Kyoto Protocols Would Have Accelerated China’s Plan to Reverse-Exploit EurAmerica

In 1978, the year China emerged onto the world stage with its four modernizations, China, a country with four times the population of the United States, had a paltry gross domestic product of $216 billion, less than eight percent of the United States. China exposed her strategy of four modernizations to the world as if to say,”Please invest in China and we will ensure that our workforce is educated, and that our business infrastructure is stable for your investment.” Yet, this openly expressed strategy, that may have seemed to the rest of the world as a difficult but noble goal for China to achieve, was only the tip of China’s Grand Plan, and only the part she wanted the world to see.

EurAmerica’s history with China was one of gunboat diplomacy, exploitation, and forced trading. When China opened her borders again in 1979, EurAmerica’s merchants were enthusiastic to exploit an opportunity once again. Yet, China had not forgotten EurAmerica’s role in the Opium War, the Sino-Japanese War, and the Boxer Rebellion. China would never open her border again to be exploited. When she finally opened her border in 1979, it was from a position of power, deep strategy, and long lived planning that suggested EurAmerica was finally ripe for reverse exploitation. China’s grand plan was to emerge as the 21st century world power.

What boldness of purpose China must have felt as she aligned her nation’s efforts to that decade’s long task. Looking back today on her impossible achievements, one must give pause to the monumental economic goal she set for herself in 1978, indeed greater than America’s technical goal of landing on the moon early in 1961. Yet, with such a miniscule $216 billion GDP and few material assets how could China possibly build her empire to surpass that of the United States?

Through a hybrid statist-capitalist political structure, China would create a conduit through which American businesses would willingly draw down the wealth of Europe and America and transfer it to China in order to share in the prosperity of that wealth transfer. Through the centralized imposition of forced savings on its people, China would provide low cost labor to sell goods at low enough prices to cause EurAmerica to look the other way as their neighbors’ jobs went to China. Through low interest loans, China would entice EurAmerican politicians to spend beyond their means to temporarily ease the pain of EurAmerica as China’s sucked away their life force. These were the basis of her strategy.

Similarly to how a business cycle contains early adopters and late stage laggards, China planned a capital extraction cycle for EurAmerica, in which China would extract capital in multiple phases, each phase having an optimal extraction strategy. First extraction would be through the early adopter “gold rush” investors rushing into China to stake a claim. China would also plan for early majority, late majority and laggard’s capital extraction.

In 1978, China assessed America’s assets:
• America’s most valuable assets were intellectual capital that resulted from 200 years of publicly funded primary and publicly subsidized secondary education
• America’s physical assets included business assets, commercial, and residential real estate worth $7 trillion in addition to public assets of land, buildings, and infrastructure
• America produced 26% of the world’s GDP at $2.8 trillion and consumed a quarter of the world’s goods
• America’s debt was as low as it had been since WWII as a percentage of GDP and its 110 million workers were capable of doubling their loans to provide China more capital
• America’s Baby boomers were entering a peak spending phase followed by peak saving
• America’s constitutional republic allowed a relative few capitalists to control the direction of her economy

By 1978, multinational corporations had steadily grown in number and size for two decades. China’s success depended on corralling MNCs through direct foreign investment to create massive inflows of capital quickly monetized as hard assets and infrastructure.

China would entice merchants to invest by offering access to the future potential purchasing power of its people. However, given China’s low household incomes, market penetration would be low to start. Therefore, to entice the early adopters, China would create special economic zones that provided the perfect investment opportunity of cheap educated labor, loose regulation, low taxation, strengthened business law, and enhanced infrastructure and transportation, in which businesses could produce goods at very low arbitrage costs to sell back to their home countries for high margins.

With low cost of goods from special economic zones, early adopter businesses were highly profitable and banks poured investment into China as a result. But, China could not complete her Grand Plan to multiply her GDP 50 times by enticing early adopter investors alone. She had to implement a plan timed to extract maximum dollars from EurAmerica at each phase of her exponential growth.

During the next stage, the early majority stage, China manipulated baby boomers’ peak spending phase:
• China’s low prices secured America’s baby boomers as loyal customers
• Prior to America noticing a substantial loss of jobs, China secured free trade agreements, and mined American businesses for their intellectual capital.
• She reinvested profits back into America’s debt to keep America’s interest rates artificially low in order to spur on higher levels of consumer spending and government borrowing.
• China supported lobbying of America’s mass investment vehicles to fund MNCs. 401Ks and IRAs, created in ‘80and ’81, funneled money through the stock market into MNCs for investment into China.

Then, America was drawn into the late majority stage as America’s baby boomers entered their peak saving years. 401Ks and IRAs artificially fed the stock market frenzy. Baby boomers sensed they knew how to invest in a bubble market that kept rising. With access to low interest rate loans kept low by China’s reinvestment, speculators borrowed money to bet on the rising stock market. America ultimately increased its debt to pump up stock values to build more Chinese factories.

Inevitably, the stock market bubble burst, leaving America’s baby boomers with lower retirement savings. The stock market that seemed destined to go up forever finally reversed rapidly decreasing valuations. However, the debt that had funded its escalation remained.

During the late majority phase:
• More businesses began to invest in China just to remain competitive with businesses that had moved offshore earlier.
• Tens of thousands of businesses transferred factories to China to obtain low cost labor
• Millions of Americans lost jobs
• With a generation of education completed, China now was able to take more advanced jobs as well as factory jobs. America’s bastion of protected, more technically competent jobs was not a bastion after all.
• American retail outlets for Chinese goods grew exponentially
• China continued to loan its excess profits back to the American government to keep interest rates low.
After having lived through the weakness of the stock market, real estate appeared to be the baby boomers’ best retirement savings alternative. In the early stages of the Great Ponsi, housing prices went steadily up. With low interest rates, Americans could now borrow on the value of their homes to continue funding China’s growth. China’s final stages of extraction saw the housing bubble increase beyond what had ever been experienced before.

