U.S. Leadership Void Squanders Influence - China Steps In

During this period in American history when the economy, business, trade and currency have taken pivotal positions in the Nation’s psyche, the country is led by what may well be the most economically uninterested Administration it has ever elected.

Loudly professing to fight for the vast middle class, the Obama Administration’s actions are taking the Nation galloping toward the destruction of middle-class incomes, toward upwardly spiralling middle-class taxes, toward bloated government, and toward overwhelming debt. 

As the expansive middle-class heads off to work at its one or two jobs each day, it has the right to expect its leadership to do the job it gets handsomely rewarded to do. That job includes paying attention to all matters which affect the long term health and stability of the country. 

We were not surprised to discover ineptitude such as the State Department’s decisions in Libya or in Egypt, nor were we astonished at cover-ups attempting to hide the incompetence. However, of more import to the middle-class is the blundering neglect and disregard this Administration has shown to economic matters which will directly impact the long term health of America – both its economic condition and its military strength. 

After four years of the current Administration’s platitudes, but prevailing economic indolence, we are presented with abundance of tell-tale ‘canaries in the coal mine’ evidencing a methane cloud sweeping across the whole country trying hard to drag it into a state of international subordination. 

The EU leadership’s attitude toward Cyprus bank depositors forecasts the future imposition of punishment on Spaniards, Italians, and other profligate governments. Any word from the White House? This act by Brussels is criminal expropriation of personal property, telling of an imperious inclination. But who cares? Surely the EU’s action cannot be a ‘canary in the coal mine’ for the American middle-class. It’s just those funny Europeans who speak strange languages, and anyway, we’re not like Europe and surely our leadership would not want to emulate theirs. So let’s look at ‘telling’ events elsewhere for more suitable ‘canaries’. 

Let’s skip to the other side of the world where Australia’s Prime Minister Julia Gillard, head of the labor party, is heading to China to slide Australia further into the Chinese sphere of influence through the signing of an agreement to allow for the direct conversion of Australian dollars into Chinese Yuan. Reducing the need for Australian businesses to convert U.S. Dollars (the greenback is the predominant currency middleman), in trade with China reduces some costs incurred by Australian companies. More importantly, this arrangement provides China a more direct and less expensive access to the raw materials it requires to fuel its own growth and increase its wealth. What of Chinese exporters to Australia? China is promising better prices and better payment terms under this new agreement. How perfect is that seduction? This Australian maneuver could be dismissed as a minor ‘canary,’ representing a trivial event relative to the global daily trade turnover of over $US3 trillion. Such an event is nevertheless an economic and political statement, highlighting the progress in the long term internationalization of the yuan. China is buying up all the mining companies and raw source materials it can in Australia, as it is doing elsewhere. It has done a successful job of hiding the reality that the communist party, which controls China, also controls most entities who ‘acquire’ foreign assets, and it influences any which it does not fully control. Down the road, that centrally manipulated ideological mindset will have massive control over foreign economies. 

Brazil is moving in the same direction with a $30 billion currency swap with China. Such arrangements are expected with other Chinese trading partners including the United Kingdom and Japan. This new and consequential trend is about receding the greenback’s and America’s prominence. 

In Canada, the disdain and the disrespect which the Obama Administration has shown for its leader, Prime Minister Stephen Harper, and for its economy, has pushed that country to bend over backwards for China. When the head of CSIS (Canada’s equivalent to the CIA), mentioned that the Chinese government had infiltrated the Federal and Provincial governments at the highest levels, the country’s predominantly liberal media admonished him and shut him down. How dare he talk against a country so busily buying up Canada’s natural resources. How dare he be so politically incorrect? The Canadian MSM actually placed the label ‘racist’ on him. As for Stephen Harper? Since Obama is not only uninterested, but recalcitrant, Harper is determined to forge a trading relationship with China to the point where everything is ‘for sale,’ including the out-of-control indebtedness of Canadians who now on average owe more than the average American. A whole generation of indentured citizens seems apathetic to its plight. China finances construction of hundreds of thousands of pigeon-hole condos, selling them to Canadians who cannot afford them. How is that for a perfect storm? A currency agreement with China such as Australia is entering into, can only be just over the horizon for Canada, further erecting the yuan’s position and sidelining the U.S. dollar. 

