March 2, 2007
by John Galt
In the last 3 days there has been a massive amount of speculation as to the root causes of the 400 plus point decline on our Dow Industrial Average and if the Chinese were the engineers behind it’s rapid decline. I think China is playing a far larger role in this but not for a lot of the reasons speculated upon in the last few days. There seems to be this excuse being floated via the Chinese government and media that the decline in their markets was designed to reduce the speculative frenzy enveloping their society and the concept of investing. At the end of 2006 there were only 886 companies trading in their Shanghai markets so government decrees and actions reverberate more intensely than actions in our own markets due the size and breadth in the United States. This begs several questions which I will attempt to answer because it affects your future as well as your livelihood.
The Chinese government has been very concerned about froth or speculation within their own society. Unlike the United States, investing is very restrictive for the Chinese citizen and the limited access of foreign capital in their markets was a deliberate design so the Communist Party can maintain controls over the economic aspect of their society. A 9% drop in their markets might seem quite dramatic to an American observer but to the average Chinese citizen programmed to deal with the day to day commands of their society, this is considered a lesson, a financial spanking so to speak. The impact on the average Chinese citizen’s life is minimal and thus why the logic behind this engineered drop being explained away in the mainstream media falls quite short in this writer’s opinion. Taking a look at the bigger picture, which I can not emphasize enough for all concerned, is where it starts to make sense. The Chinese hold over $900 billion in dollar reserves and US Treasury paper. Despite what our domestic media might have you think, these holdings are managed in a very pragmatic fashion and are being used not just to dictate our financial future, but to influence our foreign policy. Let’s analyze the Chinese strategy of “containment” and just who is being contained.
In the 1950’s the United States adopted the strategy of “containment” to reign in the expansionist policies of the Communist Bloc. The Russians and Chinese have never forgotten our efforts during that time and unlike the short term time horizon American public, many in those nations have not forgotten what we engaged in worldwide. Now the tables have been turned. Both the Russians and Chinese are creditor nations and we are a poor debtor nation. On paper, we’re a raging tiger, no way we’re a third world debtor nation you might think. But in reality our future is no longer in our control. The international bankers, Russians, Chinese, EU and other international blocs are vying for control in the international vacuum our own greed and avarice has created. The Russians do not have the financial leverage to bring the United States to it’s knees but the have the natural resources and military power to cause us massive problems in the Eastern Hemisphere. They are not militarily ready for this confrontation but they are using their proxies like Iran to tie us down and keep us engaged while they modernize and rebuild their military might in an effort to recreate the old Soviet Union and it’s empire. This leaves the Chinese. And they have been looking to contain the United States for decades now and they have figured out a strategy to do so. First, they have imported much of our consumer manufacturing base. Then by providing a subsidized labor pool (translation: slave labor), they put the U.S. on an addiction to artificially deflated pricing for goods which enabled a healthy expansion throughout the 1990’s. When that speculative bubble burst in the late 1990’s, the Chinese saw their opportunity and seized it. We had to inflate or endure a major recession, which despite the cyclical and historical necessity of flushing the system, our political elites determined that this was an unacceptable option. So we sold our souls. We elected to dive deeper into debt to keep the illusion of prosperity alive. Then events took a turn out of our control and played right into the Communist Bloc dreams:
September 11th might seem like a domestic and Islamic turning point in our society and dealings with the world, but for the Russians and Chinese, it was a dream come true. Economically they received a paper cut and kept their markets isolated and intact. Instead of opening themselves up to the international banking cartels, they closed their access and elected to let us twist in the wind. This left the old supply demand curve intact and looking for a place to park funds. The U.S. government needed trillions to fund the upcoming war and reflate the domestic economic markets and they needed it fast. And the Chinese Communists knew this. So they started acquiring U.S. government debt at a frightening pace with the dollar reserves they acquired thanks to our inept consumerist based economy. This gave the ChiComs the leverage they needed to levy controls on the United States foreign policy and worst of all, that gave them access to our domestic economy.
