For the first time ever, the Pentagon is playing a war game that is focused on *economic* warfare, instead of a war fought with missiles and possible nukes.
One of their key findings involved China selling off American dollars and debt. Apparently the war gamers found a way for China to hit us where it hurts. Yale Professor Paul Bracken, one of the participants, joined me today in The Diamond District.
The fallacy of AC's reasoning is that NONE of USA's 'friends' want to buy any more of your toxic bonds and bills, especially after your first 700 billion USD bailout.They have cottoned on the farce of your virtual paper economy.Japan & Saudi Arabia+ Gulf States stopped buying.US had nowhere to turn to. Only China was kind and stupid enough to stand by USA in that dark hour where all 'friends' disappeared.She poured another few hundred billions to help.
What did we get in return for standing by you economically, in that crisis and for the past 20 years? The moment China bailed you out, you passed the biggest military budgets for 2008 & 9, unveiled new reports of The New China Threat ,sold advanced military hardware to India to contain China,and in 2009, passed a rude Human Rights Resolution against her, passed a Tibet Resolution, and "unwavering commitment" to defend Taiwan.When your friend is helping you to pay your debts for 20 years( even now) you do not hurt or backstab him.You are to blame for the falling out between USA & China. You BIT the hand that held up your economy.Your ungrateful China-bashing after all our sacrifice makes Wen 'worried' about trusting arrogant ingratiates with our hard-earned savings of 30 years' labour.
Don't give us the GARBAGE that you prospered us.WE prospered US and foreign companies who came only to exploit our cheap sweat labour for slave wages and to dump pollutants on us,and cart back cheap consumer goods to USA.You got more from us.
April 15, 2009 at 11:56 pm
Umpire
All financial instruments are based on trust. The Chinese realize if they want to sell them, they have to find a buyer who trusts the US Government to pay. If the Chinese should dump them at less than their value, it hurts all Tres bill holders. If no one wants them they could become worthless. Likewise the US knowing what bills are circulating could issue a statement that they won't honor them. Same as a bankruptcy judge saying debt forgiven. That would throw the whole system into a panic and make others fear holding theirs. Alas, a good time to repurchase cheaply. They are only worth the faith and trust that the Chinese put into them.
That being said the Chinese have been printing currency to keep from borrowing. As long as they continue to surpass imports with exports, it will be difficult to expose since they have excess foreign currency but not at the level they need to accomplish the things they want. I venture to guess that the banking crisis is exposing what they wish to hide and the longer it goes on the less they will be able to surpress the true economy of China. The lower classes are no longer willing to accept their economic situations. Students and factory workers are returning to their farming families and talking about how well off the middle and upper classes are. Upheaval is only waiting for a ignitor.
April 14, 2009 at 4:46 pm
AC
No surprise at all. The US Department of Defense annual report on Chinese military power makes frequent reference to a Chinese security concept called "comprehensive national power." As the name suggests, this concept entails the integrated use of all facets of statecraft - military, political, economic, and cultural - to influence events outside China's borders to create outcomes favorable to Chinese interests. The United States has given lip service to the same notion, as Professor Joseph Nye's famous term, "soft power," occupies a prominent place in the 2008 US National Defense Strategy, and was frequently mentioned in foreign policy discourse throughout the 1990s. How serious we are in implementing it remains an open question. Developments to date leave one with a sense of less-than-complete confidence.
China's exorbitant purchases of American debt should have been a red flag (pun intended) to anyone concerned with the security of this country. Even if Beijing chooses to "dump" US Treasuries to punish the United States - a worst-case scenario - the mere possibility may give Beijing a de facto veto over any US policy that is considered to be too harmful to Chinese interests, from their perspective.
I'm sure many will disagree for a variety of reasons, such as concerns about protectionism, but as far as I'm concerned, sales of US Treasuries to foreign buyers should be subject to the same restrictions as sales of advanced weapons systems and certain dual-use technologies. Only those nations either allied with the United States via formal security treaties (e.g., NATO member states, Japan, South Korea, Australia), or those with whom we are not formally allied, but with whom we have friendly relations (e.g., Sweden, Switzerland), would be allowed to purchase US debt. Alternatively, membership in international organizations like the OECD could be another requirement.
