The Containment Of China:
7 March 2009
Has there ever been a rising power in the pages of history, that has picked up economic momentum packed on military might and then decided not to flex it's muscles. The answer, is that there has not. Power is power and the nations that have it in abundance chomp at the bit to use it. Which is exactly what China is doing now.
Back in October 2003, Roger W. Robinson Jr then head of the USA - China Economic and Security Review Commission gave this testimony to the U.S.A House of Representatives.
In which He laid out his thoughts on the Chinese blueprint for undermining the U.S. economy.
(1) First, they devalue their currency by as much as 40%.
(2) Then they issue tariffs on foreign goods.
(3) They cut foreign firms off from local marketing channels.
(4) They handpick partners for international joint ventures.
(5) They give preferential loans to their own factories from state banks.
(6) Chinese companies get privileged listing on the Chinese stock market.
(7) Chinese companies get special tax breaks not available to foreigners.
This assault on the American economy is already well under way.
China has an unbelievable history. Three thousand years ago, they were building palaces while our ancestors were huddling in grass shelters. So I am under no delusions about the greatness China is capable of.
Without a doubt, what is quietly unraveling the fabric of the American economy, the exploding deficits, the massive trade gap, the joblessness, and even some secret aspects of the war on terrorism, is not only no accident, but it can all be traced back to Beijing.
China's military government has actually masterminded a deliberate assault on the American way of life. It's a war, not with tanks, missiles or guns.
The combatants in this battle wear business suits, they hit you with handshakes, contracts, and smiles. But do not be fooled, this is war without rules. In the words of one of their own military officers, "nothing is forbidden." And without drawing a drop of blood, Beijing fully expects to win.
The goal is to destroy the competition, and at the same time create a guaranteed money making environment for China's own entrepreneurs. Is it working, for China, absolutely.
Beijing's ugly secret #1 is to crush the competition with slave labor.
Chinese workers average 61 cents an hour, USA factory workers average $16 an hour. In other words, USA workers make more in two weeks than most Chinese laborers make in a whole year.
It's the genius strategy of any savvy monopoly maker. First, move in and crush the competition with cutthroat pricing. Then take away his business and leave him high and dry. Thanks to slave labor, Chinese companies can crush the USA competition with lots of cheap goods that used to be made right here in the USA. In exchange, they not only get our purchases, they get our companies, when they're forced to pack up and move over to China so they can take advantage of the same cheap labor strategy.
What's more, China also gets to send a whole new kind of export to the USA, Chinese stocks And in return for that, they get billions more in investment capital. Straight from the trading accounts of private U.S. investors.
Imagine that, We are literally paying Beijing to rip the heart out of the USA.
But that's not the worst part, guess what China is doing with all that money.
First, the money we send China gets reinvested in the PLA, China's massive military machine.
Second, it goes back into funding more huge Chinese factories. With 200 million Chinese looking for jobs, China needs to build places for them to work, it also needs to buy huge stockpiles of raw resources to keep the factories running.
Third, and most dangerous of all, the Chinese government uses a lot of their extra exporting income to pile up an absolutely huge number of USA Treasury bonds
That's right, China spends nearly $7.8 million an hour or $187 million a day buying up USA Treasuries and dollars. The movers and shakers in China now hold the U.S. hostage to over $120 billion in Treasuries.
Now you don't have to ask yourself why.
Foreign reserves are starting to dump U.S. debt. Korea and Thailand dumping is one thing, but when a massive holder like China stops buying USA debt and starts dumping, it's a much, much bigger deal. Pressure on USA bond yields will skyrocket, other foreign investors will run from dollar-priced securities in a panic. Long interest-rates will jump, and USA consumers, businesses, and investors will get crushed in the jaws of a very powerful treasury trap.
China has also hoarded huge amounts of ever cheaper USA dollars, they have now got more than $310 billion in USA dollar reserves Again, you have to ask why would China want to keep so much of their newfound wealth in the USA dollar, a currency that's already down more than 50% since October 2000.
Again, it's simple. Since 1995, the Chinese currency the Yuan has been pegged to the dollar at the weak exchange rate of 8.28 to the dollar.
So no matter how low the dollar goes it's virtually impossible to close any currency related trading gap the USA has with China, it is like seeing how long two enemies can hold their breath under water. Whoever can withstand having a dirt cheap currency the longest wins. But so far, judging just by the trading deficit, it looks like China is winning.
So how will the USA defend its position as the worlds only super power.
In a word, destabilize. As much and as wide as they can, this will ensure that the capital flight out of the USA is kept to a minimum. Money tends to float to safe havens in times of trouble.
(1) Divert the worlds largest livestock feed crop (corn) to the production of fuel ethanol, all reports so far on the viability of this fuel to replace long standing sources is in a economic and practical sense doomed to fail, unless your unprincipled aim is to drive up food costs.
(2) Create and maintain a financial system with weak prudential and poor accountancy regulations, then stand back and let greed and avarice give rise to unsustainable asset bubbles.
(3) unleash the CIA, to plot and lend support with any number of terrorist groups and acts around the world. Giving rise to the need to go to war, after all battle harden troops and leaders that perform well under pressure need time to come to the fore.
(4) Maintain the worlds largest war machine, and assure super power status.
When we take a look back at current news, the USA's only defense would seem to becoming into play.
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