China threatens huge dollar selloff

posted at 9:38 am on August 8, 2007 by Bryan

I’m not an economist, so I’ll put the question to those in our audience who are: Is this threat as bad as the Telegraph is making it sound?

The Chinese government has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of US treasuries if Washington imposes trade sanctions to force a yuan revaluation.

Two officials at leading Communist Party bodies have given interviews in recent days warning – for the first time – that Beijing may use its $1.33 trillion (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress. Shifts in Chinese policy are often announced through key think tanks and academies.

Described as China’s “nuclear option” in the state media, such action could trigger a dollar crash at a time when the US currency is already breaking down through historic support levels.

It would also cause a spike in US bond yields, hammering the US housing market and perhaps tipping the economy into recession. It is estimated that China holds over $900bn in a mix of US bonds.

Xia Bin, finance chief at the Development Research Centre (which has cabinet rank), kicked off what now appears to be government policy with a comment last week that Beijing’s foreign reserves should be used as a “bargaining chip” in talks with the US.

This part caught my eye:

Simon Derrick, a currency strategist at the Bank of New York Mellon, said the comments were a message to the US Senate as Capitol Hill prepares legislation for the Autumn session.

“The words are alarming and unambiguous. This carries a clear political threat and could have very serious consequences at a time when the credit markets are already afraid of contagion from the subprime troubles,” he said.

And don’t forget that we’re financing civilization’s war on Islamic terrorism pretty much by ourselves, and at great expense. If the Chinese were to make good on the dollar selloff threat and our economy goes into a serious tailspin, that would hinder our ability to wage that war. That may be the purpose of such an economic attack on us: To see us hobbled, then defeated, then as much of a superpower as the French.

So again, I’ll put the question out to experts who happen across this post: How big a worry is this? If it’s as big a worry as it seems, China is evidently prepared to use this moment in time to wage a serious attack on us at a point of serious vulnerability, or at least threaten to do so. Can we counter it, and with what?


Related Posts:

Breaking on Hot Air

Blowback

Note from Hot Air management: This section is for comments from Hot Air's community of registered readers. Please don't assume that Hot Air management agrees with or otherwise endorses any particular comment just because we let it stand. A reminder: Anyone who fails to comply with our terms of use may lose their posting privilege.

Trackbacks/Pings

Trackback URL

Comments

Comment pages: 1 2

Can you say China syndrome?

soulsirkus on August 8, 2007 at 9:44 AM

Can you say … “Amero?”

No, it won’t be called the Amero, but it’s not going to be long before officials claim we have no choice but to move to a new currency to compete with the Euro.

Let the attacks on me begin.

Gregor on August 8, 2007 at 9:46 AM

I say let them do it, as china’s single largest consumer an act of such magnitude by china would hurt china far more than it would America more importantly as goes the US economy so goes the worlds economy. The lower the US dollar falls the more attractive US goods are to the rest of the world. Keep this in mind, a recent world wide survey found that of the 20 top most desired products on earth, 15 were made in America.

So yea, let china sell of their dollars, it would be the equivalent of china cutting their own nose off to spite their face.

doriangrey on August 8, 2007 at 9:48 AM

America promises Intellectual Property Rights Tariff.

Retroactive, as needed.

profitsbeard on August 8, 2007 at 9:52 AM

To the WSJ and other globalist cheerleaders: This is what happens when you move your manufacturing offshore to China and shrug off the trade deficit that ensues.

As I understand it, “trade deficit” = the net transfer of wealth from one nation to another. China needed to do something with their cash reserves, so they invested a portion of it in US bonds.

We should not be surprised that a communist regime would threaten to dump their investment in the US for political means.

Dave Shay on August 8, 2007 at 9:53 AM

You need to ask Ron Paul. He is big in this stuff.

saiga on August 8, 2007 at 9:54 AM

Yeah…what Dorian said

So they have piles of dollars, traded at price X…and they’re gonna sell them off for what price? If they want to dump their dollars, they’re gonna likely have to take far less than X for them…off with their nose!

This could theoretically have an impact on inflation, as a bunch of cheap dollars enters the market…but really…how much dilution can China cause? Personally, I don’t reckon it would cause more than a blip…unless idiot market traders start crapping their shorts for no good reason – which is always a possibility (they’re not that bright on the whole).

Ochlan on August 8, 2007 at 9:54 AM

Of all the things I know diddly-squat about, I know diddly-squattiest about economics. BUT…

If I were, say, a US diplomat to China, I’d make it known in no uncertain terms that such action by China would be responded to with the most Draconian trade sanctions, in effect barring Chinese-made goods from the US.

flipflop on August 8, 2007 at 9:55 AM

Dave Shay – utter crap. “trade deficit” = “I know fuck all about economics”

Ochlan on August 8, 2007 at 9:55 AM

“…to use this moment in time to wage a serious attack on us at a point of serious vulnerability…”

Our vulnerabilities are largely a malaise fostered by those in the media and the Democratic Party for the purpose of belittling their political opponents. You have only to observe the contrast between media coverage of Friday’s 281 point stockmarket decline, and Monday’s 286 point gain, to know what is going on. If you understand that economies prosper on confidence and wither on lack of it, you know how destructive the campaign has been, and can be still.

The point has been made that Bush could impose a trade boycott against China if they executed a selloff, but he could be hamstrung by the congress in doing so. This is the danger of having a congress that would literally lose a war to hurt a President – starting an depression wouldn’t bother them much either, as long as it can be bkamed on the President.

So if we end up being hit, it will be because China thinks America is a paper tiger. Sound familiar?

Just send your thanks for broadcasting that message to those great patriots, Nancy, Harry, and Pinch.

drunyan8315 on August 8, 2007 at 9:56 AM

Gregor on August 8, 2007 at 9:46 AM

Sorry but I just don’t understand this whole North American Union paranoia. There was a point in time when the United States comprised of only thirteen states, then it grew to 24, then to 35 and eventually 50. Think about it realistically, the US economy is 6 times the combined size of Canada and Mexico and has 3 times the population of Canada and Mexico.

The United States would simply swallow Canada and Mexico whole without even burping. In other words the United states would go from having 50 states to having 75 or 80, plus it would solve the illegal immigration issue with Mexico while giving the United States complete and unrestricted access to Canada and Mexico’s natural resources. Basically a win – win situation for everyone involved.

doriangrey on August 8, 2007 at 9:58 AM

There was an article on NPR (did I just feel a chill in the air?) last year about this very subject. It was a bit alarming to listen to at the time. To hear China actually take up the drum beat makes me wonder if NPR laid out the blue print for them. This probably has hard core NPR enthusiasts’ sniggling in their soy milk.

bcre8v on August 8, 2007 at 10:00 AM

Take a look at this: Dollar to collapse? I found it to be rather informative.