Even though American jobs were increasingly being driven offshore, the frenzy of increased housing prices allowed additional borrowing from Americans, feeding the China gold rush further. This behavior was not unexpected, following a pattern of historical boom-bust cycles and was part of China’s planning. As a result of the stock bubble and the housing bubble, America’s total debt had risen to over $55 trillion. With such exuberance in the housing market, secondary debt markets participated in credit default swaps to the tune of an additional $42 trillion. China now had extracted close to the maximum of America’s value, leaving America with the corresponding debt.

So China extracted maximum value, first in trade secrets and early adoptive money, then by IRAs and 401Ks, then by stock market and home equity loans, then by 2nd mortgages and housing speculation. China monetized the massive cash flows as quickly as possible, building infrastructure and excess manufacturing capacity, while leaving America holding debt in exchange.

Without any other rising asset values to borrow from, America has tapped out its debt. Having maxed its debt, America can only print money to finance its trade deficits. Without further real debt derived money extraction to give China for infrastructure investment and without a real ability to pay for low cost Chinese goods, America is fast losing her worth to China as an infrastructure vehicle. Recognizing that maximized extraction and rapid monetization of America’s wealth is nearing its end, China is now finalizing the implementation of her strategy, that of pulling out of American debt before other countries that maintain reserve currencies create a run on the dollar.

In thirty short years, China was able to accelerate her GDP from $216 billion to $11 trillion. She amassed reserve capital of $3 trillion. She reversed America’s fortunes from the greatest creditor nation to the greatest debtor nation. She gutted America’s factories while creating the world’s largest manufacturing base in her own country. A measure of output that highly correlates to GDP is energy consumption. In June of this year, 2011, China surpassed the United States as the largest consumer of energy on the planet. While the U.S consumes 19 percent of the world’s energy, China consumes 20.3 percent.

In 1992, the world came together to discuss the impact of climate change resulting from energy consumption. The talks resulted in Kyoto protocols being initially adopted in 1997 that attempted to create a framework for reducing greenhouse emissions. The protocols called for 33 industrialized nations to reduce their greenhouse gases to 1990 levels and then to maintain emissions at those levels. Although it called for emerging countries like China to voluntarily lower levels, it did not require them to be mandated.

Of course, all of the countries who had no requirements to reduce their emissions signed the agreement. The United States, under scrutiny from environmentalists and others did not sign. China did sign. This was an additional strategy perhaps not envisioned in 1978 that nonetheless would have assisted in accelerating America’s slide had we signed.

GDP highly correlates to energy usage. In 1990, America’s real GDP was about $8 trillion as compared to $14 trillion in 2011. Kyoto would have caused America to either:
• Invest billions in the attempt to lower our energy usage per dollar of GDP
• Pay billions to other countries to have them produce less so that we could grow our GDP from $8 to $14 trillion
• Or, maintain our GDP at 8 trillion

In the meantime, China’s GDP in 1990 was $1.3 trillion and has since grown to over $10 trillion. China’s energy use has correspondingly grown as well until the point that this month, she overtook America as the greatest polluter. Kyoto was a grand idea that was doomed from the start because of the flaw that allowed the now greatest polluter to play by different rules. It attempted to cap the economic growth of America while allowing other countries to grow unfettered.

China had a Grand Plan that has been executed with the finesse expected of a centrally planned economy. Kyoto added nicely to that plan. America has been thwarted by China’s plan but now has the ability to reverse course. Given China’s size and growth rate, she will pass us soon if she has not already and her stride will be too great for us to catch her. However, by avoiding traps like Kyoto, and understanding that economic gamesmanship can accomplish a much greater destruction of a nation’s wealth than warfare ever could, perhaps America can once again right its course.

Are Tariffs a Strategy for World Peace?

War with China may be inevitable. When EurAmerican multinational corporations (MNCs) were allowed by our governments to trade trade secrets in exchange for opening of Asian markets, they may have sealed the world’s fate. China’s output will soon surpass America’s and her rate of growth continues to far outpace ours. She is implementing strategies that promise to replace America as the World’s empire during the next 15 years.

Every transition in history from one empire to another has been accented by great wars. The transition of the last empire was no exception. Great Britain did not acquiesce to America’s century until after the throws of WWI and WWII. Now the rapid ascent of globalization, made possible by the transfer of capital from international bankers to MNCs, has driven the world to the edge of another conflict in our lifetimes.

During the last transition, Germany, racked with debt from WWI, experienced hyperinflation with an impotent republic led by political extremists. While the rest of the world recovered, Germany’s inability to deal with its financial obligations led to a vacuum that was filled by the Nazis. Without immediate government action, America’s debt will also become unsustainable, crowding out vital services and creating societal instability similar to Weimar Germany. Given that America has the most powerful military the world has known, will America be an exception to 6,000 years of recorded history, or will our society fall prey to the severities that initiated the last world war?

The answer rests with our MNCs. They have historically persuaded our government to use America’s military to meet business objectives. And now for the first time in history, MNCs have the power to determine the path of our “empire’s” transition. If our corporations are unable to mitigate country risks by growing beyond the regulation of most countries (many are not far from that now) they will continue to rely on the might of our military. If our MNCs position themselves to succeed even as America fails, they will decide war is not in their best interests.

