Monday’s global stock market sell-off is obviously scary for those readers with memories of 2008 still somewhat fresh in their cerebellums. And this is pretty serious, in that it seems more clear than ever that China’s economy is (a) slowing down dramatically; and (b) not responding to increasingly desperate Chinese government efforts to prop it up. Since China is the world’s second-largest economy, a slowdown there obviously has global effects.
So at a minimum, this has some ripple effects across the global economy, as well as prompting some gallows humor. That said, the U.S. economy has still been chugging along pretty well. A true Chinese collapse would probably put the U.S. economy into recession.
At the same time, China’s Black Monday reveals something useful: how potential U.S. presidents are reacting to the market sell-off. This is a big deal. One can argue that John McCain sank his chances for election in 2008 when he said “the fundamentals of our economy are strong.”
McCain got into trouble by saying things were okay when they weren’t. On the other hand, candidates don’t do too well when they panic when panic doesn’t seem appropriate (see: Ebola, Rand Paul’s reaction to). In a way, these kinds of exogenous shocks are a worthwhile test of how well a candidate can think on his or her feet and act like, you know, a leader of the free world.
So how did the candidates react Monday? The New York Times’ Gerry Mullany and Alan Rappeport report on a few reactions.
Republican presidential candidates began shifting their focus on Monday from the dangers posed by illegal immigrants to a new target: China, whose currency devaluations and stock market plunges are starting to hurt the savings of American investors.
One Republican candidate, Gov. Scott Walker of Wisconsin, called on President Obama on Monday to cancel his plans to meet in Washington next month with President Xi Jinping of China on what will be his first state visit to the United States. Mr. Walker accused Beijing of a range of offenses that have harmed American interests, including manipulating its economy and currency, carrying out cyberattacks and persecuting Christians.
Wait. What? Oh, Time’s Zeke Miller has more:
Earlier Monday, Walker blamed much of the recent drop in the financial markets on China’s recent currency devaluation.“Americans are struggling to cope with the fall in today’s markets driven in part by China’s slowing economy and the fact that they actively manipulate their economy,” Walker said. “Rather than honoring Chinese President Xi Jinping with an official state visit next month, President Obama should focus on holding China accountable over its increasing attempts to undermine U.S. interests. Given China’s massive cyberattacks against America, its militarization of the South China Sea, continued state interference with its economy, and persistent persecution of Christians and human rights activists, President Obama needs to cancel the state visit.”
Frankly, at this point both U.S. and Chinese officials wish China could actively manipulate their economy. What’s happening this month is evidence, in fact, that market forces can easily override Chinese government manipulation. To be sure, Walker lists legitimate beefs with the People’s Republic, but I’m pretty sure canceling the state visit would not help at all on any of them.
Even Walker’s defenders acknowledge that “this is a bit of kabuki showmanship to demonstrate that Walker, too, is angry at China.” So let’s move on. Did other GOP candidates say anything about China today?
As I have long stated, we are so tied in with China and Asia that their markets are now taking the U.S. market down. Get smart U.S.A.
— Donald J. Trump (@realDonaldTrump) August 24, 2015
Markets are crashing – all caused by poor planning and allowing China and Asia to dictate the agenda. This could get very messy! Vote Trump.
— Donald J. Trump (@realDonaldTrump) August 24, 2015
Oh, for the love of –. Look, I’ll keep this simple. If American voters really want any market volatility to metastasize into an actual Great Depression, then by all means break ties with China and Asia. But the only reason the 2008 financial crisis wasn’t worse was precisely because that didn’t happen.
Politico’s Ben White notes that Trump wasn’t the only candidate to sound stupid on this topic:
Trump’s candidacy is not based on logical precision but rather intense emotion. The same is true for Sanders, who also seized on the market moment in a tweet from the populist left: “For the past 40 years, Wall Street and the billionaire class have rigged the rules to redistribute wealth to the richest among us.”….
“If you are an anti-establishment candidate right now, you are going to use this to further the notion that China is taking advantage of us and that the U.S. stock market is rigged and that nobody in the establishment or Washington is doing anything about it,” said GOP consultant Lenny Alcivar. “But the problem for these candidates is that this is coming in August of 2015 and not January of 2016 or even late in the fall of 2016 — and it’s not at all clear that it will last and it would be foolish for any of the establishment candidates to go down this rabbit hole.”
Except that’s what Scott Walker did. Oh, and then there’s Chris Christie:
— Benjy Sarlin (@BenjySarlin) August 25, 2015
Let’s be clear: China owning lots of U.S. government debt has exactly zero to do with what’s happening right now. If anything, the gyrating Chinese stock market and depreciating yuan, combined with general developing country malaise, will trigger a massive surge of interest in U.S. government debt. So Christie is simply wrong here.
The scariest thing about Black Monday wasn’t the stock market fluctuations. Those will hopefully be temporary enough in the United States. No, the scariest thing was how one day of financial volatility was enough to make four presidential candidates — Christie, Sanders, Trump, and Walker — say really stupid things about the Chinese economy and the Sino-American relationship.