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Beijing Duck

This is getting boring. Another treasury secretary heads to China on what is in effect one big Kowtow. He is like an irresponsible nephew, wasteful and profligate visiting his credit-extending uncle for the umpteenth time with the promise of reform… If only uncle could see his way and help him out (with a little renminbi revaluation) one more time. What can the uncle say, it’s his only nephew and he needs him to carry on the family name, at least for now.

Here is the unvarnished truth, as a debtor to China we can only speak with words not actions. Our attempt at economic recovery is being financed with pure paper denominated in future obligations. On the other hand China is financing their stimulus with the real money America spent at Wall Mart’s every day low price stores. We have become the latest post asset economy and entered in to the Italian/Argentine world of a cash flow to debt service economy. When the ratings agencies start thinking about your credit worthiness, can an IMF rescue be far behind?

Many years ago I recall an event in China that said it all, unfortunately I cannot find it on Google or any other search engine so I will have to recall it as best as I can. A group of unfortunates needed to raise cash by selling a few pints of their blood. Some fifty of them went to a blood bank to do so. The blood-buying operator hooked them up yet did not stop after a pint or two, but drained out all their blood, leaving the deflated corpses to be found days later. As one’s blood is drained one becomes weak, dizzy and confused and loses the ability to resist. Higher profit for the blood buyers none for the sellers.

When you look at the trade deficits and the industrial strength that is being willfully sapped out of this country and being given to China, think of this true event.

We’re on a deathwatch for industry. Nothing is made in America anymore. There is no opportunity for a sober American person to make anything in a factory that would pay a living wage. A worker cannot now earn the economic security needed to raise a family in a cohesive community and live a decent life. Everything at every store from Kmart to New York’s hip SOHO district is made in China. With each day’s trade deficit and corresponding purchase of debt backed treasury bills by the Chinese central government, our will to resist Chinese policy diminishes, our ineptness increases and our currency hurtles towards utter debasement.

Does Tim Geithner not know this? Is he afraid to articulate it? Does he see an end to Chinese trade deficits and dollar accumulation? What would cause that?

It is not that China is a “currency manipulator” it’s way beyond that. It is a trade warrior that uses the fictitious concept of free trade to dismantle America’s working class and has now set its sights on the asset holding class. In search of everyday low prices we will be a nation of everyday low living standards. As we continue searching for a bargain on that gas grill or set of tires we will end up searching in the bargain bin for jobs and career opportunities.

Is Tim so naive as not to know how impossible it is to sell anything we have to China other than machine tools they will use to make what we used to sell?  Has he not talked to one business executive who has been ripped off, knocked off, or just plain counterfeited by his Chinese partners? The Chinese are not interested in partnerships or revenue sharing relationships, they want it all and absent any rule of law are well on their way to getting it all. Mathematically, you can project a day in the future that China will have transferred all the assets of America to themselves. It’s far off, but without any policy changes inevitable.

Not telling the truth in Beijing, as Obama did in Cairo, does not help America or China. There are too many other powerful witnesses in the world to this economic date rape. The bond and commodity markets for starters, with currency traders and ratings agencies not far behind. The stature and power of every treasury secretary that goes to China is lesser than the one that proceeded him. Snow and Paulson look like giants compared to Geithner.

The Chinese are going to crank up their exports, limit competition, stifle foreign initiative and keep their currency ultra low to stave off civil unrest from their out of work masses. We ought to do the same while we can.


Disclosure: No Position

Disclosure: UUP