China is the world’s fastest growing economy, and for the first time ever, it now drives the global economy when it comes to commodities like steel, lead and nickel. China’s trade surplus with the U.S. almost doubled in the first quarter and the Chinese hold an estimated $7 billion of our currency. In fact, the U.S. has less control over its economic destiny today than it’s had since WWII. China is setting prices where the U.S. used to, changing the entire dynamic of the world economy. For example, homebuilders are all weak, but copper and other uilding materials are high because of Chinese demand. Americans are now paying up for something where the demand is dropping at home. To try and explain the implications of this sea change, Joe Lavorgna, chief economist at Deutsche Bank, joins the guys on set.



We first saw this happening in oil, and now it’s happening with other commodities and raw materials, Lavorgna says. China owns a lot of U.S. assets and they are going to diversify those over time. He recommends shorting the U.S. dollar as a play against this, and buying those big cap companies that can compete against China and even benefit from a weaker dollar. You want to bet on a steeper yield curve as well, Lavorgna says, where longer-term interest rates will be higher and shorter-term rates will go lower.