Pam on August 8, 2007 at 10:00 AM

Dave Shay – utter crap. “trade deficit” = “I know F-all about economics”

Ochlan on August 8, 2007 at 10:01 AM

The massive selling of US Treasuries and Bonds owned by foreigners is an argument that is used frequently by third-world economic circles to “show” how fragile the US economy is.

Well, it is all a big BS. If you massively sell Treasuries their trade price will drop (not the face price), the entity that sells will sell below real price, the entity that buys will buy cheap, but the US Treasury will not be affected as it will continue to make the interests payments on time like nothing happened.

US Treasury is not forced to buy the Bonds back. The problem is not when already issued Bonds are dumped, the problem is when nobody buys NEW issued Bonds.

Trust me, I am a nurse and I know what I am talking about.

Ropera on August 8, 2007 at 10:02 AM

You need to ask Ron Paul. He is big in this stuff.

saiga on August 8, 2007 at 9:54 AM

Or, I could ask any economist.

Ron Paul: Jack of All Trades, Master of None

The problem with crashing the US economy is that people wouldn’t buy a lot anymore. Go into a store, and pick something off the shelf. Odds are it says: Made in China. People don’t buy stuff, guess what happens.

amerpundit on August 8, 2007 at 10:05 AM

Ropera on August 8, 2007 at 10:02 AM

Thank you.

amerpundit on August 8, 2007 at 10:07 AM

Pickpockets should never get uppity.

profitsbeard on August 8, 2007 at 10:07 AM

Ropera on August 8, 2007 at 10:02 AM

I do not quarrel with what you say but

Trust me, I am a nurse and I know what I am talking about.

A nurse is not high on my list for economic advice.

Wade on August 8, 2007 at 10:08 AM

saiga on August 8, 2007 at 9:54 AM

Seriously, do you guys ever comment without uttering the great one’s name?

amerpundit on August 8, 2007 at 10:08 AM

damn…try to clean things up and get betrayed by the devious double-post…

Dave…didn’t intend to be thorny with you personally ;-) This whole “trade deficit” thing just irks me…like we’re hemorraging cash and it’s only being replaced at a trickle from abroad. Junk. We’re _trading_ our money for stuff…stuff of _value_. There’s no ‘net transfer’ of anything.

Ochlan on August 8, 2007 at 10:09 AM

doriangrey on August 8, 2007 at 9:48 AM

Yes, China’s economy depends more on the U.S. then the other way around.
We would rebound, maybe take 5 years to rebuild, but we would. China does not have that capability, their economy is driven by our capilist system. You could not count the number of container ships, right now, steaming towards the West Coast, full of goods for the U.S. consumption.

Chinese camp (literally camp) outside the industrial compounds waiting for a chance to work for a U.S. company. They would have millions of workers unemployed, on the streets.

“You’ve got to ask yourself one question: Do I feel lucky? Well, do ya, punk? Go ahead, make my day.”

right2bright on August 8, 2007 at 10:11 AM

Just as an FYI, Japan keeps the Yen relatively weak on purpose to keep exports up.

China would be damaging themselves if they made their exports less attractive to their biggest market. Doesn’t seem to make much sense.

Asher on August 8, 2007 at 10:12 AM

China is currently financing the largest, boldest most comprehensive package of infrastructure enhancements in the history of the world. Simultaneosly it is trying to be taken serious as an economy and bring the overwhelming majority of it’s citizens out of 18th century slave-like living and working conditions.

Methinks an economic fire fight with Seal Team of world capitalism economics may not be in their best interest. The means doesn’t jive with the ends.

Alden Pyle on August 8, 2007 at 10:12 AM

Dave and Dorian got it right so no need to repeat their comments, but let me just add this: America survived WW2 and came out stronger. We have survived Sept. 11th, Hurricane Katrina and 8 years of Bill and Hillary and yet somehow we manage to get stronger. We put a man on the moon 38 years ago. We can handle anything China throws at us.

There was once a country called the Soviet Union. It’s leader, Nikita Khuschev, said to America: “We will bury you.” That country no longer exists because they tried to compete with us. China will face the same fate.

Tony737 on August 8, 2007 at 10:13 AM

“You’ve got to ask yourself one question: Do I feel lucky? Well, do ya, punk? Go ahead, make my day.”

right2bright on August 8, 2007 at 10:11 AM

My earlier point, exactly. I don’t know much about economics, but my gut tells me we could hurt them much more than they could hurt us.

flipflop on August 8, 2007 at 10:14 AM

The United States would simply swallow Canada and Mexico whole without even burping. In other words the United states would go from having 50 states to having 75 or 80, plus it would solve the illegal immigration issue with Mexico while giving the United States complete and unrestricted access to Canada and Mexico’s natural resources. Basically a win – win situation for everyone involved.

doriangrey on August 8, 2007 at 9:58 AM

Really? And you don’t see adding the entire population of Mexico to our welfare and social security systems as a problem?

Gregor on August 8, 2007 at 10:14 AM

Two issues here

China hold about 1.3 trillion is debt

To sell it off they would be forcing themselves to take a loss on each transaction and the losses would increase as the price collapsed further.

Also just exactly who right now is in position to be on the buy side of the transaction in large scale sales

CommentGuy on August 8, 2007 at 10:14 AM

I always enjoy hearing about our trade deficit and the looming doom of how large it is this month/year. It is as if once people receive US$ payment for their goods they turn around and burn the money. Or they magically convert it to their money and it ceases to exist.

My grandfather used to rail against the “transfer” of money to other countries. Explaining that all that money flows back to the US in the form of investment never convinced him that the world was not going to end.

Anyway, let China cripple the value of its artificially inflated Chicken feet. Their effects on the US economy would be like pouring a glass of water in the ocean to dilute the salt content.

sunny on August 8, 2007 at 10:17 AM

Let’s see here….

Choices:

A. China causes our economy to crash which causes less demand for their exports which = crash for China’s economy.

B. We force the Chinese Yuan to float on the monetary market which causes their exports to become more expensive which = less demand for their products which causes their economy to crash and our trade deficit with China becomes balanced.

Which choice do you think China is more scared of?

Mcguyver on August 8, 2007 at 10:20 AM

It is estimated that China holds over $900bn in a mix of US bonds.

China would lose about 350bn if it ‘dumped’ its US currency reserves anytime in the near future.

B. We force the Chinese Yuan to float on the monetary market which causes their exports to become more expensive which = less demand for their products which causes their economy to crash and our trade deficit with China becomes balanced.

Which choice do you think China is more scared of?

Mcguyver on August 8, 2007 at 10:20 AM

Ding ! Ding ! Ding ! We have a winner…

elgeneralisimo on August 8, 2007 at 10:22 AM

Besides, ‘trade deficit’ only means we’re importing more goods than we’re exporting.

Historically, the US exports around 8% and imports 10%. Our response to place tariffs on Chinese imports and Intellectual Property tariffs & restrictions would drop Chinese imports but improve our ‘deficit.’ And US companies would need to either find other countries to manufacture the good or stay in the US.

