It’d Be Fair, Right?

Can You Picture This? (Case #1)

In 2010 or 2011 Chinese Premier Wen Jiabao “requests” that President Obama step down in order to avoid China selling off its massive share of United States Treasury bonds and other debt. Stating concerns over US inflation and the risks it poses to China’s Sovereign Wealth Fund, China’s leadership demands that President Obama and many members of the US government be replaced and that the US has 60 days to develop a restructuring plan that meets Premier Wen Jiabao and his Ministers’ approval.

It’d be hypocrisy for the Liberals to complain about this – unless they’re willing to admit that they hold the government as being more sacrosanct than the People.

It would be fair, right? It’d all be proper and appropriate, wouldn’t it? After all the US went to the Chinese government looking for enough money to pay its bills rights? As our largest creditor, China has the right to look after its investments, doesn’t it?

~*~

Can You Picture This? (Case #2)

In 2010 or 2011 Chinese Premier Wen Jiabao and his ministers declare the United States a “nonviable” country, stating that no restructuring of the US as a standalone nation will provide the income necessary for America to continue. Premier Wen Jiabao mandates that the US has 30 days to partner with Canada and Mexico to create a North American Union. China further dictates that neither Canada nor Mexico can own more of the United States than China until such time as the US pays off its debt to China. At that time Canada and Mexico may acquire a combined 49% share of the US.

Again, it’d be hypocrisy for the Liberals to complain about this – unless they’re willing to admit that they hold the government as being more sacrosanct than the People.

It would be fair, right? Itd all be proper and appropriate, wouldnt it? China couldn’t really be expected to just keep throwing money at the US, could it? After all, the combination of the three countries has been talked about for years in some quarters. China would just be moving the process along. After China’s “bail-out” of the United States, they must have the right to provide regulation and oversight for America.

~*~

Now the above are just two dark fantasies about what could – with the right sort of international events – happen over the next couple of years; I find it highly doubtful that China would attempt so overt of an action. They are far more likely to use the fact that the US is massively beholden to them to influence our international trade and foreign policies.

The true point of those Distopian fantasies was to point out the logical flaws in the argument so often put forth by the Liberals that, since US companies – and States – have needed, or in some cases been forced to accept – federal funds, the federal government has the “right” to determine how those companies – or States – are operated and by whom.

From a logical, if not emotional, standpoint there’s not a great deal of difference between a government and a corporation, especially when one takes into the “trade” in national deficits through Treasury Bills and similar financial vehicles. That being the case, the Liberals’ endorsement of the government’s actions in regards to AIG, GM and others could be seen as tacit approval of similar actions by our government’s creditors…

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11 Responses to “It’d Be Fair, Right?”

  1. Susanne Says:

    Sounds like a fair analogy to me.

    Sobering. Blah.

  2. Sisyphus Fragment Says:

    I think I have a right to know how my tax money is being spent.

    That being said, I think we should have just let these places fail. If they’ve been stupid enough to get into this kind of debt then they should pay the piper.

  3. Phil Says:

    Your analogy doesn’t hold up.

    1. China isn’t buying US treasury bonds out of the kindness of their heart. They buy US bonds because United States currency is historically the stablest and most reliable of all foreign currency even with decreasing dollar prices. This allows them to devalue the Yuan and make the lifeline of the Chinese economy, exports competitive. That in turn fuels the economic expansion the communist party relies on to stay in power.

    The GM- US government relationship on the other hand is not mutually beneficial. The government is loaning automakers money because these automakers would literally shut down without it. Aside from the repayment of the loan and preventing a hit to the economy, the government isn’t getting anything out of this deal.

    Big difference.

    2. The US/China relationship is substantially different than the US/GM relationship.

    GM is coming to the US for a last ditch emergency loan. As I said before, they literally don’t have the money to pay for the lights. China’s power comes from the fact that they already own billions of dollars of T-bills. The leverage is different because China’s already been “stuck with the bill” while GM is trying to persuade the US to foot the bill in the first place.

    Now if China could sell off their T-bills without any negative consequences then this analogy might hold up better, but selling off US t-bills would have severe economic impacts on the Chinese economy. With a low dollar value, selling all of their t-bills no would be akin to selling a stock while its low.

    3. China and the US have an interconnected economy. China would never sell off all of their t-bills because any harm inflicted on the Chinese economy would return right back to China.

    The biggest importer of Chinese good is the United States, the largest market for global exports. In other words, a decrease in the economic growth of the United States means we have less money to buy on their goods. But even worse, the less money the US spends on French exports, the less money France has to spend on China’s exports.

    This means the leverage China has over the US is a lot smaller than the leverage the government has over GM.

    on the other hand, already owns billions of dollars in T-bills. They majority of the consumer power is restricted bet

  4. Phil Says:

    On a separate note, the IMF does exactly what you’re describing above. When the IMF gives out emergency loans to failing countries they force them to enact certain domestic policies. (funding x instead of y)

    The US, like most countries, also adds stipulations to a lot of their foreign funding. The most famous example would probably be the Global gag rule which stated that no recipient of US health funds could discuss, provide information on, or perform abortions. This policy was enacted has been supported by all Republican presidents since Reagan enacted it.

    There are literally millions of other examples I could provide, but my point is that stipulating aid on certain conditions happens all the time in every government and with every party.

  5. Phil Says:

    Sorry to clog up the comments but Paul Krugman’s NYT column today is particularly relevant

    S.D.R.s arent real money. Theyre accounting units whose value is set by a basket of dollars, euros, Japanese yen and British pounds. And theres nothing to keep China from diversifying its reserves away from the dollar, indeed from holding a reserve basket matching the composition of the S.D.R.s nothing, that is, except for the fact that China now owns so many dollars that it cant sell them off without driving the dollar down and triggering the very capital loss its leaders fear.

