The Trump Syndrome

Wall Street is starting ‘to get religion’ on China trade like President Trump

• Steve Bannon says China’s attempts to forge a two-tier deal to end the yearlong trade war with the U.S. is “wishful thinking.”
• “Wall Street is starting to get religion like Trump.” Bannon refers to the tough talk earlier this week from Blackstone co-founder Stephen Schwarzman, who has extensive ties to China.

By Matthew J. Belvedere

Steve Bannon on the US-China trade war: ‘We have all the cards’

Wall Street is coming around to President Donald Trump’s view on how China has been unfairly protecting its economy to the detriment of the rest of the world, former White House chief strategist Steve Bannon told CNBC on Thursday.
“Wall Street is starting to get religion like Trump,” said Mr. Bannon, a longtime critic of China. “Schwarzman now has religion on CNBC.”
Mr. Bannon was referring to comments earlier this week by Stephen Schwarzman, the billionaire co-founder and chief of private equity powerhouse Blackstone who has extensive ties to China.
In an interview on “Squawk Box on Tuesday, Schwartzman said that Beijing knows it must change its trade and business practices. 

But he added that China is reluctant to do so because it would slow the robust growth it’s been able to achieve over decades by putting up economic barriers.
“The upper Midwest, this is why Donald Trump is president,” Mr. Bannon said said on “Squawk Box.” 

“People know that the factories and the jobs all went to China and the fentanyl an opioids came in, into this despair of not having jobs.”
Mr. Bannon also said China’s attempt to forge a two-tier deal to end the yearlong trade war with the U.S. is “wishful thinking.” 

Last week, Trump signaled he would consider an interim trade deal with China, even though he would prefer a full agreement.
“What they’re trying to do to a large extent is trying to game the system,” Mr. Bannon said.
“They are trying to box in Donald Trump. And I think Trump has been the force of stability here,” he added. 

“This is about shifting the supply chain back to the U.S.”
As U.S. and Chinese deputy trade negotiators get ready to resume face-to-face talks in Washington on Thursday, there’s a thought that Chinese officials want to address the trade disputes first, leaving tougher national security issues for later.
Mr. Bannon said a key focus in the 2020 presidential election will be China. 

Candidates who pressure Beijing and show they can navigate a trade deal will do better, he said.
In goodwill gestures ahead of higher-level trade talks next month, the U.S. delayed by two weeks tariff rate hikes that had been set to go into effect Oct. 1 and China exempted some U.S. products from additional levies. 

Both sides have imposed billions of dollars import tariffs on each other’s goods.

Supreme Tech Quisling

Good for China and Google, Bad for America.
Google is sharing a military technology with America's monstrous enemy.
By Peter Thiel
DeepMind drew attention in 2016, when its AlphaGo software beat Lee Sedol, champion of the game Go.

A “Manhattan Project” for artificial intelligence is how Demis Hassabis, the founder of DeepMind, described his company in 2010, when I was one of its first investors. 

I took it as figurative grandiosity. 

I should have taken it as a literal warning sign, because that is how it was taken in foreign capitals that were paying close attention.
Now almost a decade later, DeepMind is the crown jewel of Google’s A.I. effort. 

It has been the object of intense fascination in East Asia especially since March 2016 when its AlphaGo software project beat Lee Sedol, a champion of the ancient strategic board game of Go.
Such feats notwithstanding, DeepMind, having now gone on three times longer than the original Manhattan Project, is not clearly any closer to its core goal of creating an “artificial general intelligence” that rivals or replaces humanity. 

But it is finally becoming clear that, as with nuclear fission before it, the first users of the machine learning tools being created today will be generals rather than board game strategists.
A.I. is a military technology. 

Forget the sci-fi fantasy; what is powerful about actually existing A.I. is its application to relatively mundane tasks like computer vision and data analysis. 

Though less uncanny than Frankenstein’s monster, these tools are nevertheless valuable to any army — to gain an intelligence advantage, for example, or to penetrate defenses in the relatively new theater of cyberwarfare, where we are already living amid the equivalent of a multinational shooting war.
No doubt machine learning tools have civilian uses, too; A.I. is a good example of a “dual use” technology. 

But that common-sense understanding of A.I.’s ambiguity has been strangely missing from the narrative that pits a monolithic “A.I.” against all of humanity.
A.I.’s military power is the simple reason that the recent behavior of America’s leading software company, Google — starting an A.I. lab in China while ending an A.I. contract with the Pentagon — is shocking. 

As President Barack Obama’s defense secretary Ash Carter pointed out last month, “If you’re working in China, you don’t know whether you’re working on a project for the military or not.”
No intensive investigation is required to confirm this. 

All one need do is glance at the Communist Party of China’s own constitution: Xi Jinping added the principle of “civil-military fusion,” which mandates that all research done in China be shared with the People’s Liberation Army, in 2017.
That same year, Google decided to open an A.I. lab in Beijing. 

