The US Geological Survey recorded a minor earthquake this morning with its epicenter near Wasilla, Alaska, the probable result of Sarah Palin opening her mail box to find the latest issue of CounterPunch magazine we sent her. A few moments later she Instagrammed this startling comment…
The lunatic Right certainly has plenty of problems. We’ve made it our business to not only expose these absurdities, but to challenge them directly. With another election cycle gaining steam, more rhetoric and vitriol will be directed at progressive issues. More hatred will be spewed at minorities, women, gays and the poor. There will be calls for more fracking and war. We won’t back down like the Democrats. We’ll continue to publish fact-based critiques and investigative reports on the shenanigans and evil of the Radical Right. Our future is in your hands. Please donate.
Yes, these are dire political times. Many who optimistically hoped for real change have spent nearly five years under the cold downpour of political reality. Here at CounterPunch we’ve always aimed to tell it like it is, without illusions or despair. That’s why so many of you have found a refuge at CounterPunch and made us your homepage. You tell us that you love CounterPunch because the quality of the writing you find here in the original articles we offer every day and because we never flinch under fire. We appreciate the support and are prepared for the fierce battles to come.
Unlike other outfits, we don’t hit you up for money every month … or even every quarter. We ask only once a year. But when we ask, we mean it.
CounterPunch’s website is supported almost entirely by subscribers to the print edition of our magazine. We aren’t on the receiving end of six-figure grants from big foundations. George Soros doesn’t have us on retainer. We don’t sell tickets on cruise liners. We don’t clog our site with deceptive corporate ads.
The continued existence of CounterPunch depends solely on the support and dedication of our readers. We know there are a lot of you. We get thousands of emails from you every day. Our website receives millions of hits and nearly 100,000 readers each day. And we don’t charge you a dime.
Please, use our brand new secure shopping cart to make a tax-deductible donation to CounterPunch today or purchase a subscription our monthly magazine and a gift sub for someone or one of our explosive books, including the ground-breaking Killing Trayvons. Show a little affection for subversion: consider an automated monthly donation. (We accept checks, credit cards, PayPal and cold-hard cash….)
To contribute by phone you can call Becky or Deva toll free at: 1-800-840-3683
Thank you for your support,
Jeffrey, Joshua, Becky, Deva, and Nathaniel
CounterPunch PO Box 228, Petrolia, CA 95558
Paulson in China
Treasury Secretary Henry Paulson wrapped up 2 days of high level talks with the Chinese delegation on Wednesday without any progress on the two issues of central importance to the American people"the massive $230 billion trade deficit and the ongoing manipulation of the Chinese currency, the yuan. As expected, China agreed to allow "more passenger flights between the two countries" and they also approved a plan "to remove a ban on the entry of new foreign brokerages and to allow financial services firms to expand their operations in China". (Marketwatch)
But that was basically it. China will not to allow its currency to float freely on the open market. They want to maintain the advantage they have on their American competitors by continuing to "fix" the yuan in a way that best serves their national interests. That’s the way nations are supposed to work. The Chinese aren’t taken in by the hogwash about "free trade" or "deregulation". They’re playing to "win""and that’s what counts.
It’s different in America, where the currency has been deregulated to serve the interests of a small group of bankers and investors. Every one else loses. Factories are boarded-up and workers are thrown out of their jobs because they cannot compete with foreign manufacturers who "underbid" them on every item. This doesn’t matter to Paulson and his buddies in the financial service industry. Their business thrives on ever-increasing flows of cheap capital to American markets. Whatever happens to the American worker is not his concern.
Oh sure, Paulson may wave his finger reproachfully at his Chinese counterparts for rigging their currency, but he’s certainly not going to do anything that would disrupt the flow of $230 billion into US bonds and securities. America’s massive $800 billion current account deficit is what keeps interest rates low and the stock market humming-along at full throttle. Why would he mess with that?
After all, what’s more important: American workers or the wealth and prosperity of Wall Street moguls and banking giants?
According to Marketwatch, Paulson succeeded in persuading his Chinese counterparts to allow foreign brokerages and financial services firms "to expand their operations in China." Big surprise, eh? As former chief of Goldman Sachs, it’s clear that this was high on Paulson’s list of priorities. After all, Chinese workers set aside an estimated 50% of their earnings and have saved a whopping $2 trillion in the last decade. The financial service industry must be salivating at the thought of opening shop in Beijing and tapping into that mushrooming market.
There’s a misconception in the US (particularly among "protectionist" Democrats) that trade with China is a "one way street" that only benefits the Chinese. That is not the case. In fact, the real beneficiaries of the present arrangement are the US business elites who set out to destroy the American work-force by moving factories to a country with no labor or environmental laws. The Bush administration has assisted the exodus of US corporations by creating tax incentives for "off-shoring" and by promoting a free trade ideology which is ruinous to America’s future.
