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COMMENTARY
August 11, 2007
Chinese threat
Go ahead make my day, would be one possible response to a “veiled” threat to the United States from China this week. The threat was articulated by a certain He Fan, in the China Daily, who warned that if the U.S. put pressure on China to revalue the yuan, the Chinese could always retaliate by selling dollars. China has accumulated well over a trillion dollars in U.S. currency reserves, with at least $400 billion of U.S. government treasury notes, and is now second only to Japan in holding American debt. As ever, with a state whose government looks more to its longer-term strategic position, than to its present financial one, there is no reason not to worry about this. The politburo in Beijing could suddenly decide to unload U.S. dollars on a scale that would be catastrophic to the exchange value of the dollar, and in spreading waves, to the integrity of the American, and by extension the world economy. It would be a financial Pearl Harbour, and might provide an interesting opening gambit for some military manoeuvre, such as invading Taiwan (thereby neutralizing Japan and South Korea). Verily, not since merchants in the City of London undertook to borrow all the money in the Bank of Genoa -- where the Spanish had unwisely deposited their national reserves -- has such a large act of financial sabotage been tried in prelude to war. I am referring to events in the year 1587, and forward. It was partly because of this superb anticipation of the Spanish need to provision a huge fleet, that the conquest of England was prevented. For when the Armada sailed in the following year, it was considerably less well-equipped than it could have been. (Of course, those were the days before modern banking practices obviated the need for mere gold and silver.) Many such schemes have been contemplated, however, by nefarious aggressive powers. The Soviets, as we now understand, once had a plan to deluge Europe with convincingly counterfeited U.S. dollars, and German marks, as a prelude to any Warsaw Pact invasion. And to this day, both the Iranian and North Korean regimes are notorious distributors of counterfeit currency, chiefly greenbacks, washing up in Lebanon through Hezbollah, or in the Pyongyang offices of the UNDP. But counterfeiters are amateurs compared with people who hold indisputably real foreign currency reserves, on a massive scale, thanks to the North American habit of recklessly piling up debt, at all levels -- government, corporate, and private consumer. We have entirely lost our ancestors’ frugality, and I often think we have decided, like the Europeans, to live for today, because tomorrow we die (childless). To my mind, the Nanny State has crushed long-serving habits of prudence and caution, convincing people that they can live irresponsibly, in the assurance that they will be rescued by some public agency if things go badly wrong. We have lost our sense of how tenuous any human economic order must be, and just how fast and how painfully it can take down -- not only banks, but food supplies and winter shelter. Likewise with oil. Our entire economy is absolutely dependent upon finding huge supplies at very reasonable prices, and an effective international embargo, in which the Chinese co-operated with the Arabs, Persians, Venezuelans, and Russians, to deflect all shipments from North America, Europe, and Japan, would turn us overnight into Third World countries, unable even to provision our air and sea fleets to defend ourselves from any further incursions. Leftists, environmentalists, and others who glibly utter such slogans as, “No blood for oil!” have no idea what the consequences would be, if we took them seriously. For they do not grasp to what degree they themselves depend for their miserable little existences on an economy in which self-sufficiency is a thing of the distant past. On the other hand, as members of the Bush administration will quietly observe, their (and our) potential enemies are unlikely “ever” to wield such weapons. This is because by doing so, they would hurt themselves “almost” as much as they would hurt us. I’ve thrown the quotes around those two words, to suggest the inherent weakness of their argument. Their confidence is misplaced, if they think conditions tomorrow must necessarily be the same as today. Totalitarian and authoritarian states -- unanswerable to public opinion except in a most indirect way -- do not make their calculations only for the purpose of winning elections, the way Western politicians do. Their very freedom from accountability enables them to think bigger, and farther ahead. David Warren
© Ottawa Citizen
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