According to Fei-Fei Li, the executive who opened it, the lab is “focused on basic A.I. research” because Google is “an A.I.-first company” in a world where “A.I. and its benefits have no borders.” All this is part of a “huge transformation” in “humanity” itself. 

Back in the United States, a rebellion among rank and file employees led Google last June to announce the abandonment of its “Project Maven” A.I. contract with the Pentagon. 

Perhaps the most charitable word for these twin decisions would be to call them naïve.
How can Google use the rhetoric of “borderless” benefits to justify working with the country whose “Great Firewall” has imposed a border on the internet itself? 

This way of thinking works only inside Google’s cosseted Northern California campus, quite distinct from the world outside. 

The Silicon Valley attitude sometimes called “cosmopolitanism” is probably better understood as an extreme strain of parochialism, that of fortunate enclaves isolated from the problems of other places — and incurious about them.
A little curiosity about China would have gone a long way, since the Communist Party is not shy about declaring its commitment to domination in general and exploitation of technology in particular. 

Of course, any American who pays attention and questions the Communist line is accused by the party of having a “Cold War mentality” — but this very accusation relies on forgetfulness and incuriosity among its intended audience.
Since 1971, the American elite’s Cold War attitude toward China’s leaders has been one of warm indulgence. 

In the 1970s and 1980s, that meant supporting China against a greater adversary, the Soviet Union. What is extremely strange is that this policy of indulgence continued and even deepened after the Soviet Union’s collapse in 1991.
A few years after the Cold War ended, American leaders started treating China the way they had treated West Germany and Japan. 

We tolerated punishing trade deficits in the 1970s and 1980s to support those two allies, and we had strategic reasons to do it. 

As for building up China in the 1990s and 2000s, America’s generosity was supposed to somehow lead to China’s liberalization. 

In reality, it led to the transfer of our industrial base to a foreign rival.In this sense, a zombie “Cold War mentality” never went away — though it certainly stopped making sense. 

Only recently, with help from Xi Jinping’s decision last year to, in effect, declare himself potential leader for life, has Donald Trump become the first president since Richard Nixon to pay attention and run a reality check on China.
Silicon Valley is not alone in its inattention to geopolitical reality; Wall Street has been eager to make excuses for Google’s naïveté. 

The timing is not coincidental; just this week American officials met their Chinese counterparts in Shanghai to negotiate a trade deal.
The flip side of China’s huge trade surplus has been America’s huge current account deficit. 

All of the dollars we send abroad that never get used to buy American goods have to go somewhere, and most go through New York’s money center banks on their way to buying financial assets. 

Since upsetting this imbalance is a threat to profits, Wall Street would prefer to cave on trade and keep Google’s stock price high while they’re at it.
But the banks’ experience of the last few decades of globalization has not been representative. 

The trade deficits that brought flows of money to Wall Street took jobs and bargaining power away from the median worker.Wages have been stagnant since the 1970s. 

The difference between our post-1971 era of globalization and the post-1945 midcentury boom is a breakdown in the relationship between the parts and the whole: An archipelago of inward-looking, parochial places like Wall Street and Silicon Valley have done exceedingly well for themselves while their fellow citizens have been left behind in a stagnant economy.
In the 1950s, the cliché was that “what’s good for General Motors is good for the country.” 

Google makes no such claim for itself; it would be too obviously false. 

Instead, Google says it is “committed to significantly improving the lives of as many people as possible”— a standard so vague as to defy any challenge.
By now we should understand that the real point of talking about what’s good for the world is to evade responsibility for the good of the country.

American Quislings: Wall Street and corporate America are funding China’s fight with the US

Former White House chief strategist Steve Bannon and hedge fund manager Kyle Bass accused Wall Street of funding China’s war with the U.S.

By YENNEE LEE

CNBC’s exclusive interview with Steve Bannon and Kyle Bass

Former White House chief strategist Steve Bannon and hedge fund manager Kyle Bass have accused Wall Street and corporate America of funding China’s fight with the U.S.
Bannon and Bass are members of the Committee on the Present Danger: China.

It was launched to educate and inform American citizens and policymakers about the existential threats posed by China, according to the committee’s website.
“The entire operation of the Chinese Communist Party and what they’re running in China is being funded by Wall Street,” Bannon told CNBC’s Brian Sullivan on Thursday.
“Corporate America today is the lobbying arm of the Chinese Communist Party and Wall Street is the investor relations department,” he said, calling China “the most significant existential threat that we have ever faced.”

Hedge fund manager Kyle Bass.

Mr Bass — a known China bear, who is also the founder and chief investment officer of Hayman Capital Management — claimed that large American companies are the ones pushing U.S. President Donald Trump to conclude a trade deal with China.

