China

The Number One U.S. Export To China: Waste Paper And Scrap Metal

Historians tell us that by the very end of the Roman Empire, goods were pouring into Rome from all over the known world, but about the only thing being sent out of Rome was human waste and garbage.  America has not yet reached that point, but we are certainly well on our way.  In 2010, the number one U.S. export to China is “scrap and trash”.  Yes, you read the correctly.  The number one thing that China buys from us is our garbage.  According to author Clyde Prestowitz, China’s number one export to the U.S. is computer equipment (nearly $50 billion) while our number one export to them is waste paper and scrap metal (approximately $8 billion).  When it comes to world trade, China is literally wiping the floor with the United States.  In August, the U.S. trade deficit with China set a new one month record of $28 billion dollars.  Our insane trade policies are making China (along with several of our other “trade partners”) incredibly wealthy, and the U.S. government ends up begging China to lend that money back to us to fund the exploding U.S. national debt.  That just isn’t stupidity – that is insanity.

The truth is that our “twin deficits” are literally bankrupting this nation.  We are completely and totally destroying the economic future of our children and grandchildren.

But hey, the Vikings beat the Cowboys, Dancing With The Stars is heating up and we all have a bunch of DVDs to get caught up on so why worry ourselves, right?

Unfortunately, the reality is that we can’t afford to be “comfortably numb” any longer if we hope to have any kind of a future.

It is time to wake up people.

Sadly, a significant percentage of young Americans these days can’t even tell you what a “trade deficit” is. 

If you don’t believe this, just try a little experiment some time.  Just go up to a few young Americans on the street and ask them to define “trade deficit” for you.

But fortunately, the vast majority of the readers of this column are quite informed.  Unfortunately, I still don’t believe that most of you really understand how incredibly dangerous the trade deficit is.

So just how dangerous is the trade deficit?  Well, world famous investor Warren Buffett once put it this way….

“The U.S trade deficit is a bigger threat to the domestic economy than either the federal budget deficit or consumer debt and could lead to political turmoil… Right now, the rest of the world owns $3 trillion more of us than we own of them.”

Between 2000 and 2009, America’s trade deficit with China skyrocketed nearly 300 percent.  Wealth, factories and jobs are leaving the United States at an astounding pace.  The danger that this represents to our economy is so vast that it is hard to even describe.

If you ever find yourself in a debate with proponents of “free trade”, you can almost always get them to eventually admit that “free trade” will raise the standard of living for workers in countries like China while significantly lowering the standard of living for U.S. workers, but that this must be done for the good of the emerging “global economy”.

Of course U.S politicians never really mention this nasty little fact when they give speeches about how wonderful our trade policies are.  They never really get around to mentioning that “free trade” is one of the key foundations of “globalism” and that we are being merged into a one world economy.

Today, American workers do not just compete with other American workers.  Instead, U.S. workers now find themselves in direct competition for jobs with workers in China that makes less than a tenth of what an American worker would make.  In China, a garment worker makes approximately 86 cents an hour.  Apple iPhones are manufactured in China by workers making about 293 dollars a month (and that was after a big raise).

So exactly how long do you think you and your family would be able to survive on 293 dollars a month?

But unfortunately, millions more Americans will lose their jobs and millions more Americans will be forced to take a cut in pay in order to compete in the new global economy.

According to a disturbing new study by the Economic Policy Institute, if the trade deficit with China continues to increase at its current rate, the U.S. economy will lose over half a million jobs this year alone.

The sad truth is that it is NOT a good time to be a blue collar worker in America.  If your job does not get offshored or outsourced, then it is likely to be made obsolete by computers and automation. 

The need for manual labor is rapidly declining in today’s world.  For example, there is a Japanese firm called Fanuc, Ltd. that actually has industrial robots manufacturing other industrial robots in a “lights out” factory.

How bizarre is that?

But things wouldn’t be quite as bad for U.S. workers if China was not cheating so badly.  The truth is that they just do not play the game fairly.

For instance, it is estimated that the Chinese government is keeping China’s currency valued about 40 percent lower than it should be.  This is essentially a de facto subsidy to China’s exporters.

There has been a little bit of rumbling in the Obama administration about this in recent weeks, but it is quite unlikely that they will push China too far on this issue.  After all, the Obama administration desperately needs China to keep loaning us massive quantities of money so that we can keep funding our runaway debt.

