"There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved."
- Ludwig von Mises

Wednesday, October 20, 2010

Will the Real Rogue Superpower Please Stand Up?

I pose this question in jest.  All nations act in their self interest, and the tools they use to act in their self interest are only limited by the power and wealth such nations posses.   Thus, I find it interesting that both China and the US are enagaged in a struggle to paint each other as threats to the rest of the world.

The article below was written by Li Hong, a Chinese journalist that also once resided and went to school in the US.  It is published by the People's Daily Online, yet a disclaimer as to the views of the writer follow the article.  Noentheless, I believe this article reflects an important viewpoint in China.  Whether you agree with the views or not, I think it's important to know the public relations "tools" that China will employ.

The US Dollar's reserve status will be challenged not only by the wrongful actions of the Federal Reserve, or the Forex market or the Treasury Market, but in Public Relations campaigns as well.  At the end of the day, a currency is judged along with the nation that creates it.  This not just be a currency battle between economic giants, but a battle for the hearts and minds of the rest of the world.

Who will win this public relations campaign?  Keep in mind that China's hands are not clean.  But no one's hands are clean when it comes to geopolitics.

Here's the article (yes, the English is not exactly perfect, but the purpose of the message is obvious)  Expect more as the currency and trade wars intensify:

Rogue superpower, you or me?

By Li Hong

China, following 30-odd years of spirited and painstaking efforts, is now materially better-off, and so, has rising leverages in the hands. But, the country, a new leader in global economy, isn't indulging in the newfound prominence and using economic muscles threatening to punish others, especially, the small and weak.

The Confucius has ingrained in Chinese descendants to always keep low-profile and refrain from posing noses in others' faces. The Teaching is: peace is most precious.

Only when China feels itself being bullied by the wealthier and mightier powers, or their proxies and pawns, it will be forced to use the leverages and fight back, till the bully feels the pain.

The allegation by some that China is becoming "a rogue economic superpower, unwilling to play by the rules" is not only ludicrous but also malicious. That the accusation comes from a pundit in the United States -- a country having bred and made the most out of the infamous "carrot and club" foreign policy, sounds sarcastic to many.

With no strings attached, China has for many years spelt out considerable aids, in keeping to its financial capability, to poverty-ridden countries in the Third World, mostly in Africa. Sure, China is not playing by the Western rules that catalogue governments on political grounds. But, because of China's aids and investments, the livelihood of tens of millions of people there has therefore improved.

In return, China has gained more friends, despite their remaining relatively poor today. In the eyes of these people, China's rise does not come that "rogue".

Titled "Rare and Foolish", Professor Paul Krugman wrote for The New York Times this week, taking case with China's reportedly restriction of rare earth minerals to Japan, in the aftermath of Tokyo's Coast Guard's arresting last month the captain of a Chinese fishing trawler operating in China's territorial waters. Japan only let go the captain after the strife seemed to boil over, dealing a potentially heavy blow to bilateral relations, including trade.

Mr. Krugman scolded the fecklessness of U.S. policy-makers because it did nothing "while an unreliable regime acquired a stranglehold on key materials". He went on to claim that the Beijing-Tokyo brawl showed "a Chinese government that is dangerously trigger-happy, willing to wage economic warfare on the slightest provocation". The accusations just went too far.

In the end, the Nobel laureate stated that "major economic powers, realizing that they have an important stake in the international system, are normally hesitant about resorting to economic warfare, even in the face of severe provocation." That sounds too self-righteous.

Just list an American reader's online comment which got the most approval hits: "Uh... like we're not waging economic warfare on a little island off the Florid coast that's no threat (to the United States) at all … " This commentator speaks it all.

And, didn't the ‘most reliable regime' in Washington invent the "Monroe Doctrine", readily to wield clubs to coerce whoever of the unruly it determines according to its own game rules? Aren't the small and powerless in the world shuddering after seeing the regimes from Yugoslavia to Iraq violently changed?

Need to count economic warfare launched by the United States? In addition to Cuba, how many countries remain unscathed in Uncle Sam's ‘omnipotent' trade embargo and financial black-listing? Even more than 20 years have passed since 1989, it has refused to scrap major technology embargo on China. A global currency war, as many are now seriously worried about, who is actually causing it? I bet Beijing will try its best to keep its currency stable, for the good of the world, though the dollar keeps tumbling.

China should continue to export rare earth minerals that are crucial to the production of many modern products, including greener cars that help the environment. But, if someone intentionally chooses to pick up a nuisance and forces China to swallow it, Beijing is poised to dispel it, with whatever leverages in the hands.

The articles in this column represent the author's views only. They do not represent opinions of People's Daily or People's Daily Online.

Source HERE.

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