Mark Twain is credited with an early use of the cliché “more than one way to skin a cat” in A Connecticut Yankee in King Arthur’s Court, as follows: “she was wise, subtle, and knew more than one way to skin a cat, that is, more than one way to get what she wanted”. Thefreedictionary.com defines beggar-thy-neighbor as: an international trade policy of competitive devaluations and increased protective barriers that one country institutes to gain at the expense of its trading partners. Under the guise of fostering ‘indigenous innovation’, the Chinese government has creatively used a non-conventional, subtle version of beggar-thy-neighbor. Its version doesn’t entail the competitive devaluation of its own currency, which would enhance China’s exports and inhibits its trading partners’ exports. China’s version perpetrates an over-valuation of the currencies of one or more of its trading partners. This negatively affects all the trade of the pegged trading partner(s), not just trade with China. During the recent period China pegged its currency to the U.S. Dollar, its version of beggar-thy-neighbor was 8 times as damaging to the U.S. economy as what the media refers to as “China keeping it currency undervalued”.
In November 2003, Warren Buffett in his Fortune, Squanderville versus Thriftville article recommended that America adopt a balanced trade model. The fact that advice advocating balance and sustainability, from a sage the caliber of Warren Buffett, could be virtually ignored for over seven years is unfathomable. Until action is taken on Buffett’s or a similar balanced trade model, America will continue to squander time, treasure and talent in pursuit of an illusionary recovery.

I’ve just returned from Minsk, Belarus where I was interviewing a libertarian dissident/economist in the wake of the recent elections.

In our off-topic discussions on the record to date of former communist countries transitioning to market economies, he talked about learning from the mistakes made.

When I asked him what mistakes in particular, he replied, “Don’t imitate the American/EU tax structure!”

Their military complex is hot with new technology and boiling over with materiel – stealth fighters, submarines, missiles, an aircraft carrier. They’re moving army units into North Korea. No parallel there! Ya think?

The US and China are swapping positions! They’re closely approaching parity in EVERY aspect of government, except the US is in a downward trend while the sun is rising brighter east of Zulu.

The same cycle has been happening since the first civilization appeared; just the frequency is accelerating. It’s the human way!

All this while Sun-Wu Kong flits about, apparently unaware of his impending coronation!

Hu may be a nice guy and use the right fork to eat his salad, but he’s still a politician. He represents a government, and government’s business, it’s only business, is managing wealth. Hu trades in other peoples wealth. Success in politics seems to correlate closely to success on the DSM MACH IV test. [We don’t disagree. But it’s up to the Chinese to deal with their leaders. We should fret about our own tyrants.]

Hu and Obama are essentially mirror images except that one is a winner and the other is a loser. They’re traders. If this were the 18th century, they’d probably line up well together in the slave business.

China seems in line to inherit world dominance from the US. The US looked good in 1939 (Lindbergh et al.). In another 50 years, the Chinese will appear to the world as did the Japanese on a US WWII propaganda poster. Who’ll be the next Hu? An Indian? A Venezuelan?

In 100 years, all this will be only interesting history!

When I strolled around Beijing and Guangzhou, I noted how people went around their daily lives in subways, restaurants, and stores quite similar to Boston and Washington. OK, they live under a one-party authoritarian government and we have a two-party authoritarian government.

The American government tolerates a limited amount of politically inane bloviation by each party about the other party which does not exist in China. But in the last 25 years, our government has invaded and occupied nations on 4 different continents that did not attack us. We outspend the entire world combined in armaments and maintain troops in scores of nations. We open e-mails, monitor phone calls, bribe foreign officials, entrap ordinary Americans, and arrest hundreds of thousands of users of “illicit substances”. We have embargoed over 60 nations for various misbehavior.

Apparently, China’s misbehavior entitles the American government to coercively extract money from American citizens (or, ironically, borrow it from China) in order to “threaten” or “berate” China over its Jeffersonian “peaceful relations with all” international policies or its internal lack of “human rights”.

[BRAVO!]

China is in the game to make money and is jockeying for position in the Governopoly Game. It looks as if they just bought Bank Walk and Dork Place!

Obama has one more corner to turn on the game board, and is a Snake-Eyes away from going to jail. The next traverse is no moonwalk – he’s facing the possibility of some BIG rent!

The time for repast is past. The question is: Was his attempt at insurance obsequious or obsequies?

China is foremost a country managed by a single-party, a ruling elite, the Communist Party of China. Yes, the current Party elite is much more economically enlightened than the former bunch. This elite had the foresight to hitch its wagon to the US and its currency to the Dollar. The result: a huge and ready-made export market eager to invest capital in a repressed giant. All the ruling elite had to do is plow this capital into enormous state-owned enterprises that cater to the gluttonous American diet. Cheap labor was available and a given. The Chinese “miracle” was born and continues to thrive.

This scheme worked out for the US ruling elite as well. The Democrepublicans in Washington saw an opportunity by which they could spend themselves silly, massively increase the public debt and rely on their Chinese counterparts to take them off the hook by buying $-trillions in government paper.

This relationship between ruling elites is hardly symbiotic. I would describe it more accurately as an uneasy truce between gangsters. Think of the truce between Al Capone and Bugs Moran in the roaring 20’s.

The truth is such alliances of convenience between gangsters never end well. As sure as tomorrow the Chinese miracle will fizzle. The growing inflation within China will create pressure on the ruling elite to unhitch the Yuan from the Dollar. Consequently, their massive export-oriented capital investments will sour. A young and ambitious entrepreneurial class that the elite allowed to flourish will grow restless. Likewise, the vast number of rural peasants, untouched by the Chinese miracle and most affected by price inflation. Pressure will mount on the ruling elite to cede real economic and political power to the people. But this the Communist Party elite will never do.

The story in the US will be similar. Faced with a collapse of the dollar, the US ruling elite will soon learn the hard way that their jig is up.

What happens next? Maybe the ruling thugocracis in each country will peaceably and politely get together again over lunch to discuss how they might pull their respective butts from the ringer they themselves created.

On the other hand, a St. Valentine’s Day Massacre is a distinct possibility.