[Peace-discuss] China Scorns US Funny-Money

[E. Wayne Johnson]

"...there was an uncommon flash of common sense in Washington last week. 
A special bipartisan presidential panel on reducing the national deficit 
proposed $4 trillion in federal spending cuts.
All political sacred cows were targeted. The biggest: the monstrous $700 
billion military budget. A third of US worldwide military bases would 
close. There would be cuts to social security, mortgage deductions, 
delays in retirement age, an end to politician's local pet projects. 
Taxes would rise.  The howling has already begun. Unfortunately, such 
unpopular, drastic spending cuts seem highly unlikely, particularly in 
the new US Congress where Republicans and Democrats will be deadlocked. 
America would need an economic dictator to implement the panel's full plan.

China has one -- the Communist Party. America does not and is 
rudderless. More empires have been undone by financial collapse than 
invasion or battlefield defeats. The once mighty United States is 
staggering in this direction. "


China Scorns US Funny-Money

by Eric Margolis
http://www.lewrockwell.com/margolis/margolis214.html


One day, the emperor of ancient Babylon summoned his treasury overseer 
and exclaimed, "I need more money to wage war on those filthy Hittite 
terrorists!

"But I looked in my great treasure chest and it's nearly empty. There 
are hardly any gold coins left," he thundered.

"Oh Light of the Euphrates," groveled his terrified minister, "we are 
out of gold. Your wars have become too expensive."

"But I have a solution, your celestial greatness. We will quietly trim 
the amount of gold in our imperial gold coins to make them go further. 
No one will notice."

Fast forward to Washington, 2010. It's no longer called "clipping 
coins." Today, the name for debauching a nation's currency is called 
"quantitative easing(QE)," but it's still the same old fraud committed 
by financial flim-flam men.

Washington is flooding financial markets with $600 billion of worthless 
dollars, hoping a rising tide of Monopoly money will somehow lift 
America out of recession. The Fed's first QE effort was a fizzle. 
Welcome to QE2. In high finance, hope springs eternal.

The US government is stoking worldwide inflation in order to lower its 
outstanding debt by repaying creditors with depreciated dollars. The 
rest of the world is boiling angry at Washington.

Just before last week's G20 economic summit in South Korea, China's 
state credit agency publicly downgraded America's credit rating and 
questioned US leadership of the world's economy.

In an unprecedented, stinging rebuke, China scolded Washington for 
"deteriorating debt repayment capability," and predicted quantitative 
easing would lead to "fundamentally lowering the national solvency."

This was a real slap in the face heard around the globe -- particularly 
coming from a bunch of commies! China is the largest holder of US 
government debt.

I remember the day when my father, a New York financier, used to sneer 
at iffy stock or bond issues as, "Chinese paper." Now, it's "American 
paper." How the world has turned.

Washington has been blasting China for manipulating its currency to keep 
the value low -- which is quite true. Embarrassingly, Germany and Brazil 
just accused the US of being as big a currency manipulator as China -- 
which is also quite true. The EU refused to join the US in alone blaming 
China for world financial and currency instability.

A depreciated dollar boosts US exports and hurts nations exporting to 
the US. Economists call it, "beggar thy neighbor," a destructive trade 
practice that played a key role in the 1930's world depression.

This money flood is eroding the value of the dollar, the world's premier 
medium of exchange. In the past two months, the US dollar has dropped 6% 
against other major currencies. Frightened investors are piling into 
gold, now up 17% in 60 days.

The Obama administration, just "shellacked" by voters in mid-term 
elections, and desperate to lower unemployment, is gambling more debt 
shock therapy will spark the economy back to life. But massive, 
unsustainable debt caused the US financial meltdown in 2008.

The US public debt has hit a stratospheric $14 trillion. You don't treat 
a poisoning victim with more poison. Spending one's way to prosperity 
with borrowed money is a dangerous chimera.

But panicky politicians are ready to try any sort of economic snake oil 
remedy to save their skins. Before 2007, America was living high on 
phony financial froth. Finance had become America's leading business. 
Those days are over but no one dares to tell the voters.

Besides destabilizing world exchange rates and trade, Washington's money 
flood is pouring into emerging markets as American investors seek higher 
returns than the miserable pittance available at home, creating highly 
volatile capital flows.

The so-called financial rescue package brought in by Presidents Bush and 
Obama have been a bonanza for Wall Street and the banks, and a 
catastrophe for savers and ordinary citizens.

During the 1980's, we saw fragile Asian economies battered as investment 
from the US flooded in, then out. This is happening again, boosting 
currencies of many nations, making their exports uncompetitive. 
Investments barriers are going up from China to Brazil.

President Barack Obama inherited a horrible mess from the Bush 
administration. However, his wrongheaded economic response is 
undermining the world's economic order. A nation's currency is more a 
symbol of its strength and good name than its flag. Running down the US 
dollar, which ruled world finance since 1945, could mark the beginning 
of the end of the American era.

That's what the American delegation to the G20 economic summit in Seoul, 
South Korea and Yokohama, Japan, heard last weekend. Obama's economic 
policies, notably his attempts to stimulate the US economic with the 
steroids of more deficit spending, were roundly rejected and criticized 
by other G20 members. No decisions were reached on exchange rates.

However, there was an uncommon flash of common sense in Washington last 
week. A special bipartisan presidential panel on reducing the national 
deficit proposed $4 trillion in federal spending cuts.

All political sacred cows were targeted. The biggest: the monstrous $700 
billion military budget. A third of US worldwide military bases would 
close. There would be cuts to social security, mortgage deductions, 
delays in retirement age, an end to politician's local pet projects. 
Taxes would rise.

The howling has already begun. Unfortunately, such unpopular, drastic 
spending cuts seem highly unlikely, particularly in the new US Congress 
where Republicans and Democrats will be deadlocked. America would need 
an economic dictator to implement the panel's full plan.

China has one -- the Communist Party. America does not and is 
rudderless. More empires have been undone by financial collapse than 
invasion or battlefield defeats. The once mighty United States is 
staggering in this direction.

November 16, 2010
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