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China: Sitting in the Catbird Seat; When Will It Pull the Plug on U.S. Securities?

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Do you get the idea that China is patiently waiting in the wings, ready to become the premier nation in the world when the time is ripe; when the combination of America's pursuit of foreign policy and its dire domestic problems causes it to implode economically? The Chinese may aspire to replace the U.S. as the world's dominant nation but, because of their massive investments in U.S. securities and large trade surpluses they, no doubt, have a severe conflict of emotions over what happens to America and just how they will have to react.

China on the rise, the U.S. in decline; that's reality and a sign of what the future holds for these two major trading partners. In this somewhat tenuous, competitive relationship each nation may be thinking, to take a quote from the old western movies, "this town (planet) ain't big enough for both of us." China has massive economic power, the U.S. has a mighty military force; the future will tell which of these world powers will prevail.

Should China fear U.S. military power? Well, China has a population of 1.3 billion people and the country is massive. The People's Liberation Army (PLA) has 2.3 million active troops, the largest military in the world. It also has a sizable navy, air force and a strategic nuclear force. Of course, China is very wary of America's military might and aggressive agenda of expansion, but it knows that the U.S. would think long and hard before ever attacking it. China is the one country on this planet that represents the greatest obstacle to the continued domination of the American empire.  

China , the second largest economy in the world is riding high; it is the fastest growing economy by far and will surpass the U.S. by about 2025. Sure, it has many serious domestic problems to deal with but, overall, conditions are relatively stable; it is growing ever stronger and gaining influence in the world; however, it is not involved in any aggressive military operations, it has no costly empire to maintain; it is simply biding its time, watching the U.S. get deeper and deeper into foreign wars that are draining its resources.

China is not only America's major manufacturer, it also is the largest holder of our monumental national debt. You might say that China "owns" the U.S. China holds an estimated $900 billion of U.S. securities, the largest holder of U.S. debt, with Japan second at $837 billion. There are those who feel that China may have plans to cut back, or even stop its multi-billion dollar loans to the U.S. and, in fact, might begin selling off its holdings of U.S. securities. That's highly unlikely to happen because, at least for the time being. China has no intention of bringing down its #1 customer, i.e., killing its golden goose.

However, China can see that America's current policies and actions, spending vast sums in its foreign wars and greatly neglecting its infrastructure, are rapidly weakening it. How about this for irony? Millions of American manufacturing jobs have been outsourced to China and this has greatly contributed to the growth of its economy because of exports to the U.S.; but this transfer of labor has created mass unemployment and a tremendous loss of consumer purchasing power in the U.S. economy which, in turn, will have a negative effect on future imports from China; kind of a catch-22.

So will China's strategies change as a result? Well, for certain, they are going to continue milking the U.S. cash cow as long as possible. But, at some point, as the American economy continues to unravel and China's exports to America spiral downward, the Chinese will necessarily cut back on their loans. That, of course, will severely impact America and cause the Treasury to print more and more fiat money to try to make up for the loss of loans. If that scenario continues, then China will, no doubt, begin to sell off its holdings of U.S. securities, thereby critically impacting America's economic stability.

While we are discussing the bad things that can happen to America and the dollar, here is yet one more potential catastrophe. Just recently the China Daily and People's Daily Online reported that an agreement had been finalized whereby China and Russia would use their own national currencies in their bilateral trading rather than the U.S. dollar. Not only that, but China had previously made this same type of agreement with Brazil. This appears to be an ominous trend that could, eventually, eliminate the U.S. dollar as the world reserve currency, a devastating blow to America.

It is mind-boggling to consider how these two nations, China and the U.S., seem to be rapidly heading in completely opposite directions. China, as we know, is going around the world making contracts to guarantee a steady supply of oil and natural gas into the future. And, we also know that the U.S. is continuing to expand its military empire and use that power to try to guarantee a similar supply of natural resources for America. Two vastly different strategies, two totally different effects upon the nations of the world.

It seems like China, though quite a powerful nation, has learned this lesson; that the "pen is mightier than the sword." But, sad to say, the same is not true of the U.S. which doesn't understand that and probably never will as it has come to believe that overwhelming military power is the answer. China knows how to get things done in world commerce without resorting to bullets, bombs and intimidation; the U.S. does not.

Yes, China is sitting in the catbird seat, holding by far the best cards, all the aces, biding its time, trying to figure out the best way to cope with the reality that its significant investments in America are being jeopardized by costly, misguided military actions, coupled with a sinking economy. But the Chinese are a patient people whose objectives are long term; so we cannot really comprehend what specific plans China may have for America, its maxed out credit card holder.

China 's leaders are clever and cunning but, above all, they are very astute and pragmatic in their approach to financial matters. No, they aren't going to cut their own throats by pulling the plug on U.S. securities to do harm to America in any reckless way but, at the right time when it becomes evident that America's economy is nearing collapse, they will take quick actions to protect their interests and America will be dealt a fateful economic blow.

Michael Payne

Images copyrighted by Historylink101.com & found at China Picture Gallery

 

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Michael Payne is an independent, progressive activist. His writings deal with social, economic, political and foreign policy issues. He is a featured writer on Opednews and Nation of Change and his articles have appeared on many other websites (more...)
 

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