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The First Of Many Chinese Demands

China has asked, not unreasonably, about how the United States intends to protect the dollar in order to avoid capital losses to them. This question comes from a member of a Chinese economic think tank, who would not have posed it in public without the implicit or explicit approval of his government. This shows how interdepedent the two countries are. In essence, China is now the largest investor in "America Inc."

China is the Thriftville, and America is the Squanderville in Warren Buffett's parable of two islands in the world. Eventually, the inhabitants of Squanderville selll off their country piece by piece to Thriftville, and become "sharecroppers" in their own land.

Chinese cash flows are humongous, and they have no choice to invest them in the United States. Then they will have to act to protect their increasing large investments. Eventually China will "progress" from asking questions about the safety of their investments to telling us how to run our country for the beneift of their investments. Specifically, they are now (reasonably) afraid that America will try to inflate its way out of its debts.

This can only have one of two possible outcomes: Either China will end up ruling us or we will end up ruling them. That's why Jim Rogers wants his daughters to learn Mandarin.

Disclosure: Long Chinese ancestors.