Look at a world map folks. This is where the game is being played. If you wanted to “contain” the United States how would you do it? First you would gain control of the American wallet because the hearts and minds will follow. I would say “MISSION ACCOMPLISHED” for the Chinese is an understatement. Their engineered 9% drop demonstrated that if they decided to thump their fingers on our head, our markets would react violently and they did. This was not just a computer glitch. They were able to dump some of our Treasury debt at a huge profit during that stock market decline because they knew that our programmed trading system would liquidate stocks and automatically purchase U.S. government bonds. The Chinese were able to dump a lot of our debt and the true numbers of what they sold will not be known for months. Thus they are limiting their liability and own pain and suffering should we implode on our own or when they are ready to collapse us. In Africa, the Chinese military and engineering corps are creating new projects throughout Africa in places like Mali, Mauritania, Tanzania, etc. not only to guarantee a supply of raw materials and resources but to monopolize these resources in the name of Chinese government controlled “corporations” giving them the price manipulating powers they need. By cutting off our access to these supplies, we will be forced to create even more debt to purchase the raw materials we need to sustain our high tech industries and the Chinese know this. In Latin America, their control of the Panama Canal has given their military the much needed access to bases and the Central and South American markets. Venezuela nationalizing parts of their oil industry and expanding their military is no accident. The Chinese are expanding their influence to contain us, knowing full well we can not afford economically or militarily to engage in conflicts in the Middle East, Africa and South America simultaneously. It is no accident that they are drilling for oil less than 200 miles from my location in Florida. It is no accident that nations such as Uruguay, Paraguay, Venezuela, and Ecuador are taking a more Marxist bent to control their own resources and leverage that against us. It is no accident that Islamofacism is expanding worldwide because the Chinese have been selling the arms to both the Sunni and Shiite sides in this war knowing full well that it will cause us greater problems than it could ever cause them. By tying us down in small but major firefights worldwide, they know we can do nothing to stop their expansionist policies.
So how we are being strategically and economically defeated by the Russians and Chinese?
The Russians learned that our 1980’s arm race would bankrupt us. They are doing the same to us now and because we elected to squander our resources in the 1990’s and at the pace they are on they will catch up to us in many aspects militarily within the next decade. By forcing the U.S. into a new arms race the Russians hope to break us economically and they will succeed. But the Chinese have no desire to engage us militarily nor jump into an arms race with us. They want to create a military to expand and control Asia and simply sell the excess capacity to our newly created enemies worldwide.
Did anyone else find it interesting that suddenly, right after the 9% drop in Shanghai, Secretary of State Rice agreed to meet with the Iranians and Syrians? I didn’t. This is part of the Chinese strategy. They know we won’t engage their friends as long as we are forced to “talk” to them. And they demonstrated that when they crack the whip, we had best listen. The Iranians are being encouraged by the Russians and Chinese to develop nuclear weapons not just to counterbalance the U.S. and tie us down in the Middle East for the next three decades but to bankrupt us. To force us into an isolationist hole we can not climb out of. And if the Islmofacist regime in Iran succeeds and we get nuked within our own borders, as far as they are concerned that is just a bonus to bring us down faster. This was a demonstration of just how much control they have over our foreign policy and how we respond to the financial dog whistle when the Chinese communists blow it.
To insure we implode from within, many people view the NAFTA related agreements as a self-inflicted wound and last desperate measure to keep our economy growing in a North American integrated union. The Chinese saw this as their gateway to diluting our nation and creating huge internal strife. This new super highway being built from Mexico to Canada is not a result of NAFTA nor some major conspiracy. It is being built because the Chinese demanded it be built by using their commercial leverage against us. The new super container port in Punta Colonet requires a massive overhaul in the Mexican infrastructure so the Chinese can poor goods into the U.S. and Canada on their terms. By bypassing the U.S. and Canadian ports, security can be controlled by the Chinese and their purchased friends in Mexico as opposed to our Department of Homeland Security. This new superhighway also serves the purpose of eradicating our border and allowing the free flow of people into our nation to dilute us economically and culturally. Does anyone in their right minds think that the Chinese give a hoot if we collapse tomorrow into a civil war? Of course not, because they could and would profit from that also. So this illusion of free trade and border elimination serves a commercial and strategic purpose for the Chinese communists far beyond the rhetoric coming from D.C. And it also is a reminder that when the Chinese crack the whip, we will obey them and do as they say. With their control over our consumer goods market, they could cripple us overnight. Add in their influence on our financial markets and the impact of their actions is far worse.
The chopsticks, stuck into our back by our “trading partners” are now bloody. They have stabbed us in the back this past Tuesday as a reminder that we are not in control.
Containment in reverse.
Prepare accordingly or perish.