The logic of certain recent economic actions which Communist China has undertaken becomes absolutely clear when observed in light of the poor outlook for the future of the American economy and in light of the fact that the United States of America owes Communist China the sum of $801,500,000,000.00 plus, of course, interest. The Obama administration has massive amounts of American foreign debt to pay; has massive expenses to fund for the daily operation of the federal government; and has new and very expensive federal social initiatives it wishes to implement. Unfortunately, there is not enough current income available to Washington to cover all these debts. As Obama and his handlers seek new and ever more oppressive tax measures to fund federal obligations, Communist China is considering how it can best take advantage of the said billions of dollars owed to it in both an economic and a political context.



The reports on the first day of the American/Chinese S&ED Conference show that China, in a polite manner, lectured the American representatives as to China's concerns over the huge American foreign debt; America's growing deficit spending; and the real fear of "runaway inflation" impacting the value of the dollar. Obama, H. R. Clinton and Geithner all had "profound exchanges" with their Chinese guests as they attempted to explain the Obama Administration's goals and plans. No details on the "profound exchanges" were disclosed.

There is no doubt that the Chinese concern about the impending appearance of substantial if not runaway inflation is real and this concern manifests itself in two very divergent Chinese schools of thought. The economically oriented Communist Chinese see the dangers. Their multi-billion dollar national investment could well suffer a severe devaluation as the dollar sinks. This would cause a negative influence on the Chinese economy which it does not need or want. In the other corner the Chinese military and the core Communists see the silver lining. The power of America will drop in correlation with the reducing value of the dollar. With a weakening of US influence worldwide and particularly in the Far East, China can exert more authority while it implements its expansion goals in third world nations of Asia, Africa and South/Central America.

Obama is now faced with an almost unresolvable problem. He has many possible courses of action which include massively high increases in taxes in an attempt to fund foreign as well as national expenses. He can unilaterally void all US debt to foreign nations. He could invoke a wage and price freeze in America. He could devalue the dollar or he could allow Communist China to "persuade" him to support the creation of a new international monetary standard based on the yen or the euro or a "basket" of currencies, the US dollar not included.

Back to Communist China's recent economic acts, the meeting among China-Russia-India to discuss a new international monetary standard was a prelude to the current S&ED conference at which a new monetary standard will be a topic. Last quarter's transactions between China and various South American nations using for the first time the yen as the payment standard was an experiment on how the new monetary standard would work in practice.

Still more to come.