If enough MNCs make the leap to disavow an American connection and choose to forego the protection of our military’s gunboat diplomacy, our MNCs will support the gradual dismembering of our military, reducing its capability to strike. Given America’s inability to continue funding our military as our businesses depart, some Americans may choose to rise up similarly to Japan or Germany during the 20th century. How do we mitigate such a potential? A tariff or subsidy program could achieve full employment at sustenance wages, and could deter or delay war.

When citizens of our nation are unemployed, they have several options. For 26 weeks, they have unemployment at a rate much lower than full wages. During this Great Recession, our government extended unemployment to 99 weeks. After 99 weeks, the unemployed join the ranks of the 99ers, who are given few comforts from the American system if they are not disabled or do not have children. Instead, those without family members to rely upon or without black market skills or goods to eke out an alternative living, must join the world of the unseen, those citizens who blend into our peripheral vision not to be looked upon for fear that we too will be drawn to their fate. Our country’s lack of a comprehensive strategy to transition to globalization has condemned millions of vital Americans to this murky existence.

Rather than relegate 99ers to the dark crevices of our society, America must offer a better path. We must choose to overcome partisan maneuvering and compete with the world as best we can. Rather than continue down this political path that will lead ultimately to class warfare and further disintegration of American culture, capabilities, and competitiveness, we must recreate a consortium of capitalists and workers that benefits all Americans.

A cornerstone of that consortium is that both businesses and workers must succeed. Tariffs on foreign goods that cost the American society more than the savings they provide to the American consumer are a method for producing mutual success. Tariffs provide American factories price controls to allow domestic jobs at rates that can replace extended unemployment. During periods of innovative growth and peak business cycles when higher wages are available, those businesses least able to compete will be lost to international competition but during periods of lower innovation or business troughs, Americans will keep jobs and foreign companies providing goods to America will be the first to lose employment.

Some say that tariffs gouge the American consumer, but that does not evaluate our citizens holistically. A consumer is also a tax payer, a worker, a provider, a parent, a partaker of the environment, and a member of a community. If the net holistic benefits to the American citizen are positive for a particular product or service, then that particular product or service should escape protectionism. However, we should determine how to redistribute the gross benefits and costs within our country to equitably share the benefits and social costs.

Others say that tariffs and subsidy protections would cause American businesses to become complacent and to lose their incentive to compete with the rest of the world. We continue to use this reasoning even as our structural unemployment continues to grow. However, for the 40,000 factories that have left our shores, American ingenuity has been unable to keep pace with even no complacency. American businesses will always have an incentive to improve productivity if they wish to compete in world markets regardless of subsidies or tariffs.

Still others say that tariffs perpetuate poor quality and operating practices. America did pass through a moment in time prior to globalization when we did not envision a world of emerging countries competing through quality and innovation. However, we will never return to that moment, except for the nostalgic pining of our elders remembering “better days”. Nonetheless, offsetting wage and regulation cost differentials with tariffs will not protect American businesses from foreign quality and innovative competition. We will forever more be compelled to compete.

Mitigating wage and regulation cost differentials will only slow the rapid drain of jobs, manufacturing, and national security protection of America. Those goods which are most able to provide win-win benefits to both America and her trading partners will be available in our markets at lower costs, others at similar costs. Net benefits to America will be much greater than this wholesale gutting of American value, jobs, and self worth. During times when accelerated American innovation thrusts Americans into higher wage jobs, more foreign products will be available at lower prices.

Tariffs are only one piece of a comprehensive strategy to protect America from a plunge into obscurity. However, given the realities of our politicians’ impotence in dealing with the onslaught of multinational corporations and international bankers, it is a critical first step that should be implemented immediately if we are to provide America time to catch up with China’s immense and effectively operationalized strategies. America’s current path is not healthy for America and ultimately will not be for our economic adversaries either. If war is an inevitable part of transition, then any actions taken to delay or deter war are critical. I deem strategic tariffs a support for jobs, a net benefit to America’s finances, and a mitigation to war.

Is War an Opportunity to Solve China’s Social Ills?

As I continue to uncover for my own understanding China’s interwoven long term strategies and implementation of those strategies, I have been truly awed by her disciplined rise once again to power. Of all the empires on earth, China has somehow uniquely adapted to the world’s changing influences and has repeatedly renewed her dominance, unlike all other nations that ultimately imploded into insignificance through flawed national strategies. However, one China policy above all others seems disjointed in her current quest for world preeminence.

In an apparent attempt to limit internal demand for resources, China implemented over the past 30 years a one baby rule that limits families to one child. The resulting social ills have ripped a malevolent thread throughout China that may only be disposed of through war.

Without safety nets such as social security and Medicare, Chinese parents rely on their children to protect them in their old age. Societal norms require a son for this purpose. Over the past three decades, in the face of China’s family planning policies, Chinese parents have aborted 40 million baby girls to ensure their old age needs are met.

The disastrous results of this deliberate centralized planning aberration are numerous. Because of the need for male children and as a result of China’s artificially imposed birth fines, a growing child trafficking trade now kidnaps 70,000 baby boys a year for sale, destroying families and villages in the process. China now has 40 million males that have no chance of marriage. Wealthier parents, attempting to secure brides for their baby boys, have increased the demand for trafficking of baby girls who are purchased and raised as future brides. Many of the boys, who are now of marriage age and without wives have increased the demand for prostitution. Once again, it has increased the trafficking of young women to serve as prostitutes.

Has China’s policy created a social ill that will continue through the life cycle of 40 million young men with only symptoms of enormous trafficking, or will these ills compel other resulting social ills until the ripples simply cannot be contained within China’s current attempt of world dominance?

