If you’ve followed this blog, you know that one of the negative consequences of our trade deficit that I’ve repeatedly harped on is that with ownership comes control. Our trade deficit is financed by a sell-off of American assets, both public – in the form of treasuries – and private – in the form of corporate stocks and bonds. With ownership comes control of those assets – both in the form of actual control of our corporations and in the form of influence on public policy.
The link provided above takes you to an article reporting on a speech by Chinese Premier Wen Jiabao in which he calls for international supervision of America’s economy:
“We should strengthen the supervision of the economic policies of the main reserve currency economies and push forward the establishment of a diversified international monetary system,” he said in his opening address to the Boao Forum for Asia, held annually in the Chinese island province of Hainan.
It was the second time this month that China has made such an appeal, following President Hu Jintao’s call at the London G20 summit earlier this month for the International Monetary Fund to strengthen its oversight of reserve currency-issuing economies.
No doubt, some better supervision of our economy is in order, but not from the global community. Constitutional amendments that mandate a balance of trade (See “28th Amendment to the Constitution of the United States“) or even a balanced budget would be a good start. But restoring America’s economy to health isn’t what Jiabao has in mind. His only interests are that the U.S. not adopt any protectionist trade measures and that the value of its dollar-denominated reserves be preserved.
Evidence of such international control of U.S. policy is already manifesting itself. Obama went to the G20 with one goal in mind – to get the European Union to boost its own economies with stimulus plans similar to what he had recently enacted. He got none of it. Instead, Europe got a boost from the International Monetary Fund and America got the bill.
During his confirmation hearing, Treasury Secretary Tim Geithner said that China was manipulating its currency, a move that would open the door to tariffs, restoring a balance of trade with China. But now that the economic realities of being literally owned by the Chinese have settled in, he now refuses to label them as such, fearing the consequences of China dumping its mountain of U.S. treasuries.
Though still a neophyte clinging to the apron strings of the World Trade Organization, China has become an economic know-it-all, believing that a decade of being lavished with American wealth through dumb trade policy has made them some sort of economic experts qualified to lecture the U.S., like a freshman quarterback swaggering onto the field and telling the coach how to run the team. The situation would be comical were it not such a pathetic spectacle for the U.S.
What Jiabao needs is a swift kick in the ass, a healthy dose of gratitude for America’s role in pulling his economy out of the third world cesspool and a hefty tariff bill for any future exports. After a decade of balanced trade with the U.S., then let’s evaluate which economy might need some supervision.