If you sit back and objectively analyze the facts, it quickly becomes undeniable that China is beating the living crap out of us economically.  In fact, one prominent economist is projecting that the Chinese economy will be three times larger than the U.S. economy by the year 2040 if current trends continue.

This all could have been turned around a decade or two ago, but now China has us by the throat.  At any time, China could decide to start selling off massive quantities of U.S. Treasuries.  At any time, China could decide to cut off our supply of rare earth elements (of which they have a virtual monopoly).   

China is now even the number one supplier of components that are critical to the operation of U.S. defense systems.  How smart were we to allow that to happen?

It is a direct threat to national security for China to have so much leverage over us.  But you rarely hear anyone talking about this.

The truth is that trade with China is not a left/right issue.  As I have written about previously, it is impossible for any self-respecting conservative to justify our trade policies with China and it is impossible for any self-respecting liberal to justify our trade policies with China.

Yet very few current members of the U.S. Congress ever discuss the possibility of sweeping changes to our trade policies.

So we will continue to lose thousands of factories, we will continue to lose millions of jobs and we will continue to see the biggest transfer of wealth in the history of the world accelerate.

So do any of you think that I am wrong about this?  Please feel free to leave a comment with your opinion below….

10 Reasons Why Conservatives Should Be Against Unfair Trade With China And 10 Reasons Why Liberals Should Be Against Unfair Trade With China

There are very few things that the top politicians in both political parties agree on these days, but one of the things that that they do agree on is that free trade with China is a good thing.  George W. Bush, Dick Cheney, John McCain, Barack Obama, Nancy Pelosi and Harry Reid have all fully supported our trade relationship with China.  In this day and age, virtually anyone who even dares to question how fair our “free trade” is with China is immediately labeled as a “protectionist” and is dismissed as a loon.  But when you sit down and really analyze it, there are a whole lot of very good reasons why both conservatives and liberals should be fundamentally against our unfair trade relationship with China.  But you won’t hear these reasons being talked about on CNN, MSNBC or Fox News.  You won’t hear many members of Congress get up and give speeches about how trade with China is bleeding our economy dry.  Both major political parties have completely and totally bought into “the benefits” of globalism and free trade and there isn’t even much of a national debate about our trade policies anymore.

But there should be a national debate.  Unfortunately, most conservatives are just going to accept whatever their leaders tell them to believe.  Conservatives have been convinced that to be against unfair trade is to be “anti-business” and no conservative ever wants to be anti-business.

Similarly, most liberals blindly follow whatever Obama, Pelosi and Reid tell them to believe.  Millions of hard working Democrat voters have lost their jobs due to our nightmarish trade relationship with China, but they are still convinced that Obama is their savior and that they must not ever say anything that he does is wrong.

Well, I have a message to members of both political parties….

WAKE UP!  YOU HAVE BEEN LIED TO!  

If you are truly a conservative, there is no way that you should ever support our trade relationship with China.

If you are truly a liberal, there is no way that you should ever support our trade relationship with China.  

Globalism has allowed the big global corporations that dominate our economy to make huge amounts of money, but it has also forced American workers into one gigantic global labor pool. 

Are you willing to work 12 hours a day for less than $2.00 an hour in sweatshop conditions?  

Well, that is your new competition.

The top 1 percent of all Americans is using globalism to make huge profits, but the standard of living for the rest of us is slowly but surely being forced down toward the rest of the world.

Is that what you really want?

If after reading the reasons below you can still consider yourself a good “conservative” or a good “liberal” and still support our current trade relationship with China please leave a comment to this article.  I would love to hear your reasoning.  

10 Reasons Why Conservatives Should Be Against Unfair Trade With China

1 – Conservatives are supposed to be all about creating jobs.  But millions upon millions of good paying middle class jobs have been shipped off to China and they are never coming back.

2 – Once upon a time, conservatives were opposed to communism.  But our trade relationship with China has enabled the largest communist economy in the world to go from third world status to superpower status.  China is now the second largest economy in the world, and that would have never happened without our cooperation.

3 – Conservatives are supposed to be concerned about national security.  But thanks to the massive amount of money they have made from us, the Chinese have been able to dramatically upgrade and modernize their military.  At the top levels of the Chinese government, most officials still believe in the ultimate worldwide triumph of communism, and now thanks to us they have a world class military with which to advance that agenda.