China’s historic gender aberration, perhaps a previously unplanned flaw in the context of her more systematically planned hegemonic rise, will influence her transition in ways yet unknown. Whether or not a giant flaw in her otherwise planned society or an intended gender distortion created for ulterior means, this distorting social instability must now be resolved by China’s central planners if she hopes to prosper.

Within the next two decades, the demand for commodities will peak, stressing underlying conflicts between China and EurAmerica while China demands her place as the 21st century hegemonist. Every transition from one empire to another has been marred by great wars including WWI and WWII at the start of America’s rise. An opportunistic solution to this potentially devastating draconian centralized authoritarian social policy that created such a destabilizing gender gap could be to reduce this warring age male population through war.

Is America Prepared for Kamikaze Finance?

Brett Arends, in his April 25th Marketwatch article entitled “IMF Bombshell: Age of America Nears End”  reports that the IMF has predicted 2016 as the year when China’s economy overtakes that of the United States.

http://www.marketwatch.com/story/imf-bombshell-age-of-america-about-to-end-2011-04-25

Perhaps the word bombshell is the right allusion.  What comes to mind is America’s shock and disbelief in 1941 that the Japanese could fly formations of attack aircraft for so long under the radar right above sea level to destroy Pearl Harbor.  Just as Americans were unprepared to foresee the stealth attack of Japan even after years of her militaristic advances, Americans have stood helplessly by as the armaments of American financial defense sit helplessly in Congressional harbors of polarized politics.

Two concepts of financial attack seem reasonable afterthoughts.  First is that exponential financial expansion is hidden from radar until the last few years of growth.  American appeasers failed to recognize that as China expanded it’s economy 10 percent per year for 30 years, the law of exponential growth meant China’s economy would grow 800 percent in thirty years, but that the  greatest 400% would occur in the last seven years.  

The second even more ingenious stealth move unforeseen by America but creating an even more shocking surprise attack is that by holding the exchange rate low for so many years, the Chinese were able to fly even lower to the ocean swells and build a purchase power parity empire undetected by conventional financial defenses.

In preparation for this two pronged financial assault,  China has been building the hegemonic relationships that thwarted Japan’s  military attempt to over take the United States just 6 decades ago.   China also was successful in its hegemonic strategy to preemptively gut American factories through the “treasonous”  collaboration of multinational corporations and international banks residing  in financial cells right here in America.  

Our American factories, that were so successful in mounting a war of attrition against the Japanese in WWII, now lay dormant in the rust belt as 24 percent of our capable American workers line the “soup kitchens” of the American social welfare system and charitable organization’s generosity.  This time around, without the physical and financial capabilities to defend ourselves from within, it may be Americans who are forced to display patriotism through financial kamikaze during the end stages of the American empire.

How Could America Have Squandered the Gold of Ancient Egypt and the Incas?

Gold has been the store of human endeavor since ancient times. While each ounce of gold can hold only a finite amount of labor, perhaps 1,000 hours in non-industrialized nations, some of the gold locked in Fort Knox has touched millions of hours of labor from civilizations untold. For gold’s greatest benefit, as with all money, is not its storage of value but its lasting ability to temporarily hold value in the exchange of non-coincidental barters.

For millenniums, money was the interchange commodity for simple trades as between farmers and herders. The farmer gave the herder a coin in winter for meat, and the herder returned the coin at harvest time for a bushel of vegetables. Farmers and herders relied on the value of gold because precious metals took effort to mine and purify, were tested for weight and purity, and could be stamped, coined and carried. With such a universal appeal, precious metals became synonymous with storage of value and dominated the world’s choice for money.

At one point, America held within its coffers 70% of all the gold that has ever been purified from ancient Egypt and the Incas through modern times. But it was our misjudgment as to the true value of gold that robbed our forts of ingots and brought America to the precipice of ruin. As history’s greatest superpower, why did America not learn from ancient empires that tumbled down the path to insignificance, and why did we allow our government to amass more debt than has ever been owed by every other soul that has ever lived?

1964 marked an accelerating turning point in America’s misfortunes. In 1964, President Johnson was elected to enact Great Society reforms just as America was increasing her involvement in Viet Nam. Baby boomers were entering the work force just as multinational corporations were beginning an upsurge of direct foreign investment and the transfer of jobs to overseas markets. America’s use of oil was peaking just as political undercurrents were coalescing around oil as a geopolitical force.

Six simultaneous assaults on the American dollar joined to fuel the American financial malaise; a lack of fiscal adherence to a gold standard, military excursions in support of American interests, funding of the great society, a lack of will to respond to oil cartels, multinational corporate indifference to the plight of the American worker, and a financial industry gone wild.

America did not Steward Its Gold

Even though, for 600 decades of recorded history, gold was the stable base of transactions, the world has temporarily abandoned this gold standard for the last 5 decades. Our abandonment was not because of the world’s enlightenment that gold is an unnecessary physical impediment to the electronic age of finance. It is because, with no viable alternative, the world has clung to the hollowed out American dollar that inflated beyond the discipline of the gold standard.

In the 20th century, industrialized nations twice attempted to redistribute wealth through great wars that left all of Europe bankrupt. Afterward, America held 70 percent of the world’s processed gold, and became through Bretton Woods the gold-backed, paper money guarantor of the free world. During the next 15 years, America squandered her gold to cover currency imbalances, until by 1960 the dollar lost its legitimacy. Interestingly, it took Spain over a hundred years to squander its 20,000 tons of Inca gold.