Sure our dollar would drop quite a bit if China dumped their bonds, but that would make US productions costs cheaper as a result. Unless Congress keeps upping the Minimum Wage…they’d had to improve manufacturing incentives to keep production domestic.

I don’t believe the US Treasury is obligated to buy back the bonds. The fear here is the value of the dollar, but there are other remedies for that beyond what I’ve mentioned above.

Although I think Ropera was being facetious, in all seriousness I spent 10 years as a Financial Consultant.

Miss_Anthrope on August 8, 2007 at 10:26 AM

China’s economy is, what, about $1 trillion? If we did a trade embargo, it would crash. Which would just break my heart. Embargo, slow down the WTO grievance procedures, whatever those might be, and watch those commie bastards squirm on the hook.

JohnW on August 8, 2007 at 10:28 AM

We should have imposed tarrifs years ago. China has been dumping cheap goods, made with slave labor, with the help of domestic corporations for a long time now. They have blocked imports from us as well, creating a HUGE trade imbalance.
How much of our manufacturing has gone there?
Also, they hold a large % of our mushrooming debt, thanks to the thieves that we keep sending to Washington. The only reason they have not pulled the carpet out from under our feet thusfar is that we are the largest consumer of their cheap crap.
Let the games begin.

mountainmanbob on August 8, 2007 at 10:31 AM

Not to get stuck on this trade deficit thing, but during the great depression the US had a trade surplus in all but one year. (10 total years) Walter Williams had a nice artice about it here:

http://www.gmu.edu/departments/economics/wew/articles/07/deficit.html

sunny on August 8, 2007 at 10:33 AM

I think this is a bluff, China wants our Customs to allow their counterfeit goods to come into the country….and they make high quality counterfeits that are just as good as real thing. Its a big part of their economy.

if they “dump” our bonds/debt, it will only hurt China not US. the Issure of bonds are only obligated to pay at maturity at original terms, however you can trade the bonds you buy in the marketplace which is all that China would be doing. The idiots like Ron Paul who use this scare tactic talking point are relying on an ignorance of bond markets. And as its already been said why would they piss on their best, #1 Customer.

jp on August 8, 2007 at 10:36 AM

I am actually a know-it-all nurse!

And if I may add:

If the price of the Treasuries/Bonds drop significantly, the US Treasury could buy them back from the market when it becomes cheaper that paying the principal/interest as scheduled, thus cancelling the debt with itself!

and more: if in the future the dollar goes up, the US Treasury can put those same Bonds back in the market (providing they have not expired, of course) thus making money in the trade!

Ropera on August 8, 2007 at 10:36 AM

Those dollars? Oh, I’m soreee, those are no good any more…”

mojo on August 8, 2007 at 10:37 AM

Yeah and then maybe Wal-Mart will quit selling their slave made goods.

China knows if America quits buying their crap it will hurt them too.

TheSitRep on August 8, 2007 at 10:37 AM

sunny on August 8, 2007 at 10:33 AM

Trade Defeicts are a good thing, they spin this because it sounds bad and refuse to look at the full picture which includes Foreign Investment which is through the roof.

protectionism is the biggest cause of the Great Depression, see the Hawley Tarrif act and what happened afterwards. Its the source of the Depression.

jp on August 8, 2007 at 10:37 AM

So they have piles of dollars, traded at price X…and they’re gonna sell them off for what price?
Ochlan on August 8, 2007 at 9:54 AM

Roughly two dollars each.

And by “roughly,” I mean “within a dollar and sixty cents or so.”

I think China is just sending out coded messages to keep the Nutroots energized.

And don’t forget that we’re financing civilization’s war on Islamic terrorism pretty much by ourselves, and at great expense. If the Chinese were to make good on the dollar selloff threat and our economy goes into a serious tailspin, that would hinder our ability to wage that war. That may be the purpose of such an economic attack on us: To see us hobbled, then defeated, then as much of a superpower as the French.

The “War That’s Crippling Our Economy” is costing us a bit less than one percent of GDP per year net. That’s roughly what a one-time sell-off of all of China’s dollar holdings would “cost” us – if you count all of the currency exchange as a net “loss.”

So, yeah, if China sold off all its dollar holdings at once, and assuming that Hillary was President at the time, and assuming the Democrats gain about a hundred seats in Congress, and assuming they didn’t touch any other spending besides that which is specifically earmarked for opposing terrorism and decided to absorb all of the loss immediately…

Then, yeah, we’d suspend all offensive military operations and all expanded CIA and FBI functions for one year.

But so what? If the moonbats were running the country, we’d do that anyway.

logis on August 8, 2007 at 10:43 AM

We should have imposed tarrifs years ago.

So we could pay more for the goods we buy?

China has been dumping cheap goods, made with slave labor, with the help of domestic corporations for a long time now.

They have an absolute advantage in labor. Should they not use that resource for their benefit just so you can feel better when you sleep. And “slave” labor is just precious. I wonder if the employee that has a job and is supporting his family feels like a slave. Our standards of living aren’t those of the world, but by all means, let us put that guy out of work.

…creating a HUGE trade imbalance.

Oy, read a book.

Also, they hold a large % of our mushrooming debt, thanks to the thieves that we keep sending to Washington.

I won’t argue with the thieves comment. I believe (pretty sure, haven’t checked lately) Japan holds the largest % of our debt in bonds. But just like China, they can’t just cash them in and raid the US treasury. Its not an ATM card.

sunny on August 8, 2007 at 10:47 AM

And don’t forget the most important thing:

We have more nukes than them!

Ropera on August 8, 2007 at 10:48 AM

Simon Derrick, a currency strategist at the Bank of New York Mellon, said the comments were a message to the US Senate as Capitol Hill prepares legislation for the Autumn session.

Does anyone else see the irony of a Democratically controlled Congress precipitating a fiscal war with their Commie brethren?

LarryinVA on August 8, 2007 at 10:50 AM

China’s economy depends on its sales to the USA otherwise it goes into a tail spin

Don’t expect their government officials to be any more intelligent than our government officials

EricPWJohnson on August 8, 2007 at 10:53 AM

jp on August 8, 2007 at 10:37 AM

Absolutely agree with the protectionism and Taft. We often fight against progress and the global market at our own peril.

sunny on August 8, 2007 at 10:54 AM

I am not an economist but an Engineer with an MBA, so here’s my best understanding.

The Treasury is constantly auctioning off debt. If billions in bonds flooded the market, the Treasury would be forced to raise rates to attract buyers for all the new debt. (when you cut the price of a bond with a fixed interest rate, you essentially raise the rate of return of that bond).

What happens when the US Government raises rates? Interests rates rise across the board.

What happens when interest rates rise? People stop borrowing, building and buying and the economy heads into recession.

What gets hit first and hardest? The housing market and capital intensive industries.

What happens when the housing market collapses? Chaos! Cats and dogs sleeping together – Armageddon. Seriously though, watch the Cramer video posted here the other day. We could be on the edge of a collapse already if the Fed doesn’t cut rates soon (which they could never do if China floods the market with paper).

