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The Chinese Come Calling
What a hoot. The Chinese Communists invaded Washington on Monday demanding not that we sacrifice our freedoms but rather that we balance our budget. Creditors get to make that kind of call. And the Marxists of Beijing, who have turned out to be the world’s most prudent bankers, are worried about their assets invested in our banana republic.
“China has a huge amount of investment in the United States, mainly in the form of Treasury bonds. We are concerned about the security of our financial assets” was the way China’s assistant finance minister put it. Briefing reporters at the U.S.-China Strategic and Economic Dialogue, he added, “We sincerely hope the U.S. fiscal deficit will be reduced, year after year.” Quite sincerely, one suspects, given a U.S. budget shortfall this year that is slated to reach $1.85 trillion.
Suddenly, it was U.S. officials who were promising deep reform to their disgraced economic system rather than demanding it from incompetent foreigners. President Barack Obama’s economic team of Clinton-era holdovers, who a decade ago had hectored China on the virtues of fiscal responsibility, now were falling over themselves to reassure the Chinese that their $1.5 trillion stake in U.S. government-issued securities is safe, and that they should buy more at this week’s $200 billion Treasury auction. If they don’t, we’re in big trouble.
U.S. Treasury Secretary Timothy Geithner promised to behave, saying the U.S. is “committed to taking the necessary measures to bring our fiscal deficits down to a more sustainable level once recovery is firmly established.” Now let’s hope that the Chinese Communists and their natural allies among congressional deficit hawks will be able to keep him to his word.
And don’t blame any of this on peacenik liberals. The new conciliatory—nay, deferential—tone toward China precedes the Obama administration, having begun in bilateral talks during the last years of the Bush administration as the U.S. economy began its ignominious downfall. It was George W. Bush’s treasury secretary, Henry Paulson, who set the course when the former Goldman Sachs chairman realized how dependent were his Wall Street buddies on Chinese goodwill.
But from all of this adversity may come something good: recognition that the United States is not the repository of all wisdom. Maybe the Chinese have found a model different from ours that also works? Might there not be an Arab, Latin or Indian one that also qualifies and need not be overthrown?
The tone of this week’s talks, ironically held at the Reagan Building and co-chaired by Geithner and Secretary of State Hillary Clinton, finally signaled the end of the Cold War assumption that regimes with labels like communist and capitalist could not form profitable partnerships. On the contrary, as Secretary Clinton noted, it is time to move from “a multipolar world to a multipartner world.” And President Obama in opening the conference made clear that the partnership between China and the U.S. is decisive: “The relationship between the United States and China will shape the 21st century, which makes it as important as any bilateral relationship in the world.”
Mark it as a historic Rip van Winkle moment. For those who recall the rhetoric of the Cold War, the idea that we would someday be cooperating with Chinese Communists because they had humbled us economically rather than militarily is a startling turnabout. How did they get to be better capitalists than us, and being that they are good capitalists, why are we still spending hundreds of billions a year on high-tech military weapons to counter a potential Chinese military threat when the weapons they are using are all market-driven deployments?
A recognition that our tension with China is not military in nature came at this week’s conference in an announcement by Adm. Timothy Keating, commander of the U.S. Pacific Command, that agreement had been reached with his Chinese counterparts on improving relations: “A statement was made by a Chinese delegation official yesterday [Monday] that no country can develop sound policy if they try and do so in isolation. And I think that’s a great way of addressing the sense that all of us feel, the desire, to get back together again and discuss exercises, discuss personnel exchanges, discuss responses to humanitarian assistance crises and the provision of disaster relief.”
Not bad for a start, and maybe we can help solve our economic problems by selling our latest high-tech weapons to China as we do to the rest of the world. Or better yet, we could do some serious damage to our deficits, and our dependence on the Chinese, by sharply cutting expensive weapons programs now that the Cold War is finally over.
18 Comments so far
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"Maybe the Chinese have found a model different from ours that also works? Might there not be an Arab, Latin or Indian one that also qualifies and need not be overthrown?"
Two thoughts: first, what works for the Chinese is what the bondholding class here wants---a Stalinist state apparatus and a crony-capitalist economy. Mission (almost) accomplished. Also note that China has studiously avoided any attempt at empire building and the inevitable military/financial quagmires that follow.
Second, there's a model that works all too well, in the eyes of those same bondholders---the Cuban one, which is portrayed in the corporate media as a disaster, but which has improved the lot of the Cuban citizenry despite the US's vicious and unrelenting attacks against it for more than a half-century.
“We sincerely hope the U.S. fiscal deficit will be reduced, year after year.”
Like that's going to happen! LOL
Oh, it's going to happen.
No, you're not going to like it much at all either. The slap you recieved from the Chinese is very much like the slap you delivered to the Brits and French during the Suez Crisis; you can't pay for your wars so stop fighting them.