4 – China has a very strict one-child policy which should be absolutely abhorrent to any true conservative.  

5 – China uses mobile abortion vans to help enforce the one-child policy.  How any social conservative can justify trade with China after learning this is a total mystery. 

6 – If Republicans actually started fighting to protect American jobs from going overseas they could win the “angry working class vote” and take both houses of Congress and the White House in 2012.

7 – Conservatives don’t like when other countries try to take advantage of the American people.  Yet China is taking advantage of the American people by keeping their currency artificially low and most conservatives are strangely quiet about this.  This currency manipulation has put large numbers of U.S. small businesses at a huge competitive disadvantage and has forced many of them to shut down.  Essentially, this currency manipulation has enabled China to get us down on the mat and continually beat the stuffing out of us.  Meanwhile, our politicians stand by and do nothing.     

8 – Our trade deficit with China has enabled them to accumulate about a trillion dollars of our debt.  This gives them tremendous leverage over us and is a very serious threat to our economy and to our national security.

9 – Conservatives are traditionally very protective of national sovereignty and state sovereignty.  But a global economy governed by the G20, the WTO, the IMF and the World Bank is a giant step toward world government and a giant step away from national sovereignty and state sovereignty.

10 – The giant trade deficit that the United States runs is making us poorer as a nation each and every month.  Each year, somewhere around half a trillion dollars of our national wealth gets transferred out of the United States.  Much of that gets transferred to China.  The United States spends approximately $3.90 on Chinese goods for every $1 that the Chinese spend on goods from the United States.  The transfer of wealth that this represents is absolutely mind blowing.  China is literally bleeding us dry.

10 Reasons Why Liberals Should Be Against Unfair Trade With China

1 – Liberals are supposed to defend unions, yet our trade relationship with China has done more to hurt unions than anything else and most liberal politicians don’t seem to care.  Globalism has put the average American worker in direct competition with the cheapest labor in the world.  Unemployment is going to continue to increase unless something is done to stop the offshoring and outsourcing of our jobs.

2 – Liberals are supposed to care about the environment.  But our trade relationship with China means that thousands of factories and businesses leave our shores and end up in China where the environmental regulations are not nearly as strict.  In fact, China has become a complete and total environmental nightmare at this point.  If liberals truly cared about the environment they would want to keep factories and businesses here.

3 – Our trade relationship with China (and with the rest of the world) has caused the income inequality gap in America to explode.  The top 1% of all Americans have done very well in this environment while the rest of us suffer.  For much more on this phenomenon, please see my recent article entitled “Winners And Losers“.

4 – Dangerous products from China are pouring into the United States. Liberals should be horrified that so many of our products are now made outside the United States far from the watchful eyes of our regulatory agencies.  Over the past couple of years, there has been headline after headline about dangerous products made in China.  The following is just one example of this: 10 Babies Die Mysteriously At Fort Bragg: Toxic Drywall From China Used In Base Homes The Culprit?

5 – In a global economy, every piece of legislation that Democrats intend to help American workers with ends up backfiring.  For example, a rise in the minimum wage or a law increasing worker benefits causes American workers to become even more expensive and gives corporations even more incentive to move jobs overseas.

6 – “Free Trade” has been the most destructive in the inner cities where Democrats have traditionally gotten a tremendous amount of support.  Shiny new factories are going up all over China while at the same time formerly great manufacturing cities such as Detroit have degenerated into rotting war zones.  This is not good for liberals.

7 – Democrats won’t get elected if there are no jobs.  Each month, more jobs leave the United States for China and the growing number of long-term unemployed workers in the U.S. is not going to be inclined to keep the same politicians in office if this continues.  If liberal politicians value their jobs they should start protecting the jobs of average Americans.

8 – Free trade with China threatens to ruin our social safety net.  It is a good thing to help those in need, but there comes a point where too many people jump on to the net and it breaks down.  Already, one out of every six Americans is enrolled in at least one anti-poverty program.  Over 40 million Americans are on food stamps.  These are not good numbers for liberals.

9 – True liberals should be absolutely horrified by the exploitation of labor in China.  In China, millions of people work in horrific conditions for what is essentially slave labor pay.  The fact that big global corporations are getting rich from this should make the stomach of every liberal turn.   

