Food for thought regarding the US and Chinese economies.
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HEADLINES
'Our Rising Dollar: Bye-bye American Pie. An anxious world waits amid signs suggesting America is heading for it's biggest financial crisis since the Depression'
Dragonlords: Chinas Role in America's Looming Financial Crash'
NATIONAL MAGAZINE EXCERPT
'The full extent of America's desperate financial circumstances is only just emerging, along with confirmation that China is bankrolling the US to the tune of US$240 million a day. JOHN SCHMID reports.
When an American buys a house, there's a decent chance the Chinese bankrolled a chunk of the mortgage. In fact, the People's Republic of China finances more consumer and government spending than any foreign lender other than Japan. Beijing's central bank, the People's Bank of China buys mortgage-backed bonds from both the US home-lending agencies, Freddie Mac and Fannie Mae, to the tune of US$48.6 million on average every workday. In that way, the central bank lends its vast dollar reserves, a by-product of Chinas trade surplus with the United States, to main street homeowners. Those funds in turn help sustain the US housing boom and put money into the pockets of American consumers.
China, in other words, not only provides US consumers with cheap, high-quality goods, says Joseph Quinlan, chief market strategist in New York at Bank of America Capitol Management, it also lends Americans the money to buy the goods.
Chinas financial relationship with the United States goes well beyond consumer loans.
China maintains an even higher credit limit with the federal government. Chinas reserve bank buys some US$187 million in US Treasury securities every business day, helping fuel the nations record federal deficit which in turn pays for its military expansion, its welfare programs and the economic recovery.
We are beholden to them by our Treasuries, says former US Trade Representative Carla Hills. That worries me.
It also should worry those who want Washington to clamp down on what they see as Chinas unfair trade practices, Quinlan and other analysts concur. Thats because the United States, as the worlds largest debtor nation, cannot afford to cut off a key source of foreign capitol, they say. And apart from Americas financial debt to China, political and national security reasons restrain the political establishment from imposing any meaningful tariffs, quotas or duties on the Middle Kingdom.
And as freighter loads of washing machines, DVD players and running shoes pour onto US shores, all with everyday low prices, they continue to depress prices across the economy. That deflation adds to the cost pressure on American producers, who as a group have cut factory jobs for 40 consecutive months.
A blue-chip roster of US based multinational corporations forms the main line of resistance, pressuring lawmakers to widen trade ties, not constrict them. According to the Chinese government, 400 of Americas Fortune 500 companies do business in China. Most of them boast lucrative profits.
The Chinese spend no money lobbying, Says James Sasser, a former US senator from Tennessee, who served as embassador to China from 1995-99. Their lobbying is really done by the American business community in Washington. And they dont want legislation that will adversely affect business ties.
Every president since Nixon, after a year or two of turbulent relations with China, always reverts back to a relationship of mutual tolerance, Sasser says.
Bill Clinton initially refused to cuddle the Butchers of Beijing, which is how rights activisists labelled Deng Xiaoping and his deputies after the 1989 Tiananmen Square massacre. But Clinton reverted to a strategic partnership with the mainland and even cleared the way for its entry into the World Trade Organization
Then George W. Bush ran for office, calling China a strategic competitor, twisting Clintons phrase into more of a snarl at what his advisors identified as an emerging rival superpower.
Less then three months later, after Bush took office, a Chinese fighter jet collided in an air duel with a US Navy spy plane as it flew along the southern coast of China. The Chinese pilot died and the government held the American crew after an emergency landing on the Chinese island of Hainan.
The precarious incident was a foreign policy turning point for Bush. The Chinese demanded a formal apology for its pilots death and held the American crew for 11 says
It was Bush who blinked first. The State Department issued a carefully written apology with the words sorry and regret. Then, a few days later, the American ambassador followed up with a written declaration of sincere regret.
These days, Bush treats Chinese disputes gingerly, although his cabinet issues tough sounding rebukes to the Chinese for keeping their exchange rate pegged at a level that boosts exports.
His administration, in November, used velvet gloves to apple sanctions on Chinese textiles even though it announced them with blustery language and the measures only apply to specific import niches.
