1) Paring Down/Disengagement:

Begin thoughtful and disciplined paring down, disengagement and/or de-linkage from both investment (manufacturing/corporate/supply chain) in China and Treasury selling U.S. debt to China, even if it incurs additional and painful near-term cost. In other words, a revolutionary diversification effort is required on all these fronts. This also includes beginning to treat the export of investment, banking and economic et al expertise in all respects with the same sensitivity and “need to know” security access that might analogously be afforded key military information.  

Analyst Note: Specifically, a brief yet targeted thought to provoke debate on mitigating the debt situation. In addition to both paring down its exposure vis-à-vis accelerated purchase back at slight premium if necessary, and the Treasury more aggressively seeking other customer countries with different intent (investment versus control) for future debt selling, another action is recommended. As a defensive measure when China begins its bullying “concession demanding mode”, the U.S. might in advance consider (creating) an innovative “sale/leaseback” (or other derivative) approach. If (when) triggered (conditions/terms TBD), shifts the debt to a 99 year lease like arrangement, removing the short term China leveraging opportunity. Link this conditionally to NTR status. See section C (Part 8) to come. 

On de-linkage of supply chain (risk), the Analyst uses Wal-Mart as case in point. In fact consider it a proxy for all U.S./WEAST strategically significant supply chain risk. One need only go (and the Analyst challenges each reader of this article to do so), to any Wal-Mart (or Target et al) as this Analyst went to several, and indiscriminately look at 20 different categorical items in each different store. The Analyst did just that, noting in each case, “at least” 15-16 or more of them noting on the label, “Made in China”, arguably then 75-80% plus of inventory. The good news however, at least Titleist golf balls are still “Made in U.S.A”. The question though - for how much longer?  

Questions to address: What that all says is that U.S. and WEAST consumer product “demand” is satisfied for all intents and purposes almost exclusively with China “supply”. Imagine if China decided to leverage that stranglehold at some future point. How would the typical consumer handle going into a Wal-Mart and finding the shelves bare or prices skyrocketing overnight? What contingency plans exist now to address this huge vulnerability/exposure? What actions to address and counter the relentless off-shoring of the U.S. manufacturing base? 

2) Create a (real) Exon-Florio “country involvement” condition and more stringent evaluation parameters – see coming Part 10 - Section 5 (Technology/Intelligence) for greater detail. 

Hint - FINSA is fundamentally flawed. Find out why and how to fix in Part 10.  

This condition is triggered whenever there is activity by the Chinese (and/or Russian) government(s). Given the significance of China’s underlying global economic agenda and the associated national security risks posed to the U.S. economy, the U.S. government should promptly be made aware anytime the Chinese (or any other Commulist) government in any way vis-à-vis use of one of its in house agency (state owned) companies (tentacles) attempts to partly own or invest, purchase or joint venture with any U.S. company or entity. CFIUS will immediately make this a priority review and employ standards more stringent than non-state owned entity involved transactions. The standards should be of a nature that more often than not will negate the transaction in the interests of direct or derivative national/economic security.      

3) Create a joint and integrated (collusionary) U.S./WEAST “Advanced Monetary Policy (AMP)”. Alternatively call it the “Counter-Commulism Monetary Policy (CCMP)”.  

The key here is that in the emerging Cold War II, the U.S. and WEAST will have much more defensive (and offensive) leverage working collectively in tandem together, rather than each acting on their own. Commulism would prefer the latter in sympathy with the benefits it derives from its adversarial “divide and conquer” approach. 

CCMP Policy Making Board - The mechanism to create that coordinated, actionable monetary policy will be a policy making committee structured not unlike the UN Security Council with the CCMP governing board initially comprising senior policy making officials from the Big 3 - Federal Reserve, European Central Bank (ECB) and the Japanese Central Bank. Then build out the rest of the committee (council) infrastructure with remaining WEAST constituents. 

In effect, CCMP becomes the next evolution of G7 (G8 ex Russia), as G7 moves from 7 individual entities to one integrated one, at least as respects monetary policy.  

This effort will require rethinking and new ways of conducting business by all parties. It will be based on an understanding that the way to succeed against Commulist economic policies is to focus on the collective inflation and growth aspects/effects of the “group” (U.S. and WEAST collectively), rather than country by country’s “individual” situation. This is based on the principle that when it comes to competing with Commulism “in the long run”, what’s good for the whole is better for the individual parts (countries). See coming NATO article. 

A quick comment specifically as respects the U.S. contribution to CCMP. The longstanding separation between “church and state” (i.e. the Fed and Treasury) no longer makes sense. They must each change behavior and work collaboratively together against a common external threat which undermines both growth and inflation. This broader CCMP blueprint will adapt and align the policies of all U.S. agencies as well as it would do the same for WEAST government agencies, using China and the “Commulist” Block as the new threat basis, just as the military will do with its “to be developed” Flex-Plex integrated Cold War II doctrine, reflecting both superpower v superpower and superpower v terror sub-doctrines.  

Note: This broader global discipline and approach to monetary policy has the added benefit of obviating the temptation for future Greenspanian-like rate pendulum swings, which lead to unhealthy boom and bust economic volatility. That new stability will produce fewer economic vulnerabilities (e.g. housing and credit crisis) and in doing so create a better and more stable economic counter-balance to Commulism over the long haul. 

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