The geopolitical war between the US and China continues with China using its creditor powers and trade and the US using raw military power. Every time the US imagines they win a round by adding more military bases and making more military obligations to foreigners, the more China does a run around behind all of this bristling raw power and scores hits against us in the heart of NATO and Tokyo.
The latest move is most stunning since the US has invested billions in military obligations to Eastern Europe and has endangered our relationship with Russia very badly while doing this. This, in turn, pushed Russia into China’s orbit and it costs the US taxpayers very, very dearly. Our social services will now be ruthlessly cut as we can’t pay for this generous military empire.
The fact of the matter is, to pay for our military power in Eastern Europe and Asia, we have to sell debt to the Chinese! So all our military moves dig our own graves. We can’t run an empire trying to encircle another empire if that empire is buying our debt which is run up due to this futile attempt at encirclement.
We see this in the game of Go: it is recognized that encircling and holding territory uses many turns in the game and requires many stones. The winner of the game is the person using the LEAST number of stones to hold the maximum amount of territory.
So, it isn’t the territory held but the COST of holding that determines who wins. This is why the players must count the empty spaces which their stones surrounds. The cost of war has to be considered when going to war. Many countries imagine they will recover costs via looting. When looting fails, this can be a disaster.
The other way of profiting from war is to make the loser an ally. The US did this with Germany and Japan but the pressure of Russia and China being communist led the US to make Germany and Japan our allies via helping them destroy our own industrial base. This was foolish in the long run.
The deal with Japan and Germany was, we would let them undermine our own industrial base and in turn, they would support us against Russia and China and furthermore, above all, would hold US dollars and buy US debt. Before this Cold War deal was made, the US bought its own debts and paid them back to ourselves.
Now, we must send taxpayer money overseas to our trade rivals who get richer this way while we get poorer. Eventually, the habit of running up debts and paying foreigners to hold them has become the custom here and now we think this is normal, not a fatal turn for any empire. The turned the US from a creditor nation to a debtor nation. This significantly weakens us forcing us to constantly run our military in the red defending foreign powers while going into debt to these powers at the same time and worse, going into debt to nations that we are in conflict! That is totally insane.
China has virtually no military bases anywhere outside of China but has many trade zones and ports and an immense civilian fleet of ships. The US has pretty much destroyed our own civilian fleet and now relies entirely on foreigners to bring in foreign goods and take out our mainly commodity sales.
Europe is in financial collapse due to the housing bubble (except for Germany that didn’t allow a housing bubble to occur!) so Europe needs credit and Europe wants credit and guess who is bailing out the EU? Eurozone relief as China pledges debt bailout! HAHAHA. Yes, our NATO partners need Chinese credit and this comes with significant strings attached, as normal.
Even as the nuts in the Pentagon celebrate our stupid move to back Vietnam and Japan in disputes over tiny, unoccupied islands offshore of China, President Hu packed his bags and went off to Europe to save the EU from internal collapse: Commentary: Chinese premier visits Europe at time of debt crisis
China was ready to purchase Hungarian government bonds and extend a one billion euro (1.4 billion U.S. dollars) credit to the country, Wen said in Budapest Saturday.
“China’s government has adopted a series of positive measures, such as increasing its holdings of euro bonds and promoting its economic cooperation and investment in Europe, to help European countries tide over the current crisis,” said Chinese Foreign Ministry spokesman Hong Lei prior to Wen’s visit.
As an old Chinese saying goes, “A friend is never known till a man has need,” which is what China has been doing since the European sovereign debt crisis started early last year. A series of concrete moves by Beijing has proved that China regards Europe as a real strategic partner and will act as a responsible strategic partner itself….China also has purchased large amounts of the national debt of European countries such as Greece, Spain and Portugal, helping them boost confidence in their local economies and markets.
Of course, the US hopes the Europeans bite the hand that feeds them. The US plans to bite China’s hand except for one huge problem: the Chinese expected this way back in the mid-1980’s and it is a key component of the Chinese 50 Year Plan! ‘We are willing to lose a trillion dollars if this bankrupts the US,’ they said to me and I take this very seriously.
They may even warn us to not do this and make all kinds of noises but they know as I know, a bankrupt America is finished as an empire. The Federal Reserve bailed out Europe in 2008-2009 and we degraded the dollar significantly to save a bunch of craven bankers. In return, we demanded Europe provide military cover in Afghanistan and now, Libya and support for isolating Iran and backing Israel when they violate UN rules.