From 1971 until now, America and the rest of the world have had little choice but to allow our currencies to float, giving up the imperfect discipline imposed by a gold standard. As a result of America’s freewheeling monetary policies, it is now encumbered by a spend drunk Congress and an obliging central bank that have conspired to reduce the value of America’s 1971 fiat dollar to a mere 17 cents today.

Scholars suggest that the reason for the dollar’s fall was the inevitable Triffin dilemma which requires America to carry a current account deficit to provide the world with reserve currency. Yet debt financed trade imbalances are not required to provide reserves. Reserves could just as well have been sold to other countries as given to them through trade shortfalls. No, America’s post war monetary policies quickly gambled away the historical hegemony that was bestowed on us at the end of two world wars.

This five decade hiatus from a gold standard will prove only temporary. Gold’s appeal as the engine of financial growth has not been lost on China. At the end of World War II, U.S. gold reserve was over 18,000 tons but has since reduced to 8,000 tons. China is executing a strategy of purchasing approximately 250 tons per year and, as the world’s largest producer of gold, producing 320 tons per year, and now has surpassed all but the U.S. as the second largest holder of gold with 2,000 tons.

Military Excursions Drained America’s Coffers

Without the ability to borrow vast moneys, earlier civilizations relied on warring, exploration and conquest to quickly expand their stores of gold. This strategy was not without consequences. To fund war, Rome engaged in coin clipping and smelting with lesser metals to reduce size and value of denarius in attempts to pay soldiers with coins of veiled value. After 200 years, the Roman denarius reduced from 100 percent silver to only 5 percent just prior its army leaving Rome unprotected from invasions and fall. Interestingly, it has taken less than 100 years for America’s dollar value to plunge that amount.

As all empires have before, America found that its wars must be financed with inflation. The Fed supported an excessive expansion of the money supply (dollar clipping), creating debt to fund each of America’s wars. The Civil War added 2.8 billion. WWI added another 21 billion. WWII created another $216 billion. The Korean War was financed with taxes. Viet Nam increased the debt $146 billion. Cold war expenditures cost 1.6 trillion. The first Gulf War cost a mere $7 billion. In contrast, Iraq cost $786 billion and Afghanistan cost $397 billion. Not including the 700 foreign soil U.S. military bases that contribute greatly to America’s balance of payments deficit, her major wars added a total of $3.4 trillion dollars of carried debt.

The Great Society Became the Broke Society

President Johnson outlined The Great Society in his State of the Union Speech on January 4, 1965, saying “The great society asks not how much, but how good; not only how to create wealth but how to use it.” Notwithstanding the good that was done by these programs, they drained America’s future potential GDP growth and the money that would fuel her economic engine.

46 years later, Great Society initiatives touched education, health, urban renewal, transportation, arts and culture, Medicare and Medicaid, the Food Stamp program, Project Head Start, The National Endowment for the Arts, The Corporation for Public Broadcasting and federal aid to public education for a total expenditure of $9.5 trillion dollars.

America’s Addiction to Oil Made Us Slaves to the Oil Cartel

Oil enabled powerful nations to create a world order that flowed money from agrarian nations to those that controlled hydrocarbon powered machines. Oil was the catalyst that propelled the 20th century’s world leaders into fortune and thrust the world into war. Oil is a finite fuel, controlled by a few nations that are barely separated geopolitically and have common ancient civilizations and modern goals.

Already struggling from Viet Nam and Great Society debts, America found herself the object of a politically motivated oil embargo in 1973. Fuel prices soared and supplies tightened to cause the 70’s stagflation in America. From then until now, America has not found the political will through fluctuating fuel prices to organize an intervention away from oil dependence.

Since the embargo, America has consumed 250 billion barrels of oil at a total cost of $11 trillion dollars. This debit line in our national budget has only one trade, oil for dollars. Had America given our energy war a smidgeon of the effort of placing a man on the moon, we could have easily reduced energy consumption by 20 percent for the same productive output, transportation, and environmental comfort, and saved 2.2 trillion dollars. Surely, the costs to achieve such a modest conservation would have to be netted from the gross, but those costs could have been internally generated and added to America’s GDP.

America’s Multinational Corporations (MNC) were Indifferent Citizens

While America fought the war on poverty, her political leaders surrendered to the war on American jobs. Certainly, with the relative world peace supported by America’s military, globalization was bound to occur. With the risk of direct foreign investments reduced, the last five decades have unleashed an acceleration of money flow and intellectual capital from America to other countries.

While over 4 trillion dollars have been invested overseas by American uberwealthy, America has also been a receiver of investment, so that the net outflow has only been 0.7 trillion. However, the loss of America’s wealth and jobs has been much greater, contributing to a stagnant workforce where one in four able Americans has been idled. MNC direct foreign investment has indirectly added $4 trillion dollars to America’s debt.

The Fed Financed MNCs and Saved Banks but Failed to Keep America Employed

During most of the 17th century, Europe embroiled itself in wars that killed 30% of its population. Some of the world’s largest banking houses failed as royal debtors defaulted, including England in1672. Finally, in 1694, the king agreed to give the Bank of England authority to print all of England’s bank notes in exchange for bank loans to support his war with France. The newly created Central bank, having transferred its risk of loss to British subjects, profited simply by printing money for the monarchy. However, this excess printing did not stop the emptying of England’s coffers.

After America revolted to escape the monetary control of the Bank of England, Hamilton, the United States’ Secretary of the treasury, proposed a charter to a create a similar central bank for America. Against Thomas Jefferson’s insistence, the First Bank of the United States became the precursor to America’s Federal Reserve. Some say major banks manufactured a bank run in 1907 to destabilize the Treasury and instigate support for the Federal Reserve Act of 1913 establishing the Fed, a quasi-agency, private enterprise with a quasi-public board.

