China on the Rise
Today we live in a world where international business is commonplace and often extremely beneficial. On the flip side, however, we are doing business and providing much-needed money to many of our enemies because of it.
When anyone brings up the dangers of dealing with China, the rebuttal is almost always how much China needs the United States to sustain its growth and how without the United States, China would not have the money it needs to continue to develop. That is nothing more than an ego-driven idea and a dangerous one at that because nothing could be further from the truth. The question is, “who really needs who?” The last time I checked, the United States asked for help. Now, factor in this new push for globalization and a world currency . . . the dollar and the people of the US become pawns rather than players.
China is forecast to spend roughly $1 trillion over the next decade buying up foreign assets, including about $15 billion to $20 billion a year on US investments, according to a recent Kiplinger Letter. It is speculated that they will buy energy, food production, financial services, manufacturing, and Real Estate.
They will use our own tactics against us by taking our useless money and buying up real assets for their own gain. This is not only brilliant on China’s part but extremely dangerous for us. Of course, it is also highly enlightening for those paying attention. Who is to stop China? No one, really! Most American businesses are in a position to take the deals they provide.
People should be reminded that when we talk about modern-day China, we are not talking about democracy. We are talking about military despotism. A dictatorship that is much more engrossed in power than it is trying to emulate the United States. This is evidenced by China’s tight grip over its people and its anti-American propaganda spoon-fed to its people. Not only is China growing in economic power, but its military modernization efforts are also growing.
Additionally, you can look at who China closely allies itself with and begin to see an amazing pattern of anti-American money and rhetoric. Russia, North Korea, Iran, and Venezuela, to name a few. As demonstrated earlier, recent news articles from around the world illustrate the desire for China and its partners to step away from the dollar and American influence.
China is in the process of crushing the United States with lots of cheap goods that, at one point, were made right here in America. In exchange, they not only get our money from the purchase, but they get the new-found demand from the companies who were forced to either move their operations to China to take advantage of that same inexpensive labor or simply close. As you can see, they are taking that money and buying our assets right out from underneath us.
In turn, the Chinese stock markets begin to increase, and again, they obtain even more money to the tune of billions in investment capital from American investors. The whole time, smaller American companies and American jobs are shattered, and the Chinese reap the profit as even more Americans depend on their cheaper goods. We are literally paying China to rid America of its livelihood. So from this point, we need to realize that China takes this money and does a couple of things with it—it builds up its military and buys more factories.
Once again, it is a military dictatorship. The Department of Defense (DOD) recently issued the 2013 annual report to Congress on the Chinese military, stating that the People’s Liberation Army (PLA) is engaged in a massive, extensive modernization program, drawing upon the resources of a constantly expanding economy (now the world’s second-largest) to support improvements in not only the ground forces but the PLA Navy (PLAN), the PLA Air Force (PLAAF), the Second Artillery (China’s rocket forces), as well as space and cyber capabilities. The report provided details of various new ship classes, new fighters, new missiles, and improvements in Chinese space assets (Cheng, 2013).
Then it builds more factories to make more products for ignorant Americans. Then they take whatever is left and purchase US Treasury bonds to the tune of millions a day. China is the world’s largest foreign owner of US government debt (Treasury, 2013).
The future of US-China relations looks bleak. Nothing indicates a positive outcome when you assess the facts. Simply hoping that China will need us is not enough to abandon our need for self-reliance and hemispheric stability, though this boat seems to have already sailed. We have paid the devil with the livelihoods of our own. When we fall, we will have only ourselves to blame. Look at the stimulus package delivered to everyone in early 2008. This money was borrowed from China and the Bailout package . . . it’s the same thing. Now the goal was to get everyone to get out and buy products. The majority of the products were undoubtedly going to be Chinese. Who won here? If we cannot afford to give a few hundred dollars to each American citizen without borrowing it from China, how will we be able to afford the “Affordable Care Act” without some outside assistance, or worse?
Perhaps that is a moot point. On October 13th, 2013, China’s official news agency Xinhua said that “The Founding Fathers of the United States of America created Congress for the sake of balance of power” and that “They would turn in their graves if they saw their design being kidnapped for political brinkmanship” (Xinhua, 2013).
Truer words have never been spoken. However, they also said that US fiscal failure warrants a de-Americanized world. The scary part is that, in many ways, this is already underway.
As mentioned before, if the US falls, another nation will surely fill that void, and China appears to be setting itself up for that position. Yet more proof of their capabilities came in October of 2013 when Asian American News reported that China apparently feels its naval buildup has progressed enough to send surveillance ships to Hawaiian waters. The recent deployment is seen as Beijing’s message to the US, and the rest of the world, that China can now contest the waters of the western Pacific and that the US Navy no longer has a free pass in the region (GoldSea, 2013).