So Europe did all of this. Now, the population there hates these things and is now very restive. So the leaders there want to have a better deal so they are now going to China for real credit. The US can print dollars to infinity but we have NO CREDIT. We only have this floating fiat currency that keeps our trade deficit afloat. But we have no surplus of anything.
Our lack of basic capital is a serious problem but most American economists have ditched the idea of ‘capital accumulation’ as a means of creating credit in favor of printing money as a credit machine so they imagine this is OK and will continue to infinity. Instead, it wrecked the buying power of the dollar and now the world will eventually move to the yuan as the main floating fiat currency but before then, it will move to the euro as a gap filling mechanism. So, China proposes more cooperation with central, east European countries as China uses the credit needs of these countries as a means of opening more trade.
Two-way trade has grown rapidly. In 2000, China’s trade with central and east European countries was only 3 billion U.S. dollars. In 2010, it surpassed 40 billion, representing an annual average growth of 32 percent. China’s imports from the central and east European countries had grown even faster, registering an average annual rate of 38.7 percent. Our trade mix has improved. The proportion of trade in electric, mechanic and high-tech products has exceeded 60 percent. Today, the rose oil, amber, crystal, beer and cars from central and east European countries have entered numerous households in China. And the quality yet inexpensive consumer goods from China have been warmly received by the local people here.
Two-way investment has been burgeoning. So far, central and east European countries have set up close to 2,000 enterprises in China. Investment by Chinese enterprises in those countries has also seen dynamic growth. The Chipobrok shipping company, established in 1951, was New China’s first joint venture with a foreign country. Today, the company owns 20 modern ocean cargo ships, and operates along shipping routes covering Asia, Europe, America and Africa. China’s Huawei company has set up its European supply center in Hungary, creating more than 2,000 jobs for the local community. After acquired by the Wanhua Group of Yantai, Shandong province, Hungary’s BorsodChem, a time-honored chemical enterprise in central and eastern Europe, has shown renewed vitality…
…First, increase bilateral trade. Currently, trade between us takes up less than 4 percent in our respective total foreign trade, and less than 10 percent in China-EU trade. Much potential remains to be tapped. We should open markets wider to each other, reduce tariff and non-tariff barriers, step up cooperation in customs, quality inspection, logistics, and personnel entry and exit so as to fully release the potential in our bilateral trade. China welcomes enterprises of central and east European countries to actively explore the Chinese market. We are willing to hold more commodity fairs for you and set up designated areas at the China Import and Export Fair (Canton Fair) and the Eastern China Fair to help your competitive products access the Chinese market.
Second, promote two-way investment. This will not only boost our respective economies, but also contribute to greater balance in our bilateral trade. We must work intensively to improve the laws and regulations on two-way investment, remove investment barriers of various kinds, actively engage in diversified forms of investment promotion activities, and strive for early substantive growth in two-way investment. We should continue to enhance investment cooperation in telecommunications, new energy, agriculture, and natural resources development, and encourage joint establishment of industrial parks and high-tech development zones. China supports competitive Chinese enterprises in investing in central and east European countries, and actively participating in the merger, acquisition and reorganization of enterprises in these countries. We hope that the central and east European countries will relax restrictions concerning market access and technical standards as appropriate, and provide policy support for investment by Chinese enterprises.
Third, enhance infrastructure construction cooperation. Chinese enterprises have solid strength and rich experience in infrastructure construction, while the central and east European countries have big markets. There is a lot we can do together in this field. Chinese enterprises are now actively seeking opportunities to participate in infrastructure development in central and east European countries. The Zemun Bridge in Serbia, which will soon be built, will become the first “business card” of Chinese enterprises to access markets in central and east European countries. We support Chinese enterprises in undertaking infrastructure projects in central and east European countries through PPP, BOT and other customary formats in Europe, and we are willing to provide financing support in this regard. We hope the two sides can reach early agreement on some big landmark projects. China is willing to accelerate the construction of the Eurasia Railway and will support enterprises in establishing a smooth logistic network to facilitate the flow of goods and personnel between the two sides.
Here is a headline from today’s news in the US: San Francisco Bridge, With a Made-in-China Label. We were going to build China. But that plan collapsed by 2000 and now, after building up China, themselves, they are now building us up. This is a key matter to me: we thought we opened up China so we could dominate them but they didn’t allow this to happen. Meanwhile, the reverse has happened. And nothing is done to stop it.
