by Eve Ottenberg, published on Counterpunch, May 21, 2024
So, after egregious theft of foreign reserves and promiscuous abuse of sanctions, Joe “Not the Climate President” Biden slapped huge tariffs on Chinese green tech and guess what? Beijing turned around May 18 and dumped $53 billion-worth of U.S. Treasuries for gold. Are alarm bells going off in federal financial centers and huge efforts underway to reverse this by any ingratiating means possible, because China holds another $700 billion-worth of USTs? No, they are not. China is the U.S.’s second biggest creditor after Japan and now the Biden incompetents have so thoroughly pissed off Beijing that they’re ditching our debt. If China disposes of the whole $700 billion, other nations follow suit and the foreign market for USTs begins to collapse, the ripple effects ain’t gonna be pretty long-term for the imperial economy. So skip tariffs, you white house megabrains! If American green tech can’t compete price-wise, then maybe subsidize it, just like the Chinese do. If you can’t beat ‘em, join ‘em. Especially when the alternative involves a slow motion, or possibly not so slow, financial bust.
What are Biden’s inane tariffs on goods made in China? Twenty-five percent on steel and aluminum, 50 percent on semiconductors, 100 percent on EVs and 50 percent on solar panels. At the time he imposed them, el president announced: “China is determined to dominate these industries. I’m determined to ensure America leads the world in them.” Well, on our current fiscal road, one paved with tariffs, sanctions and theft of foreign reserves, America won’t be leading the world anywhere in anything. This course is simply unsustainable. Washington desperately needs to shrink its empire by shuttering lots of its wildly expensive 800 foreign military bases. It must get control of an absurdly financialized economy and invest in reindustrializing key sectors, like green tech, with big subsidies if necessary. And it needs to do all this yesterday.
But, but, the Bidenites exclaim, China’s overcapacity! This is bogus, according to David Goldman on X May 19. “China’s exports to developed markets are stagnant but exploding in the Global South. This pulls the rug from under the ‘overcapacity’ argument. China has had a plan for a dozen years to export its growth model to the Global South and it is proceeding faster than I expected.” So what’s all the fuss about China subsidizing and overproducing those cheap (how dare they!) exports? It looks like political grandstanding in an election year, as Biden tries to trump Trump on China tariffs. (Nota bene: when Biden announced these inflammatory tariffs, right before they backfired, Treasure Secretary Janet Yellen mumbled something about Washington hoping the Chinese wouldn’t mind. Well, they did mind.)
As Foreign Policy magazine argued May 16, Biden claimed China “didn’t play by the rules.” But undercutting this complaint is that Washington failed to sue them at the WTO, “which exists for this very purpose,” as Arnaud Bertrand tweeted May 18. “But not only did they not do that, it’s actually China that’s suing the U.S. at the WTO for the United States’ EV subsidies, which include local content requirements that violate WTO law. Who’s not ‘playing by the rules’ now?”
According to Foreign Policy, “China doesn’t just control important supply chains – it often makes better products,” while Washington under Donald “Definitely Not the Climate President” Trump and Biden “has been justifiably concerned about the national security implications of China’s dominance in the critical mineral and battery supply chain. Chinese entities process more than 60 percent of essential battery components such as lithium, graphite, cobalt and nickel and manufacture around 80 percent of cathodes, anodes and battery cells.”
Bertrand concludes we’re dealing with a failure of western governance and “now the U.S. wants to punish China over it, claiming they’re ‘not playing by the rules.’” This, in turn, causes “more bad governance,” because as Foreign Policy notes, “the tariffs will end up increasing costs on the final consumer and slow down the energy transition.” That so-called communist planned economy is starting to look pretty good, especially because Beijing – be it communist, state capitalist, plain old industrial capitalist or some combo of all three – has proceeded rationally, methodically and now sits, fiscally, in the cat bird seat, while Washington made lousy decisions, played politics and degraded the real economy by always encouraging pursuit of a fast buck. In short, the U.S. is in a mess of its own making and hopes, irrationally, that tariffs are the way out. But the only thing tariffs cause are higher prices for American consumers. Oh, and they slow down or even halt the transition to green energy, two things Joe “Talking Outa Both Sides of His Mouth” Biden supposedly doesn’t want.
