Posted on 02/21/2014 8:11:40 PM PST by Tolerance Sucks Rocks
In order for our current level of debt-fueled prosperity to continue, the rest of the world must continue to use our dollars to trade with one another and must continue to buy our debt at ridiculously low interest rates. Of course the number one foreign nation that we depend on to participate in our system is China. China accounts for more global trade than anyone else on the planet (including the United States), and most of that trade is conducted in U.S. dollars. This keeps demand for our dollars very high, and it ensures that we can import massive quantities of goods from overseas at very low cost. As a major exporting nation, China ends up with gigantic piles of our dollars. They lend many of those dollars back to us at ridiculously low interest rates. At this point, China owns more of our national debt than any other country does. But if China was to decide to quit playing our game and started moving away from U.S. dollars and U.S. debt, our economic prosperity could disappear very rapidly. Demand for the U.S. dollar would fall and prices would go up. And interest rates on our debt and everything else in our financial system would go up to crippling levels. So it is absolutely critical to our financial future that China continues to play our game.
Unfortunately, there are signs that China has now decided to start looking for a smooth exit from the game. In November, I wrote about how the central bank of China has announced that it is "no longer in China’s favor to accumulate foreign-exchange reserves". That means that the pile of U.S. dollars that China is sitting on is not going to get any higher.
(Excerpt) Read more at freedomoutpost.com ...
The beginning of the end for Barry’s “America”.
Bring American jobs, back to America.
We run a 300 billion + deficit with China, which does not reciprocate by any measure. That is a 300 billion + deficit, on trade in American goods of less than 150 billion.
Every month, the situation further deteriorates.
Enough. Bring back jobs.
The credit card is about to be canceled.
This is why I don’t feel China ever intended to use their military or nukes of any kind. They have WAY more effective weapons in their arsenal and they’re unloading their best one at Americans right now.
Considering all the worthless paper Obama has had printed in the past few years, can you blame the Chinese for making a move?
Bad move.
They should wait for 24-36 more months for maximum effect, IMO.
To move prematurely will put them in just as bad a situation as the US, IMO.
Free Trade...especially Free Trade with Communist China...doesn’t work
Eventually you run out of your own wealth
The only way you can counter Communist China moving away from our dollars is to put tariffs on their goods....that is a much better move than whining like a Liberal Statist Free Trader reciting failed economic theory like a Chairman Mao disciple.
Time to dump stupid Free Trade nonsense
Someone also commented that Jim Rogers has been awfully quiet for some time now.
Peter Schiff says gold ready to make a major move up.
Maybe the music's about to stop.
Easy enough: end the individual and corporate income taxes, and bring back modest tariffs, enough to fund a government small enough to fit in the heel of my left shoe.
Some businesses would move back here under such circumstances.
The problem for China is that right now, if we go down, they go down. And while it will be bad all around, it will be worse for them. (Talking strictly internal turmoil.)
The problem for both the US and China is that the current situation is going to take us both down. It simply is not sustainable. Sigh.
Yes, China, you “win.” And it will suck for us all.
Screw Free Trade. Bring jobs back to America. Do you hear this Club for Growth?
Oh, and to be clear: If (when) we go down, about 100,000,000 Chinese starve to death within six weeks. The revolt that will result will be Biblical in its scale. I mean that literally.
Except that China’s currency is now nearly backed by gold, providing monetary and bank stability that is now gone here.
The other is, if they lose 500 million people, the remainder well say ‘more room and jobs for the rest of us.’
The Chinese will survive a meltdown. We won’t.
“The beginning of the end for Barry’s “America”.”
For everyone’s I’m afraid. As we know it anyway.
“if we go down, they go down”
They have an option, war.
“Yes, China, you “win.” And it will suck for us all.”
They have a history, letting big percentages of citizens starve.
DITTO. China is playing catch up on stealth, aircraft carrier, space program and etc. Notice they are doing it at a leisurely pace. Four aircraft carriers by 2020?!!!! We have eight on station plus 2 on reserve/refit. If China has four they must keep one in reserve/refit. That is the best China can do in near future. I remember the Cold War where the Soviet Union was pumping out new designs and adding to her forces every five years. That was a true arms race where the Soviet Union was truly aiming for military global dominance. China’s pace is much more mild. I think you hit the nail on the head, because China intends to use her financial might. Makes sense since China defense budget is a distant third to the US with Russia as number 2. But China currency reserves is $ 2600 trillion while the US is only $ 150 trillion. China has about 20x more foreign currency reserves then US which she can use to invest or buy things in the world. If I were China would I use military (distant 3rd to US) or financial (20X strength then US) power to compete against the US?
......”if China was to decide to quit playing our game and started moving away from U.S. dollars and U.S. debt, our economic prosperity could disappear very rapidly”......
I don’t believe that...
first of all the IMF we’ve been feeding full of revenue isn’t about ready to let that happen any time soon. They’ll continue to prop up any nation while they get into place the Global Monitary Controls and Revenues, and they aren’t quite there to let the USA fall at all.
Second of all....China needs us more than we need them. They were unloading our debt a few years ago too...but it’s part of the International game and they can only go so far and they know it.
>>The problem for China is that right now, if we go down, they go down. And while it will be bad all around, it will be worse for them. (Talking strictly internal turmoil.)<<
Yep, but China also has a growing middle class numbering close to 100,000,000 people, belonging to households making over $100,000 annually. Let them develop this trend to increase domestic consumer base, be self-reliant and we shall see.
Chinese labor is not cheap anymore. Qualified laborers in industry are making $700-900 a month - way over nations like Ukraine and Romania right now, and we are talking about China with it’s living costs so much lower (all Walmart merchandise is three to ten times cheaper than in US).
Keep surrendering your industry to a power like that, which is starting to produce engineers capable to develop their own technology while your colleges are cranking liberal artists - all of these is a road to the future of Avatar movie, with Chinese as an humans and Americans as a blue critters.
“Time to dump stupid Free Trade nonsense”
A 30% tariff, applied to all Chinese imports, plus a container processing fee on all incoming containers, would bring the Chinese economy to its knees. Add to that a 0% tax rate on profits derived from manufacturing in the USA. Implications:
1) Importers would immediately begin shifting sourcing from China to other countries until domestic capacity increased to fulfill demand.
2) The Chinese government would have to respond by increasing subsidies (yes free traders the Chicom government does subsidize exports) which makes fewer resources available to support the military buildup.
3) The economics of producing in the US would shift enough to result in capital flowing into the construction of state of the art factories at home. Chinese factories are aging (built 10-20 years ago) and are highly inefficient with respect to labor productivity. New, highly automated, domestic factories would be cost competitive with aging Chinese factories, particularly with a tariff in place.
4) Millions of jobs would be created in the US over a 10 year period as new US factories came on stream. Even if the new US factories would much more efficient than the Chinese factories (employing say 25% of the labor force of a Chinese plant) millions of jobs would be produced.
5) Thousands of new businesses would start up to serve the new domestic factories. These new businesses would employ additional millions.
6) Tax revenue would flow to state an local governments from the new tariffs as well as the income taxes collected from newly employed workers.
7) The middle class would grow again.
8) Our cultural mindset would shift again to an opportunity society from the current redistributionist society.
Let’s get on with it.
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