China was once a closed society, isolated by their communist leaders. In 1972, President Nixon met with Moa Tse-Tung and started the current period of openness. This benefited both the United States and China. We needed cheaper goods; they had an impoverished and captive workforce that worked for pennies per hour. We could sell them high tech products and they could sell us shoes and textiles. Many of our factories shut down as production moved to China and other countries. Gradually, Chinese manufacturers moved up market, resulting in televisions and computer manufacturing moving overseas. This process continued until most American factories were shuttered. Just drive though the rust belt cities of Rochester, Syracuse, Buffalo, Akron, Pittsburgh, Bethlehem and you will see the impact of closed factories. You will see the abandoned ruins that once housed manufacturing giants.
When you go into Wal-Mart, try to find something made in the United States. Most of the products are now made in China, with a few made in other countries. Is it any wonder that our middle class has been decimated? Without factories, we lost valuable jobs that provided our workers with a decent income. They transformed from workers pumping money into the economy and into the treasury into welfare recipients and early retirees, pinching their pennies to scrape out a living. Our economy was tied to their prosperity. When American companies discarded these hard working citizens, our economy crashed.
So what does this mean to us? First, China finances the excesses of our government by purchasing treasury bills. They currently hold about one trillion dollars of our debt obligations. They are buying our debt in large but declining amounts. Last year they bought $10 billion a month. Now they are down to $8.2 billion a month. http://news.malaysia.msn.com/business/article.aspx?cp-documentid=4151671 .
I am not an economist but I understand the impact of rising debt on the economy. Some of us remember the rampant inflation in December of 1980 when interest rates were over 20 percent (http://research.stlouisfed.org/fred2/data/PRIME.txt ). We were in debt and no one wanted to lend to us. As a result, we had to pay more for the funds we dearly needed. With China now holding our debt, they control our government. If they decide to stop buying our treasury bills, the Federal Reserve will step in to "buy" the debt, effectively monetizing it. Printing money only leads to inflation. China can cripple us not with missiles but by withholding their purchases of our debt. Since we as a country are living beyond our means, we are beholden to and bow down to those countries that finance our excesses.
So will China stop buying our debt? As the numbers indicated above, they are buying less. They have internal problems that need to be addressed, which may affect the sale of our treasuries. (http://www.telegraph.co.uk/finance/china-business/7851504/Chinas-chief-a... ). They are also buying up oil companies and stockpiling minerals to ensure constant supply and stable pricing.
We gave China our factories. We gave them our jobs. We gave them our debt. Now they control much of our economy. I believe that China is the greatest threat we face. If their economy stalls, it could send the United States into another recession. If China chooses to pull the plug on us, we no longer have the manufacturing capability to produce electronics, clothing or even the parts that go into American made cars. The United States cannot be free as long as another country can control our economy and supplies of essential products. It is time to take back America.
To quote Lau Tzu, "A journey of a thousand miles must begin with a single step." We can start repatriating our industry and our jobs, one company at a time. BigToys Inc. used to manufacture in China. Now under new ownership, it is making higher quality merchandise, less expensively right here in the United States. (http://www.forbes.com/forbes/2010/0628/entrepreneurs-bigtoys-manufacturi... ). If this one company can do it without any federal funding, what could we do if we really wanted to reinvigorate our manufacturing? Made in America can be achieved. Here is how I suggest we do it:
We give over $900 million in foreign aid to Russia and the former members of the Soviet bloc. Yet Russia continues to spy on us. Today, as I write this article, 10 alleged Russian spies were arrested for espionage here in the good old USA. I say, cut the foreign aid to the old Soviet Bloc and use the money to fund competitive factories in Michigan, Pennsylvania and Ohio. We can use the jobs, and Intel Corp can use chips. How about using the $900 million we are giving to the old Soviets each year and build a state of the art computer processor factory right here in the United States? Intel or Dell could pay for the factory over the next 30 years from the profits made by American workers, manufacturing an American designed chip, in an American factory.
Imagine what would happen if we took our entire foreign aid budget for just one year and spent it here, building state-of-the-art factories? We take Americans off unemployment and welfare, retrain them and put them back to work. Our politicians should be suggesting this not a humble writer. Have the politicians given up on the American people? Well I have not and I will not!
Independence Day is Sunday. Our founding fathers created a country like no other, with freedom and justice for all. They did not bow down to before King George III, of England. We should not bow down to any other nation. This Independence Day, please pray for our nation and our leaders. Pray that they recognize the dangers of foreign powers controlling our economy and our jobs. Let us return to the glory days when Made in America stood for quality. We can do this one factory at a time, one industry at a time, and yes, one job at a time.
©2010 Gordon Smith - All Rights Reserved