during the Iran hostage crisis in 1979, President Jimmy Carter imposed trade sanctions against Iran, freezing Iranian assets in the US, according to CRS.
Stephen Vladeck, a law professor at the University of Texas and a CNN legal analyst, told CNN in May that what Trump wanted to do under the law with Mexico may have been within the authority given to the White House by Congress -- though it might not have been what Congress ever intended.
"The idea behind these authorities is that the President is better situated to make those kinds of determinations than Congress, especially when they're time-sensitive," Vladeck told CNN at the time. "So I think the President's conduct may well be within the letter of the law here. But, as with the National Emergencies Act, I very much doubt this kind of exercise of the authority conferred by the statute is what Congress had in mind."
On Saturday, Vladeck again weighed in, tweeting: "One of the enduring phenomena of the Trump era is going to be the list of statutes that give far too much power to the President, but that many didn't used to worry about—assuming there'd be political safeguards. Today's entrant: The International Emergency Economic Powers Act."
Under the law, though, Congress can end an emergency with a joint resolution.
Former Massachusetts Gov. Bill Weld, who has mounted a longshot bid against Trump for the 2020 Republican presidential nomination, called it "outrageous" that a US President would tell US companies how to conduct business.
"That he believes he can actually carry out such an outrage is the insanity of a would-be dictator," Weld
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Saturday.
 

localizer

Colonel
Registered Member
Posting again here since deleted :(.

Why the US Debt, Federal Reserve, and Trump Will End the Dollar and US Supremacy

I’m making this post because I see people everywhere hearing that too much public debt is bad, but also hear experts being split on whether it’s really an issue. I’m not an economist, so I can only express my understanding of the situation.

My position is that the dollar’s position as the reserve currency will end and the process cannot be stopped unless some major events happen. I will explain why by using the 3 graphs I posted and relating them to each other.
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1. Interest Rates

People have seen Trump blasting away at Jerome Powell to force the Fed to decrease interest rates to stimulate the economy.

We all know what interest rates are, but few understand the implications of artificial interest rates. Typically, when you lend to someone, you would like to understand their reason for borrowing and you would set an interest rate based on many factors such as risk and expectations of returns. This is obviously to minimize losses to the lender, but also forces borrowers to take on higher quality investments.

However, in comes fiat currency and central banks. Central banks are allowed to “set” Fed Funds rates and lend money out of thin air to banks directly. The US economy works in debt cycles. Whenever the government sees a need for stimulus in the economy due to things such as a recession, war or weakening global economy, the Fed can decrease the interest rate and drive the overall interest rates down through market forces. This is shown by graph 2 which demonstrates that when the Fed decreases interest rates, the mortgage rates for buying a house also tend to come down. When interest rates drop, economic activities expand. This is how you supposedly “fix” an economic downturn.
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2. Government/Public Debt

The downside of artificially low interest rates is inflation. Low interest rates cause massive expansion of credit and higher consumption, but also low quality investments. As a certain point, money supply outpaces productivity and causes inflation.

To fix this, the Fed has to increase interest rates again to make borrowing more expensive. However, this kills off the low-quality investments as demonstrated in 07-08. The subprime mortgages failed, banks failed, auto failed, … all because of easy money. So once again Fed rates were decreased and the government itself had to take out loans to “bail out” these companies and banks to save people’s retirement accounts and pensions and jobs. Obama added nearly an additional $4.5 trillion to the national debt bailing out everyone. The US is now at nearly $21 trillion in national debt due to all the wars and unscrupulous government spending.

We first have to ask, how has the US been able to control inflation relatively well all these years despite putting over $10 trillion debt money into the economy in the last decade?

A big factor is the dollar as the reserve currency. All the extra money is sent out of the United States via trade deficits in order to circulate in the global economy in forms such as the petrodollar. The US has to buy more than it sells and also make sure that money outside doesn’t come back into the US in droves.

Thus, Trump wanting to decrease the trade deficit will likely cause more inflation at home if he success in making people send more money back into the US. This is a Mistake.
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3. How Government Funds Debt and Why It Can’t Continue Forever

To fund the US government’s massive spending which exceeds its income, the government issues Treasury bills, notes, and bonds. Each with an increasing duration till maturity. These loans to the government are bought by individuals, domestic and foreign investors, the Fed itself, and domestic and foreign governments such as China.