The other thing a “cheap” dollar does is make foreign goods more expensive in the US. Given how much we import, that’s a problem because now you have high interest rates coupled with inflation. That’s a disaster.

Would it hurt China? Yes but they aren’t all that develop to begin with. They can weather anything because they don’t care how much their people suffer.

They are counting on the fact that we would be willing to stick with the status quo rather than risk the consequences.

That’s my best shot off the top of my head. More reading needed to confirm.

TheBigOldDog on August 8, 2007 at 10:55 AM

sunny on August 8, 2007 at 10:17 AM

I had a Finance/Economics professor that said the same thing as your grandfather. Then he said we could just muke ‘em when they want their money. He was a libertarian.

The trade deficit isn’t scary neither is China’s threat. Buying our own bonds back at a discount would be great long term for us, but could we make a short term sacrifice to do it? I doubt it, but the scenario isn’t as scary as the media will make it.

Good Comments all.

doginblack on August 8, 2007 at 11:02 AM

B. We force the Chinese Yuan to float on the monetary market which causes their exports to become more expensive which = less demand for their products which causes their economy to crash and our trade deficit with China becomes balanced.
Mcguyver on August 8, 2007 at 10:20 AM

Hehe. Oh yeah, China really has us over a barrell don’t they?

China comes to the World Bank with their hat in hand every year praying to Buddha we let them keep their MFN status for a little bit longer. This economic terrorism crap fools no one who knows ANYTHING about economics. The only reason we don’t take it seriously is because it’s so incredibly pathetic we can just assume it’s intended as self-depricating humor.

logis on August 8, 2007 at 11:04 AM

Gregor on August 8, 2007 at 10:14 AM

Really? And you don’t see adding the entire population of Mexico to our welfare and social security systems as a problem?

And exactly how would that change anything? We already have some 20 million of them here doing that now, or do we? If anything it would be a good thing. In as much as they would become legal citizens required to pay into the system just as you and I do now.

You obviously have some very inaccurate idea’s about Mexicans. Yes, a lot of Mexicans are just like most Americans, they will go pretty much anywhere that the pay is higher. Most Mexicans share in common with most Americans a very strong work ethic nothing to be feared there.

A north American Union would solve on of the major problems in America right now, that being the pay inequality between what the average Mexican earns in Mexico and what the average American earns eliminating the currently existing strong incentive for Mexicans to immigrate illegally to America.

The number of Americans who would move to what is now Mexico in order to take advantage of the lower cost of living would stun the living crap out of those currently living in Mexico. $hit the cost of housing in Mexico alone would cause an enormous redistribution in the general population.

doriangrey on August 8, 2007 at 11:06 AM

Any attempt to do a mass sell off and hurt the US could be declared an act of war. The US could seize all Chinese assets in the US and publicly declare that we will refuse payment on any US securities held by China or purchased from China by any third party until they cease hostilities. There are plenty of other countries that can make our cheap crap for us.

Patrick H on August 8, 2007 at 11:11 AM

The US could seize all Chinese assets…

I get all the rubber dog shit. That stuff never gets old. In the bed, at the front door, I could litterally cover my neighboors lawn if I had it all. O’ good times, good times.

Exit question: What is the multiplier effect of rubber dog shit in the free market.

sunny on August 8, 2007 at 11:23 AM

hurt china far more than it would America

stole my line

plus, the American economy is so vast and deep, this sort of tactic would hurt a bit, but we would survive–though I don’t know about anyone else, including China, and it would give us ample justification to do all sorts of nasty things to them…

urbancenturion on August 8, 2007 at 11:25 AM

Dave Shay – utter crap. “trade deficit” = “I know fuck all about economics”

Ochlan on August 8, 2007 at 9:55 AM

Dave Shay – utter crap. “trade deficit” = “I know F-all about economics”

Ochlan on August 8, 2007 at 10:01 AM

Once is enough, sir.

Dave Shay on August 8, 2007 at 11:30 AM

A north American Union would solve one none of the major problems in America right now
doriangrey on August 8, 2007 at 11:06 AM

.

There fixed that for you.

I hope you don’t mind.

Further, what I have to say is you better read the Book titled: Shut Up and Sing, By Laura Ingraham

I am always happy when your types expose themselves on HA because then I can just skip over your comments knowing I don’t miss anything!

Also thanks a lot for taking this conversation off topic!!

Keep singing.. I’m sure you sound good.. I will never know.

Mcguyver on August 8, 2007 at 11:37 AM

Perhaps we should tell China something along the lines of this:

“Dear China,

You do realize that you have a neighbor to the southwest that has nearly as many people willing to work for around the same pay as you are, in a country that just happens to be our political and military ally. They’re called India. Perhaps you’ve heard of them?

Have a nice day.”

BKennedy on August 8, 2007 at 11:39 AM

I was in a customs warehouse yesterday, and almost one hundred percent of the boxes were from China. The US dollar has been dropping steadily with the Pound, Euro, Canadian dollar (is almost at par) and Australian dollar all climbing up.

This move means that everything you buy will go up in cost since our currency is worth less (, and the fact that we buy so much from China means they will benefit by our destruction in spades. Add to this the the possibility of a Democratic house and president burdening the country with more taxes and you have the solution to get rid of the illegals. The “legals” will all be heading south and leaving the mess to them.

Hening on August 8, 2007 at 11:43 AM

This would be one of the best things to happen to the US, for a number of reasons:

As others have pointed out, our products (and services) would suddenly be much more economical to other countries. Can you say, call centers in Oklahoma for German and British companies instead of in India?

If China did this “massive” sell off, they would no longer have any real bargaining power with us. And since we’re their largest market, a trade embargo enforced by us would cripple their economy overnight. Suddenly, there’d be no reason NOT to do just that.

And lastly, the $1.33 trillion that China is sitting on is equivalent to less than one day’s worth of trading on the Forex markets. Does anyone really think that one day’s worth of trading in a sell off will have any real appreciable effects?

If the Chinese want to start an economic war, I say, let ‘em bring it.

corbettw on August 8, 2007 at 11:47 AM

“I am not an economist but an Engineer with an MBA, so here’s my best understanding…”

I am not an economist but a common male prostitute working the docks for a buck, so here’s my best understanding…

This is all a pile of chinky poop

NO BIRDS NEST SOUP FOR YOU…NEXT

Ochlan on August 8, 2007 at 11:49 AM

Sorry for being late to the party. Left my first comment before heading to work, and now I’ve just got caught up with all the comments.

damn…try to clean things up and get betrayed by the devious double-post…

Dave…didn’t intend to be thorny with you personally ;-) This whole “trade deficit” thing just irks me…like we’re hemorraging cash and it’s only being replaced at a trickle from abroad. Junk. We’re _trading_ our money for stuff…stuff of _value_. There’s no ‘net transfer’ of anything.

