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Proposal To Eliminate $1 Trillion In US Debt Needs Your Input

The purpose of this article is to run this idea by all of you Seeking Alpha readers because you are sophisticated thinkers.  Your input and comments are welcome.  Should the following idea be proposed to the leaders of the US and China....

Solving Multiple Problems With a Chinese “Louisiana Purchase”

Please consider the following proposal in light of the solution of several persistent distressing problems, including:

1). The unsustainable national debt

2). The absence of a clear Afghanistan occupation exit strategy

3). The aspirations of the People’s Republic of China for Taiwan

To Barack Obama, President of the United States and to Jiang Zemin, President of the People’s Republic of China:

Proposal:

The United States shall exit Afghanistan and a multiple party agreement shall be formed in which permanent annexation of Afghanistan will occur resulting in Afghanistan becoming an integral part of the People’s Republic of China in perpetuity. China shall have full control over the government, economy and resources of the former Afghanistan, and it shall become a province of the People’s Republic of China.

This agreement is to be considered a friendly arrangement, a modern-day version of the Louisiana Purchase, if you will.

In consideration for the permanent acquisition of Afghanistan by the PRC, the following concessions (payment) by the PRC will be agreed to:

1). All US Treasury securities (bills, bonds, notes) held by the PRC or sovereign Chinese government entities or those in its employ will be returned to the US Treasury immediately upon withdrawal of the last military unit from Afghanistan. No monetary compensation will be paid for those securities.

2). The PRC will officially recognize the government of the Republic of China and will agree never to invade or threaten Taiwan with military force or subvert its government.

Context:

The similarities between Afghanistan today and the American west in 1803 are striking. A powerful bordering central government (the US) had aspirations on the lands and resources of adjacent lands held by various groups lacking a central government or modern technology (the Indians) yet “owned” (controlled) by another superpower (France). France knew that they could not control the territory half a world away, so they were willing to make the best deal they could get, and President Thomas Jefferson became wildly popular. The indigenous population (Indians) were no better or worse off over the short run.

Similarly, China may have aspirations on the resources to support its huge population and emerging economy. America knows that it cannot control the territory half a world away for long. By getting its Chinese-held debt forgiven, Americas future generations will be that much better off. The dollar will be somewhat strengthened and our economy will be ultimately stronger. Further American blood and treasure will be spared. The Taiwanese can live without fear, and China should be happy that a much larger territory was acquired without loss of a single life. Further, China realizes that holding US debt is a losing proposition, and this transaction will result in getting rid of an asset which will relentlessly decline in value in exchange for hard assets (land and the resources thereof). Russia will probably acquiesce to the deal because they have already had a belly full of Afghanistan and would like to see it disappear. Iran might not like to see China next door, but their objections will fall on deaf ears. Elements in Pakistan will strongly protest, but will quickly learn to remain quiet and accept the fact, lest their home country become threatened. The Pakistani government will find it in its best interest to silence the protesters.

In principle, this is appears to be a win-win-win for the US, Taiwan, and PRC. It seeks to add stability to a volatile region and a volatile dollar-based world economy.
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Well, my fellow readers, is this a good idea, or a bad idea?  What are the economic implications and what might be the unforeseen consequences if such a proposal is enacted?



Disclosure: Author owns some Fidelity China Fund, and numerous investments unrelated to this article.

Disclosure: Author owns shares of Fidelity China Fund and numerous investments unrelated to this article.

Disclosure: Long YUII. Author also owns shares of Fidelity China Fund and numerous investments unrelated to this article.

Disclosure: Long YUII. Author also owns shares of Fidelity China Fund and numerous other investments unrelated to this article.