Looking at all the graphs, you can see a pattern, after every debt cycle, the interest rates can no longer be increased to previous heights. Government debt has also increased non-stop. So why can’t interest rates “normalize?”

Well, most of the US debt matures in the short term. Treasury interest rates are also affected by the Fed Funds Rate. That means that every few years, the government has to take on new debt at a new interest rate to fund its previous debt. Since the US government now consistently has a deficit, the debt perpetually increases. It is more affordable for the government to borrow at the lower rate. Thus when Obama borrowed his bailout money, the interest rates were low.

For example, just a meager 5% average interest rate on $20 trillion of debt is $1 trillion in interest payments annually. Yea, not very affordable.

Trump has cut taxes, increased spending, leading to >$1 trillion annual deficits.

During the imminent next recession, the government has to bailout everyone again. How much money would that take? $10 trillion? What about social security and Medicare payments to Baby Boomers?

By 2030, or the end of the next cycle, the US national debt could be easily greater than $40 trillion since the trend is doubling every 10 years. What’s 5% of that? $2 trillion in interest payments alone up from today’s $377 billion.

How much does the US economy/tax revenue grow per year? 2-3% on $20.5 trillion compared to nearly 7% on the growth of debt?

The End of the Dollar as a Reserve Currency

So here we see that the US Fed Funds rate will likely stay low as determined by the trend as to not increase the deficit even further and also make it impossible to bailout banks and other companies. Borrowing will be cheap, forever. Inflation will increase way beyond 2% no matter how much money they send overseas. Eventually, people will no longer buy US debt because it does not give good returns and it inflates. Less demand means dollar becomes less valuable. All the dollar outside of America will quickly be dumped back into the US leading to even greater inflation. A vicious cycle appears. A dollar that is both inflationary and depreciating cannot serve as a reserve currency. The US will lose control over the world and will not be able to sanction anyone. It will not be able to fund its military. Its people will live at lower standards of living.

Technically speaking, this can be fixed. However, interest rates need to be increased, taxes will have to be massively increased, and government spending would have to go down. The surplus would need to be much greater than $1 trillion per year, which we know will never happen when interest rates are high and government debt has to be funded at a higher rate.

No sitting president would want to tackle this. The rate at which Trump is decreasing the Fed Rate even before an actual recession just shows the desperation of the US.


When Lee Kuan Yew said in order to control the Pacific, the US must keep its national debt in check, he wasn’t bullshitting. Now I believe I understand why.
 
Basically decreasing marginal rate of return on excessively catering to the same special interests.
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GLOBAL ECONOMY|OPINION
AUGUST 28, 2019
We are living in a Bizarro capitalism era
By MARSHALL AUERBACK

Remember “Bizarro Superman,” the character who represented the polar opposite of Superman and all that he stood for? Today we have an economic equivalent in the form of Bizarro Capitalism. In the good old days, borrowers paid interest on the money that was loaned to them, and bankers paid depositors a savings rate to entice them to store their money at the bank. Now it’s increasingly the other way around.

Judging from the speeches given at the recent annual gathering in Jackson Hole, Wyoming, of the various bigwigs in the global central banking scene, the mutation of the world economy hasn’t fully dawned on them. For the most part, we heard the same old shibboleths. Indeed, the very notion of having a high-profile forum in a glamorous setting to highlight the views of central bankers symbolizes how far we have come in terms of prioritizing monetary policy over fiscal activism, despite the fact that this has led to a policy “black hole,” according to former US treasury secretary Lawrence Summers.

The hesitation in embracing fiscal policy further (despite the anomalous presence of negative interest rates that could be arbitraged away by fiscally generated economic growth) is largely the product of a number of myths that have governed policymaking during the 40-year period of neoliberal ascendancy.

Among them: the misconception that excessive government spending “crowds out” private sector investment; the belief that “responsible” fiscal policy and reduced budget deficits in and of themselves create the conditions for sustained economic growth; the questionable notion that “quantitative easing” actually does anything to benefit the real economy (as opposed to merely inciting financial speculation); and, last, the very idea that independent central bank technocrats are better suited than democratically elected officials to solve our current problems when the record shows the opposite.

Far from being disinterested umpires, the monetary authorities have consistently prioritized financial interests and, in so doing, have acted more like arsonists adding to a major fire

Far from being disinterested umpires, the monetary authorities have consistently prioritized financial interests and, in so doing, have acted more like arsonists adding to a major fire. The irony today is that central banks have historically been the traditional agent of deliverance for the financial sector. But in the current environment of negative rates, they are becoming its angel of death.