Ochlan on August 8, 2007 at 10:09 AM

OK. As long as you’re attacking the comment and not the commenter. :)

I’ll agree with you on this point: we are receiving goods of value.

My larger point, which I failed to adequately state, is we’re shooting ourselves in the foot over the long haul. We’ve sent a substantial amount of our manufacturing to China, and let’s not forget about all the tech work that has been sent to India, Brazil, Israel, Ireland and soon China.

I’m not crying “the sky is falling” today. But I am saying we need to start thinking generationally instead of just looking forward to the next quarterly profit statement.

Where will our next generation of engineers and programmers come from? And should a national crisis arise, will we have the internal manufacturing capacity necessary to “ramp up” to meet whatever the need might be?

Would China be cutting off its own nose if they dump our bonds? Sure, I imagine their economy will take a significant hit in the short term. I’ll pose the question: who would eventually emerge stronger from such an action, the US or China? This question isn’t rhetorical as I don’t know the answer… that’s why I’m asking.

It seems to me, though, that China dumping their US bonds would be a “perfect storm” for the US economy when you consider what’s going on in the US lending sector (massive amounts of margin loans backed by sub-prime mortgage portfolios). Combine that with the overhanging liability of Social Security entitlements for the Baby Boomer generation.

Work calls again… gotta go!

Dave Shay on August 8, 2007 at 11:52 AM

Mcguyver on August 8, 2007 at 11:37 AM

you better read the Book titled: Shut Up and Sing, By Laura Ingraham

And that applies to me how?

I am always happy when your types expose themselves on HA

So exactly what would my type be there Einstein?

doriangrey on August 8, 2007 at 11:53 AM

Finance professional with MBA here, but no expert by any means. If China floods the bond market, the issue isn’t that we need to repurchase that debt and there will be a liquidity crunch or something like that. The bonds will float on the open market, the price will drop, and buyers will swoop in to purchase that debt. The issue is we are constantly financing our growing budget deficit by issuing more debt. In an environment as described above, the US will find itself selling debt in a very weakened position. To attract buyers of that debt in a weakened bond market, they will have to sell it on the cheap (higher interest rate). You probably all know how religious the Fed has been in trying to reign in interest rates. Higher interest rates will put the squeeze on this economy, big time. Or I could be wrong about all the above.

RW Wacko on August 8, 2007 at 11:56 AM

Finance professional with MBA here, but no expert by any means. If China floods the bond market, the issue isn’t that we need to repurchase that debt and there will be a liquidity crunch or something like that. The bonds will float on the open market, the price will drop, and buyers will swoop in to purchase that debt. The issue is we are constantly financing our growing budget deficit by issuing more debt. In an environment as described above, the US will find itself selling debt in a very weakened position. To attract buyers of that debt in a weakened bond market, they will have to sell it on the cheap (higher interest rates). Higher interest rates will put the squeeze on this economy, big time. Or I could be wrong about all the above.

RW Wacko on August 8, 2007 at 11:57 AM

All I know is that I have a MASSIVE trade deficit with the local donut shop. I buy their donuts every day, and they never buy anything from me. I am sure I am headed for a personal currency crisis. Oh, and this trade deficit is growing since they increase the price to 50 cents per donut!

Clark1 on August 8, 2007 at 11:57 AM

Yikes, double posting sorry

RW Wacko on August 8, 2007 at 11:57 AM

Clark1 on August 8, 2007 at 11:57 AM

All I know is that I have a MASSIVE trade deficit with the local donut shop.

You know I have that same damn trade deficit with the liqueur store across the street, I keep buying beer from them, but at least I get a CRV back, still I am likewise sure that I am headed for a personal currency crisis…

doriangrey on August 8, 2007 at 12:04 PM

Go here and read about the national debt.

spec_ops_mateo on August 8, 2007 at 12:08 PM

To attract buyers of that debt in a weakened bond market, they will have to sell it on the cheap (higher interest rate).

RW…Can we still apply this theory to the bond market? This certainly has not held true over the last 5 years. Rates have not been raised to finance debt, and countries have rushed in to purchase them. The opportunity cost of a weak US economy has thus far offset any concerns over the yield.

Granted, I can imagine a point in time where the benefit no longer exists, but it is not in my lifetime unless something spectacular happens.

And…I always have a problem with tone, so just to be clear, this is a polite conversation response. And my Bona Fides are as yours: MBA.

sunny on August 8, 2007 at 12:12 PM

They own us…literally, but…but…they also need us. I don’t see them ever cashing in those Treasury notes.

SouthernGent on August 8, 2007 at 12:21 PM

SouthernGent on August 8, 2007 at 12:21 PM

Check the link that spec_ops_mateo on August 8, 2007 at 12:08 PM posted…

doriangrey on August 8, 2007 at 12:24 PM

I say let them do it, as china’s single largest consumer an act of such magnitude by china would hurt china far more than it would America more importantly as goes the US economy so goes the worlds economy. The lower the US dollar falls the more attractive US goods are to the rest of the world. Keep this in mind, a recent world wide survey found that of the 20 top most desired products on earth, 15 were made in America.

So yea, let china sell of their dollars, it would be the equivalent of china cutting their own nose off to spite their face.

doriangrey on August 8, 2007 at 9:48 AM

well said and very accurate. Dollar down would make our products more affordable around the world. It is a global economy. The only problem would be if you travelled outside of the US and tried to buy something.

I was actually surprised at the small amount that they have. Congress’ budget is 3 Trillion dollars every year. So the impact at worst would be 1/3 of 1 years budget? We’ll be fine.

ThackerAgency on August 8, 2007 at 12:33 PM

sunny on August 8, 2007 at 12:12 PM

The reason rates haven’t been raised is supply and demand. The US Economy has been good and there have been lots of buyers (like the Chinese and Japanese).

Now what happens when one of the largest buyers decides to become a seller and flood the market with all the paper they bought? Again, it’s supply and demand. You’d have billions (trillions?) of “old” bonds competing with all the new bonds for fewer buyers. Rates will rise to attract buyers.

Since all the big buyers (nations and large institutions) know that Chinese dumping will cause the US Economy to head into recession coupled with inflation, they will be reluctant to want to hold US debt, or dollars – fewer buyers – rates rise even more.

TheBigOldDog on August 8, 2007 at 12:33 PM

Sorry but I just don’t understand this whole North American Union paranoia. There was a point in time when the United States comprised of only thirteen states, then it grew to 24, then to 35 and eventually 50. Think about it realistically, the US economy is 6 times the combined size of Canada and Mexico and has 3 times the population of Canada and Mexico.

The United States would simply swallow Canada and Mexico whole without even burping. In other words the United states would go from having 50 states to having 75 or 80, plus it would solve the illegal immigration issue with Mexico while giving the United States complete and unrestricted access to Canada and Mexico’s natural resources. Basically a win – win situation for everyone involved.

doriangrey on August 8, 2007 at 9:58 AM

If our Constitution would stand as the law of the land I might not object to a joining of Mexico and Canada.