This message was exacerbated when China’s navy recently tested a new high-speed maneuvering torpedo that is set to challenge US ships and submarines in the Pacific. Other new weapons include China’s recently deployed anti-ship ballistic missile, the DF-21D, designed to sink US aircraft carriers far from China’s shores (Gertz, 2013). Still, many refuse to see such possibilities even when the Defense Department calls such technology a significant threat.
I want you to consider the words of someone who has achieved the titles of both “Mr. Commodities” and “Global Investing Guru.” He is the Chairman of Rogers Holdings and Beeland Interests, Inc., and was the co-founder of the Quantum Fund with George Soros and the creator of the Rogers International Commodities Index (RICI).
The person I am introducing to you is a fellow named Jim Rogers. Jim’s words come as both a warning and excellent advice. Still, you need to listen and fundamentally understand what he is saying: “If the 19th Century belonged to Britain and the 20th Century to the United States. Then the 21st Century will surely belong to China. My advice: Make sure your kids learn Chinese.“—Jim Rogers—Worth Magazine
This comes from a man who believes in China’s rise so much that he has moved to Singapore. Rogers says that “China’s long-term prospects are so strong that even a civil war, an economic collapse or political assassinations would only temporarily delay its emergence as a worldwide economic powerhouse . . .” (Rogers, 2008).
Powerful stuff, but something tells me that if you are reading this book, this is not the first time you have heard about the “Rise of China.” As a matter of fact, China seems to be associated with many of the topics concerning some of America’s more pressing issues. For example, if one were to bring up America’s National Debt, one would have to discuss China’s lending practices. When we talk about currency stabilization or the International Monetary Fund, you will undoubtedly speak about China’s Yuan at some point. A simple search for the term “yuan global currency” will give you more than enough information. When you look through your house and find the origin of most of the products you have purchased, you will be forced to talk about China.
Everything seems to have some Chinese connection to it. When you hear about military advancements, you will hear about China. When you hear about nations standing up to the United States, you will hear about China. Honestly, if anyone was unaware of China’s fast and dramatic rise, they have either been blatantly lied to or had their heads rooted deep in the sand. It does not take a Ph.D. to see that China has become the factory of the world and that nation that many around the globe are turning to.
Now, we could delve into the many economic and political reasons why people like Jim Rogers (and many others) believe China will rule in the 21st Century. Still, chances are you are probably not interested in the nuts and bolts. So, I will attempt to explain this briefly.
Our dollar is collapsing because there is nothing to back it except, perhaps, oil. Our economy is collapsing because we are no longer producing local goods. Our unemployment rates are increasing because we are running out of money and not hiring due to a lack of American production and consumption. Our infrastructure is collapsing because we do not have the funds necessary to rebuild it. Our nationalist ideologies (love of country) are faltering because of the preceding and because someone thought it would be a good idea to feed the bears.
These are general statements and not meant to be blanketed, of course. There are few manufacturing facilities left in the United States, but not many. More than 56,000 manufacturing facilities in the United States have been permanently shut down since 2001 (Sutton, 2011). Fewer Americans are working in manufacturing today than in 1950, even though the country’s population has more than doubled since then (Snyder, 2013). These are rough statistics, but we have to discuss China when discussing these basic numbers.
According to a new United States Chamber of Commerce report, the US needs at least $8.2 trillion between 2013 and 2030 in energy, transportation, and water-related infrastructure projects. This is a conservative estimate because it does not factor in other necessary projects. This report suggests that we will not be able to get the money from dwindling US public funds, but instead that we will need to get the money from China (U.S.Chamber, 2013).
In 1985, our trade deficit with China was approximately six MILLION dollars for the entire year. In 2012, our trade deficit with China was 315 BILLION dollars (Census, 2013). That was the largest trade deficit one nation has had with another country in the history of the world. For clarification, that means we are simply buying billions more from China than what we are selling to them. A proverbial nail in the coffin might be that, according to the Economic Policy Institute, the United States is losing half a million jobs to China every year.
Are you beginning to see the correlation? I hope you are beginning to see the trend here because we are on a rapid and dramatic decline, and China is a big part of this. Ironically enough, our government is helping them every step of the way. I want to put this into perspective for you.
According to the US Department of Treasury, about 32 cents for every dollar of US debt is owned by the federal government in trust funds for Social Security and other programs such as retirement accounts (Murse, 2013). These programs are being raided at an alarming rate, so this money will likely not be there to cover this portion of the debt down the road. You might reread this paragraph for good measure.
