Reason #42: China and the Myth of Free Trade
Did you know that an authoritarian communist country is now keeping our supposedly capitalist economy afloat? No? Well, it’s true. And it’s scary as hell.
Politicians from both parties remind me of cult members sometimes, the way they mouth the mantra of “free trade” and parrot the conventional wisdom that globalization and more trade with fewer barriers is always a good thing. They treat “free trade” like it’s a religion. But like most religions, the free trade faith has an awful lot of myth in it.
Globalization has its benefits, for some at least. It makes many of our largest corporations boatloads of money by drastically lowering their labor and production costs. And it gives the rest of us bargains at places like Wal-Mart. But globalization is far from the purely positive force our politicians and our media like to portray it as. It’s caused rampant job loss, lower wages for American workers, and weak environmental standards in offshore factories.
One effect of our politicians’ free trade fever is particularly galling though. Did you know that an authoritarian communist country is now keeping our supposedly capitalist economy afloat? No? Well, it’s true. And it’s scary as hell.
Our Treasury Department pays for our almost $10 trillion deficit by selling government bonds, known as Treasury Notes or T-Bills. Americans used to be the biggest buyers of these bonds. But our lifetime politicians have spent us into such a huge abyss of debt, the entire world is awash in our government-backed I.O.U’s now and foreign buyers own the majority of notes on the market. The People’s Republic of China is one of the biggest T-Bill customers. It holds more than $500 billion of them already. Only Japan owns more.
Because of this huge glut of global supply, the value of T-Bills has been dropping steadily for years, as has the value of the U.S. dollar. Yet, even though U.S. T-Bills are sinking like a stone, China keeps right on buying them. Why would a country continue to buy an asset like T-Bills that keeps going down in value? That goes against the basic tenets of free market economics, right? Well, our relationship with China is anything but a free market. It’s a rigged game and they hold all the cards.
By buying up T-Bills like there’s no tomorrow, China keeps their currency, the Yuan, artificially undervalued. That means even though the U.S. dollar has plunged nearly 50 percent in recent years, Chinese-made goods are still inexpensive for us. And that keeps all that stuff at the mall cheap enough for American consumers to buy. Seventy percent of our nation’s Gross Domestic Product now depends on consumer spending. In other words, if people stopped going to the mall or shopping at Wal-Mart, we would go into a deep recession or even a depression. So by snatching up all those T-Bills and keeping their goods cheap and plentiful, China is “saving” our country from financial ruin.
But make no mistake, the party bosses in Beijing aren’t doing this out of the goodness of their hearts. They’ve got us over a barrel. They slap huge tariffs on American-made goods to keep themselves in the dominant position, with billions of our dollars flowing across the Pacific and into their pockets. They know if they didn’t buy up all those T-Bills, we wouldn’t be able to afford their cheap goods and our government wouldn’t be able to pay its bills, so they spend a portion of the dollars they earn subsidizing our debt.
That’s right, folks. Thanks to our free-spending politicians and their shortsighted so-called leadership, the Land of the Free is now dependent on a Maoist regime for its financial wellbeing.
Thank god for letting me I am not alone