You describe the 13 original states and how we grew into 50 states and that was no problem, in fact was beneficial to us. But the NAU would not be Mexico and Canada “joining the Union,” instead it would be a nullification of the Union and our Constitution.

The Constitution is the only thing that stands between the American Citizen and tyranny, once it falls don’t expect to get the Bill of Right back, it won’t happen. If the NAU happens, and I think it eventually will, then get ready to say HELLO to economic slavery. You may be an advocate of it now, but after it happens you will be wishing it didn’t.

Maxx on August 8, 2007 at 12:36 PM

ThackerAgency on August 8, 2007 at 12:33 PM

Problem is, we import far more real goods than we export. We’ve moved away from a manufacturing economy. So, a falling dollars causes prices for real goods to rise at home – inflation. Now what happens if, at the same time prices are rising, interest rates are also rising? Disaster. That’s why this is no idle threat.

TheBigOldDog on August 8, 2007 at 12:37 PM

Hmmmm if this is true, I should buy a large amount of yuan and then sell it off for dollars.

So is this an opportunity or an empty promise?

- The Cat

MirCat on August 8, 2007 at 12:51 PM

China threatens huge dollar selloff

Terrorism is only an annoyance compared to China… the REAL threat.

This is what happens when you allow your enemies to buy your debt. Think of this, by some estimates the “National Debt” is as high as 80 trillion dollars. That means China may own as much as 1.25 percent of our debt. Wonder who owns the other 98.75 percent ?

Maxx on August 8, 2007 at 12:55 PM

Can we counter it, and with what?

Loan out a couple of mothballed nuke subs to Taiwan with just enough capacity to make Beijing glow in the event China attempts a cross-channel invasion of Taiwan.

Then we can laugh in the face of the People’s Republic when we say, “Guess you’ll have to put off your invasion of Taiwan indefinitely. Have a nice day!” :-)

clark smith on August 8, 2007 at 12:55 PM

Maxx on August 8, 2007 at 12:36 PM

instead it would be a nullification of the Union and our Constitution.

Thats an assumption on your part for which there is no evidence. Sorry Maxx but you are fear mongering. Both the Mexican and Canadian constitutions are very similar to that of the United States there is no valid reason for believing that our bill of rights or constitution would disappear.

A North American Union would not be a nullification of our Union, just an expansion of the currently existing Union. Just as it has been expanded many times in the past. Our constitution would be no more nullified than Great Britain’s Germany’s or Frances were by their entrance into the European Union.

doriangrey on August 8, 2007 at 12:57 PM

I’m not an economist, but I’ll try with a 3 simple examples:

Say the currency of country ZZZ is called $Z.
And say the U.S. Dollar is called $U.S.
And say one $Z = one $U.S.

Let’s further say that the U.S. produces product XX, and country ZZZ also produces product XX of the same quality.
Let’s say product XX sells for 100 $U.S., it would follow that it would also sell for 100 $Z. In this case, neither the U.S. nor ZZZ would export product XX to each other because there would be no economic advantage.

But then, all of a sudden, one $Z is worth two $U.S. (dollar devalues against $Z by 50%). Then people in ZZZ could import product XX from the U.S. for 50 $Z, whereas they would still have to pay 100 $Z for domestic XX. U.S. exports would start to take over the market for XX in country ZZZ, probably driving production of product XX out of business in country ZZZ.

The reverse is also true. If country ZZZ is exporting goods to the U.S. and the dollar devalues against the $Z, country ZZZ goods become more expensive in the U.S. That rise in prices would cause consumers in the U.S. to buy domestically-produced goods.
______

Suppose that the U.S. produces goods where 1/2 of the inputs to that product are from foreign sources. If the dollar devalued against the currency of the countries where those inputs were produced, those foreign-produced inputs would become more expensive, thereby increasing the price of those U.S. produced goods. The general effect would be one of two possibilities:

The goods-producers would look to domestic sources. The reason they weren’t using domestic sources before the currency devaluation was because domestic inputs were more expensive than foreign inputs. Now, domestic inputs are cheaper. The net effect is increased production of those inputs in the U.S. and fewer imports, and a slight rise in prices in the U.S.

or:

The goods producers cannot get domestically produced substitutes for the foreign inputs and prices in the U.S. rise substantially.
________

The U.S. must import foreign goods. Say…oil. If the price of oil is based on a currency other than $U.S. (for example, the Euro), and the $U.S. is devalued against the Euro, prices in the U.S. rise dramatically.
________

Simply put (because I’m simple):

In a competative market, devaluing the $U.S. is good for U.S. domestic production, and also good for U.S. exports.

In a market where some of the inputs to a product are domestic and some are foreign, it might be good or it might be bad, depending on whether the U.S. can substitute domestic inputs for foreign inputs. If the market for inputs is somewhat competative it’s good. If not, it’s bad.

In a non-competative market where the U.S. must import from a foriegn producer, prices in the U.S. will rise.

It all depends on competition.

jaime on August 8, 2007 at 1:00 PM

TheBigOldDog on August 8, 2007 at 12:33 PM

But it is not a perfect market. Supply and demand do not meet at the optimum market price. It is artificial. And the flood of bonds on the market while it may create fewer buyers simply by the volume of $’s, doesn’t take into account the reaction of the world economy nor the growth of the US economy. Nor does it account for the world needing the US economy.

Again, I get the arguement and would normally agree, but supply has been high for the last five years with return being low. The world still finances us because of the cost of not doing so.

I am really enjoying this thread by the way.

sunny on August 8, 2007 at 1:02 PM

doriangrey on August 8, 2007 at 12:57 PM

OK… then you trust them… I don’t.

Maxx on August 8, 2007 at 1:04 PM

doriangrey on August 8, 2007 at 12:57 PM

Yeah and only drag down our economy further as the EU has done to Germany. We would inherit Canada’s national heathcare (and all the rights, privileges, and wait times that come with it) and a huge wellfare population to the south. And how would you consolidate things like minimum wage, SEC type laws, and French Canadians?

- The Cat

MirCat on August 8, 2007 at 1:08 PM

Now what happens if, at the same time prices are rising, interest rates are also rising?

You get the Carter administration. But efficient mfg and delivery of goods and services within the US is good and much improved Since the 70′s & early 80′s. Government regulation has also vastly improved since the Reagan years moving forward. The decline of unions and artificial price controls also help to prevent this reoccurance.

sunny on August 8, 2007 at 1:19 PM

sunny on August 8, 2007 at 12:12 PM

Sorry to all, I actually started that. It was the result of Ropera’s ‘qualifications’ being questioned because of being a nurse.

It doesn’t matter what the education is, but I thought metnioning would explain my perspective…and I didn’t mention my MBA in an effort to keep it as a back issue. So much for that idea!

