A contest to see who has the least clothes


America is doing everything it can to make sure China doesn’t call America out on its bluff(the bluff being that America still has a functioning economy):

To me (and some other commentators), what was more significant is what is not being said during this meeting. Quoting David Sanger of the New York Times, who wrote an insightful article on this topic, “The demands that the Chinese let their currency appreciate, clean up their banks or get rid of the subsidies for state-owned enterprises has been toned down.” In fact, such criticisms are entirely gone.

Sanger attributes this more subservient attitude to the typical relationship between mortgagor and mortgagee: “You do not talk to your largest creditor [lender] that way – especially when you have a record-sized loan application pending.”

To a certain extent the US’ current perceived subservience to China is a contest between two naked Emperors trying to prove the other has the least clothes. After all, if the US defaults somebody is going to be stuck with trillions of dollars of worthless foreign reserves. However, if that happens, at the very least China will have great capacity for future growth, what will the US be left with?

The fact is that is was absurd for the U.S. to lecture China, from a supposed position of ideological superiority five years ago – it has just now become obvious to most of the world. The U.S. has always had the world’s most heavily-subsidized economy, a far cry from the “bastion of capitalism” which it pretends to be.

Hundreds of billions of taxpayer-dollars flow into the U.S. military sector each year, with a large chunk of those billions flowing into the hands of U.S. businesses – getting fat on their “cost-plus” contracts with the U.S. government. Military suppliers are now virtually all that is left of the U.S.’s manufacturing sector.

Once past the heavily-subsidized manufacturing sector, and even more heavily-subsidized financial sector, we come to the heavily-subsidized agricultural sector. The U.S. pumps more than $100 billion of subsidies a year into their agriculture economy. Yet, despite this massive subsidization, U.S. farmers claimed they needed to import ten million workers to stay competitive.

The obvious question to ask is: if the U.S. agricultural industry requires $100 billion/year of subsidies and labour in order to compete globally, why can’t the U.S. government find an industry where the U.S. can actually “compete” without massive subsidization?

Does the economy described above sound like one whose ‘best days are ahead of it‘?

(Quotes via Seeking Alpha).


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