China's financial veto

ARTICLE: Utah's GOP Governor Chosen as China Envoy, By Michael D. Shear, Washington Post, May 17, 2009

ARTICLE: The China PuzzleBy DAVID LEONHARDT, New York Times Magazine, May 13, 2009

Roughly a decade ago, as part of my pre-9/11 brief on globalization, I started pitching the notion that I later wrote up with Hank Gaffney: that America was running a grand transaction strategy with the world but heavily with Asia (the focus of my work then at the War College and with Cantor Fitzgerald). In this transaction, our over consumption was covered by our agreement with those nations in Asia running an export-driven growth strategy: they feed the surplus back into our markets and, by keeping our money cheap, we were able to maintain our Leviathan service (i.e., our military might). That meant our Leviathan service was a product of sorts--as in, like it and you remain willing to pay for it. But don't like it and the transaction ends.

I was routinely ridiculed for my naivete on this subject : How could American power be reduced to such a simplistic economic transaction?

Worse, I would declare that when countries like Japan and China grew weary or dissatisfied with our product, their financing would end.

Again, how simplistic and naïve!

Then the financial crisis revealed all, and the structural imbalance and the cheap money it generated finally caught up to us, and I was naturally caught completely unaware because my theory of globalization (to include a signature concept of regular system-disrupting and rule-set scrambling crises called System Perturbations-- from my Y2K work) posited the complete end of the business cycle! And globalization's continuous linear advance!

Imagine how shocked I am, a decade later, to find the media's best minds now positing that China has a financial veto over our future and that we better make friendly on that basis!

Who da thunk it?!

I will tell you, people like Geithner and Huntsman thunk it, and my ideas weren't ridiculed everywhere.

So pardon those of us who choose not to freak out at this moment in history. Doesn't mark anyone as genius. Just reflects the skill of keeping one's strategic head out of one's ass.

And yes, it's a lifelong struggle.

But it's also an entry-level skill for a would-be (I prefer the term, "self-declared") grand strategist.

Comments

[joe Michels]

I've heard Tom discuss this topic before on radio and I always though he made a fine argument because it made total sense.

But now we have a huge problem. Our public sector is spending money we don't have. Obama and and Dems have chosen a path of borrowing that will crowed out private sector credit. That will prevent our damaged economy from recovering and possibly damage it even more.

As a person who believe is a strong military, I don't see how the US can continue to be the worlds policeman. We will have to surrender large portions of the world to chaos in hopes of protecting our most vial interests, oil, our boarders and curtailing radical Islam.

Until we get the out of control spenders who are driving our economic system to socialism or statism (whatever you like) out of office, we will be a declining country and economy.

[Louis Heberlein]

So, last year became the 'time for a transformation' ... right?

[L]

It does follow that as Afghanistan/Pakistan goes kaput, so too does our economic power.