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The Grand Chinese Fraud

Here’s Karl Denninger on China,…

The Grand Chinese Fraud

Wen JaibaoWen "cats in the kettle" Jaibao spouted:

“I don’t think the renminbi is undervalued,” Wen said yesterday at a press conference in Beijing marking the end of China’s annual parliamentary meetings, using another term for the yuan. “We oppose countries pointing fingers at each other and even forcing a country to appreciate its currency.”

Oh really?

It’s time that we stop the the BS here with regard to China.

The entire premise of so-called "Free Trade" with the Chinese was predicated on the belief that if we opened our borders to their products on a "no tariff" basis that we would, over time, change their political system.  That is, we would import cheap Chinese plastic junk and export democracy.  More or less.

Well, we got all the cheap DVD players but they didn’t get any democracy.  Quite to the contrary.  There have been no meaningful improvements in areas of environmental protection, workers rights and wages or political freedom.  Indeed, the recent dust-up with Google just underlines the reality in China:Their government is a band of murderous brigands and thugs.

Disagree with them inside their nation, refuse to censor The Internet, for example, so that people can’t read about Falun Gong and China will be happy to arrest the executives of your firm inside the nation and provide this as "corrective influence" to your head:

Oh, they send the 50 cent bill for it to your family too.  Isn’t that special?

At least in this country they don’t shoot people for talking about the evil-doing that both private parties and government engage in.  If they did, well, I’d be long-dead.

Second, China hasn’t changed its spots a bit.  It has pursued a mercantilist policy for over two decades while at the same time stealing anything that isn’t nailed down (and some things that are), including such wonders as our technological prowess in nuclear warhead design.  Argue the defensive merits of nukes in a silo all you want – when they’re flying, they’re anything but defensive.

In short our policies have been an abject failure.  We’ve destroyed consumer product manufacturing in The United States, we’ve shuffled a huge amount of wealth over to China due to their manipulated currency, we’ve trashed our real standard of living and replaced production with debt and the supposed benefits of an open and free market, along with a democratic political system in China have failed to materialize.

It’s time to stop the stupid.  It’s time to force those firms who want to offshore production to return the so-called "savings" to the United States as something more than executive bonuses.  And it’s time to treat those who are a communist dictatorship as exactly that.

The simplest solution is to hit China with a 25% tariff on everything – literally everything – and close the market entirely to anything coming over here that contains stolen intellectual property.

China has done us one better with their "liquidity program."  Instead of allowing the economy to adjust and build internal demand, they have stoked a huge bubble in fixed assets.  This, coming on the back of what we just experienced in our property market, is one of the most-pernicious and outrageous series of acts I’ve seen out of a sovereign in a long time.  Couple that with questionable (at best) "official" statistics on China’s economy and you’ve got the ingredients for real trouble.

There are often claims that we’re "hostage" to China’s holdings of Treasuries and other bonds.  Nonsense.  First, if China sells them they cut off their own nose.  Second, in an extreme circumstance we could easily institute capital controls that would effectively neuter their influence entirely – and they know it.  Third, it’s time for us to live within our means anyway, so if China was to provoke that, where’s the foul?  There’s a solid argument to made for such an event being positive for America, not negative.  And finally, China needs us more than we need them – should we throw up a complete barrier to their cheap junk, along with the Euro zone who is likewise tired of the manipulation their mercantilist game would collapse on their heads.

It’s time to call the curtain down on the cock-and-bull story coming from China.  We have not achieved our goals with "engagement" and "trade", and won’t.  Our nation has been intentionally and severely damaged by these thugs who have adopted a mercantilist "raid ‘em and loot ‘em" approach to commerce, then hidden behind their communist ability to manipulate and even kill those who disagree with them.  If we don’t deal with this now, we will wind up having to deal with it militarily, and it will be even less-pleasant than telling them to stick it with the slave-labor-produced, water-fouling and air-blackening $30 DVD players.

In short, it’s time for us to grow a pair of balls and tell the Chinese to put it where the sun doesn’t shine, neutering their interference and intentional distortion of trade balance and currency valuation.

We didn’t get what we bargained for, so it’s time for us to change the bargain. 


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