Trade

The American Empire vs. The Red Ponzi

By David Stockman  |  January 11, 2019

We shouldn’t fear war. We shouldn’t be afraid of atomic bombs and missiles. No matter what kind of war breaks out – conventional or thermonuclear – we’ll win. As for China, if the imperialists unleash war on us, we may lose more than three hundred million people. So what? War is war. The years will pass, and we’ll get to work producing more babies than ever before.

– Mao Zedong

Editor’s Note: We’re at a critical point in history, a period of uncertainty perhaps unmatched in the postwar era. More than ever since 1945, the role of United States of America on the world stage is in serious question.

So, over the next five days, I’m going to describe five steps that could lead to war with China and the end of the American Empire. This is, of course, a hypothetical. But here’s one way the question, “Where do we go from here?” might be answered…

All empires fall, and none of them go quietly.

Indeed, Donald Trump was elected President of the United States precisely because Americans are tired of bearing such burdens. The benefits of “hegemony” and this “unipolar moment” have accrued overwhelmingly to an increasingly narrow elite ruling class inside the Acela Corridor.

It’s not that simple, though, because Imperial Washington would like to perpetuate the existing regime. “The Great Disruptor” purports to overturn it.

Ironically, he’s been coopted into doing the Warfare State’s and the Deep State’s bidding when it comes to elevating the China “threat.”

Here are the facts.

Massive and chronic interventions fueled out-of-this-world credit growth in China and in other emerging markets. From 2000 and through mid-2018, credit outstanding in the non-government, non-financial sector of the Chinese economy grew from CNY10 trillion to CNY180 trillion.

That’s an expansion of 18 times in 18 years. It’s what makes Red Ponzi sui generis. Its like has never before been seen on this earth. That’s not a “good” thing.

It’s a debt-fueled economic mad house. And it only resembles a stable capitalist economy because Beijing is pleased to keep up the pretense and Wall Street long ago lost its capacity to reason.

This “Red Ponzi” is also a frightfully totalitarian state that recently banned Winnie the Pooh from the internet. And it’s conferred virtual dictatorial powers on a nationalist brute who thinks of himself as the 21st century incarnation of Mao Zedong himself.

Imperial Washington – with an assist from Bubblevision – insists that China’s “main goal will be to go to war with America.”

It’s a house of cards. And its influence is overblown. Without our export markets, without 4,000 Wal-Marts and everything else in America, China’s economy would collapse. They don’t dare threaten us.

America’s monumental trade problem is a symptom of its failing Main Street economy and the destructive monetary central planning of the last three decades.

The rot goes a hundred times deeper than the absurdity of China’s $506 billion worth of exports to the U.S. in 2017 compared to only $130 billion worth of imports from the U.S.

And there’s not even a remote chance that tit-for-tat trade negotiations can ameliorate the deep underlying ailments.

Xi Jinping is not going to roll over in the face of the Tweeter-in-Chief’s impetuous bluster anyway.

I’ll go even further: It doesn’t matter what technologies China begs, borrows, and/or steals. They are – almost by definition – not a threat to the American homeland.

At the same time, however, the Great Disruptor’s glandular protectionism plays right into Imperial Washington’s hand. And that’s the problem right now.

Indeed, his team has him trying to lay a trade spanking to the Middle Kingdom because it doesn’t buy enough American soybeans, liquefied natural gas (LNG), and Ford Explorers.

But the Deep State has something far bigger in mind.

It wants complete control of trade in the name of national security in this new age of advanced information technology.

On that front, the Great Disruptor is turning out to be a battering ram beyond their wildest dreams.

The American Empire’s $800 billion national security budget feeds a vast complex of weapons suppliers, intelligence contractors, bureaucrats, NGOs, think tanks, K-street lobbies, so-called “law” firms, and all-purpose grifters.

It’s what accounts for Imperial Washington’s unseemly, ill-gotten prosperity.

