Since Barack Obama’s election, right-wingers have been worried about a socialist tide within the United States’ three existing branches of government (the legislative, executive, and judicial branches).
But Harvard Professor Niall Ferguson, of the Council on Foreign Relations, in recent Q&A after a speech in Canada, reminds us that we already have, in defacto, a veto wielding branch of our government that is completely communist: the government of China:
If China announced tomorrow ‘we’re selling our Treasuries,’ the effect on the bond market would be explosive. And it would cost the Chinese because their dollar reserves would be worthless. But you have to remember most of China’s wealth is not in dollars, it is in renminbi. So they would lose on their international reserves, but they would gain on every other asset that they own. I think the question is: What issue is big enough to play that card? . . .
[L]et’s conjure up a scenario where the United States finds itself having to support Israeli attacks on Iran’s nuclear facilities. Now, the Chinese would have some good options there. One would be to just let it play out and watch. Another would be to very publicly seek to [exert] their leverage over the United States by saying ‘no, no you can’t do this.’ And that would be a very high-risk strategy, but I could imagine how that would work.
So, I think at some point, the currency issue and the U.S. debt issue does give the Chinese real power, just as the currency issue and the debt issue gave the United States power over Britain in the 1950s, particularly at the time of the Suez Crisis. So, you have to imagine a Suez Crisis — where the U.S. does something and the Chinese just decide ‘we’re not going to support that because by not supporting it we will make many friends.’ [T-bills] are a strategic lever and they can be used to deter military and other actions.
This, of course, is not Barack Obama’s fault, and it has been a long time in coming. The debt ballooned enormously under President Bush, and if the pay-as-you-go policies of Bill Clinton’s tenure in the 1990s had been maintained, we would not be in such a situation in relation to China now. But we are. Debt has compromised U.S. sovereignty.
This is yet another of the legacies of the Bush years, and of a deadlocked two-party system in which one side is rewarded for tax cuts that are not accompanied by spending cuts (the Republicans) and new spending initiatives that are not accompanied by sufficient tax increases (the Democrats). Both sides balloon the Chinese funded deficit, and seem to deliver to the American people something for nothing.
Not smart. When the next big crisis gins up, and the clamor for war as a quick “solution” arises (debt financed, of course), Americans will be in for a rude awakening: there will be no more truly viable go-it-alone, George Bush-style, cowboy foreign policy moves available to us (as in a bumper sticker I saw around my city during the invasion of Iraq: “Kick their ass, take their gas”). The world is now too interconnected to pretend that we can just do whatever we want. And whatever we do, we will have to ask the Chinese for permission first. Like it or not, the death of American national sovereignty isn’t coming. It’s here.