The huge rally that has characterized this summer’s trading in the global bond markets has culminated with a new phenomenon hitherto unseen: the presence of negative-yielding bonds, a growing and increasingly widespread feature of the economic landscape. We now have more than US$16 trillion worth of negative-yielding bonds (out of a total global bond market size of around $100 trillion).

Adding to this topsy-turvy financial landscape, UBS in Switzerland has introduced a charge of 0.6% on deposits larger than €500,000 ($554,000). Similarly, Denmark’s Jyske Bank has just announced plans to charge negative rates on deposits. To be sure, it’s only wealthy clients who will incur this charge for now (a nice socialist touch, for this Scandinavian social democracy), but it’s an ominous precedent for any saver nonetheless if the banks ultimately decide to extend these charges to the less affluent. Functionally, a charge on deposit represents a penalty on savings that acts like a tax increase. It represents the perverse apotheosis of a “too big to fail” banking system in which depositors are now starting to pay to store their money at banks that survive in their current form because our monetary and fiscal policy officials backstop them.

Think about the implications: Banks are charging depositors to store their money at their institution, and $16 trillion worth of borrowers are now being paid by the world’s creditors for the “privilege” of holding their bonds. Imagine what that is doing to your pension fund (how does a trustee calculate his/her firm’s pension liabilities with a negative interest rate?), or your insurance annuities, let alone the money you deposit in your bank account. Or consider buying a home in Denmark now that Jyske Bank, the country’s third-largest bank, has launched the world’s first negative interest mortgage: 10 years at -0.5%. What this means is that borrowers still make monthly payments, as is usual on all mortgages, but the outstanding loan is reduced each month by more than the borrower has paid, by virtue of the negative rate. We are truly in uncharted waters.

We started down this road decades ago in Japan, and it is to the Land of the Rising Sun that we should look for a glimpse of the future. The Bank of Japan owns almost half the stock of the country’s outstanding public debt, so in effect it is the Japanese Government Bond market; secondary trading activity is virtually non-existent. Not that we should shed any tears for Japanese bond traders (who are gradually becoming extinct – no bond vigilantes here), but perhaps we should ponder the fate of Japanese savers, whose savings income has dwindled as a consequence of decades of virtually zero interest rates. This makes the economy particularly vulnerable to external shocks (such as the planned consumption tax increase, which twice before has created economic relapse in this aging country of savers) because there is minimal income flow to cushion the sharp change.

Outside Japan, the broad global rally in bond prices (which has led to a corresponding decline in bond yields) represents a collective panic attack that, notwithstanding all of the monetary gymnastics of the world’s central bankers, the global economy is rapidly slowing down. The signs are out there: In China, the escalating Sino-US trade war is adversely impacting overall growth; in Germany, a degenerating banking sector and rapidly slowing exports are grinding down the economy; and in the rest of Europe, especially the UK, the imminence of Brexit is engendering a crisis of confidence, as fears of No Deal chaos are rising as we approach the October 31 deadline.

For some decades since Bretton Woods, the tools available to central banks did the trick. Most recently, the markets have increasingly taken to heart European Central Bank president Mario Draghi’s “whatever it takes” pledge to save the euro. Draghi has repeatedly used the ECB’s balance sheet to backstop sovereign euro-denominated paper, leading investors to pile into government bonds in countries once thought to be on the threshold of insolvency. Overall credit spreads between southern periphery and the more “fiscally sound” north have accordingly diminished considerably to the point where 100-year bonds are becoming a thing: Ireland and Austria have both issued 100-year paper (likewise non-eurozone Argentina, which historically has been a serial defaulter, but still was able to capitalize on this mania). Markets today discount totally the risk of national bankruptcy in the mad grasp for yield and additional income. This is moral hazard run amok.

All the norms of a market economy are being subverted by the very agents – central banks – that embody the market fundamentalism that has taken deep root in the global economy. Borrowers get paid, savers get charged. The solvency of pension funds is also coming under risk in countries like Germany, where institutions by law have to buy negative-yielding government bonds. The entire German Bund yield curve trades at negative yields, so Berlin is in danger of being hoisted on its historic fiscal austerity petard. The “cure” of negative rates is proving to be as bad as the disease for many, which yet again illustrates why excessive reliance on interest rate manipulation is a terrible way to conduct economic policy.

