It started with a joke, but quickly went viral everywhere from the South China Sea to the White House.
“We hate you guys,” Luo Ping, director-general at the China Banking Regulatory Commission, wisecracked in New York last month, speaking of the U.S. habit of issuing trillions worth of the Treasury bills that China still considers safe havens. “Once you start issuing $1 trillion, $2 trillion … we know the dollar is going to depreciate, so we hate you guys, but there is nothing much we can do.”
That is, nothing much aside from flexing China’s economic and military muscle, the latter of which it recently accomplished in the South China Sea when five Chinese vessels aggressively surrounded the USNS Impeccable, an unarmed surveillance ship spying in the internationally contested Spratly Islands.
The Impeccable turned firehoses on the encroaching ships, whose sailors nevertheless stripped down to their underwear and continued to move in as close as 25 feet from the ship.
Laughably terming the nearly naked Chinese display of territorial strength “provocative,” a Pentagon spokesman complained that China, America’s largest creditor and owner of the world’s largest holding of U.S. Treasuries, and its marine vessels’ bold actions “violated the requirement under international law to operate with due regard for the rights and safety of other lawful users of the ocean.”
After all, the last thing the United States needs from China, a nation bankrolling not just our economy but also our military gamesmanship, is a bunch of naked nationalists reminding us that our empire is in steep decline.
Flex Those Biceps
“China is beginning to show some muscle,” explains journalist and economist Danny Schechter, whose 2006 documentary In Debt We Trust examined the capital flows that led us to our worst downturn since the 1930s. “This is why Hillary Clinton was so easy on China in her recent visit, after once popularly criticizing its human rights record. The U.S. is trying to signal to China that our economy is strong, but at the end of the day, the proof is in the pudding. If there is any pudding left.”
Schechter’s grim assessment is one shared on both sides of the Pacific. Since the Obama administration came to power just as the global economy sputtered to a halt, Chinese Premier Wen Jiabao has repeatedly complained that the world’s major economies, especially that of the United States, have been witlessly living and spending on borrowed time and money.
“I think the main reason for this global financial crisis is the imbalances of some of the economies themselves,” the premier correctly noted in early February. “For a long time, they have had double deficits [trade and budget deficits] and kept up high consumption based on massive borrowing.”
In mid-March, Wen was more forcefully direct: “We have lent a huge amount of money to the U.S., [and] we are concerned about the safety of our assets,” he said. “To be honest, I am definitely a little worried.”
But how far is his country willing to go to safeguard those assets? If Chin purchases fewer of those Treasuries, or, in the worst-case scenario, holds a nightmare sell-off of those assets, it could ruin the United States economy in ways we can only imagine at this stage of the geopolitical game.
At best, it could dump the dollar into the currency basement as the world follows China’s suit and diversifies its reserves in other denominations. At worst, it could spell the end of America as a superpower and destroy the global economy as we know it.
Spice It Up
As the AIG controversy came to a head, and member nations prepared for the G20 conference in London on April 2, the governor of the People’s Bank of China, Zhou Xiaochuan, proposed replacing the dollar as the world’s reserve currency, using instead what he called a “super-sovereign” currency managed by the International Monetary Fund.
This article appeared at AlterNet