Shipping Our Economy, Our Jobs And Our Prosperity To China

As the U.S. economy continues to implode, large American corporations are investing billions upon billions of dollars in China.  But all of this investment comes at a price.  Over the past several decades, hundreds of factories and manufacturing facilities that would have been constructed in the United States, along with millions of decent paying jobs, have ended up going to China instead where labor is so much cheaper.  In the process, China has become a massive economic powerhouse, while once thriving manufacturing cities in the United States such as Detroit are now rusted-out corpses.  In fact, China’s economy has grown so rapidly that it is being projected that in 2010 China will replace Japan as the world’s second-largest economy.  Not only that, but China has already overtaken Germany and is now the biggest exporter of goods in the entire world.  But none of this growth in communist China would have been possible without all of the globalism and free trade that U.S. politicians from both parties have been pushing on us for the last 40 years.  When they were selling us on the benefits of “free trade” they didn’t tell us that we would end up shipping our economy, our jobs and our prosperity over to China. 

American consumers never seemed to be able to put two and two together.  As we were busy running out and filling up our shopping carts with cheap plastic crap made in China, we didn’t seem to realize that a “global economy” meant that we would be competing for jobs and wages with workers on the other side of the world.

So now the U.S. economy, with its high wages and repressive government regulations, is suffering while China’s economy is thriving.

So just how much money are U.S. corporations pouring into China?

Well, according to the U.S.-China Business Council, U.S. corporations combined for $3.6 billion in direct foreign investment in China in 2009.  That was substantially up from $2.9 billion in 2008.

As U.S. companies pour increasingly large amounts of money into China, the economies of the U.S. and China are becoming inextricably linked.

In fact, some of the biggest “American” success stories are now manufactured in China.

For example, have you purchased an Apple iPhone?  Well, if you have, there is a really good chance that it was made in China.  Of course what Apple doesn’t tell you is that ten workers at the facility in China where the iPhone is manufactured have committed suicide in the past year by jumping off buildings at the factory.  Perhaps they were depressed over their low pay – the workers at the factory work very long hours but make less than 300 hundred dollars a month.

How would you like to work for 300 dollars a month?

But things could be even worse.

Reuters recently described the ordeal of one Chinese worker who spends at least eight hours a day standing on an assembly line putting together locks for Honda cars….

“Each year is the same. It makes me sick in the stomach. There’s no freshness to things anymore,” he said of his job which pays around 30 yuan (US$5) per day.

How in the world can American workers be expected to compete with someone who makes 5 dollars a day?

But some Chinese workers toil in even more difficult conditions.  According to the Toronto Star, employees at the Pingdingshan Cotton Textile Company work grueling two day shifts and yet only make 65 cents an hour.

These low wages have enabled big global corporations to make huge profits, and they have helped provide lots of low price products for American consumers, but in the process they are cannibalizing U.S. jobs, factories and businesses.

In fact, it is getting quite hard to find things that are made in the United States anymore.  Even many of the “organic foods” that you are buying at organic food stores are now actually made in China.

As tens of millions of American workers sit at home collecting unemployment checks, U.S. companies are busy making plans to invest billions more in China.

According to Pacific Epoch, a China-focused research firm based in Shanghai, Pepsi “has committed $1 billion over the next four years to build 14 new beverage production plants, in a move that will almost double its production capacity in the country.”

Couldn’t we use a few of those beverage production plants in the United States?

But who wants to pay U.S. workers 12 dollars an hour when they can pay Chinese workers 2 dollars an hour?

But Pepsi is far from alone.  Forbes recently detailed the massive investments that some of the major car companies are making in China….

General Motors and Volkswagen have invested billions in China, starting more than a decade ago. Ford is rushing to catch up by adding production capacity and expanding its dealer network in China. Ford and its joint-venture partner, Chang’an Ford Mazda Automobile, plan to start producing next-generation Ford Focus models at a new, $490 million plant in Chongqing in 2012.

Meanwhile, once thriving American manufacturing cities such as Detroit and Flint, Michigan are so dilapidated and run down that they literally look like war zones.

But it is not just U.S. companies that are investing in China.  According to China’s Ministry of Commerce, overall direct foreign investment in China rose 14 percent to approximately $39 billion in the first five months of 2010.  Nearly half of that money was spent on building or expanding factories.

The implications of all this are staggering.

First of all, nobody can deny any longer that China has become a superpower.  China now has one of the largest economies in the world, their military has been dramatically upgraded and modernized and they have developed a network of economic and diplomatic contacts around the globe that would have been unthinkable 20 or 30 years ago.