The most significant portion of US debt, roughly 68 cents for every dollar, is owned by individual investors, corporations, state and local governments, and foreign governments such as China. According to the Treasury, the largest foreign holder of US debt is China, which owns the debt in bills, notes, and bonds. According to the Federal Reserve, China’s ownership of US debt is even larger than the amount owed by American households.
This means that the debt owned by China is substantially more significant than the trust funds for Social Security and other programs such as retirement accounts. In other words, good luck paying that off.
The question you should be asking yourself is whether or not China is simply helping us out of the goodness of their hearts, or if they stand to gain from such a move, and if so . . . what? Think about this. When you take out a loan, you have to provide some collateral. Collateral is something pledged as security for repayment of a loan, to be forfeited in the event of a default. A bank requires this because they would like to gain one way or another by fronting you the funds. Why would any other lending situation be any different?
Immediately, there are going to be those who would like to debate the idea that the US debt does not require collateral because it is backed by the “full faith of the US government,” which would be great if anyone had any faith left in the US Government, but I digress. If you are in this school of thought, you need to consider the following.
Over the last several years, I have read some ignorant statements about this topic. Jim Luke, a Lansing Community College professor, made one of these statements, expressing the lack of logical thought that seems to be going around these days.
Jim Luke teaches “college principles of economics, along with the occasional Economic History, Comparative Econ Systems, and Econ Geography.” Mr. Luke seems to think that the people of this great nation should stop worrying because there is no international court of claims where one country can foreclose on another for a bad debt. He says that what happens when a nation defaults on its debt is that, basically, the lenders get really upset. They stomp their feet. They call serious meetings (Luke, 2011).
This has literally got to be one of the most ignorant statements in the history of economics because many wars have been waged over commodities and to assume that another will not occur is naïve at best. I will not be able to provide you with every single little piece of this puzzle in this article but try to understand that I am merely pointing out that China will receive their money one way or the other.
Situation One—Yes, the full faith of the US Government indeed backs the loans taken out by the US government. However, many fail to realize that this “full faith” is “guaranteed” via the property and assets of every living US Citizen as already pledged as collateral for the National Debt. We own it. We are our own government and nation. It is ours.
Taking it to the next step, we should consider something called Eminent Domain. Once again, there will be some who would argue that Executive Order 13406 (“Protecting the Property Rights of the American People“) states that the federal government must limit its use of the taking of private property “to situations in which the taking is for public use, with just compensation” and “not merely for the purpose of advancing the economic interest of private parties to be given ownership or use of the property taken” (EO13406, 2006).
That order says “limit,” not cease. Second, per the Supreme Court ruling, private property and assets can be taken from one private owner and given to another private owner, even on the simple basis that the new owner would generate more tax revenue than the previous (Kelo V. New London, 2005). Big shocker; it happens all the time.
Bloomberg News has reported that some Chinese officials have asked for a guarantee that the US will support the dollar’s exchange rate and make sure China’s dollar-denominated assets are safe (Cao & Chen, 2009).
Not the DOLLAR, but the dollar-dominated assets. It is not a stretch to imagine the US Government providing some collateral for such a high debt load, and it would be stupid for China to give the aid without some kind of guarantee on the backend.
Maybe the idea of the government handing over large amounts of land to foreign nations or companies is too much for some to handle or even explore right now. Never mind the idea that it already occurs.
Situation Two—The United States sees its rapid decline, as demonstrated throughout my work. So let us assume that China forgives our debt once we default or hyper-inflate, and China allows us some time to lick our wounds.
In this scenario, China fills the vacuum left by the Americans and becomes the world police. However, in this scenario, the United States government will have effectively lost control over a great portion of its territory because there would not be any money to pay the foot soldiers of the regime. Differences in ideology play out in the domestic crisis mentioned in previous articles.
How long would it take before a foreign nation (such as China) decided to seize any abundant natural resources available in the United States? After all, technically, it would be theirs anyway, having been guaranteed it via the “full faith of the US Government,” which, once again, is nothing more than you and your property.
The United States government and military currently walk into other nations as though they own the place. Is it a stretch to imagine another country doing so to us once we have lost our power and influence?
Perhaps the idea of a Chinese invasion over an inability to pay a loan payment is too extreme for some to imagine. True, it may be intense, but this may be inevitable in many ways. Have you ever noticed how throughout history, when the balance of power has shifted between two nations, a battle always seems to occur between them?
Now I want to show you why perhaps the next several years may end up being some of the most turbulent times in recorded history.
Be sure to check back… as future articles will do just that.