From the establishment of the Fed until today, many have argued that major Fed decisions have enriched banks at the expense of the American People. An example is the erroneous decision the Fed made to keep interest rates high for an extensive period of time as America and the World clearly were entering the Great Depression. Also of heated debate was the decision to bail out the banking industry at the start of the Great Recession.

Nonetheless, Fed decisions combined with lobbied efforts to reduce financial regulations, allowed Wall Street to orchestrate multiple financial bubbles that consecutively destroyed value in American portfolios. It cost taxpayers $88 billion to bail out the S&L crisis. The boiling and bursting of the dot.com bubble evaporated $5 trillion dollars. Notwithstanding that the credit default bubble lost the world $30 trillion in value, it has thus far cost America $51 billion in bank bailouts, $787 billion in stimulus, $1.5 trillion in quantitative easing, $5 trillion in lost property values, and with over 5 million bankruptcies and 5 million foreclosures, ruined trillions of dollars worth of wealth generating credit.

In Conclusion

Adding up the numbers versus our $15 trillion dollar debt, it is amazing that the resiliency of the American economy is thus far holding ground:

10,000 tons of gold: $0.5 trillion
Wars: $3.4 trillion
Great Society: $9.5 trillion
Lack of Energy Policy $2.2 trillion
MNC DFI: $4.0 trillion
Banking Debacles: $12.4 trillion +
Total $32.0 trillion

The idea of currencies unsupported by gold reserves is not in itself troublesome. Whether Crowley shells, tally sticks, or paper money, if the market has trust in its role as a place holder for non-incidental barter, any money will do. However without the external discipline imposed by a gold standard, America must instead substitute gold’s imposition for a President strong enough to stand for American sovereignty, a Fed subjugated to defend a stable currency, a Congress selfless enough to impose its own financial discipline, and a willingness of American businesses to defend American jobs. Otherwise, America’s five decade reign over this short lived worldwide fiat money dollar system will come to an end.

Trade you an Ounce of Gold for a Haircut?

I was the last customer to receive a haircut from my barber so after paying him, we both walked out to our cars. As he drove away in his Ford sedan, I thought that people all around the world give haircuts and that most of the barbers in our world cannot trade their services for an automobile. The mere birthrights of an empire’s citizen enable him to receive empire benefits from his participation in its economy. A rich country’s citizens trade the gold acquired through the ages from other nations with each other to receive small comforts of life from each other.

The bible tells the story of a rich man that asked Christ how he could obtain heaven and Christ told him to give away all his belongings to the poor. The man went away saddened by Christ’s answer but kept his belongings. A citizen of a wealthy nation by virtue of their birth fits the parable of the rich man. While I do not think the story truly means we have to give away our wealth to enter heaven, it certainly lends itself to the hypocrisy of a wealthy nation’s citizens denouncing the hegemonic advances of their country while indulging daily in the relative benefits of their happenstance.

Obviously all democracies are not hegemonists but democracy is the only form of government that has shown any semblance of restraining hegemony’s corruption, or corruption from petty tyrants that squeeze the little wealth of the citizens of African nations for their own aggrandizement for that matter.

Certainly there are wealthy elites in Europe that will benefit from spurring on America’s involvement in Libya just as there are financial lobbyists that attempt to sway every decision made in Washington and every decision made by politicians worldwide. One benefit of Democracy is that countries somehow occasionally rise above the incessant lobbyist barking to do the right thing, and in this case it was to give the people of Libya their own voice against a maniacal bully who has vowed to commit wholesale slaughter of anyone and all who dare to speak of freedom.

As America leaned socialist during the great depression to begin a redistributive process of allowing the common man to share in the wealth of its nation without destroying its capitalist core, so will African nations and others find their way. Revolution seems to destroy economic engines. Democratic evolutions can point a nation’s capital in the direction of the good of all its people.

When I hear cynicism about America’s justification for entering Libya, I am more sympathetic to the argument of isolationalism and protecting our military from harm when the threat to our country is minimal than I am to insinuations of the U.S. bombing to prop up our empire or of us forcing our failed form of democracy on the continent of Africa in this case.

I understand the continued economic injustices that have occurred in Africa after their decolonization movement failed to give them the freedoms they desired when despotism, supported by industrialized nations, proved too strong a force to overcome for the next several generations. I understand that they have many reasons to distrust nations that have exploited their continent for a century and now say they want true independence for Africans.

But now is the time that countries like Libya could use oil to invest in infrastructure to build opportunities for their nations, or for countries like Egypt, whose population is educated, to take on economic growth. My push for democracy is that any nation is subject to tyranny by the few on the many, and that no matter if it is America or Libya, democracy is needed to defend against corruption.

In my barbershop scenario, perhaps the 22nd century chinese barber will be given title to a barbaric fuedal city in Europe as the price for his haircut. Perhaps the concentration of national wealth will create the ultimate in barter exchange between the birthright entitled. ( barbaric stretch of the imagination, agreed)

Did China Learn from Japan? You Bet!

In 1853, Commodore Perry, demonstrated United States military force on behalf of U.S. business interests. Perry intimidated Japan into a one sided treaty with threat of vanquishing Japan’s much less industrialized military. Having been subjected to America’s use of colonial might, Japan embarked on the Meiji revolution, a modernization frenzy for 60 years, much as has been occurring in China since the 1978 Four Modernizations.

Just as America colonized through WWII for economic dominance, rationalized with a mistaken belief of cultural superiority, Japan colonized through imperial treaties and war for decades through the 1930s. During this time, similarly to China today, Japan’s leadership inspired a deep devotion to Japan’s destiny through education, media, military and other institutions.