    So what Mr. Zhous proposal actually amounts to is a plea that someone rescue China from the consequences of its own investment mistakes. Thats not going to happen.

    Of course you should probably ignore this since Krugman is a liberal and therefore stupid despite his Nobel Prize in economics.

    http://www.nytimes.com/2009/04/03/opinion/03krugman.html

  6. jonolan Says:

    Sisyphus,

    I actually agree with you. We have the right to know where our tax money is being spent and, within certain limits, how its being spent. I’d never argue against that.

    As for letting the businesses fail, I think that would have been the best of a set of all bad choices, but I’m forced to admit that I’m not positive of that.

    I’d be careful with that “If they’ve been stupid enough to into this kind of debt then should pay the piper” argument though – which was the point of this parable – since the US is racking up unprecedented debts right now and the Libs’ plan seems to be to increase that situation.

    Vaya sans Dios 😉

  7. jonolan Says:

    Phil.

    This post was something of a parable to show the evil of the Liberals’ ideas involving what is acceptable behavior for a lender. Of course you either didn’t see that or chose to ignore it because it bothered your Liberal, anti-American sentiments or detracted from your goal of spreading your – sadly well-crafted I admit – misrepresentations of facts and propaganda.

    No China – as I said and you ignored – is highly unlikely to do either of the things sown in the fables above. They will, however, exert their control in other more subtle ways.

    As for Krugman – I don’t ignore him because he’s a Liberal; I ignore him because he’s a devout Keynesian, a school of pseudo-economics that was already proven wrong and pernicious long before now.

    I don’t put too much stock in the Nobel Prize either. Intelligent beings realize that many of the awards are based more on popular politics than on skill.

  8. zhann Says:

    Jononlan … Phil’s comments about Chinese intentions on Dollar loans/reserves is 100% correct. They really have no grounds to stand on, if they dump the dollar their economy collapses. Without a solid gold reserve, there is little they can do. They will only become scary when they start trading $$$ for gold … that could sway the balance of power, but it will drastically increase the value of the Yuan.

    As for the analogy in general, I am curious, but why do you strictly blame the Democrats for this? Bush has, to date, given out more money than Obama. Not to mention, it is Republican practices that caused the trouble … 2 wars, crazy tax breaks, and so on.

    While I have no intention of defending Democrats at this point, I find it odd that all Conservatives are currently laying the blame for everything on the Democrats. This is something I called from day one … the Financial Crisis started with the Republicans, but the Democrats will take the fall (I was assuming the Democrats would win the election) because they will not be able to get out if this mess.

    … sorry, but I am a cynic, I don’t think that this mess will end any time soon. I am sure that Obama will stabilize the situation temporarily, it is in many peoples best interests, republicans included. But our Real Problem is what to do with the US Dollar, its only a matter of time before it comes crashing down … fun times ahead!

  9. Phil Says:

    Jono

    My argument was that the government forcing out a GM as a condition for a bailout is not analogous to the Chinese selling T-bills. A false analogy is by definition a logic fallacy.

    BUT, to more directly anwser your analogy, if this unrealistic hypothetical situation did occur the blame would lie with the US for selling so many T-bills and not with China for buying them. Much like the blame in Waogner being dismissed lies with GM and not on the government for demanding concessions in return for a bailout of GM.

  10. jonolan Says:

    zhann,

    Phil is fairly accurate in his assertions about how and why the scenarios posted here are far-fetched. He and you are both missing the point though that the feasibility of these scenarios wasn’t the point of the post.

    Since I described them as “dark fantasies,” I begin to wonder who you’re trying to convince, me or yourselves… 😉

    But think about about it. If China did to the US what our government is doing to the financial sector and the automotive sector, what would your feelings and response be?

    Phil,

    You’re still missing the point – or more likely choosing to post as if you did. You Liberals need to start thinking about your attitudes towards strong control being awarded to creditors over their “tenants.”

    You say you would blame the government in this parable. OK, think about that for a moment. Would you be alright or supportive of the Chinese in this parable? After all, you said you’d blame our government?

    That’s the attitude that causes the problem – though I admit that your response does show a lack of hypocrisy.

  11. Phil Says:

    dude, I don’t know how i can give you a more direct answer.

    In your analogy, the Chinese are entitled to ask for whatever concessions they wish in return for the service they’re offering. (Keeping US t-bills/continuing to buy them.) Of course the US is entitled to either accept these terms or reject them. If the US choose to accept them, I wouldn’t like it personally, but we would have no one to blame but ourselves for getting in this situation.

    But even within this analogy, I would probably reject China’s ultimatum and accept the consequences, China refusing to buy more T-bills/selling off its current stock. I would value the sovereignty of the US and my faith in our ability to weather the storm over Chinese rule

    GM had the same choice. Declare bankruptcy and try to weather the storm or accept the government’s bailout with strings attached. They choose the latter. But it was their right to choose this option.

    Bottom line, your anger at the government is misplaced. No one was forced into any agreement. Every party thought through what they felt was best for them and an agreement was reached.

    GM was NOT entitled to receive a government bailout. They wanted the something from the government and the government wanted something in return. Both sides agreed to the price and an exchange was made. That’s called capitalism.

    I think that was a pretty direct response to your question, so please spare me your “oh you’re a liberal ignoring my point” bs this time.

    Thanks

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