But that’s not China’s fault. China can’t be blamed for our job losses or "unsustainable "trade deficit—that’s the result of the neoliberal policies which have enriched a few wealthy American industrialists and bankers at the expense of everyone else. As China expert Henry C K Liu says in his article "A Dialogue of the Mute"
"China has actually been a powerless respondent to the dysfunctional terms of trade set by US economic policies, aggressively exploited by US transnational corporations and financial institutions for unfair profit." (More than 60% of China’s trade surpluses are traded by foreign companies, many of which are US firms)
Liu adds: "China cannot expand domestic consumption because Chinese wages and benefits are too low. Yet Chinese cannot raise wages faster because real wealth has been leaving the country through export trade while the yuan money supply is expanding through the central bank buying dollar inflows with yuan. The result is a liquidity bubble, with too much currency chasing a dwindling supply of real wealth that has been exported."
The Strategic Economic Dialogue (SED) between the Chinese and US delegations was a complete failure. The yuan will continue to be manipulated and America will continue to bleed jobs and wealth. We’ll probably never know what really went on behind closed doors, but one thing is certain; the US is not giving the orders anymore. With $1.3 trillion in dollar-backed securities and US Treasuries, the Dragon is in the driver’s seat. Now that Japan has slowed down its purchases of US debt; China represents the last bit of scaffolding holding up the feeble greenback. That means that the Fed will have to consult with their "loan-officers" in Beijing before raising or lowering interest rates.
Sounds crazy, but its true.
And, while everyone is predicting that Fed-master Bernanke will probably lower interest rates to save the struggling real estate market; it may be that our Chinese friends will demand a rate-hike to preserve their investment. That’ll just speed up the sub-prime meltdown and send tremors through world stock markets.
Our favorite economic guru, Elaine Supkis, provides a bit of historical background to our current economic predicament. In Yesterday’s post she says:
"Anyone with half a brain can see that on 9/11, we reset our economy on its present irresponsible course. Bush and the American people declared a war on terror and began spending like fiends and cut taxes and Bush famously said we should all go shopping so we went on the world’s biggest, stupidest shopping binge.
To hide the inflation this new policy brought and thanks to the Federal Reserve simultaneously dropping interest rates to an amazing and irresponsible 1%, hiding inflation became the #1 job and to do this, we had to shift as much labor as possible to China! China’s surplus in trade with us was fairly insignificant before 9/11 but it shot through the roof. After 9/11, China passed Japan and has been the #1 source of cheap labor for the US which must use China in this fashion or find some other nation to do this for us.
What I am saying is, we cannot simply force China to raise their prices to us, we will simply rush to India or some other cheap labor nation to do the work for us!
The US RULERS know China’s intentions. Bush’s family works for the Communist Chinese, they have had business deals with them for years and years. The Chinese have cultivated corrupting the Bush clan since they first met Mr. Bush Sr. when he jumped from the CIA to ambassador to China. These people then ran off to China to make money off of the differential between Chinese labor’s wages and American consumer buying abilities. The Chinese exploited this treason as they should, after all, we are in competition with them for ruling the world and if our rulers are so banged stupid that they think they will dominate the Chinese and not vice-versa then…we get what we are getting today.
Namely, our necks in a Chinese noose. But do not forget, the American ruling class put our necks there, not the Chinese. They simply cooperated! (See the whole post here.)
The economic war against the American people started on the same day as the war on terror"9-11. Interest rates plummeted, the money supply was put on steroids, and the US began auctioning off its national wealth at a rate of $800,000 billion a year. The current account deficit and the loss of 3.2 million manufacturing jobs has been used to conceal inflation which is only now beginning to rear its head in the form of recycled dollars in an over-leveraged stock market. (Why else would the Dow hit new highs every day when GDP is an anemic 1.3%?)
We can see now, (from the coordination of policy) that it wasn’t just Big Oil and the neocons who led us to war with Iraq. The Federal Reserve played an equally important part in that deception. It lulled the people to sleep with low interest rates (which kept the economy humming-along) while the nation’s wealth was shifted from the middle class to the mega-rich. The Fed’s policies have created enormous equity bubbles and a massive "unsustainable" trade deficit. When the bubbles burst, the America people will be forced to "privatize" whatever public assets are left.
Wasn’t that the goal from the very beginning?
Now, we’re stuck and there’s no way out. If China allows its currency to rise; then the US economy will plunge into recession or worse. And, if we stay on the same course, the country’s wealth will be sold piecemeal to foreign investors while the dollar continues to weaken and unemployment soars.
Our options are limited and we appear to be headed for a hard landing. But–Elaine Supkis is right–you can’t blame the Chinese for that. It may be their noose, but it was Bush and Co. who put our necks there.
MIKE WHITNEY lives in Washington state. He can be reached at: firstname.lastname@example.org