Similarly to China’s concerns today, Japan was unable to limit its urbanization and required rapid GDP growth through the 1920s. When Japan’s economy was devastated by the Crash, instead of leaning socialist like America, Japan’s submitting culture turned militaristic, assassinating its elected Prime Ministers in favor of military leadership.

Japan’s military miscalculated its securing of oil from U.S. controlled colonies and eventually lost the war. After the war, the world, retreating from its wounds, was unable to contain decolonization. However, friendly autocratic governments mostly replaced colonies with terms favorable to business interests. The U.S. policy of world military dominance secured these relationships for a time.

In this environment, Japan thrived applying its discipline and tightly controlled banking and industry to a growth miracle. The miracle ended with bubble inflation caused by non secured raw material inputs, loose monetary policy, and a large rise in the valuation of the yen. Japan’s economy, like the United States, also succumbed to globalization.

Did China learn from these events as it prepared to reenter the world stage? You bet.

Of course, Chinese people are not evil and Chinese have long endured too much racism in America. But, no-one should be deceived by the Chinese government’s strategy to secure enough raw materials during this relatively peaceful period as possible for the future inward growth of their nation before such hegemonic relationships are hindered. China learned from Japan’s pre-war mistakes and will not repeat them.

Yes, the Chinese government is manipulating the value of its currency to give it an advantage in the international market. The idea that it is somehow unfair is a bit weird to me. If China wants to accept fewer dollars for its labor, why is it not entitled to do so? The world’s insistence on revaluing currency higher is just a system like any other. China is only copying a technique well implemented by Japan earlier.

Its U.S. strategy has limits, and China is coming to the end of those limits. China has fed off of the United States as much as it can. As a potential fatal flaw, it may have sucked too much life from its host. China must now somehow realize these saved dollars before Bernanke has a chance to take them back through QE2 and Qex’s.

Will the Chinese government collapse any time soon similarly to the end of the Japanese miracle? Heck no.

While War is Sometimes Justified, Its Aggression is Encroached by Multinational Corporations

As our country lent our military support toward Libya, voices were heard from all sides of the issue on America entering this war. I had my own rationale for support of Libya, being that our history owed its allegiance to balancing the disproportionate voice of Muammar’s loyalists that bloodily silenced the Libyan cries for freedom from tyranny, trampling their neophyte flags of democracy.

Opposition rang out that there is never cause for pursuing war, that all war is instigated by evil, and that Libya is not a righteous purpose for an American call to arms. Although our country has only declared war five times, I intend to reflect on war’s broader sense, armed conflicts in which one state imposes its will on another.

Humankind’s darker nature has always been to impose our will on others. In fact, all religions have recorded that man is driven by lust, greed, rage, envy, vainglory, and hubris, to aggressively take what others have gainfully acquired. As technology and civilizations have advanced, war is ultimately the tool that has best bent the will of nations.

From the beginnings of such great city states as Sumer in 2,700 B.C. until today, parallel development of technologies and cultures has enabled men to use war to feed their unsatiated desire for power, wealth, subjugation and slavery of others. As each empire from the Egyptians through the Persians, Romans, and Ottomans rose and fell, expanding armies and improved logistics increased geographies of conquest to eventually subjugate the earth’s known limits.

Earlier Americans were not the exception. After having penned the Declaration of Independence and Constitution, we also recorded for posterity our malevolent aggressions. Armed with euro-centric land charter rights, we justified pacification of natives. We offered biblical verses to justify all manners of sin in the institution of slavery, supplied by warring African nations. We claimed Manifest Destiny to take land from the Mexicans as we completed our expansion westward. And with the industrial revolution, we acquired the capital and technology to exert our wills on “lesser civilizations” through colonization and banana wars.

While history’s wars of aggression have mostly been thrust upon the world by power lust rulers and capitalists attempting to garner military objectives for their own ends, wars have also been waged to free people from tyranny. Since man’s darker nature will always exist, all nations must be able to defend themselves against the aggressions of others, and when oppression comes from within, the governed must ultimately, if by no other means, defend against despotism.

America’s military action in Libya was to defend humankind to this end, to free Libyans from the bleakness to which the world is capable. Libya is within the moral subset of war that justifies force against institutions of evil purpose. For this reason, modern nations must support standing armies.

The existence of an army however leads to the temptation of a corrupting use of its force. Abraham Lincoln in his comments regarding the Mexican-American war stated, “Kings had always been involving and impoverishing their people in wars, pretending generally, if not always, that the good of the people was the object. This our Convention understood to be the most oppressive of all Kingly oppressions; and they resolved to so frame the Constitution that no one man should hold the power of bringing this oppression upon us.”

If the mere existence of a standing army tempts its corrupting use, it is understandable that the third world is wary of the greatest military force ever known. America’s 20th century exercises were mixed with both historic defense of freedom and support of hegemonic expansion. However, as we placed bases in over 700 locations worldwide, our transition to the world’s first and sole superpower was also a witness to the transfer of our military’s aggressive purpose to multinational corporations (MNC).

Having created a plateau of peak world stability over the past three decades, the United States military has also created the perception of less need for its presence. As such, MNCs have perceived less value in militaries to accomplish their purpose. If the aggressive purpose of militaries was to take the spoils of other nations by force, this purpose has been transferred to the MNCs, who accomplish this task without bloodshed. Man’s darker nature has created a modern wealth extraction mechanism that has far exceeded the capability of war.