Lawmakers seem relieved to settle for a symbolic gesture like Chinas just announced $6 billion spending spree on American cars and aircraft. The figure made a bold headline in the government controlled China Daily.
But the amount wont prevent another record US-China trade deficit. The bilateral trade gap, which will widen to at least $125 billion in 2003 from $103 in 2002, is the widest between any two nations in history.
For all its fragilities, nothing yet has slowed this fire-breathing dragon not the Asian financial crisis of 1997-98; nor the internet and technology crash; not synchronous global recession of 2001; and not last years outbreak of [SARs].
Nor can the USA afford to have China slow down. Throughout the past downturn, which has ravaged the global economy, China has been the one major nation with stable growth.
While its not presently in Chinas interest to use its very large dollar reserves as an economic weapon against the US, this possibility exists, the US-China Review Commission report warns.
The US has the best recovery that money can buy, says the outgoing chief economist of the International Monetary Fund, Kenneth Rogoff, when he retired in September. Its borrowing a great deal in order to sustain this very high recover.
NATIONAL NEWSPAPER EXCERPT
We have not come all this way through tragedy and trail and war only to falter and leave our work unfinished
President Bush sets out the themes of his re-election campaign in his State of the Union address, in which [he says that America is strengthening its economy] and successfully combating terrorism.
***************
I had wondered, previous to reading these articles, whether the Bush government might be steering the USA toward a financial crisis with its eyes more open than might first appear. Regardless of the fact, crisis does appear to be on the cards, as successive governments, and, increasingly, the current one, deliver the US economy into the control and dubious care of a foreign nation. But, perhaps I am being naïve and such a situation has existed, to a certain extent, for decades with dependence simply varying or Bush intends to declare war
against China, and reshuffle the monetary accounts resulting
EDIT - Added [ and ] to highlight Bush quote from newspaper.
***************
HEADLINES
'Our Rising Dollar: Bye-bye American Pie. An anxious world waits amid signs suggesting America is heading for it's biggest financial crisis since the Depression'
Dragonlords: Chinas Role in America's Looming Financial Crash'
NATIONAL MAGAZINE EXCERPT
'The full extent of America's desperate financial circumstances is only just emerging, along with confirmation that China is bankrolling the US to the tune of US$240 million a day. JOHN SCHMID reports.
When an American buys a house, there's a decent chance the Chinese bankrolled a chunk of the mortgage. In fact, the People's Republic of China finances more consumer and government spending than any foreign lender other than Japan. Beijing's central bank, the People's Bank of China buys mortgage-backed bonds from both the US home-lending agencies, Freddie Mac and Fannie Mae, to the tune of US$48.6 million on average every workday. In that way, the central bank lends its vast dollar reserves, a by-product of Chinas trade surplus with the United States, to main street homeowners. Those funds in turn help sustain the US housing boom and put money into the pockets of American consumers.
China, in other words, not only provides US consumers with cheap, high-quality goods, says Joseph Quinlan, chief market strategist in New York at Bank of America Capitol Management, it also lends Americans the money to buy the goods.
Chinas financial relationship with the United States goes well beyond consumer loans.
China maintains an even higher credit limit with the federal government. Chinas reserve bank buys some US$187 million in US Treasury securities every business day, helping fuel the nations record federal deficit which in turn pays for its military expansion, its welfare programs and the economic recovery.
We are beholden to them by our Treasuries, says former US Trade Representative Carla Hills. That worries me.
It also should worry those who want Washington to clamp down on what they see as Chinas unfair trade practices, Quinlan and other analysts concur. Thats because the United States, as the worlds largest debtor nation, cannot afford to cut off a key source of foreign capitol, they say. And apart from Americas financial debt to China, political and national security reasons restrain the political establishment from imposing any meaningful tariffs, quotas or duties on the Middle Kingdom.
And as freighter loads of washing machines, DVD players and running shoes pour onto US shores, all with everyday low prices, they continue to depress prices across the economy. That deflation adds to the cost pressure on American producers, who as a group have cut factory jobs for 40 consecutive months.