No, I daresay that yanks will not react positivly to this situation (should they understand it...).
The recovery that Geithner makes conditional for US compliance is reliant upon two factors: an increase in consumer spending, which has been funded by means of credit since the US no longer creates consumer goods in any close proportion to its demand; and an increase in defense spending, also funded by credit, to turn high cost military technology against China and others, which are the goods the US continues to produce in excess of its own prodigious demand. Both of these require the increase in the US fiscal deficit, and both of these function as direct intravenous feeding into America's morbidly obese corporations – institutions that have just been given a trillion dollar glucose injection that would have killed a healthy economy. There is no way out of this crisis that does not involve pain that must be kept from the public, who bears no responsibility for the matter. Progressive income tax rates must be restored to 1950s levels, tax loopholes must be closed, and unions must be revitalized with government protection. Only then can we hope to pass muster in the long term for our Chinese creditors.
Actually I think you're quite correct. And then we would have to ask ourselves what will happen when the buffoons in DC can't achieve the income tax changes necessary to accomplish this? Essentially, the US has offshored it's currency and in exchange for a devaluing dollar what will the Chinese demand in repayment? As the economy continues to crumble and less is purchased from abroad where is the "repayment" mechanism? US based Corporations are slowly starting to leave the US and the youthful talent pool is looking overseas for job opportunities. The US will slowly come to resemble the Lower Ninth Ward after Katrina. The only thing left for the US to exchange for the debt is land or an equity share in GM?
"U.S. Treasury Secretary Timothy Geithner promised to behave, saying the U.S. is “committed to taking the necessary measures to bring our fiscal deficits down to a more sustainable level once recovery is firmly established."
I can't wait to hear how Geightner plans on doing this when the government is taking on $Trillions of the toxic assets that the banks don't want on their balance sheets.
Is he Harry Houdini or an Alchemist?
Sioux Rose
GAIL: He suffers from a truth deficit, and the acquired, "Excessive Greed Disorder." Both corrupt judgment and distort conversation. (As per your Leo and BS detection comment on another thread, how do you explain Obama and Clinton being immuned to it?)
Sioux Rose,
As far as Bill Clinton is concerned, there was never a moment that I thought anyone was BS-ing him. What I believe to this day is that he was more of an opportunist than a president of the people; and for the most part, played his role the way the powers wanted him to play. NAFTA got signed under Clinton but it was incubating under Reagan and Bush I. Major policy changes such as NAFTA are well crafted by the sleazebags on Wall Street and eventually implemented by the people they support through campain contributions and most likely inside deals that we don't know about.
The second destructive piece of legislation he signed was the Gramm-Leach Biley Act which essentially gutted the protections of the Glass-Steagall Act and allowed large banks to become brokerage houses and insurance firms. This enabled these power houses to scam investors and create the credit crises and real estate bubble we are now dealing with. Do I think that Clinton didn't understand the ramifications of this bill? Not a chance! He's an attorney and far too intelligent.
On the other hand, he did try to compensate for these misfortunes by trying to get a health care bill passed and making an effort to balance the budget and reduce taxes for middle America.
And Obama? It's too early to judge given the number of critical issues he's dealing with; the major one being the worst economy in 70 years and the U.S. dollar losing ground as global reserve currency. That's huge! Any president would have his head served on a platter if the dollar lost its status. And as we all know, the banksters don't want their fiat Ponzi party to end.
"The owners of the country ought to run it"
Maybe the Chinese should run our country.
Let's not let distaste with Wall St. make anybody romantic about the Chinese.
There are socialists, communists, and anarchists in China, but they are not running government or business, and they have not come to Washington to chide their debtors.
OK, the Chinese despots haven't bled themselves fighting; they haven't, for the most part, gambled their seed money, except on the US; and they haven't exported their industry and proletariat through "free enterprise" pretensions: kudos, China.
However, granting that US domination has to break somehow, having China play IMF to the US's Argentina is brinksmanlike at best.
China's own love of peace is severely suspect, given their occupation of Tibet, investment in the US military, and severe repression of strikers within their borders.
China is by most measures fascist, not communist.
IMF-style controls are meant to protect investments and maintain the state of debt, not to preserve the economy of the debtor nation.
Pinochetismo, Somocismo, and the various other faux-free-market dictatorships arrived through IMF-style collusion between foreign investment and local Xe-Blackwater-style rightist thugs.
China cannot wrest military influence from the US, but they may subsume it like US interests subverted Latin American despots, by bribery and eventually by coercion. If they do, it will not be to create broad human sovereignty in the US or China or to create a broad community of sovereign nations.
[China is by most measures fascist, not communist.]