Their No. 1 priority is to keep that gravy train rolling. And that’s accomplished by inventing and exaggerating threats to America’s homeland security and by formulating far-flung and misbegotten missions designed to extend and reinforce Imperial Washington’s global hegemony.

Thus Establishment foreign policy “intellectuals” push the “Thucydides’s Trap” frame.

As I noted in a November 2018 appearance on Fox Business News, “We’ve got a perfect storm of a madman in the White House pursuing trade wars and border wars and a fiscal policy that’s totally out to lunch.”

The Trump administration’s attempt – purposeful or not – to destroy China’s second-largest telecom supplier is a hideous case in point. Once upon a time that would have been considered an act of war.

But, under the aegis of empire, the shoe goes on the other foot: It’s China’s fault, apparently, that ZTE failed to comply with Imperial Washington’s hex on Iran.

In effect, the Great Disruptor is functioning as another handmaiden of American Empire.

There have been no charges that ZTE has “stolen” American technology or subsidized exports to the harm of American cell phone factories – because, well, there are none left.

The Chinese state-owned company’s only alleged offense, in fact, was not functioning as a complaint enforcement arm of Imperial Washington’s foreign sanctions strike force.

Meanwhile, each side has now “detained” a citizen of the other country, as low-level escalation continues…

And China continues to waste money on sand castles in the South China Sea. Who cares?

Well, Imperial Washington does. Here’s how Harry J. Kazianis explained “a crisis in the South China Sea” in The National Interest, the organ of Imperial Washington’s “neocons”:

Accurately dubbed by frequent TNI contributor Robert Kaplan “Asia’s Cauldron,” the South China Sea continues to present what amounts to an open wound for U.S.-Chinese ties – a wound that could ooze with blood at any moment. With Beijing declaring its nine- or (sometimes referred to as) ten-dash line, which effectively declares the area a massive Chinese lake, there is always the possibility a clash could spark a greater crisis in which America would feel compelled to intervene.

Why China continues to press its claims in the area of the South China Sea makes sense once one realizes the stakes involved. Trillions of dollars’ worth of goods passes through this vital body of water. Trillions more might be under the water in the form of oil, natural gas and precious minerals. With multiple overlapping territorial claims, we just might be lucky that we have not yet had a major crisis spin out of control.

In the South China Sea, the risks are quite obvious: if a U.S. ally, specifically the Philippines, were to become engaged in a major kinetic clash with China (it was entirely possible at Scarborough Reef back in 2012), the U.S.-Philippines alliance could set off a chain reaction of events. While Washington has been rightly vague about what types of scenarios it would back Manila in if open conflict were to arise, you can bet the United States would clearly be involved in some capacity – increasing dramatically the possibility of a Washington-Beijing clash.

If there is a war between the U.S. and China the whole world financial system will crash and burn beyond anything anyone saw in the 1930s.

And so will the American Empire.

Crisis and Opportunity

Desperate times call for… “common sense” measures.

These are desperate times… how else to explain 600- and 800-point swings for the Dow Jones Industrial Average on what seems a daily basis?

This is not “normal.”

Markets are corrupted by monetary central planning. They’re confused. And the road back is going to be treacherous.

We’re looking at a major re-pricing for all financial assets. And thousand-point intraday or day-to-day swings are part of that equation. Those can be frightening… for “buy and hold” investors.

I have a different approach, one that combines strategy and tactics into a plan flexible enough for you to survive and thrive amid the coming chaos. It’s called “The Stockman Model.”

All we’re after is a little stability, perhaps a chance to pocket a windfall when opportunity presents…

Sincerely,

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David Stockman

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David Stockman

David Stockman is the ultimate Washington insider turned iconoclast. He began his career in Washington as a young man and quickly rose through the ranks of the Republican Party to become the Director of the Office of Management and Budget under President Ronald Reagan. After leaving the White House, Stockman had a 20-year career on Wall Street.MORE FROM AUTHOR