Trump's Secret Weapon Against China

 An interesting piece from Rod Martin (h/t Instapundit) which asks "Is Scott Bessent Working to Crash the Yuan?" Bessent is the current Treasury Secretary. But back in the day, Martin relates, Bessent was part of the team at Soros Fund Management that “broke the Bank of England.” So he knows how to crash a country's currency. Martin hypothesizes that Trump wanted Bessent to head up the Treasury Department because of his experience in exploiting weaknesses in currencies, and wanted to apply that against China. 

    Martin explains:

Speculators do not destroy sound currencies by magic. They attack when governments defend lies. They see the contradiction before politicians admit it, before central bankers explain it away, before the press corps discovers it three years too late and pretends it was obvious all along. Britain broke. The pound fell. The Bank of England lost.     

[snip]

    China is not Britain in 1992. The analogy is not exact, nor does it need to be. Britain was defending a currency arrangement markets no longer believed. China is defending something far bigger: the fiction that an overbuilt, overleveraged, export-addicted dictatorship with too little domestic consumption and evaporating foreign direct investment can keep growing forever while its own people are trapped behind financial walls and its customers are shutting their doors.

    That fiction is embodied, crystallized in the yuan.

    The yuan is not a normal currency. It is not the dollar. It’s not even the euro. It is a managed instrument of Communist Party control. A real reserve currency requires trust. It requires convertibility. It requires deep and open capital markets. It requires the rule of law. It requires confidence that the government will not trap your savings the moment they become politically inconvenient. 

As Martin continues, Trumps tariffs go the heart of the matter because it forces China to defend one of its lies at the expense of revealing the contradiction on other points. 

Trump isn’t just raising costs. He is forcing choices. He’s making China decide which lie it wants to defend first: the lie that its export machine can survive without unrestricted access to the American consumer, the lie that its domestic economy is healthy, the lie that the yuan is trusted, or the lie that Communist capital controls are compatible with global financial leadership.