Who's really in charge here

[hermetic]

Corporate globalizers turned America from being a proud, strong, manufacturing nation into a nation dependent on imports. Our global trade balance is an embarassment – we now buy $500 billion a year more in goods from abroad than we sell in the world market. China alone pockets $18 billion a year from us––selling that much more to us than they by from America.

What most Americans don't know, however, is what China and other nations do with this excess cash that they're amassing from our trade imbalance. They've been using much of it to buy the U.S. government's bonds, putting our country deeply – perhaps dangerously––in debt to them. Indeed, the central banks of just four Asian nations – Japan, China, Taiwan, and South Korea––now hold roughly 40 percent of Washington's public debt. In effect, they've quietly become our world banker, giving them inordinate power over America's purse strings.

On everything from the value of the American dollar to the spending policies of congress, these four foreign banks are in a position to yank our strings...and they are. They're now demanding, for example, that Washington protect the value of their investments in U.S. bonds by cutting back on federal spending––cuts that would come from the education budget, Social Security benefits, and other spending that we Americans count on.

When did we vote for this?

Sources: "Dollar's Fall Tests Nerve of Asia's Central Bankers." The New York Times, December 4, 2004

"White House Defends China on Currency." The New York Times, December 6, 2004

[HysteryDiagnosis]

1. Interesting scenarios from big brain people.....

In this thread on the future of the American Military, particularly the Air Force... one of the scenarios paints an Asian colossus knocking us out of our much loved role as the world's superpower.

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=104&topic_id=2935303&mesg_id=2935303
In the first world, the U.S.'s military might is constrained by many world players with other forms of power. A second world depicts the extreme impacts of a future dominated by multinational corporate giants. A third world is a scary future in which information and biogenetic technology is dispersed, giving individuals and small groups untold power. In a fourth world, the U.S. loses its status as a superpower to an Asian colossus.

[Robert Oak]

2. new world order

we never voted for it.

Frankly Clinton did a lot to set this up. Sorry but it's true.

He signed NAFTA pushed for the China PNTR deal (the trade agreeement
that opened the flood gates for what is going on right now)

he sold the airwaves to big business so our media is even more shut down in terms of being a service that reports the news...

and then Bush took this set up and ran down the field as fast as he could to sell the US down the river.

But, I think we need to look at Clinton here because if the US
is to be saved...all of these, both repuke and democrat corrupt
politicians who give big bucks to their big business pals need
to get removed from office.

Who voted for this? I think people were manipulated with extreme
propaganda tactics.

Bush throughs his fundamental christians a bone to push their morality
onto the rest of us and then goes about selling us down the river.

[elsiesummers]

3. A bad situation could be worse - private holders of US debt more dangerous

One of the things that economists point out is at least government holders of our debt have vested interests in not flattening the world economy which depends on the US economy. Private holders of US debt could repond to market hysteria at a whim and dump treasuries causing a crash. Even if foreign governments should dump our treasuries, they won't because then they'll be left cleaning up the mess - and because they couldn't sell off all our debt (their treasury investments) at once so their remaining holdings would crash.

While it's better not to be in too much debt, it's better to be in debt to govenment banks than to individual investors.

[idlisambar]

4. Each has its perils....

...Consider these remarks a few years ago from current mayor of Tokyo --- Shintaro Ishihara...


("Gendai", December 1999 edition. A special story: A series of 10 exciting opinions "I can't leave without saying this")
Ishihara: Japan is so exploited by the US. It is also a financial slave of the US. Why is it so afraid of America? Japan doesn't need to care the security treaty with the US at all. If America complains to Japan about the treaty, we just ask the US Army to get out of Japan. At present, this country has enough military technology and budget, so we make it become a strong defense nation by using its money and ability. Then, we should do what the US is most afraid of. Japan sell US Treasury bonds (it has bought about 3 trillion dollars). It will be criticized as pulling a trigger of the Depression, but this is Japan's turn to drop atomic bombs. The world economy will sink after Japan sells all its Treasury bonds. Then, which country or region will recover first? It will be Japan and East Asian Nations that can make high quality products. The best manufacturing country, Japan, as admitted by the US, will survive. And the East Asian nations also have manufacturing technology and a high standard of education. Therefore, the "Greater Asia Yen Sphere" will be established.


Does this represent the thinking of the Japanese establishment? Probably not. Yet it provides some insight into why East Asian nations are willing to continue buying our overpriced treasuries -- in the long-run, wealth goes to those who have the technology and manufacturing capacity.