All of this is to say that governments, not central banks, have the optimal tools for our challenges: money distributed to the public for the general welfare through a range of projects and programs as opposed to central bank-engineered bailouts to a potpourri of financial institutions (many of which should have been shut down in 2009 and beyond). As much as it might frustrate the designs of financiers and billionaires and their fear of government money going to the public, that’s the only thing that’s going to move the needle. Certainly, there is no way out, absent a robust government fiscal response that borrows at these historically unprecedented rates and generates sufficient economic growth to arbitrage away the negative yields.

Far from “crowding out” private investment (the usual argument deployed against “excessive” government spending), public investment via properly targeted fiscal policy could provide a new source of growth that “crowds in” additional business investment. As I’ve written before, “the basis of the ‘crowding out’ claim is that … [excessive] government spending causes interest rates to rise, and investment to fall. In other words, too much government borrowing ‘crowds out’ private investment.” That’s totally wrong, as J M Keynes came to realize almost a century ago: “For the proposition that supply creates its own demand, I shall substitute the proposition that expenditure creates its own income.”
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What deficit?
For all of his multifold flaws, perhaps Donald Trump’s one singular virtue is that he is not a deficit hawk. In spite of what many have criticized as the president’s fiscal profligacy (in reality, because of it), the US economy remains a conspicuous oasis of growth. As economist Paul Krugman has wryly noted, that isn’t really a surprise given the Republican Party’s “willingness to run huge budget deficits as long as Democrats don’t hold the White House.”

Trump’s lack of attachment to prevailing economic orthodoxy, and the political imperatives of the 2020 election, likely means he will pull out all the stops to try to prevent a recession next year in the US. The recent funding agreement secured with Congress on the debt ceiling will likely ensure another fiscal jolt to sustain some growth going forward into the first quarter of 2020, as the government budget deficit as a percentage of gross domestic product is now running at around 4.5%.

Which is not to say that all is well in the US. It remains a major problem that the bulk of the fiscal-policy benefits continue to flow to the top tier, which has the highest savings propensities, and historically unprecedented sums are going to the military. Consequently, the US economy fails to get maximum bang for its fiscal buck (at least as far as the civilian economy goes). It doesn’t grow as efficiently as it could because more and more of the economy’s gains are being funneled to increasingly fewer people.

Moreover, the employment gains that the president has continued to hype have been overstated, according to the Bureau of Labor Statistics, and companies are now cutting back on hours worked. Normally when the workweek is being cut like this, it signals a slowdown or, at the very least, diminishing confidence in future growth prospects on the part of the private sector. So Trump’s instinct to spend now might not be mistaken, but if past policy is any indication, the president is likely to misallocate in favor of his fellow oligarchs and generals. Only properly targeted fiscal policy that takes aim at raising living standards and delivering the public investments in education, technology and infrastructure will deliver real long-term prosperity for all of us, not just the privileged few.

To reiterate, this is a job for elected officials, not central-banking technocrats. At this stage, in fact, ineffective monetary policy is making things worse. Central bankers are perpetuating a perverse risk-reward asymmetry as a consequence of this very-low-interest-rate policy, which is also death for financial institutions. This is a profound irony, considering the degree to which central bankers have consistently prioritized the interests of finance over other parts of the economy.

And while a shrinkage of finance relative to the rest of GDP may be good for the rest of us, absent a fundamental philosophical change in overall policy (especially on the fiscal front), we will still be facing an environment characterized by wage stagnation, non-existent job security, rising inequality, and subpar growth potential, all the while continuing to reward irresponsible economic behavior.