As any country’s trade with China increases relative to that country’s other trading partners, China’s ability to dictate trading ‘conditions’ increases. In Europe, the general weakening of the Euro trading block opens the door to sidelining the greenback. China can hardly be accused of being subtle in its efforts toward economic dominance. Here is a statement from a Professor Yu, who was a member of the monetary policy committee of the People’s Bank of China and an economic adviser to the government ”It is a simple case of invoicing and settlement currency, it is not about making the yuan a reserve currency.’’ Of course. 

Australia, Canada, Europe, South Korea, Japan, Indonesia, and, . . . and, . . . and, all depend on America for security. Individuals in much of the world go about their day, conscious that America has for as long as they’ve been alive, been a positive influence on their safety and on their stability, and most importantly on their freedom. The capacity to provide that stability has been financed by the strength of America’s economic engine, the health of its currency and confidence in its ability to lead. Flaccidly standing-by as ‘friendly’ economies become smothered and influenced by a communist government does not augur well for our well-being and our way of life. 

History dictates that maintaining a strong position on the global stage is essential for self-preservation and is imperative for the preservation of freedom and core values. It requires interested, visionary, and inspiring leadership. True leadership cannot be concocted through alchemy, or fashioned on a Hollywood back-lot, or discharged through a teleprompter. It is innate. Before more canaries prognosticate degradation of the Nation’s international stature, America’s taxpayers should make themselves heard, and demand pro-active leadership in Washington.

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• AMERICA FOR SALE?

The New York times recently asked “Does the America for Sale sign require a warning label?” The implication being, should the U.S. warn the global financial community that there are certain conditions to buying American companies? In this writer’s opinion, the New York Times has it wrong. These days it is not America that should have a warning label… the financial opportunists should get their Brioni designed lapels branded “HOSTILE”. Here’s why...

With weakness in the dollar, the world is coming to purchase everything, attached or not. It appears there are almost no limits… everything is for sale, our companies, our financial institutions and our real estate. Who’s buying? Well now, there’s the rub.

First let’s put the size of this new wealth in perspective. The average person going about the daily business of earning a living and attempting to build a life is familiar with the meaning of “wealth” as it might pertain to certain names who regularly appear in the media as being amongst the wealthy or wealthiest. Most of us can probably quote Warren Buffet’s stated fortune. By any measure the aggregate of his assets are substantial. They pale, however, when compared to the size of the foreign funds that have been accumulating through this past decade of oil price runaway inflation and global economic boom. Whether from trade, as China has done, or from the sale of a critical resource like oil, foreign governments have accumulated colossal amounts of cash. Some of this bullion has been parked in so called sovereign wealth funds. To this potent wealth, add the existing large pools of capital in off-shore trusts and funds also controlled by foreign governments, desert princes, dictators, and inheritors, and you have potential for irrepressible influence and leverage. Little is revealed of these enormous stores of wealth. They are not internationally accountable and there are no visible audit trails. They provide no structural evidence or transparency and their influence in the North American economy and markets is substantial.

Historically, corporate America has viewed these large baskets of cash as usually non-interfering deep pockets. Until now, it has been considered discourteous, indelicate, irritable and absolutely ungentlemanly to ask probing questions. The “depth and breadth” of this new-found power will engender audacious influence on whatever elements might fit the policy interests of its “owners” in the moment. Trade secrets will only be a line item in their “influence and pressure” list of priorities. They will have bigger fish to fry. The disturbing challenge to both the U.S. and Canada is that in the majority, these funds represent foreign entities antipathetic to North America’s way of life, its social structures and mores, its political structures, its culture and most importantly, its freedoms. This new financial clout is in fact new-found political authority for foreign geopolitical forces. This should energize all North Americans to sit up and take sober notice.