The US is on a rage looking for cheap labor and cheap deals so we can keep on going while we print money like crazy since we lost our capital base. We have no more sovereign wealth systems, only red ink systems. Now, back to President Hu:
Fourth, deepen fiscal and financial cooperation. This will provide an important guarantee for our business relations to reach a higher level. China sincerely welcomes financial enterprises of central and east European countries to open business in China. We support financial enterprises of both sides in setting up branches in each other’s countries and increasing the scale of cross-border trade settlement in RMB. China is exploring the possibility of setting up a cooperation fund between the two sides, which will provide strong support for our economic cooperation and trade. China is a responsible long-term investor in the European financial market. We support the economic and financial adjustment measures adopted by the central and east European countries, and have confidence in the future of their financial markets. We are willing to explore all kinds of effective ways of cooperation, and will continue to support the development of central and east European countries. We hope that the central and east European countries will further open up their financial markets.
This is key: China is now going to have everyone doing business, to do this in RMB, not US dollars! This is a key change. Japan, for example, settles all foreign trade in dollars. China put an end to this by demanding Japan do its trade with China in yen and yuan. This is a KEY part of the collapse of the US dollar and a change in FOREX mixes in Asia and now, the EU.
The Japanese and EU countries hold mainly US dollars in their FOREX accounts. This will now change! Big time! The change is just beginning and this worries the US since someone will begin to disgorge all those many trillions of US dollars in foreign FOREX accounts and once that begins, everyone will be forced to follow suit.
Right now, Congress is toying with ritual suicide as they debate the budget. The GOP thinks they can win the White House and get rid of pesky minorities via starvation, if they don’t raise the debt ceiling. But this ritual collapse of our finances (don’t pay the interest on debts owed overseas) will have severe consequences on all of us as trade collapses with the US.
This WILL happen. Some people are actually alarmed about this. We figure, the GOP will blink at the last minute and raise the debt ceiling at midnight but the Chinese will laugh at us and talk seriously with Eastern Europe and the EU about all of this and seriously, as NATO is used to attack Muslims, it is increasingly unpopular there and China doesn’t mind us doing this, it is bankrupting us, but Europe is also being bankrupted by all of this.
So they are motivated to side eventually with China. As a PR move, Prominent Chinese Dissident Hu Jia Is Freed From Jail on the even of Hu’s visit to Europe. Europe imprisons quite a few people for talking wrong, for example. A famous French designer got drunk and went into an anti-semitic rant in a restaurant. He was arrested and charged with talking naughty. So he probably will go to prison!
Now, the point here is, in China, if you say the wrong thing, you also can go to prison. There is zero freedom of speech in Europe and in China. But the propaganda machine in Europe happily loves to talk about the evil Chinese suppressing freedom of expression and putting artists in prison but lord help you if you talk frankly in Europe! A Dutch politician was nearly put in prison for criticizing Islam! Talk about insane.
The US still has some semblance of ‘free speech’ even if we live with a lot of propaganda. We still can express opinions about all sorts of things even if this means other forms of punishment are applied. But the EU actually arrests people for saying unpleasant things. Like the Chinese government, it is done to ‘keep the peace’ and incidentally, prevent real debates.
Back to the Chinese using their credit power to expand: Treasury urges British banks to take big losses to help Greece avoid meltdown. That is, the British printing press will be used to debase the currency in order to keep the EU operation afloat. This is due to Britain being one of the world’s biggest banking powers while having NO sovereign wealth and running deep in the red like the US which also is a huge banking power.
China will make this UK sacrifice futile. The taxpayers in Britain are being told this year they must do without social services and pay for schooling and the suggestion is, their youth imitate US young and go deep into debt to get an education. This is strangling our own economy as our kids have to pay off huge debts before being able to buy a house or start a family.
There are some British who love all of this: Vulture funds to profit from a second Greek bailout. Yes, the pirates and gnomes are absolutely happy! They get ZIRP loans and then play derivative games with EU debts and pocket the differential which is massive.
Here is a typical news editorial in Britain right on the heels of that hideously expensive royal wedding: Profligate Britain risks suffering its own Greek tragedy. Now, the author isn’t demanding the royals live in normal houses and have normal marriages. No, it is the pesky peasants who are way too over their heads and must reduce their carbon footprints to say, zero. Japan is seeing its own people reduce and reduce and reduce as they use less and less energy, buy fewer cars, live in more and more discomfort and do with out children.
This is a downward spiral to death. The rich are not part of this Greek tragedy…yet. But I assume, based on history’s examples, they will find angry peasants banging on their gates. Like we see in the Arab Spring uprisings. Which are far from finished.
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