10 – The giant trade deficit that the United States runs is making us poorer as a nation each and every month.  Each year, somewhere around half a trillion dollars of our national wealth gets transferred out of the United States.  Much of that gets transferred to China.  The United States spends approximately $3.90 on Chinese goods for every $1 that the Chinese spend on goods from the United States.  The transfer of wealth that this represents is absolutely mind blowing.  China is literally bleeding us dry.

Liberals and conservatives should both be able to agree that it is not a good thing for millions of American jobs to leave the United States and go to China.

Liberals and conservatives should both be able to agree that it is not a good thing that billions of dollars in wealth gets transferred from the United States to China every single month.

But will our leaders wake up and start pursuing a more logical approach to China?

Don’t count on it.

Rare Earth Elements: The World Is Rapidly Running Out And China Has Most Of The Remaining Supply

Most people have no idea what rare earth elements are, but a wide array of the technologies that we use every single day are dependent on them.  Without rare earth elements, we would have no hybrid car batteries, flat screen televisions, cell phones or iPods.  Without rare earth elements, the entire “green economy” would not be able to function, because almost all emerging green technologies use them.  Not only that, but rare earth elements are used by the U.S. military in radar systems, missile-guidance systems, satellites and aircraft electronics.  Without rare earth elements, the U.S. military (and militaries all over the globe) would not be able to function.  There are 17 key rare earth elements that we rely on every day.  But there is a huge problem.  China owns more than 85 percent of the known global reserves of rare earth elements.  Right now, the rest of the world is absolutely dependent on China’s exports of these metals.  Without these Chinese exports, the western world would quickly run out of these precious resources.  But in just a few years, the rapidly expanding Chinese economy will gobble up the entire domestic production of Chinese rare earth elements.  So what will the rest of the world do at that point?

This is a major problem that you aren’t hearing a lot about in the mainstream news.

But analysts are now predicting that by 2012 this could be a tremendous crisis.

So exactly what are rare earth elements?

Well, rare earth elements are a group of 17 relatively rare chemical elements that you can find on the periodic table.  These rare metals have names you may not be familiar with such as lanthanum, cerium, tantalum, neodymium and europium.  As mentioned above, they are used in products that we use every day such as laptop computers, iPhones, magnets, catalytic converters, night vision goggles and wind turbines.  These metals are not well known, but they are absolutely crucial to our way of life.

So what is going to happen when we start running out of them?

According to The Independent, the move towards “green technology” will cause a dramatic increase in demand for rare earth metals in the years ahead.  In fact, it is being projected that the world will need 200,000 tons of rare earth elements by the year 2014.

But analysts fear that China may drop exports of rare earth elements to exactly zero tons by 2012.

Can anyone else see a problem forming?

Last summer, one leaked report indicated that Chinese authorities were already considering a complete export ban of the most critical of the rare earth elements.

But while we may speculate when the complete ban is coming, the truth is that China has already moved to dramatically cut back exports of the metals.

China recently announced that they have cut export quotas for rare earth elements by 72 percent for the second half of 2010.  The U.S. government reacted quite angrily to this news and warned that this could potentially cause a trade war. 

TechNewsDaily recently quoted W. David Menzie, chief of the international minerals section at the U.S. Geological Survey, regarding the coming shortage of rare earth elements….

“Countries and companies that have or plan to develop industries that need rare earth minerals to make products are concerned about China’s growing consumption, which they fear will eliminate China’s exports of rare earths.”

So what needs to be done?

Well, nations and corporations that use rare earth elements need to start weaning themselves off the supply coming from China.

But there is a huge problem.

That cannot be done overnight.

According to a recent report by the U.S. Government Accountability Office, building an independent U.S. supply chain for rare earth elements could take up to 15 years.

So what in the world will we do until then?

That is a very good question.

The truth is that those running the U.S. government are just not very good at thinking strategically.

The U.S. Government Accountability Office report mentioned above lists Mountain Pass, California as perhaps the largest non-Chinese rare earth deposit in the world. 

But it almost fell into Chinese hands unnoticed.

You see, the mine in Mountain Pass is owned by Unocal, and in 2005 a Chinese bid for Unocal almost succeeded.

Yes, the Chinese were trying to strengthen their monopoly on rare earth elements and it almost worked.

Not that they don’t have the rest of the world in a very difficult situation already.

The truth is that if China cut off the export of all rare earth elements to the rest of the world tomorrow, it would throw the global economy into absolute chaos.

That is a lot of power for China to have.

Let’s just hope they don’t use it any time soon.

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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