[oecher3]

5. This is a bit loft-sided, don't you think?

spendingafraid that others believe the US Government Bonds are safe to invest money into?
See this from a positive view. This article is a bit too anti-Asian, in my view. Yes, China seems to be on the best way to become the next world superpower, thanks to its undervalued fixed currency. But since we (the US companies, Walmart is unfortunately a good example) have invested so much into China, at least global players yield well of the Chinese economy getting stronger. If this "trickles down" to the general public remains to be seen. It is not like a country can cash in all bonds at a time, theoretically they can but practically this is unheard of.
It is also true that the US is a net-importer. But that is not a danger either. This has been the case for almost the entire history of the US, if I am not mistaken and correct me if I am. That is, as long as we play fair in the world market and don't raise, i.e. a 40% tax on steel or subsidize stuff.
Finally, this :
"On everything from the value of the American dollar to the spending policies of congress, these four foreign banks are in a position to yank our strings...and they are. They're now demanding, for example, that Washington protect the value of their investments in U.S. bonds by cutting back on federal spending––cuts that would come from the education budget, Social Security benefits, and other spending that we Americans count on."

Just sounds polemic and scare tactics pure. Yes, central banks like to see the dollar strong, that's why the European Central Bank tries to intervene. A strong dollar besides the usual economic consequences, also represents a strong economy and good government, in other words a sign of stability. But certainly helps for the rest, too. For example, importing things is cheaper.
Why do you think the euro is so much rising against the dollar?
The confidence in the US is slipping, countries rather invest in the euro so far without ties or strings attach. It is rather obvious that the resentment against the US is alsomirroredd in the devaluation of the dollar. And the US economy as a hole drifts with the threat of even bigger budget deficit (not the trade deficit). On Friday the dollar rose b/c Treasury Secretary Snow said, the government is taking the deficit serious and they will cut it in five years and promptly fell today, when the increase in the deficit was announced.

So please, think about this article a bit first and wonder if it isn't a bit Asian bashing

[idlisambar]

7. careful throwing around the term "Asian Bashing"

The label "Japan basher" first appeared in the early 1980s. Its inventor was Robert Angel, the former president of the Japan Economic Institute, a Washington institute financed and overseen by Japan's Ministry of Foreign Affairs.....

....Angel's goal was to discredit opposition to Japan's trade practices by insinuating that it was based on racism and xenophobia. His model was the pro-Israel lobby's use of the term anti-Semitism to stigmatize opponents of Israel's policies. he first tried out the term "anti-Japanism" in speeches and interviews but it didn't stick. Then, inspired by the British term "Paki-bashing," he tried "Japan bashing" -- and it worked. "The first people to pick up on it were the Japanese press," Angel says. "However, within a year the American press began to use the term." The term became a weapon in the public relations war being waged in Washington over trade policy and U.S.-Japanese economic relations.

http://archives.cjr.org/year/92/6/trade.asp

********************************************************************
From Angel himself...

While president of the Japan Economic Institute in Washington, D.C., I used the phrase to discredit the more effective critics of Japan's economic policies. Several years later I admitted authorship to John Judis, a Washington journalist friend, but still refused to admit it in public. He persuaded me to "confess," so to speak, and wrote the whole thing up in a Columbia Journalism Review article. It is amusing to watch otherwise thoughtful people fall right into the trap, although my views on political economy have changed considerably since then.

http://www.debito.org/PALE898.html#japanbashing

[idlisambar]

8. US as a net importer

"It is also true that the US is a net-importer. But that is not a danger either. This has been the case for almost the entire history of the US, if I am not mistaken and correct me if I am."

In fact before the early 80's, the U.S. was the world's largest creditor, only in the last 25 years or so has it assumed its chronic debtor role. To give our current situation a little perspective, the current account deficit for 2004 will probably come out to around 6% of GDP. Before the early 80's America had never had a deficit that exceeded 1%.

[German-Lefty]

6. Would it be smarter for them to keep cash instead of bonds?

I just had an idea!!! If you're the EU and Asian banks you've got tons of long term bonds, so it's not in your interest to see those bonds fall. At the same time we tend to export to the US, having a strong dollar is nessesary for that. Wouldn't it make more sense to not buy bonds and just bunker the money in cash?

a) This would reduce the dollar supply, every dollar sitting in a vault in Japan is one less dollar floating around devaluating the others. Loaning a dollar back to the US will let it devaluate the others.

b) It's a way better to put the breaks on US spending. By not loaning money to the US government, we'd force the treasury to spend less or borrow from others. This would force the yeilds up, so even if you bought some bonds you might actually get more profit from them.

c) Cash is easier to dump than bonds.

Sure doing this would mean you'd miss out on 2-4% interest, but that's not all that much anyways. It seems like you could prop up the dollar with a lot less commitment, if you used cash instead of bonds.