To make matters worse, this fiasco of incompetence occurs at a very bad time – when most Americans are looking at their bank statements, credit card bills and weekly expenses and frowning. According to a Washington Post headline May 19: “Americans are down on the economy (again), with inflation topping election concerns.” The report finds consumer sentiment at a six-month low and notes people are shopping less. Well, duh. Have you seen the prices in the grocery store, pharmacy (where you can’t get out with two over-the-counter health items for less than $50) and gas station lately? Or looked at your auto insurance or homeowner’s insurance bill? And don’t mention rent or travel – the cost of hotel rooms and airplane tickets have soared through the roof. So even if the proles cut out all the extras, they still face high prices and now the geniuses inside the Beltway will boost them even higher with tariffs – which darken the long-term forecast by leading Beijing to dump USTs (which erodes Treasuries as a reserve asset), among other things. And inflation still stinks. Since January 2017, prices are up, up, up: food, 32 percent; shelter, 34 percent; energy, 35 percent; transportation services, 36 percent, according to David Stockman in Zerohedge May 27. You know what that means – we’re all getting poorer.
“McDonald’s, Home Depot, Under Armour and Starbucks all recently reported disappointing earnings,” the Post sez. “Retail sales were flat in April…And gas prices…are up overall for the year.” The article quotes an expert saying that “the economy has been driven by household spending,” but now people are retrenching. “The pressure from inflation has finally started to hit even upper-income households.” So, reading these tea leaves, I guess we are to conclude that rich people have been the economy’s main engine of late, which makes sense, because those who shun $7 lattes aren’t the engine for anything besides just getting by. And that’s the majority of Americans. Remember, 40 percent of our countrymen and women are technically impoverished. And the next 20 to 30 percent above them are not exactly buying second homes in the Caribbean or the Mediterranean. You’re looking at a real minority of Americans wealthy enough to power the economy.
How will that impecunious majority fare as our money loses value due to possible quantitative easing (the Federal Reserve might ultimately just print more money, as China and other countries dump Treasuries)? Not well. Anyone with a passing familiarity with true economic stats knows that most Americans are deeply in debt and just getting by. And according to renowned economist Michael Hudson, the U.S. is no longer a home-owning society. Before the presidency of Barack “Evict the Homeowners” Obama, 59 percent of Americans owned homes, Hudson says in a video clip retweeted by Combate on May 26. But once Obama paved the way for banks to evict 8 million homeowners, that percentage of homeowners dropped so precipitously that today it’s less than 50 percent. Compare that to Europe, where 60 to 90 percent of citizens own their homes, depending on the country. Who snatched up those 8 million homes that the banks seized and sold under Obama? According to Hudson, the feudal landlords known as private equity grabbed those domiciles. It sure would be nice if there was some way to begin to reverse this catastrophe. Maybe Biden could skip the tariffs and work on that instead.
Now is the time for some real, intelligent economic engineering from the white house. Biden’s anti-trust moves against monopoly price-gouging are a step in the right direction, and another impressive one came May 23. That’s when the Department of Justice asked a court to break up Live Nation Entertainment, which owns Ticketmaster. The DOJ said the company ran an illegal live entertainment monopoly that boosted ticket prices. So even though our bread costs $6 per loaf, our circuses will be cheaper.
We need a fiscal visionary in the white house, and while that may not sound glamorous, it’s what most Americans would vote for. Not more tax cuts for billionaires and wealthy corporations, not more “stay the course to nowhere,” but someone who recognizes that an economy that penalizes half the population is broken, and who acts to correct that. Half of Americans believe they’re in a recession, but this is not the astounding error of plebian ignorance the mainstream media crows it is: for them, unable to pay their bills, unable to afford necessities, this sure seems like a recession. Maybe we need a ruler who deals with that.
*Featured Image: Oriental Pearl Tower, Shanghai at night, pudong HD wallpaper