Thursday, September 23, 2010

Chinese power and the Iran problem

Obama met China’s #2,  prime minister Wen, today at the UN and they talked about China’s FX policy. Obama said that unless China acts, Congress will. Wen (I’m guessing) said “if you do, you’ll be sorry”. Ways and Means is taking up another China bill tomorrow. I can see an argument for using tariffs as a weapon against the RMB. Reducing the trade deficit increases GDP (GDP=C+I+G+net exports).

The problem with the imposition of unilateral tariffs is that it violates our treaty obligations under the WTO, which is a problem if you believe in the whole GATT/WTO free trade enterprise, which the US inaugurated at Bretton Woods in 1944.

However, we are a sovereign nation and can do whatever we want including ignoring the WTO treaty like everybody else does. (Ever try to sell anything in China that wasn’t made there?)

What can China do to retaliate? Well, clearly they cannot dump their US$ assets. That would instantaneously result in a massive revalution of the RMB, since you can’t support the dollar’s value and trash it at the same time. The treasury market is not hostage to China; China is hostage to the treasury market.

China has other sources of levarage against us: its naval build-up, its long-range anti-ship missiles and modern submarines, its assertion of regional hegemony, its oceanic adventurism (“the South China Sea belongs to China because it did under Emperor Xiang”), and, above all, its veto in the Security Council against additional Iran sanctions.

We (BHO and Hillary) will need to decide which is more important: the trade deficit, the Spratly Islands, or a nuclear-tipped Islamic Entity (which the nuclear-tipped Zionist Entity will not allow). 

China must be given a very short fuse to sign onto Iran sanctions. We have moved on from Munich; this is crunch time. Either sanctions are imposed and work quickly, or we go to Plan B with or without the UN.

For me, I would readily agree to China’s financial and territorial extortion in exchange for effective Iran sanctions. But if China stonewalls us on Iran, then what do we owe them? Give the Spratlys to Taiwan and let Chuck and Lindsey have their punitive tarrifs. We can't be the only family on the street which obeys the town ordinances.

In the end, Iran will have to understand that we are prepared to neutralize them militarily. I say this having watched their lunatic leader interviewed on TV (a subsequent posting). He is not a clown; he is a Hitler.

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