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 ...
I agree 100%.
We must return jobs to America. Now.
If the USA did what you said and stopped the Keynesian economics the USA would soar.
Agreed. I never understood our "love affair" with China. Sure, they do EVERYTHING cheaper, but cheaper isn't better.
And, in the end, NO ONE WITH A BRAIN, can ever think that China would be our FRIEND. The Chinese believe in TWO things and ONLY two things: luck and money. Honor? Commitment? Loyalty? Please...they know who they are and will not change. They haven't in 3000+ years. Why would they do so now? Any "change" would be cosmetic and false.
We have ONLY our own greed to blame for wanting our "stuff" cheaper. Whose fault is China's place in our USA world? We need only look in our mirror.
Well stated.
“Ever noticed that not ONE major high visibility economist ever talks about what your well written post articulates? “
Academics, multinationalist corporations, and Wall Street banks worship at the altar of the modern definition of “free trade” because it is one step on the path to global government. The modern definition of free trade means trade governed by international agencies such as the WTO and NAFTA, not nation states. These international agencies, instead of the market or nation states, determine the rules under which goods will move between countries.
The modern definition of free trade, as directed by these multinational agencies, means the United States ends tariffs, quotas, and other trade restrictions (such as inspections) allowing the free flow of goods into the world’s largest consumer market. Meanwhile the international agencies permit other nations to maintain tariffs, quotas, and non tariff barriers against US exports. The international agencies also allow nations to subsidize the exports of their manufacturers into the US. In essence the US is restricted to an academic theory of free trade while other nations pursue their mercantilist trade policies. As a result, the US has been deindustrialized and the US middle class worker is forced to compete with third world labor. Twenty-five years of this experiment have resulted in declining standards of living in the US, increasing wealth disparity, less domestic competition, bigger government, stagnant economic growth, and loss of national sovereignty. What are the benefits to US citizens of this experiment with modern free trade?
Our founding fathers had a different understanding of free trade. They employed high tariffs to fund the national government and to allow domestic industries to develop. They perceived tariffs and duties to be a source of funding for government than direct income taxes levied on individual citizens. Better let the foreigners wanting to do business in the United States pay the taxes through income duties than stifle the economic freedom of US citizens by taking from income.
To the founders, free trade simply meant US merchants were free to trade with any country. Merchants in the colonies were restricted by the English government to trading only with countries and entities (such as the East India Company) allowed by Parliament. Once America became an independent nation, merchants were free to engage in trade with any nation and any foreign company. Free trade to the founders did not mean absence of tariffs and quotas.
During the 35 years after the Civil War the US rapidly developed the strongest industrial infrastructure on the planet. High tariffs were assessed on imports throughout that period protecting developing US industry from European manufactured imports. Had we employed our current low tariff philosophy, European producers would have crushed new US manufacturing entities and the US would not have become a major power in the 20th Century.
We need to learn from our history. A renaissance of US manufacturing will have incredible benefits to our economy and the nation. The only thing stopping us is vested interests whose loyalties lie with a vision of world government.
I keep warning the ‘Free Traitors’ that in a hot war scenario with China, the ‘Free traitors’ will be hanging from the light poles....
You are correct, however the is a BIG BUT.
Your policies amount to a trade war between the two largest economies in the world. The US would look at this as trade and economic policy decisions. The Chinese would look at it as an act of war.
Let's hit the wayback machine. In the late 1930's Japan was the Asian power with an expanding economy and imperial ambitions. They invaded China to extract badly needed raw materials. The US and some European nations did not approve so they embargoed oil exports and froze Japanese assets. This would have destroyed the Japanese economy in 18 months. Rather than starve, Japan decided to fight.
History really does repeat itself. I figure we are tracking around 1938.
Agree. I think Trump was right when he said even the threat of a 25% tarrif would make China stop manipulating their currency. The other thing Trump said which we all need to keep in mind is that we only owe China just under a trillion dollars. Not really that much. We owe Japan more.
so what does this mean in lay vocabulary?.....what does it mean to US consumers and what would be the first signs of it happening?....thx in advance...
“Your policies amount to a trade war between the two largest economies in the world. The US would look at this as trade and economic policy decisions. The Chinese would look at it as an act of war.”
The Chinese already view themselves at war with the US. Spying, cyberattacks, intellectual property theft, targeting entire US industries and then subsidizing exports of those products to undercut the prices of the US competitors until all of the US factories and the underlying supply chain are shut down, shipping tainted products to the US (poisoned foods, lead paint on toys), actively weaponizing space (i.e. killer satellites), facilitating nuclear proliferation (Korea, Pakistan and Iran), forcibly downing our planes in international airspace (remember early in the Bush administration) and actively bribing US politicians (Charlie Trie and the Clintons for example). All we would be doing by putting in place a stiff tariff is finally responding to decades of attacks on our economy and national security. I’d rather risk arm conflict now than give the Chinese the opportunity to pick when they crash the dollar or have one of their proxies (Korea or Iran) launch an EMP attack on our shores.
I’m assuming it would mean inflation. If China gets rid of its dollars, the dollars would become less valuable, assuming demand by other countries for it stays the same.
You might be right. I think some kind of armed conflict with China is almost inevitable. Better now than later.
Come July 1, when FATCA goes into full effect, the dollar is dust.
After that no foreign bank can possibly accept the dollar on any basis.
I’m sure that this result was designed into FATCA by the bill’s authors, knowing how most congresscritters vote without reading the bill.
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>> “ I’d rather risk arm conflict now than give the Chinese the opportunity to pick when they crash the dollar” <<
.
See post #33.
You’re right.
Keep your fuel tanks full, keep plenty of water on hand, be ready to get the heck out of dodge.
Whatever you do, make sure you have plenty of precious metal, brass and lead.
Could be as simple as hedging a much larger long position.
just yesterday we refied our heloc....to a 15 yr 4% fixed rate....the mortgage guy said he had heard rumblings about the fed raising the rates...
Not quite. When I was there (GuangZhou and Beijing, both in the last 4 years), appliances and electronics were all the same or slightly higher than US prices for similar brands and makes. Where you save the most in China is when you're buying labor-intensive things... like car repairs, housing additions, etc. Amazing how much cheaper they are there!!
>>Not quite. When I was there (GuangZhou and Beijing, both in the last 4 years), appliances and electronics were all the same or slightly higher than US prices for similar brands and makes. Where you save the most in China is when you’re buying labor-intensive things... like car repairs, housing additions, etc. Amazing how much cheaper they are there!!<<
Go closer to Russian border and pick local brands and makes.
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