Jolt of reality
For all the talk we do around here about our unsustainable Empire of Debt, certain events are still startling. Not surprising, but startling. Take, for instance, the sentence that greeted me when I opened my morning e-mail briefing from the Financial Times:
China urged the United States to spare no effort to stabilise its economy and financial markets to help avert a global recession
I mean, really: For an older Gen-X’er who came of age during Ronald Reagan’s “Morning in America,” whose twentysomething salad days were the era of the “sole superpower,” this is jarring stuff indeed, no matter how much awareness I had on an intellectual level that it was all hokum. Seriously, the headlines I’ve been accustomed to seeing my whole adult life have been about the United States “urging” other countries to “spare no effort” to do such-and-such.
And then you bore into the meat of the story and you see a Chinese leader talking about the need for Washington to “guarantee the safety of China’s assets and investments in the US.” Heck, the whole last century, going back to the days of the United Fruit Company, has been about Washington telling other governments to “guarantee the safety” of American assets and investments in their countries.
And there’s more. The governor of China’s central bank says, “Over-consumption and a high reliance on credit is the cause of the US financial crisis. As the largest and most important economy in the world, the US should take the initiative to adjust its policies, raise its savings ratio appropriately and reduce its trade and fiscal deficits.” And how many times have the likes of Robert Rubin and Lawrence Summers, through their intermediaries at the World Bank and International Monetary Fund, delivered this same lecture to countless third-world kleptocrats?
And Hank Paulson actually thinks he has a leg to stand on in urging the Chinese to keep goosing the yuan’s value against the dollar, if Beijing doesn’t believe that to be in China’s interests?
Again, none of this is surprising to those of us aware that China is now the biggest foreign holder of U.S. Treasuries. None of it is surprising to those of us who know that, well, as the Chinese central banker said, Americans are addicted to consumption and debt.
But it’s still a startling thing to see. The shoe is on the other foot.