Global financial, communication and operational technologies allow a hyper-concentration and fungibility of capital by MNCs that subdue the governance of democracies, autocracies and theocracies. They thwart the efforts of communism and socialism to redistribute their power. They have conquered most nations on earth and have aligned the productive means of much of mankind to their will.

While modern MNCs do employ mercenaries, and in fact some MNCs specialize in the field (i.e. Blackwater), MNCs are accomplishing more than any imperialistic state has been able to achieve through war. However, since the effects on mankind are similar, the definition of war may need to expand to the forces employed by these new virtual states. America is also being subjugated by the darker nature of men. This modern MNC warfare is upon us and we should arm ourselves before its tyranny bends us to its will.

Will America’s lack of a Multinational Corporation Policy Bring a Resurgence of War? (Part 2)

America must cull the artificial bubble economy effects from our analysis and reassess the effect of American trade policy on our country’s wealth over the last thirty years.  To ensure we correctly right size our military, we must account all costs and benefits of having achieved world military dominance.

Through our military support of world stability, did we better America’s future?

 America’s military budget exceeds $600 billion.  For the last 60 years, we have spent more than all other countries combined to export freedom, including the stabilizing effect of more than 700 overseas military bases.   Some argue that the relative world peace our citizens have enjoyed is more than offset by the negative consequences of our military on our country’s historic debt.

 However, our military has been paid for by the world.  America controls much of the world’s reserve currency.  Through currency manipulation, we have “taxed” the world for the peaceful trade benefits they have gained.  With over $15 trillion reserve currency held by foreign governments, inflating dollars by just 4 percent each year pays our military budget.  America’s waning percentage of world trade would have caused the U.S. dollar to cease as the world’s reserve currency decades ago were it not for the perception our military created that the dollar was the best alternative for wealth storage stability.  So, at least for now, reserve currency benefits have been supported by and have paid for our military.  

 However, if other economic factors caused by our military dominance strategy are included, the net resulting benefit to America becomes less clear.  Our military dominance reduced the risks of direct foreign investments, resulting in an explosion of MNC growth.  Trade skeptics claim that MNCs are directly responsible for trade deficits of $800 billion and job losses of over 14 million, enough to re-employ all able Americans. Cumulative trade deficits, financed through government and private borrowing, have crowded out entitlements and infrastructure, and have diminished American standards of living.  In addition, our military strategy has led American wealth to be reassured of safe returns off-shore, limiting access to capital and credit for domestic businesses.  Investors transferred $6 trillion abroad to direct foreign investments, and an additional $10 trillion to offshore banks shielded from taxation.

Unfortunately, trade deficits have led the world to nearsightedly consider replacing the dollar with a world denominated reserve currency, threatening our ability to sustain our military.  As we pull our military back from the world stage, the security gap will be filled from competing sources, creating military instability that will threaten the peace the world has enjoyed for the last 40 years.  As a result, the MNC investments that precipitated these changes will be at risk of default and trillions of dollars of hard assets already invested in emerging countries, could be at risk of nationalization.   As emerging nations continue to expand, commodity exporters may be unable meet world demand.  Recognizing the threat to national security, with the world’s warring history as a guide, armed conflict could ensue.  Ironically, MNCs gutted our country of essential, strategic, manufacturing capability to mount a credible and sustainable war for commodities.

 These possibilities argue for a comprehensive review of our trade, economic, and taxation policies regarding multinational corporations.  What are your thoughts?

Is China’s Growth a Well Executed, Sustainable Strategy or a Short Lived Emergence?

If I were a strategist for China’s planned economy in 1978, I would look to America’s Gilded Age as my playbook and model.  America did not rely heavily on exports to grow her enormous wealth for that time.  She connected her internal markets through the building of the great railroads, with supporting industries like steel to build the rails.  Our entrepreneurs’ first strategy was to build internal trade with our settlers to the west.  This strategy, or perhaps happenstance, would later support the growth that ultimately allowed America to supply the First World War, and to emerge as the world’s 20th century hegemonist.

During the Gilded Age, America’s wealth accumulated in the very few hands of our “Captains of Industries”.  Searching for the needed imported mining materials to continue our rapid growth, our Captains encouraged Theodore Roosevelt to embark on one of the greatest engineering and construction feats the world had known of that time, a canal to cross the Isthmus of Panama.  Through the opening of the canal in 1914, we created an economic path to mining materials that would later supply our war industries.  America had the luxury of growing our internal markets first, connecting with third world suppliers through hegemonist relationships second, and exporting war goods to Europe third.

In China’s case, she has a much larger internal market to feed than America did at the turn of the century.  If China has planned her economy well, she knows that to sustain internal consumer growth, she needs secure access to much of the world’s raw materials. She also remembers that lack of access to commodities inevitably led Japan into World War Two.  Therefore, secure commodity control through hegemonist relationships is critical prior to China accelerating internal consumer growth.  The question of how to acquire the funding for these relationships might lead China to Japan’s export growth model. 

While Japan’s model proved unsustainable during the eighties, by copying it for a brief thirty years, China could acquire the needed capital to first build the hegemonist trading relationships needed for later internal growth.  Unlike capitalist democracies, China’s planned economy, using capitalism as its means, could command the ability to concentrate wealth as easily as America’s Captains for this purpose.

Could China’s interdependence with America really have been only a needed transitional step to acquire America’s wealth and trading relationships for China’s second phase of inward consumer trade and rise to 21st century hegemony dominance?  Was China’s plan, “Export first, acquire hegemonist trade second, and build internal trade third?”  Was this a masterful, long horizon strategy, executed with age old discipline, or was it happenstance which will prove a short lived emergence for China?