Totalitarian, much like the elite in the usa wants their country to be. Check out Gore Vidal's article about the police state that's being built in the usa. On truthdig I think...
They want their money back with interest, so they're really not communist (if ever they really were). I doubt fascist, as they don't recognise that the corporation has - or should have - as much power as the state does. Totalitarian, yep. They say that the ruling elite - who call themselves communist - are the only ones who rule and the only ones who can express a valid opinion.
[China cannot wrest military influence from the US, but they may subsume it like US interests subverted Latin American despots, by bribery and eventually by coercion. If they do, it will not be to create broad human sovereignty in the US or China or to create a broad community of sovereign nations.]
Well, they can demand that you stop spending so much money on the military. You spend more money on the military than the rest of the world combined, but if the Chinese stop buying t-bills how are you going to pay for those shiny new aircraft carriers? The Chinese really are having enough problems with keeping their own country together, I don't think they give much of a damn about who rules other countries (as long as those other countries aren't attacking them.)
We must acknowledge that we live under an oligarchy: financial, banking, insurance, oil and the military-industrial complex.
What that means is that the country is their possession; it's structured to operate as their money-making machine. If an underserved group gets crumbs from the cake, it must be given by the oligarch him- or herself.
That is how oligarchs set up a clientalist system of hangers-on and personal dependents. They fight against any state action that actually benefits the lower-classes. It erodes both the clientalist system and their profit margins.
Ultimately, when an oligarchy establishes itself, the civil rights, political power and standard of living of the average citizen increasingly diminishes.
We can observe this phenomenon with the huge non-democratic, non-transparent, and no-strings-attached bailouts given to the largest financial and banking oligopolies.
Can we imagine the horrific outcry if such sums of government monies were directed toward constructing a single-payer health system that overrode the insurance and Big Pharma oligarchs...oh well. The outcry would be especially resounding if there was no monitoring, oversight, transparency, no-strings-attached, etc., etc., and ect.
Here is a juicy tidbit. The Big Bank oligarchy is profiting by lending to states that need money to balance their budgets.
Just think! If instead of throwing billions of dollars at the banking oligarchs we, instead, gave that money directly to our money-strapped states; we would lower unemployment, lower the Federal and states' deficits...it's too much to even imagine!
That's the problem with oligarchies; they rob the people by duplicating and overpricing privatized public services, privately tax us through oligopoly pricing of these services, while, at the same time, they lobby our government to deregulate all laws that limit their short-term profits but force them to be socially responsible, cut their taxes and promote and expand their Federal subsidies.
Thus, our government becomes their money-making machine.
The 1976 film, "Network," railed against Arab money owning the USA. Paddy Chayefsky was partially wrong: our creditors are the Chinese. Regarding how we got there, the movie still hits the mark.
For the U.S. "banana republic" at least, it seems like China is starting to sound a lot like the IMF in some respects. Doubtful that they'll be insisting on more "privatization" anytime soon however.
The creditor-debtor conflicts of interest between China Incorporated and USA Incorporated should make for some very interesting priority shifts along the way.
Robert Scheer wonders:
"How did they get to be better capitalists than us, and being that they are good capitalists, why are we still spending hundreds of billions a year on high-tech military weapons to counter a potential Chinese military threat when the weapons they are using are all market-driven deployments?"
************
Because Robert Scheer, you well-meaning but silly goose, the Chinese never were our enemy and we never were the enemy of the Chinese--the "enemy" are the elite oligarchs of capitalism regardless of nationality or philosophiocal or religious belief.
Poet
Dear Chinese,
You should know by now that the United States is too big to fail.
Therefore, you ought to buy some more U.S. treasury bonds. We suggest another half a trillion bucks' worth of them.
We love China and we are looking forward to a new spirit of cooperation between your nation and ours.
Yours very truly,
The U.S. Treasury Department
If the dollar loses a little more in value, that will help our manufacturers and employment. When the economy picks up a bit, it is likely we will raise taxes slightly on the rich. As long as the Democrats are in power, this is likely. If we wind down our wars on Muslims, we will save a lot of cash, and if we can somehow cut a few more unnecessary weapons programs, we're well on our way to a balanced budget.
Anybody starting to smell the death of SSI & Medicare? From Geitner to Summers it's Moscow '93 all over again. And Russia didn't do tooooo bad, did they? A little human die back, a spike in the infant mortality rate, homeless elderly, life expectancy of about 46 for males (guess they don't exercise and maintain a proper diet) and a society owned by and run by ruthless thugs (which we have in abundance already).
Future's so bright I'm heading for my daddy's anti-Khrushchev bomb shelter. Playing "My Three Sons" episodes this month. And the trivia quiz question of the day, "What famed actor who made 'Flubber' a household word starred as 'Daddy'?" You see we even have trivial pursuits in Hell...