Miss_Anthrope on August 8, 2007 at 1:21 PM

sunny on August 8, 2007 at 1:02 PM

It has nothing to do with a perfect market – these things happen, just ask George Soros who single handedly broke the Bank of England by shorting the Pound. The world economy does not do things out of charity or even long term interest. People who manage this money have a fiduciary responsibility to maximize the ROI period and that’s what they do. The could care less what happens to to the US Economy.

If there is a flood of US debt in the market interest rates will rise as sure as the sun will rise tomorrow. If the flood is big enough and rates rise high enough the economy will head right into recession. If the dollar falls we will also be hit with inflation due to the amount of hard goods we import. If these things happen simultaneously it will be a disaster. How bad and how long is hard to say. I would at least expect an economy like we had under Carter.

The other thing to consider is that the Chinese are making this threat because the US Government and the world financial markets understand the consequences.

TheBigOldDog on August 8, 2007 at 1:23 PM

Maxx on August 8, 2007 at 1:04 PM

OK… then you trust them… I don’t.

Who exactly is the “them” you don’t trust? The Trilateral Commission? The Illuminati? The shadow government? The Grey/Reptilian space alien overlords? Or are you suggesting you just don’t trust the American people? Because any modifications to the US Constitution involved in the creation of the NAU would require the approval of the American people.

MirCat on August 8, 2007 at 1:08 PM

Analogies between any NAU and the EU only go so far, unlike the UE the creation of a NAU would open up massive natural resources to American exploitation and the one thing that America does better than the entire rest of the world put together is turn exploitable natural resources into real tangible wealth.

Access to Mexico and Canada’s petroleum resources alone would dramatically alter the current American dependence on foreign/middle eastern oil. Between the two of them they have an estimated 280 billion barrels of crude, almost as much as Saudi Arabia

doriangrey on August 8, 2007 at 1:32 PM

Who exactly is the “them” you don’t trust? The Trilateral Commission? The Illuminati? The shadow government? The Grey/Reptilian space alien overlords?

doriangrey on August 8, 2007 at 1:32 PM

The “them” is whoever it is that is pushing for an NAU. I don’t know if they are space aliens or not… do you ? Are you a space alien… no offence intended, I got nothing against space aliens, it’s just that you seem to favor an NAU, so I though I would ask.

Maxx on August 8, 2007 at 1:41 PM

Evrything you say makes perfect sense. And I think the answer lies somewhere in the middle.

The currency market cannot be compared to every other investment when it comes to foreign investment. If it was, Japan and China would have never financed our debt over the last few years especially with the falling dollar(not too mention low rates). That just reduces the value of a bad investment. Really, why would anyone choose such a small return through bonds when the could make plenty more in stocks and other investments.

They do it because their economies would be devastated by a US recession. They live on the purchasing power of US citizens. This is why I say it is not a perfect market. Demand will not absolutely dicatate price and we know it. I just don’t think the currency market can be simply defined with immediate ROI logic.

sunny on August 8, 2007 at 1:41 PM

TheBigOldDog on August 8, 2007 at 10:55 AM

I’m thinking you are a little more on topic than some of the others here. My mom is a finance professor, and has taught international finance in China several times. She thinks this news is bad.

BadgerHawk on August 8, 2007 at 1:48 PM

would this threat be diminished if we gold-backed our currency?

liquidflorian on August 8, 2007 at 1:54 PM

sunny on August 8, 2007 at 1:41 PM

Because they are awash in US Currency due to the trade deficits. They want a safe, liquid, vehicle to park that money and they want the political influence holding that much debt and dollars gives them (for cases just like this). Again, China would be hurt no doubt but they are not a free society. They don’t care how much their people would suffer and hence can take actions like this if they think it’s in their long term interest to do so. That’s why they bother making the threat in the first place – they know the world financial markets and the US Government take it seriously.

TheBigOldDog on August 8, 2007 at 1:55 PM

I have been trading interest rate futures since 1990 and I have a masters degree in finance. There are my bona fides upon which you can judge my comments.

The dollar was under threat as soon as the European Union decided to issue a currency. Before that the dollar was the only reserve currency, held in the vaults of central banks, which was used to settle international payments; i.e., oil, trade.

Being a reserve currency was a tremendous boon to our economy which allowed the U.S. Fed to export our inflationary policies. The Euro gives the world another currency in which to run in times of upheaval and means that if we continue to debase the dollar then the U.S. and the U.S. alone will bear the cost of this. (I know a lot of you enjoy calling Ron Paul a crank but he is right about this issue. We are playing a very dangerous game.)

The Chinese will bear a cost if they decide to dump the dollar. We are their major trade partner and a recession in the U.S. will hurt them also. Still, they might be willing to bear that cost because it will definitely hurt us more. There is one thing the U.S. can do to keep the Chinese from selling our dollars and, therefore, or assets. We can freeze the Chinese out of the market. Refuse to allow them access to our financial markets. Of course, the cure might be worse than the disease. The key will be getting the Japanese and Europe to play along. Everyone has good reasons to prop us up and to see us fall. It’s sad that our financial future is in the hands of foreigners.

Now might be a good time for our gov’t to bring in the major purchasers of Chinese goods and tell them to start looking to move there operations out of China. With the Chinese putting this on the table trade with China is now a matter of national security.

The other great threat to the dollar is the unwinding of the Yen-carry trade. That is about a trillion dollars that could be withdrawing from our economy. Sleep tight.

Bill C on August 8, 2007 at 2:03 PM

Maxx on August 8, 2007 at 1:41 PM

Yes, I am one of your evil reptilian space alien overlords so quit questioning my superior intellect. I know what is best for you poor ignorant unwashed earthlings. /snark

So basically what you are saying that you really have no idea who the “them” are but that you know you oppose what ever it is that they are trying to do. Oh and BTW I was browsing through your mail the other day and noticed that your subscription to “The Lone Gunman” is about to lapse.

You do realize that such unfocused and insubstantial fears place you standing at the precipice of conspiratorial paranoia? It matters not one single bit how much elected officials, unelected officials, members of super seckret shadow governments or even space alien overlords push for the NAU, it will never happen unless the citizens first and foremost of the United states and then Mexico and Canada as well vote to allow it to happen.

doriangrey on August 8, 2007 at 2:07 PM

doriangrey on August 8, 2007 at 2:07 PM

doriangrey… the reason we have the Constitution is because the Founding Fathers didn’t trust the government…. AND THEY WERE THE GOVERNMENT.

Jefferson… I think it was Jefferson… once said … the price of freedom was constant vigilance. (loosely quoted)

I believe that…. I am a Jeffersonian.

And if that annoys you… then go back to your own planet.

Maxx on August 8, 2007 at 2:25 PM

Maxx on August 8, 2007 at 2:25 PM

the reason we have the Constitution is because the Founding Fathers didn’t trust the government….

Are you having a blond moment or just suffering a reading comprehension problem?

It matters not one single bit how much elected officials, unelected officials, members of super seckret shadow governments or even space alien overlords push for the NAU, it will never happen unless the citizens first and foremost of the United states and then Mexico and Canada as well vote to allow it to happen.

doriangrey on August 8, 2007 at 2:31 PM

What a gigantic shock that no one saw coming.