The policy world needs to change course, and do it quickly. However, the presence of negative yields (and all the implications that flow from that) suggests that we’re still a long way off from that happening.
 

manqiangrexue

Brigadier
New recession sign: Americans down-shifting from luxury to Walmart.
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New recession warning: The rich aren’t spending
PUBLISHED WED, AUG 28 2019 7:00 AM EDTUPDATED 5 HOURS AGO

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  • A sudden pullback in spending among the wealthy could cascade down to the rest of the economy and create a further drag on growth.
  • High-end real estate is having its worst year since the financial crisis.
  • Luxury retailers are struggling while discounters like Walmart and Target thrive.
  • At this month’s massive Pebble Beach car auctions, the most expensive cars faltered on the block.
  • In the first half of 2019, art auction sales were down for the first time in years
 

Hendrik_2000

Lieutenant General
An excellent discussion going on at CGTN on the subject of "American Factory" Tian Wei the host she shine today with her intelligent shepherding the discussion and Prof Dong excellent commentary. He is right every company feel the pressure of competition and bringing food to the table is of utmost important bare none There is no luxury to choose and pick
His American counterpart on the other hand still emphasize life balance of life and work, worker protection and high standard of living Well that is not possible in the era of globalization Excellent Excellent discussion. Apparently this film is also popular in china
 
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Equation

Lieutenant General
New China tariffs a 'job killer,' US industry tells Trump


New China tariffs 'will be a job killer,' U.S. industry groups tell Trump



Washington (AFP) - President Donald Trump's new tariffs on Chinese goods are a "job killer" that will slam consumers and could make a recession more likely, industry groups said Wednesday.

The latest cry for peace in Trump's year-long trade war came just days before the first in series of tariff increases is due to go into effect -- potentially raising prices ahead of the crucial holiday shopping period.

In a sharp deterioration in the US-China trade war, Trump last week ramped up the punitive duties for the vast majority of US imports from China.

The five percent increases, which will take the tariffs to 15 percent and 30 percent, are due to roll out in stages through December and target some popular items, such as laptops, mobile phones and some shoes.

More than 200 footwear manufacturers and retailers, including major brands such as Nike and Foot Locker, signed onto the letter alerting that the new tariffs could cost US consumers an additional $4 billion a year and increase the chances of an economic downturn.

A broad array of 160 other trade groups -- including software and electronics manufacturers, as well as retailers, liquor producers and others -- also warned Trump of higher prices and damaged consumer confidence and urged him to abandon the tariff strategy.

"We've been telling the White House since the beginning that tariffs will be paid by Americans in the form of higher prices, and that due to our already high import taxes, this will be a job killer," Matt Priest, president of the Footwear Distributors and Retailers of America, said in a statement.

The footwear group directly disputed Trump's claim that China is bearing the cost of the tariffs.

"There is no doubt that tariffs act as hidden taxes paid by American individuals and families," its letter said.

Long a powerful voice in Washington, US industrial lobbies have been unable to persuade Trump to avoid escalating his year-old trade war with China.

The Information Technology Industry Council agreed China needs to change its unfair trade practices, but said in a statement Wednesday that "the current tool of tariffs has simply not worked, and we’re continuing to see the negative results."

- Recession risk -

The companies agreed with economists that recession risks are rising, warning Wednesday that uncertainty caused by the confrontation with Beijing was rattling the wider economy -- a sensitive subject as Trump seeks reelection next year.

"An economic downturn will take away disposable income from US consumers, even as they have to pay more for products," they said.

Already high US import duties on footwear have continued to rise in recent years even as shoe prices have eased, according to the letter, meaning new tariffs almost certainly will be passed onto consumers.

US officials have delayed or canceled tariffs on some popular items until December, including some shoes, preventing price hikes from hitting just before the holiday shopping period.

But, even before they take effect, the tariffs threaten to drive up prices by straining manufacturers outside China to meet a sudden rush of demand, the letter said.

Trump has blown by turns hot and cold this month, thundering last week that US companies should withdraw from China but optimistically predicting a deal on Monday.

Trump's recent, more moderate tone helped stanch bleeding on Wall Street but was quickly met with skepticism by investors since Beijing did not seem to share that optimism.

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manqiangrexue

Brigadier
Well, I think this is a new low. I don't know how much worse America's economy is than what the administration is trying to show but when the president is lying about calls from China in order to prop up the stock market, that's BAD, bro.

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Trump’s Fabricated China Phone Call Is ‘A Serious Escalation of His Lying’ Which Bodes Ill for America: Reporter
August 26, 2019 at 05:17 PM ET
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"Former Secretary of State Rex Tillerson has
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that China doesn’t even need to negotiate with the United States — they may decide to just step back, let Trump’s tariffs ruin his own economy..."

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AIDES ADMIT TRUMP WAS FAKING THOSE “PHONE CALLS” WITH CHINA
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AUGUST 29, 2019
The president was reportedly “eager to project optimism that might boost markets,” which should hearten the Chinese.
 
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