Congress Declare a Trade War Against China?
by Ron Holland
by Ron Holland: A
Free-Market Sovereign Debt Manifesto
is more communist than China is right now." ~ Jim Rogers
ratings for both the US House and Senate are currently in dramatic
free-fall. A September 2011 Gallup Poll warns that 81% of Americans
are dissatisfied with how the United States is being governed.
include a near record criticism of Congress, elected officials,
government handling of domestic problems, government power and waste
of tax dollars. The most important finding is 49% of Americans now
believe the federal government has become so powerful that it threatens
the rights and freedoms of American citizens.
throughout history have used wars as an excuse to rally citizen
support for the political establishment to win elections or hold
off revolutions. But with America currently involved in numerous
military conflicts with falling popular support and no victories
in sight, the Democrats and Republicans have decided on a contrived
trade war instead.
for the 2012 elections both Democratic Senator Harry Reid and Mitt
Romney, the perceived leading candidate for the GOP presidential
nomination, are engaging in rampant demagoguery and brinkmanship
for political gain. Still, we find it difficult to believe both
parties are so desperate that they would initiate a trade war against
China, America's banker that owns over one trillion of Washington
to punish China for their alleged currency manipulation, while Romney
promises if elected president he will immediately issue a Presidential
Executive Order to sanction China for its trade practices and currency
manipulation. Yes, this may well be just more political propaganda
as usual but will China see it this way?
Currency Manipulator Is the USA Not China
and both political parties have continually charged China with the
evil activity of "currency manipulation" and keeping their
currency artificially low compared to the dollar. This charge is
based on the fact that China exports more to the US than the US
exports to China.
exports to America are about four times as much as we import from
them and therefore we run a major trade deficit with China. But
no one mentions how China takes much of the extra dollars and then
buys US Treasury securities (US sovereign debt) thus allowing American
politicians to continue to expand our national debt and buy votes
with more giveaway programs.
While our politicians
claim China keeps its currency pegged to the dollar at an artificially
low rate to increase their exports, this is not the real issue.
The political and media elites conveniently forget to discuss how
the collapsing dollar actually allows China to also increase exports
to other nations as their currency falls with the US dollar. The
long dollar downtrend has made Chinese exports to most other nations
even lower in price.
China is simply
following the policies of most major exporting nations and attempting
to encourage industrial growth and exports by managing their currency
differential with major trading partners. Every country does this.
is the real currency manipulator, harming both the United States
and the rest of the world by its policy of dollar depreciation and
destruction. Their long-term goal is to destroy the dollar so America
can pay back pennies on the dollar for our $14 trillion dollar national
debt. These actions will impoverish the US and destroy trillions
in foreign reserves and private wealth investment in US Treasury
securities. Thus the real currency crime here is the US policy of
currency manipulation and destruction rather than the Chinese monetary
Reid and the Senate Democrats, big labor and a few establishment
Republicans are about to hand the Chinese a wonderful PR victory
over the United States. The China response is likely to be a public
rebuke, which will be a dramatic defeat for the US further indicating
how weak the US is economically and financially because of our growing
sovereign or national debt.
In any case,
I hope neither Romney nor any other US President are actually dumb
enough to sanction China for their currency policy or start a tariff
war with massive new import duties on Chinese goods. The simple
response by China only needs to be a public declaration that they
will refrain from buying more depreciating, dollar denominated Treasury
securities or will delay rolling over existing debt at maturity
and the US threat will immediately end, as the impact on Treasuries
and interest rates would be catastrophic. This action would cause
a worldwide run and panic with US Treasuries. No one knows where
this could end.
world knows that the "American emperor has no clothes"
where the dollar or the debt is concerned, thus threats to China
on currency valuations or tariffs are only more election-year propaganda
for the uninformed voting public and union voters. But the threat
to the US is real should China respond.
the real currency crimes and criminals against the United States
can be found closer to home, in the US Treasury Department and the
Federal Reserve. Again quoting Mitt Romney, "The real problem
is China's refusal, largely for political reasons, to liberalize
its financial system and allow the free flow of capital. In particular,
China and other countries sterilize inflows of dollars from abroad
to prevent prices from rising as the country's productivity increases.
This is the practice that has led to the accumulation of more than
$3.2 trillion in foreign reserves by the central bank."
I have only
one question for Romney if he becomes president. Are you willing
to destroy the US Treasury market and the dollar and threaten the
entire world economy by forcing the Chinese central bank to reconsider
actions with the 1 trillion dollars in US debt and possibly create
a run on sovereign debt around the world? I think this would be
a high price for the world to pay for election-year demagoguery
and why I prefer Ron Paul, who understands markets and economics.
Chinese central bank, unlike the Federal Reserve and the rest of
the controlled central banking cartel, appears to work in the best
interest of China and it's economy. Looking around at the Federal
Reserve in the US and the European Central Bank (ECB), this is certainly
not the case in most other nations.
When I hear
Harry Reid talking tough for the American labor union vote, I think
of the 1971 Clint Eastwood Dirty
Harry movie when he said, "Go ahead. Make my day."
Well, "Dirty Harry Reid," go ahead if you dare and make
China's day with such a stupid move but the loser will be the Washington
political establishment and our Treasury bond market.
I'm sure following
a China response the present congressional 19% approval rate will
be the good old days. You will have totally destroyed American confidence
in the political establishment and the sovereign debt few Americans
ever wanted in the first place.
So Romney and
Reid, go ahead start a trade war if you dare for political gain.
This might become the incident that will galvanize public support
and just maybe the American people will again decide they've finally
had enough. Remember, this happened once before over a tiny little
tax on tea.
So go ahead,
Mitt and Harry make my day!
with permission from The
Holland [send him
a contributing editor to the Swiss
Mountain Vision Newsletter
and Chairman of the Advisory Board of the Foundation for the Advancement
of Free-Market Thinking (FAFMT)
in Vaduz, Liechtenstein.
© 2011 The
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