Perhaps, as an unintended consequence, such restrictions will serve to impose a certain degree of fiscal discipline on an out-of-control US budget process and national debt.
Yes, of course, what was I thinking? They'll find a way around it if they really want to.
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Brian Hu Wen
The fallacy of AC's reasoning is that NONE of USA's 'friends' want to buy any more of your toxic bonds and bills, especially after your first 700 billion USD bailout.They have cottoned on the farce of your virtual paper economy.Japan & Saudi Arabia+ Gulf States stopped buying.US had nowhere to turn to. Only China was kind and stupid enough to stand by USA in that dark hour where all 'friends' disappeared.She poured another few hundred billions to help. What did we get in return for standing by you economically, in that crisis and for the past 20 years? The moment China bailed you out, you passed the biggest military budgets for 2008 & 9, unveiled new reports of The New China Threat ,sold advanced military hardware to India to contain China,and in 2009, passed a rude Human Rights Resolution against her, passed a Tibet Resolution, and "unwavering commitment" to defend Taiwan.When your friend is helping you to pay your debts for 20 years( even now) you do not hurt or backstab him.You are to blame for the falling out between USA & China. You BIT the hand that held up your economy.Your ungrateful China-bashing after all our sacrifice makes Wen 'worried' about trusting arrogant ingratiates with our hard-earned savings of 30 years' labour. Don't give us the GARBAGE that you prospered us.WE prospered US and foreign companies who came only to exploit our cheap sweat labour for slave wages and to dump pollutants on us,and cart back cheap consumer goods to USA.You got more from us.
Umpire
All financial instruments are based on trust. The Chinese realize if they want to sell them, they have to find a buyer who trusts the US Government to pay. If the Chinese should dump them at less than their value, it hurts all Tres bill holders. If no one wants them they could become worthless. Likewise the US knowing what bills are circulating could issue a statement that they won't honor them. Same as a bankruptcy judge saying debt forgiven. That would throw the whole system into a panic and make others fear holding theirs. Alas, a good time to repurchase cheaply. They are only worth the faith and trust that the Chinese put into them. That being said the Chinese have been printing currency to keep from borrowing. As long as they continue to surpass imports with exports, it will be difficult to expose since they have excess foreign currency but not at the level they need to accomplish the things they want. I venture to guess that the banking crisis is exposing what they wish to hide and the longer it goes on the less they will be able to surpress the true economy of China. The lower classes are no longer willing to accept their economic situations. Students and factory workers are returning to their farming families and talking about how well off the middle and upper classes are. Upheaval is only waiting for a ignitor.
AC
No surprise at all. The US Department of Defense annual report on Chinese military power makes frequent reference to a Chinese security concept called "comprehensive national power." As the name suggests, this concept entails the integrated use of all facets of statecraft - military, political, economic, and cultural - to influence events outside China's borders to create outcomes favorable to Chinese interests. The United States has given lip service to the same notion, as Professor Joseph Nye's famous term, "soft power," occupies a prominent place in the 2008 US National Defense Strategy, and was frequently mentioned in foreign policy discourse throughout the 1990s. How serious we are in implementing it remains an open question. Developments to date leave one with a sense of less-than-complete confidence. China's exorbitant purchases of American debt should have been a red flag (pun intended) to anyone concerned with the security of this country. Even if Beijing chooses to "dump" US Treasuries to punish the United States - a worst-case scenario - the mere possibility may give Beijing a de facto veto over any US policy that is considered to be too harmful to Chinese interests, from their perspective. I'm sure many will disagree for a variety of reasons, such as concerns about protectionism, but as far as I'm concerned, sales of US Treasuries to foreign buyers should be subject to the same restrictions as sales of advanced weapons systems and certain dual-use technologies. Only those nations either allied with the United States via formal security treaties (e.g., NATO member states, Japan, South Korea, Australia), or those with whom we are not formally allied, but with whom we have friendly relations (e.g., Sweden, Switzerland), would be allowed to purchase US debt. Alternatively, membership in international organizations like the OECD could be another requirement. Perhaps, as an unintended consequence, such restrictions will serve to impose a certain degree of fiscal discipline on an out-of-control US budget process and national debt. Yes, of course, what was I thinking? They'll find a way around it if they really want to.