Heads of North American corporations, regardless of the wealth they have been able to privately accumulate, are pawns in the larger scheme of the global movement of capital and influence. It is unfortunate that senior executives managing these companies too often demonstrate a dearth of common sense, and default to “self-service” instead of considering the greater national perspective. Only very occasionally an acquisition emits blinding optics that politicians cannot ignore. Out of Congressional or Parliamentary pockets come the admonishing waving fingers incarnating “national security” or “national interests” and investigations are launched. Rarely is an acquisition, even one jeopardizing national security, ever stopped in its tracks. For such occurrence, a glaringly abusive corporate capture would have to have received an overdose of public attention.

Let us not ever assume foreign powers can be implored to act in our best interest. We can barely influence our neighbors to act conscientiously. Ask the Ukraine if getting oil cut off in winter by Russia was for financial reasons, or was for offensive political coercion. To date any attempts to bring reason to the table, clarify motives, or establish parameters for investments (acquisitions), have been all but dismissed out of hand and rebuffs have come with subtle warnings from individuals representing foreign interests. The IMF and the World Bank cannot be expected to provide surveillance or even negotiate on our behalf.

Is the current methodology satisfactory? 3Com’s recent presence in the headlines is a perfect reminder of the too present proclivity for careless and self-indulgent influence affecting decisions by both sides of the equation - the executives as well as the acquisitors. Only slightly further back in memory reside the shadows of Oriental Steam Navigation Co. (P&O) and its six major U.S. ports. There were at least two sources of bewilderment for Americans. One was that the company’s sale to the UAE (a foreign government) was being touted by the U.S. President, and the second was learning that the biggest “port” authority in the world was Dubai Ports World. “What? Who? How was this possible?” When it was finally slapped down following very loud public objection, did the threats from the UAE about damaging relations etc. ever come to pass? Not a chance. We should file that for future reference.

Now let’s go to the other side of the globe and consider the enlightening attitude of the Chairman of the China Investment Corporation, Lou Jiwei, speaking of the U.S., “if any country receiving investments has misgivings, China may choose to leave or look elsewhere.” We must heed this feigned indifference, while emulating the dispassionate “who cares.” Let’s not be so quick to further lubricate the already slippery out-of-balance free trade system. Prudence and sound judgment absolutely have to prevail, and balanced rules applied and followed.

Only a vigorous and impervious stance can be effective. It is a rare negotiation that is effectively concluded from a position of weakness. Since all acquisitions cannot be reviewed, foreign governments aren’t about to restrain themselves and executives will push boundaries whenever possible, what policy will protect the home front interests?

Answer: RULES. Congressional rules, not negotiated rules. The rules should include transparency of structure and control. The U.S.’s Committee on Foreign Investments should be dragged out of its closet and a more public vehicle installed for oversight.

This is at odds with the current approach of placating out of fear or out of misguided spirit of gentlemanly co-operation or perhaps ulterior motives or even backdoor inducements. Endless objections would surface, “we fear retribution” and “don’t we want their money?” and “our economy is in a downturn” and even “we can’t afford to right now, we need foreign investment” and “we can’t annoy these foreign governments” etc. Where else would they place their vast pools of capital? Will Saudi Arabia, Kuwait, Norway and Singapore switch a few trillion dollars to China's corporate sector? Or will Qatar, Bahrain and the UAE pull out of U.S. treasuries and markets, and perhaps invest in Russia’s unrecognizable version of democracy? Is there even another continent that the world’s largest pools of cash will move to? For the crumbs (risk capital) maybe. Not for the large cash. Owners of this new-found wealth and power may resent America, but they are not fools.

The U.S. remains the most stable and safe place for the world’s capital. PERIOD. No need to be arrogant – just confident.

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