Us Collapses Under Weight Of Red Greenbacks
Newcastle Herald
Friday August 10, 2007
NEXT time you're on the internet try logging on to this address: http://www.americaneconomicalert.org/tickerhome.asp.
Take a look at the fast-changing number at the top of the page. That number represents the 2007 US foreign trade deficit. When I looked at it the other day it was $448,377,000,000.99 and racing upwards almost too fast to read properly. Every month America adds $US60 billion to this total.For a different view of the world you might visit the China Daily website, where you will be able to read that China's foreign trade surplus is running at about $US27 billion a month.Plenty of people in America are worried about this, and about the fact that the US has now exported so many jobs to China that its natives are getting restless. Some people are talking about imposing legislative sanctions on Chinese imports to stem the flow of depreciating dollars.This idea is not making China happy. And these days, when China isn't happy, everybody had better take notice. After years of frenzied export, the Chinese are sitting on a vast mountain of money, including dollar assets worth $US1.3 trillion.Two top Chinese officials have warned the US that if it continues its sabre-rattling then China might consider the "nuclear option" of accelerating a sell-off of US-dollar investments.Official Xia Bin said last week that Beijing's foreign reserves could be a "bargaining chip", adding politely that China wouldn't like to see "any undesirable phenomena in the global financial order".Another official, He Fan, bluntly stated this week that Beijing had the power to make the US dollar collapse if it chose to. "China has accumulated a large sum of US dollars. Such a big sum, of which a considerable portion is in US treasury bonds, contributes a great deal to maintaining the position of the dollar as a reserve currency," he said. If the US hassled China too much "the Chinese central bank will be forced to sell dollars, which might lead to a mass depreciation of the dollar". It's like the bank manager telling you he might demand immediate repayment of your home loan balance. Or the bookie, having let you run a mile into the red, suggesting it might be nearing square-off time.Many in the US are now afraid that their country has given its creditors the perfect weapon: power over its currency, its economy and maybe even some of its political decisions.US Treasury Secretary Henry Paulson, fresh from a four-day visit to China (that's significant in itself) has returned to America warning lawmakers not to pass protectionist trade laws aimed at China.Sounds like Paulson has heard China's warning and wants his fellow Americans to hear it too. Whether they hear it or not, there's no slowing down that ticking debt-meter that is propping up the economic, social, political and military structures of the biggest super-power the world has seen. Yet.gray@theherald.com.au
© 2007 Newcastle Herald