Meanwhile, the United States has an economy that is imploding, a reputation that has been deeply tarnished and a debt that is the largest in the history of the world. 

In fact, China owns about a trillion dollars of U.S. government debt.

Yes, the United States is falling and China is rising.

So now that China’s economy and manufacturing base has been built up so dramatically, what happens when someday the communist Chinese government decides that it doesn’t want to be such great friends with the United States anymore?

If relations between the two nations really go south someday, could U.S. corporations suddenly lose the billions upon billions that they have poured into China? 

Also, many Chinese military strategists believe that it is inevitable that there will be a war between the United States and China someday.  So could China end up using all of the technology and manufacturing capacity that they have gained at our expense against us someday?    

The truth is that all of the money and technology that we have poured into China could end up being one of the greatest national security blunders of all time. 

China is not a democracy.  The Communist Party runs China, and most of their leaders still believe in the ultimate worldwide triumph of communism.

So in the end the United States may look back and realize how incredibly stupid it was to build up communist China at the expense of our own economy.

But this is the world our leaders have built for us.  A world where globalism and “free trade” force us to compete for jobs against sweatshop laborers around the globe.

The reality is that this “new world” is not very good at all for the American middle class.  The economic realities of the 21st century are very cruel for Americans who are seeking to live a middle class lifestyle. 

Gradually, everyone in the world is being pushed into two economic groups.  The massive global corporations that dominate everyone and everything, and the worldwide mass of expendable labor that serves those global corporations.

It is this kind of “neo-feudalism” that we must avoid at all costs.  If the American people would just wake up this trend towards increasing globalism could be reversed.

But will they wake up?

Has China Begun Dumping U.S. Treasuries?

Has China decided that now is the time to start dumping U.S. Treasuries?  The Treasury Department announced on Tuesday that foreign holdings of U.S. Treasury securities fell by $53 billion in December, which is an all-time record decline for one month.  China alone reduced its holdings by $34.2 billion.  So is this because the U.S. doesn’t need to borrow as much money anymore?  Of course not.  In fact, the Obama administration just released a new budget which calls for a record 1.56 trillion dollar budget deficit.  Obama has publicly stated that the U.S. will be running trillion dollar deficits for the foreseeable future.  No, China is not getting rid of U.S. Treasuries because the U.S. doesn’t need to borrow anymore.  The U.S. needs to borrow from China (and from everyone else) more than ever.

So what is going on?

The truth is that China recognizes that the long-term prognosis for U.S. Treasuries is really bad.  The U.S. government had piled up the biggest mountain of debt in the history of the world, and when the U.S. dollar eventually collapses (and it will) the Chinese could end up holding a trillion dollars of worthless paper.

So they are slowly starting to slide towards the door, hoping that everyone else does not suddenly catch on that the party is over.

The Chinese know that the great U.S. economy is slowly spiralling into the toilet.  Everyone is so focused on the financial disaster in Greece right now, but Michael Pento, a senior market strategist with Delta Global Advisors, says that the financial situation in the United States is “worse than Greece”.

The Chinese don’t want to be the ones left standing when this bizarre game of musical chairs is over.  In fact, it is just not U.S. Treasuries that the Chinese are getting rid of.  There are reports that the Chinese government has 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.

But as we have seen, the Chinese government is also reducing the size of their U.S. Treasury holdings.

For years, there have been financial analysts that have been warning of this day.  They have been warning that when the Chinese and other foreign governments start dumping Treasuries it will send interest rates skyrocketing through the roof and it will crash the U.S. economy.

Well, China is starting to dump Treasuries and the U.S. government is borrowing more money than ever, but interest rates are staying somewhat stable.

So what is happening?

Well, as we have covered previously, the truth is that the Federal Reserve is soaking up the excess borrowing.  Some analysts refer to this as “printing money”, but it is more like “printing debt”.  In fact, the Fed “bought” the vast majority of new U.S. Treasuries issued in 2009.

So that is how the U.S. government can continue to borrow obscene amounts of money when the rest of the world won’t lend it to us.  But this can’t continue forever and it is obviously a recipe for hyperinflation in the long-term.

Meanwhile, the Chinese are trying to make a smooth move towards the “exit” sign.  Whether they will be able to successfully pull it off is another matter.

Extreme Food Storage

Are We On The Verge Of An Economic War With Russia And China?

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….

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