“If you look behind the scenes, it is corporate America pushing Trump to do a deal. And it is the corporate American chieftains that have their biggest businesses, let’s say most growth, coming out of China. And China plays that card. They play it better than anybody else,” Mr Bass told CNBC’s Sullivan.

“They open a market to very specific people to basically court influence with that person and going... into the presidential office to actually change policy,” said Bass.

No hope of coexistence with China
The Committee on the Present Danger was first established in the 1950s to warn President Harry Truman’s administration of the influence of communism in the U.S. 

The committee’s latest focus on China is its fourth iteration.
In addition to Mr Bannon and Mr Bass, other members of the group include fervent supporters of President Trump, fellows from think tanks, and former defense and intelligence officials.

Huawei is a spy agency for the Chinese Communist Party

Under President Trump, Washington has taken a tougher stance on China compared to previous administrations. 

In addition to issues surrounding trade, American intelligence chiefs expressed their distrust of Chinese tech giant Huawei and Chinese telecom company ZTE.
But the committee appeared to advocate a stronger take on rogue China compared to the Trump administration. 

In its guiding principles posted on its website, the committee said: “There is no hope of coexistence with China as long as the Communist Party governs the country.”
When asked if he would tell U.S. companies to stop doing business in China, Bannon replied: “No. What you do is you back President Trump.”
“We have a whole of government approach to really confront China on this economic war. This has never happened,” he added.

Why China is loath to pursue US probe into JPMorgan hiring

‘Princeling’ hiring scandal exposes nexus of corruption between party and Wall Street
By Tom Mitchell in Beijing


The Chinese Communist party’s corruption watchdog has a tricky problem that the US Securities and Exchange Commission, of all organisations, may be able to help solve.
The Central Commission for Discipline Inspection (CCDI) has been a victim of its own success when it comes to catching “tigers” — Chinese government, military and state-owned enterprise officials with vice-ministerial rank or higher.
When you have bagged, on average, more than 50 tigers a year for three years running, the public expects the skins to keep coming. 

But that is easier said than done, even in a country where corruption flourished as much as it did before the launch of Xi Jinping’s anti-corruption campaign in 2013.
This is where the SEC could come in. 

All the CCDI needs to do is start pulling on some of the threads recently unravelled by the US securities regulator.
Last week the US regulator accepted a $264m settlement offer from JPMorgan, which admitted to running a sophisticated jobs-for-mandates scheme. 

Chinese “princelings” — the progeny of China’s most senior government officials and executives at state-owned enterprises — were granted jobs or internships in return for which the same officials and executives steered business towards the US investment bank.
According to the SEC, at least 100 “referral hires” on behalf of Chinese officials at more than 20 SOEs and 10 government agencies yielded JPMorgan tens of millions of dollars in investment banking revenues.
It constituted a blatant violation of the US Foreign Corrupt Practices Act. 

The SEC’s 26-page summary of JPMorgan’s “Sons & Daughters” programme would be amusing were it not so outrageous.
Some of the referral hires were so incompetent they were referred to internally at JPMorgan as “photocopiers”. 

Contracts often ran from mid-January until mid-December so the hires would not show up on end-of-year headcount tallies — and were renewed only if the mandates kept coming.
Chinese officials have been given very long jail terms for less.
Two years ago, Liu Tienan, a former vice-minister at China’s powerful economic planning agency, the National Development and Reform Commission, was sentenced to life in prison after he and his son were charged with accepting bribes totalling Rmb36m, or $5.2m at the current exchange rate.
The bribes included a shareholding in a car dealership for Liu Junior. 

The arrangement was facilitated by a state auto executive whose company was regulated by NDRC.
Just $5.2m in alleged bribes? 

What amateurs. 

In last week’s settlement with JPMorgan, the SEC documented more than $100m in investment banking revenues attributable to the jobs-for-mandates scheme.
The CCDI could easily increase its tiger count if it asked some awkward questions of the Chinese executives and officials who directed more than $100m in state funds JPMorgan’s way so their sons and daughters could work or take internships there.
However, there are a few reasons why the party’s corruption investigators are unlikely to pick these low-hanging fruit.
It is one thing when official graft involves state-owned enterprises. 

That does not surprise the average man or woman on the Chinese street. 

But a corrupt intersection between the Chinese Communist party and Wall Street? That is too sensitive a connection.

The CCDI also likes to control its corruption investigations start-to-finish, and there is no telling where some of the SEC’s threads might lead.
In one example of the often collusive nature of Chinese corruption, a government official was able to get his son an internship in JPMorgan’s Hong Kong office but not a coveted analyst position in New York. 

So the official asked for help from an executive at a Chinese SOE, who joined the eventually successful lobbying effort.
The whole sorry saga does, however, highlight one big difference between Chinese and American justice. 

When Chinese officials find themselves in the CCDI’s crosshairs, they often spend the rest of their lives behind bars. 

When investment bankers are targeted by Uncle Sam, their employers just pay a fine.