Has our exploding national debt become an economic weapon of mass destruction in the hands of the Russians and the Chinese? Have increasing tensions between East and West put us on the verge of an economic war with those two superpowers? Those who are convinced that the Russians and Chinese would never work together to collapse the U.S. economy should really consider what former U.S. Treasury Secretary Henry Paulson is saying in his new book. Paulson's new book is entitled "On The Brink", and in it he claims that the Russians contacted the Chinese in 2008 and proposed that both nations dump their Fannie Mae and Freddie Mac bonds at the same time in a bid to force a bailout of the largest U.S. mortgage-finance companies by the U.S. government. Fortunately, China declined to go along with Russia's proposal at the time, but this revelation just underscores the economic danger that the United States has gotten itself into.
You see, if the Chinese and the Russians had done that, it would have set off mass panic in the financial markets. It would have been an unmitigated economic disaster.
Due to our greed and our reckless spending, we have gotten ourselves into a situation where China and Russia have a tremendous amount of leverage on us.
Near the end of 2009, China owned U.S. Treasuries worth approximately $789 billion, and Russia owned U.S. Treasuries worth approximately $128 billion.
If China and Russia decided to dump their Treasuries in unison it could literally devastate the U.S. economy. Already the Federal Reserve is having to "purchase" the vast majority of all new U.S. Treasuries. The talking heads on the cable networks claim that this kind of "Ponzi scheme" by the Fed cannot continue indefinitely, but the U.S. government is continuing to spend recklessly and nobody else is stepping up to buy our new debt. So what would happen if China and Russia suddenly decided to dump nearly a trillion in U.S. Treasuries on the market?
Don't think that it can't happen.
Already, the Chinese government has reportedly ordered its reserve managers to dump all "riskier securities" and to hold on to only U.S. Treasuries and U.S. agency debt that comes with an implicit or an explicit U.S. government guarantee.
So is this a prelude to even more dumping to come?
The truth is that tensions between the United States and China are escalating rapidly....
*Barack Obama recently promised to get "tough on trade" with China, and the Chinese government responded to that notion very angrily.
*Senior Chinese military officers have suggested that the Chinese government should sell some U.S. bonds to punish the U.S. government for the latest round of arms sales to Taiwan.
*Barack Obama has attempted to pressure Chinese President Hu Jintao to raise the value of the Yuan, but the Chinese are not giving an inch. In fact, there are reports that the Chinese regard Obama as weak.
*The Chinese government is reportedly extremely upset that the White House has announced that Obama will meet with the Dalai Lama in the next few weeks.
The vast majority of the American people have no idea what is going on, but the truth is that the Chinese people, and especially the Chinese military and the Chinese government, are very pissed at us. Just consider the following quotes....
Luo Yuan, a researcher at the Chinese Academy of Military Sciences:
"Our retaliation should not be restricted to merely military matters, and we should adopt a strategic package of counter-punches covering politics, military affairs, diplomacy and economics to treat both the symptoms and root cause of this disease."
Chinese Major-General Yang Yi:
"This time China must punish the U.S."
Huang Xiangyang, a commentator in the China Daily newspaper:
"When someone spits on you, you have to get back."
Nationalism is surging right now in China, and attitudes toward the West and toward the United States are taking a turn for the worse.
In facat, one new poll taken in China recently has revealed that more than half of Chinese citizens now believe that China and America are heading for a new cold war.
But China was so weak a few decades ago.
How could this happen?
That sad thing is that we have done this to ourselves.
It was us who allowed the Chinese to artificially keep their currency so low for so long.
It was us who struck highly imbalanced trade agreements with them.
It was us who allowed our corporations to shut down factories in the U.S. and open them up in China.
It was us who insisted on "free trade" with China even as the human rights abuses over there continued to get worse.
It was us who kept running out to the big box stores to keep buying cheap Chinese-made products when we could have bought more American-made products.
It was us who kept voting for politicians who promoted "globalism" and "free trade agreements" when we should have known that globalism would ultimately have some very painful consequences.
It was us who kept giving China access to advanced military technology and allowed Chinese generals to sleep over at the White House.
It was us who kept pumping money into China and then asking them for loans when we knew all along that they were one of our biggest strategic enemies.
It was us that has allowed China to become the second-largest economy and the number one exporter in the entire world.
If it was not for the stupidity of the United States, the biggest Communist nation on earth, China, would not be an economic and military powerhouse today.
But it is.
And we did it.
In addition, most analysts in the United States seriously underestimate Russia.
Russia (not Saudi Arabia) is now the number one oil exporter in the world. Their economy has been humming like a machine for most of the past decade, and they are rapidly modernizing and expanding their military. Russia has made it known that they intend to play a major role in world affairs and that they do not intend to be pushed around by someone like Barack Obama.
The sad thing is that the majority of economic talking heads on the cable channels are still convinced that Russia and China will never use the economic time bombs that we have put into their hands.
They are convinced that they would be "shooting themselves in the feet" by taking us down.
While that may be true, the truth is that there comes a time when other matters become much more important than losing money on some investments.
For both Russia and China, the United States is still the number one strategic enemy out there. They do not look at the United States as a true friend. If it comes to a point where it suits their purposes to pull the trigger on an economic war with us, then that is exactly what they will do.
For more on the potential for economic war with Russia and China, check out the excellent video below....