China Blackmailed USA!?

Mish is asking if the US was blackmailed economically by China. This puts the Chinese in a bad light, unfairly. Our Hamiltonian politicians made a bet in the 1980’s that the Chinese Communist Party would be willing to enslave the Chinese to benefit the United States. Initially, the Russians masters agreed, but have since reneged on the agreement.


The Chinese went along with a plan that they would make things for USA, and accept funny money in payment, which China would invest in T-Bills. Eventually, the theory goes, China would be trapped and enslaved by the burden of TBills, in essence, money lent to the United States. China played the game long enough to transfer the tecnhology enough to be the world’s # 1 manufacturer, get into the WTO, and hey, host an Olympics.

The problem with the game is China developed enough domestic market and export markets outside the USA in the last 25 years that China can survive without us. And so they no longer need to buy our funny TBills. If they continue to do so, it will only be if it benefits China. And they do have the wherewithal to encourage the US government to pass the risk of Fannie and Freddie on to the US taxpayer, rather than on to China. Mish is characterising this as “blackmail.”

The irony is The Communist Party of China, which no one voted into office, takes serious its responsibility to keep China and the Chinese free of foreign domination. In the United States, the democrats and republicans are voted into office, but they could give a damn about the American taxpayer. Instead of letting the Freddie and Fannie go bust and let the USA citizens sort out our problems, the US government is selling us down the river. Better to rule the ruins than lose power.

Karen de Coster and Eric Englund are explaining how we got here, GM division:

At one point they quote:

“ With deregulation of brokerage commissions in 1975, which ended the practice of fixed-rate minimum commissions, investment banks found their brokerage business drying up, undercut by Charles Schwab & Co. and other discount brokerages.”

So, that was the problem! Deregulation! From there, crime follows! Regulations deny people the right to freely contract. By denying securities investors the right to buy from whom they like at a price they choose, the government made sure through policy that one group of people was rewarded, and another was punished. If people lose their monopoly, or cartel, they then turn to crime? No, monopolies and cartels can hold only if government-backed. Government intervention rewards some and punishes others. Once the cartel or monopoly is established, thieves are attracted to the work. Take away legal protections, and the people doing the work are still thieves. Switching from government protected theft to unprotected theft is no leap at all.

Liberals will blame deregulation. That misses the point: both regimes were theft. It was theft under regulations, and it was theft under deregulation (deregulation lite, never have we had true free markets in securities).

The solution again is to get rid of the regulations, and a free people will sort it out among themselves. The democrats and republicans have both lost faith in our system, because it has failed. Thus they are happy to sell us down the river. What they miss is hamiltonianism has failed. Jeffersonian America is till doing just fine, as you can see in any toyota or honda factory in america, or at teh countless thriving small businesses.

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