A blue-chip roster of US based multinational corporations forms the main line of resistance, pressuring lawmakers to widen trade ties, not constrict them. According to the Chinese government, 400 of Americas Fortune 500 companies do business in China. Most of them boast lucrative profits.
The Chinese spend no money lobbying, Says James Sasser, a former US senator from Tennessee, who served as embassador to China from 1995-99. Their lobbying is really done by the American business community in Washington. And they dont want legislation that will adversely affect business ties.
Every president since Nixon, after a year or two of turbulent relations with China, always reverts back to a relationship of mutual tolerance, Sasser says.
Bill Clinton initially refused to cuddle the Butchers of Beijing, which is how rights activisists labelled Deng Xiaoping and his deputies after the 1989 Tiananmen Square massacre. But Clinton reverted to a strategic partnership with the mainland and even cleared the way for its entry into the World Trade Organization
Then George W. Bush ran for office, calling China a strategic competitor, twisting Clintons phrase into more of a snarl at what his advisors identified as an emerging rival superpower.
Less then three months later, after Bush took office, a Chinese fighter jet collided in an air duel with a US Navy spy plane as it flew along the southern coast of China. The Chinese pilot died and the government held the American crew after an emergency landing on the Chinese island of Hainan.
The precarious incident was a foreign policy turning point for Bush. The Chinese demanded a formal apology for its pilots death and held the American crew for 11 says
It was Bush who blinked first. The State Department issued a carefully written apology with the words sorry and regret. Then, a few days later, the American ambassador followed up with a written declaration of sincere regret.
These days, Bush treats Chinese disputes gingerly, although his cabinet issues tough sounding rebukes to the Chinese for keeping their exchange rate pegged at a level that boosts exports.
His administration, in November, used velvet gloves to apple sanctions on Chinese textiles even though it announced them with blustery language and the measures only apply to specific import niches.
Lawmakers seem relieved to settle for a symbolic gesture like Chinas just announced $6 billion spending spree on American cars and aircraft. The figure made a bold headline in the government controlled China Daily.
But the amount wont prevent another record US-China trade deficit. The bilateral trade gap, which will widen to at least $125 billion in 2003 from $103 in 2002, is the widest between any two nations in history.
For all its fragilities, nothing yet has slowed this fire-breathing dragon not the Asian financial crisis of 1997-98; nor the internet and technology crash; not synchronous global recession of 2001; and not last years outbreak of [SARs].
Nor can the USA afford to have China slow down. Throughout the past downturn, which has ravaged the global economy, China has been the one major nation with stable growth.
While its not presently in Chinas interest to use its very large dollar reserves as an economic weapon against the US, this possibility exists, the US-China Review Commission report warns.
The US has the best recovery that money can buy, says the outgoing chief economist of the International Monetary Fund, Kenneth Rogoff, when he retired in September. Its borrowing a great deal in order to sustain this very high recover.
NATIONAL NEWSPAPER EXCERPT
We have not come all this way through tragedy and trail and war only to falter and leave our work unfinished
President Bush sets out the themes of his re-election campaign in his State of the Union address, in which [he says that America is strengthening its economy] and successfully combating terrorism.
***************
I had wondered, previous to reading these articles, whether the Bush government might be steering the USA toward a financial crisis with its eyes more open than might first appear. Regardless of the fact, crisis does appear to be on the cards, as successive governments, and, increasingly, the current one, deliver the US economy into the control and dubious care of a foreign nation. But, perhaps I am being naïve and such a situation has existed, to a certain extent, for decades with dependence simply varying or Bush intends to declare war
against China, and reshuffle the monetary accounts resulting
EDIT - Added [ and ] to highlight Bush quote from newspaper.
remember that nobody really knows what will happen - all the different theories that are actually based on logic and simulation add fuel to the denialist fire. Simply put though, it must be fair to say that things will not be the same 
I also think there's some merit to the idea civilization may have been wiped out before and a lot of thing sare older than we think. We may end up wiping ourselves out and having the shattered survivors start over, forgetting our once glorious species' civilzations and technology.
goes too far against historical, and quite contemporary evidence.
