Monday, June 27, 2005

Three Interesting Facts

1. China Owns Us The White House blusters about new defense programs, about new nuclear programs, hints at the possibility the US will attack Iran or any country having the effrontery to disagree with us. And yet, our military is so weak we can't defeat a country like Iraq-which, it should be noted, we picked to attack because it was weak and vulnerable. But the most awkward truth about the helpless state of the United States is that we are owned by China. New York Times columnist Paul Krugman has an eye-popping column today reporting on the US indebtedness to China. “Power usually ends up in the hands of those who hold the purse strings", Krugman says. “America, which imports far more than it exports, has been living for years on borrowed funds, and lately China has been buying many of our I.O.U.'s. Until now, the Chinese have mainly invested in U.S. government bonds. But bonds yield neither a high rate of return nor control over how the money is spent…So it was predictable that, sooner or later, the Chinese would stop buying so many dollar bonds. Either they would stop buying American I.O.U.'s altogether, causing a plunge in the dollar, or they would stop being satisfied with the role of passive financiers, and demand the power that comes with ownership. And we should be relieved that at least for now the Chinese aren't dumping their dollars; they're using them to buy American companies.” China is buying Maytag and is trying to buy Unocal. Krugman is not bothered by the sale of a quintessential American company like Maytag. He says, “Although Maytag is a piece of American business history, it isn't a prestige buy for Haier, the Chinese appliance manufacturer. Instead, it's a reasonable way to acquire a brand name and a distribution network to serve Haier's growing manufacturing capability.” Krugman says Maytag stockholders will gain from the sale, and fewer American workers will be dumped than if Maytag stayed in the USA. But Unocal is a different matter. Krugman says Unocal is “exactly the kind of company the Chinese government might want to control if it envisions a sort of "great game" in which major economic powers scramble for access to far-flung oil and natural gas reserves. (Buying a company is a lot cheaper, in lives and money, than invading an oil-producing country.) So the Unocal story gains extra resonance from the latest surge in oil prices.” As WaPo recently put it, “the US dollar is now at the mercy of Asian governments." That would come as a great surprise to the Bush-enamored uninformed far-right zealots who reside in the red states and idiotly believe the United States is its own master and is the most powerful nation on the planet. Krugman ended his column by saying, "If it were up to me, I'd block the Chinese bid for Unocal. But it would be a lot easier to take that position if the United States weren't so dependent on China right now, not just to buy our I.O.U.'s, but to help us deal with North Korea now that our military is bogged down in Iraq." 2. On June 13, 1971 the NYT started publishing the Pentagon Papers (the secret history of the Vietnam War). WaPo began publishing the papers that week. In order to find dirt on Daniel Ellsberg who leaked the papers, the “plumbers” burglarized Ellsberg's psychiatrist's office on September 3, 1971, which started the whole Watergate debacle, ending in Nixon's resignation on August 8, 1974. 3. The Downing Street Memos are every bit as important as the Pentagon Papers.

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