From The Daily Reckoning
Bill Bonner
London, England
Wednesday, May 18, 2005
dailyreckoning.com
Micro or macro? The little telltale bit of information...or the big picture?
You never know which is worth looking at. Most of the "news" is merely noise. It is a distraction; it is diverting...a form of entertainment. Usually a waste of time. The Dow goes up. The Dow goes down. Housing starts increase...or they decrease. There are so many weedy facts in the daily news; it's almost impossible to see the whole lot.
Still, you never know what you might find. Houses in California are still rising at 15% per year - a rate five times faster than consumer prices. That trend will come to an end, but it didn't end yesterday.
Meanwhile, foreign central banks were net sellers of U.S. Treasuries in March - for the first time in 19 months. In February, they bought $84.1 billion worth. In March, the total was cut nearly in half - to $45.7 billion. Hmmm...that is a trend worth keeping an eye on. Perhaps that is the beginning of the end of a trend...
But to give it meaning, we have to stand back and try to look at the big picture. And the picture we see is a picture of imperial finance. Why does America have troops all over the world? Why does she spend more than all other nations combined on the military...at a time when she has no worthy enemies? Why does she depend on foreigners to pay her expenses and provide the everyday needs of her citizens? Why does she neglect her own industries...and ignore her own Constitution?
The U.S. Empire is a very different thing from the U.S. republic. Americans still think of their country and their government in 19th century terms. Here at The Daily Reckoning, too, we had a hard time getting used to the idea. We had a sentimental attachment to the old republic of Jefferson, Fillmore and Harding. Like getting over a love affair, it took time before we were ready for a new fling. But now, after a suitable interval, we've come to appreciate the curves and caprices of the new empire.
Not that it makes Americans safer or wealthier. Not at all; it does just the opposite. But it is so full of bluff, vanity and absurdity that it is far more amusing. Even before we had our morning coffee, we read the paper and found ourselves in shock, awe and stitches.
The headline story in today's International Herald Tribune tells us that America is fed up with Chinese currency "manipulation." How are the Chinese manipulating the yuan? By pegging it to the imperial currency! Oh...that is clever...wily...diabolical, isn't it, dear reader? The Chinese are maintaining their 10-year-old policy of pegging the yuan to the dollar. Doing so, they get around the imperial power's method of collecting tribute. The United States counts on a steady devaluation of its money. It buys from overseas and pays in dollars. Then, in effect, it prints up more dollars to replace those it has shipped overseas. The resulting "inflation" of the currency...reflected in the increase in prices of oil, gold and other internationally traded goods...is a form of imperial tribute. It's America's way of making the empire pay. As the dollar goes down, the trillions of dollars held in foreign accounts become less valuable.
But the Chinese refuse to play along. As the dollar goes down, so does their yuan. Instead of raising prices on Chinese goods and lowering the value of Chinese dollar holdings relative to its own currency, everything remains even. The Chinese aren't paying their tribute.
Americans are indignant. A Senate committee says it will rewrite the law of the land to make what the Chinese are doing qualify as currency "manipulation." Bush administration officials say they will give the Chinese a deadline to shape up.
Meanwhile, from elsewhere in the empire, comes news that the Iraqis are not cooperating either. The war against Iraq seemed like such a big success a few months ago. "Blood dries quickly," said Charles DeGaulle. The blood of a hundred thousand people killed in the war seemed to have dried up and blown away earlier this year. People stood in line to vote. The whole exercise - invading the country, blowing things up, forcing a different style of government on the desert tribes - almost seemed to make sense, at least within the logic of the new imperium.
But now, the tribes seem to have united against a common enemy - us. Wet blood is in the streets. And the pundits back in the homeland are beginning to whine and complain.
What the critics don't seem to appreciate is that an empire is a natural, inevitable thing. Nature abhors a vacuum...so she fills the empty spot in world power politics with an empire. It is America's turn to play that role, whether she wants to do so or not. But Nature is a fickle mistress. While she abhors a vacuum, she abominates a monopoly. As soon as the imperial power attains a monopoly on force - that is, as soon as it becomes the world's only super-power - she sets to work finding ways to destroy her. The invasion of Iraq and the twin deficits are really just Nature's way of ruining us.
There. That's the big picture... |