China is has been sucking our blood with a gun to our head and if we move to stop the blood flow they’ll pull the trigger.

Of course if we hadn’t sold them the gun we might not be in so much trouble.

What now? We could pull out half of the troops in Korea and threaten to remove the other half if they don’t play nice or we apologize and sell off more debt to them and then…default.

BTW it’s Dollar hegemony that’s at stake.

http://en.wikipedia.org/wiki/Dollar_hegemony

Think our administration has the stones to pull it off?

Speakup on August 8, 2007 at 2:48 PM

It matters not one single bit how much elected officials, unelected officials, members of super seckret shadow governments or even space alien overlords push for the NAU, it will never happen unless the citizens first and foremost of the United states and then Mexico and Canada as well vote to allow it to happen.

doriangrey on August 8, 2007 at 2:31 PM

If our Constitution would stand as the law of the land I might not object to a joining of Mexico and Canada.

Maxx on August 8, 2007 at 12:36 PM

I hope you are right about that. And that puts us back where we started.

Maxx on August 8, 2007 at 2:50 PM

And exactly how would that change anything? We already have some 20 million of them here doing that now, or do we?

doriangrey on August 8, 2007 at 11:06 AM

Um. I guess you don’t see a difference between having 20 million illegals, and adding over 100 million people currently living below poverty levels?

If anything it would be a good thing. In as much as they would become legal citizens required to pay into the system just as you and I do now.

Pay into the system? Pay with what? All that massive wealth the Mexican people have stored in those personal Mexican bank accounts? Maybe you’re not aware of the current levels of poverty in Mexico. Which direction do you think the money is going to go when over 100 million poverty level Mexicans are suddenly told they’re eligible to apply for welfare? Will more money go OUT, or will more money come IN?

Who’s going to build all of the new hospitals which are going to be required to provide free medical care to 100 million new Americans? Where’s that money going to come from? The drug cartels? The corrupt Mexican government?

You obviously have some very inaccurate idea’s about Mexicans.

Obviously. I get those inaccurate ideas from my son, his mother, and her entire family, who are all Mexican. LOL! Thanks for the laugh.

A north American Union would solve on of the major problems in America right now, that being the pay inequality between what the average Mexican earns in Mexico and what the average American earns eliminating the currently existing strong incentive for Mexicans to immigrate illegally to America.

Really? So, with a touch of a wand, we’re just going to suddenly raise the minimum wage in Mexico to the levels here in the U.S., and like magic … Mexicans in Mexico would suddenly be earning wages equal to U.S. workers? Where are these jobs going to come from? Where are the employers going to come from? And IF there should suddenly be a boom in new businesses to actually HIRE these workers in Mexico … where are the customers going to come from? Mexico?

Are American business owners going to suddenly run to Mexico and spend billions up front to open retail malls, so all these new workers can spend their new Ameros? Or, are the corrupt Mexican officials who are making plenty of money working with drug cartels or in other shady areas going to see the light, find Jesus, and decide to invest in the little people? And all of these new Mexican workers are going to be earning enough to put them over the poverty level, thereby eliminating them from the welfare lists?

Oh wait.

Maybe that little McDonald Taco stand owner in Encenada will now be able to start paying $12 an hour. Or, is it more likely that part of the back-room dealing involved in the any merger would rule the minimum wage exempt in Mexico, causing even more American businesses to relocate, instead having the opposite effect and causing American wages to fall to record lows?

Of course, these American businesses in their desire to obtain the lowest possible costs of doing business, will pay under-the-table “fees” to the same corrupt Mexican officials, thereby making them even richer.

Or, do you think the U.S. is going to send Team America in to monitor the entire situation? Maybe some U.N. officials? You know? Just to make sure everything is legit and to prevent corruption? I’m sure it will be easy to clean it all up.

You conveniently blind yourself to the big picture. You ignore the total corruption of the Mexican government and law enforcement. Will the North American Union magically clean out all of this corruption? Will the U.S. write a nasty little letter telling them that they’re all going to have to start being honest? What do you think would happen if the U.S. were to go in and attempt to clean out all the drug cartels? Do you think the cartels would just close up business and open up yogurt shops? How many people would die in the inevitable war that would take place between these new “honest governments” and the cartels?

You also ignore the fact that the Canadian people want nothing to do with a merger. But I guess the people of Canada are too stupid to know what’s good for them? Maybe you think they’ll all be happy and thank us later.

You also ignore the fact that the American people want nothing to do with a merger. But again, we’re probably just too stupid to know what’s good for us. We’ll thank them later.

And that whole Constitution thing is over-rated anyway, right?

Gregor on August 8, 2007 at 2:54 PM

Maxx on August 8, 2007 at 2:50 PM

Which is exactly why I cant understand anyone’s paranoia over a NAU, if it should happen it will happen under our (as in we the people) terms. As I said before, the constitutions of Mexico and Canada are very similar to the US Constitution, a modified combination of all three constitutions would not make our constitution less protective of individual citizens rights than it already is.

Now please allow me to tie this into the current thread. The combined natural resources, populations and economies of the United States, Canada and Mexico and the unprecedented economic opportunities that such a union would result in such a dramatic increase in productivity that china’s threat of liquidating all of its US dept would amount to nothing less than a international joke with china being the but of said joke.

American corporations are currently in the process of major outsourcing of manufacturing to, thats right you guessed it Mexico. A NAU combined with or predicated by a massive or near total Chinese divestment in US debt would have the result in a near total ban on all Chinese imports whilst simultaneously driving unprecedented investment in manufacturing in the NAU’s southern most states.

In other words American corporations would shift their base of manufacturing to present day Mexico for reasons of financial costs/tax incentives, access to resources and cheap labor. China would find itself not only barred from the US as a market, but replaced in the world as significant manufacturing nation.

I personally suspect that an act of economic warfare such as china is threatening would probably result in just enough of a recession not just in the United States but all over North America as well as world wide that could very well provoke the creation of a NAU.

Under such conditions I imagine that we would very shortly after its creation see the most dramatic economic growth in the NAU that has ever been witnessed on the face of the earth by any nation.

doriangrey on August 8, 2007 at 3:20 PM

In other words American corporations would shift their base of manufacturing to present day Mexico for reasons of financial costs/tax incentives, access to resources and cheap labor. China would find itself not only barred from the US as a market, but replaced in the world as significant manufacturing nation.
doriangrey on August 8, 2007 at 3:20 PM

That’s why NAFTA was one of the very few truly bipartisan issues in recent history: Republicans liked it because it’s free trade; and Democrats liked it because it’s protectionism. Everybody wins.

But this “brilliant” idea to abolish the United States Constitution that the liberaltarians keep preaching? I’m pretty sure only the Alien Overlords are on board with that plan.

logis on August 8, 2007 at 3:43 PM

Comment pages: 1 2