China and the U.S. Must Face Harsh Truths About Each Other

Today’s Agenda

  • China needs the West, and the West needs better nuclear defenses.
  • Spotify has too much power.
  • Markets will be jumpy for a while.
  • We’re running low on oil.
The U.S. and China, somehow, sort of.

The U.S. and China Need Family Counseling

You can’t exactly call what the U.S. and China are going through a divorce, because the two were never really married. Instead for the past couple of decades they’ve been more like a Bizarro World Brady Bunch, a temporary union of rival clans that now seems to be nastily unwinding.

It’s always the children who suffer the most in these things. And the children in this metaphor, which is admittedly so tortured it violates several Geneva Conventions, are the world’s economy and ability to avoid nuclear winter. So for the sake of these metaphorical children, it’s time for some family counseling.

China must realize it can’t just cut itself off from the West economically, writes Minxin Pei. Though it may be condescending and leaves the toilet seat up even after you tell it a million times to put it down, the U.S. is still China’s most important trading partner. A little more self-sufficiency couldn’t hurt China, but shutting down this symbiotic economic relationship would lead to stagnation and unrest.

The U.S., meanwhile, must recognize China and its new bestie Russia are bulking up and modernizing their nuclear arsenals, writes Hal Brands, ending blissful decades when we could pretend nuclear war was just something Sting sang about. Now we have to re-learn the bananas geometry of nuclear deterrence, where up is down and less is more, like something from an Escher painting.

Oh, and don’t forget China’s problem child North Korea, which has its own nuclear arsenal, a crisis President Joe Biden can no longer ignore, writes Bloomberg’s editorial board.

If the U.S. really wants to top China in a constructive way, it should let in more skilled immigrants, especially those from Hong Kong, writes Matt Yglesias. This will make the economy more productive while also setting a good example for the rest of the world. Taking the high road is always better in these breakups, especially when children are involved.

After the Gold Rush, Spotify Edition

We get many unhinged PR pitches here at BOT, usually involving NFTs, but a particularly unhinged one today claimed rock legend Neil Young had “reverse assassinated himself” by forcing Spotify to remove his music in protest of Joe Rogan’s Comedy and Bad Medical Advice Hour. In fact, Neil Young is:

  • still alive (i.e. not reverse-assassinated) and
  • only giving up about 14% of his streaming and sales revenue and 10% of his publishing revenue in this spat, according to Billboard.

Still, the total hit to Young’s income is massive — maybe $754,000 a year. That would hire a lot of maids, even at today’s wages.

The incident is also a reminder of just how much power Spotify has over both the music and podcasting industrial complexes, writes Lionel Laurent. A lot of people have threatened to leave Spotify over this controversy, and not just Young and Joni Mitchell. These threats even pushed Spotify and Rogan to admit they could do better. (Tyler Cowen argues nobody in this dispute comes out looking good.)

The truth, though, is that leaving Spotify is hard to do. Closest rival Apple Music has notoriously terrible UX, and moving your data from app to app is too difficult, Lionel writes. With or without Neil Young, Spotify could use more and better competition.

Market Forecast: More Anxiety

Stocks today continued to either

  • dead-cat-bounce or
  • plow their way to durable new highs.

Who knows, really? But the odds seem pretty good this isn’t the end of the selling, with expectations about what the Fed will do to interest rates changing almost by the hour, as John Authers notes. A week ago we expected maybe four rate increases this year. Now we’re up to maybe seven.

Structural factors alone, including thin liquidity and the influence of ETFs, will keep markets jumpy for a while, too, writes Mohamed El-Erian. Nor does it help that we can no longer rely on credit markets to be our coal-mine canaries, writes Lisa Abramowicz. They’re too ’roided up with Fed largesse to be truly sensitive to looming disasters, ironically.

Author: Mark Gongloff, Bloomberg

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