Monday, April 16, 2012

Human flesh is just too tempting

A lot of things happened today that don’t seem to have much significance, the same way that one snowflake at the top of the mountain that begins rolling downhill doesn’t have much significance to the ski lodge at the bottom… until it gets there in the form of an million ton avalanche.

China has announced that starting today the Renminbi will be allowed to float a full percentage point each day in currency trading with the USD, double the previous policy.  This seems like merely a snowflake, until you consider that that the Peoples Republic of China has been spending 200 billion USD each year to keep this from happening.

This has much to do with why China has acquired over 3 trillion in foreign currency reserves (though some is in Euros and other currency). The biggest reason China has so much cash is that the US has allowed huge trans-national corporations like GE, Hewlett-Packard and Walmart (among many) to keep their money offshore. This used to be treated as tax fraud. That “tax shelter” in the Cayman Islands isn’t there because the Caymans has no income tax, but because it is simply a shell game.

Transnational corporations buy from themselves in an offshore country to sell in the US so that the “actual trade” with China takes place in a never-never land of no taxes. Nothing more substantial than a PO Box will take for itself all the mark-up on the transaction. This leaves no profit in the United States to be taxed. Ostensibly they are known as US corporations, but they have accumulated off shore more 2 trillion in USDs this way.

This sort of extra-legal wheeling and dealing is why somebody like Mitt Romney has bank accounts in Switzerland and the Cayman Islands. It’s no wonder he’s said that basically his tax returns are none of your business.

Back to the new liberalized trading of the Yuan, if China really does allow its currency to be exchanged in an unregulated way we should in theory see the USD rise in value, making all that stuff Walmart sells become 40% more expensive. That should make manufacturing jobs come back to the US.

The problem is that you can’t really rely on monetary policy alone to create an economy. You need an actual trade policy, a policy on manufacturing, on the financial sector, on labor, energy, education… you know, all that stuff that the first Congress back in 1790 created  policies on, and that Ronald Reagan did away with.
An economic policy that was designed by Alexander Hamilton took us from a wooden shovel economy to the greatest industrial power on the planet. A status that China will claim for its own in the next five years because they understand our history, and we don’t.

This is not to say that we Americans have no potential. American technology was able to take a human heart and make it beat inside Dick Cheney’s chest. Of course he may tear it out and eat it at any moment. China is working on a cure, and will probably find it.  www.prairie2.com

1 comments:

adam said...

Heard this on Mike Malloy tonight.

"This is not to say that we Americans have no potential. American technology was able to take a human heart and make it beat inside Dick Cheney’s chest. Of course he may tear it out and eat it at any moment. China is working on a cure, and will probably find it.."

LOL