OK, the USA will not default now, but reserves itself the right to do so later. Say in three months.
Amusingly, the official Xinhua news agency from the People’s Republic of China is repeating much of what I have been saying for years. About the USA, of course. Before unleashing the hypocrites from Beijing, let me point out a few facts:
Can the USA default? Sure. The USA defaulted in 1789, 100%, and in 1933, 40%. So the USA defaulted when it was convenient. As the Romans used to say: caveat emptor USA (=Let the buyer of USA bonds beware). And you know what? Deep down inside, the USA’s elite does not care.
Here are a few numbers:
53% of the bonds of the USA are held inside the USA. 47% outside (mostly by other central banks).
61% of the world currency reserves are in dollars.
42% of the world transactions are made in dollars.
One dollar out of two is outside the USA.
Around 60% of 3.66 trillion dollars of Chinese reserves are in dollars.
The bonds of the USA were long claimed to be the safest holding in the world. However, in light of constant threats to default, in recent years, at the very least, the reasons for that conclusion have to be changed. One cannot argue with a straight face, that a default of the USA is unimaginable. The threat of default of the USA keeps on re-surfacing ever more urgently. It has obviously become a chronic disease.
Certainly, one cannot argue that it’s a big surprise. One has, instead, to explain why a default of the USA does not matter. The People Republic of China has to explain why, knowing full well that the USA loves to threaten default, it nevertheless kept on pouring up to 1.3 trillion dollars in US bonds.
The naïve reason usually given is that China has to put its money somewhere. However, the more Machiavellian reason is that the plutocrats in Beijing want to please their masters in Washington. And the more they help their masters, the more the masters will be pleased, and co-dependent. Or so the silly Chinese leaders hope.
As I have explained in the case of the Chinese and Spanish empires, there is a co-dependency. Right now it is between Washington/Wall Street and the global plutocracy (including the one in China).
Thus investing in the bonds of the USA is, for China, and not just for China, as if paying for protection money from the Mafia. The plutocratic Mafia.
Consciously or not, the leaders in Washington are playing this BOND RACKET. Like a global violin. That will work, as long as global plutocracy calls the tune.
Before a bit more on this, let me roll out the Chinese government’s melodious hypocrisy (with my comments between brackets):
“Commentary: U.S. fiscal failure warrants a de-Americanized world
BEIJING, Oct. 13 (Xinhua).it is perhaps a good time for the befuddled world to start considering building a de-Americanized world.
Emerging from the bloodshed of the Second World War as the world’s most powerful nation, the United States has since then been trying to build a global empire by imposing a postwar world order, fueling recovery in Europe, and encouraging regime-change in nations that it deems hardly Washington-friendly. [“Washington” is one thing, plutocracy a much more general one.]
With its seemingly unrivaled economic and military might, the United States has declared that it has vital national interests to protect in nearly every corner of the globe, and been habituated to meddling in the business of other countries and regions far away from its shores.
Meanwhile, the U.S. government has gone to all lengths to appear before the world as the one that claims the moral high ground, yet covertly doing things that are as audacious as torturing prisoners of war, slaying civilians in drone attacks, and spying on world leaders. [If it were covert, it would not be as bad; the worse was trying to officialize torture and assassination without judicial process. Obama seems to start to understand this belatedly, though!]
Under what is known as the Pax-Americana, we fail to see a world where the United States is helping to defuse violence and conflicts, reduce poor and displaced population, and bring about real, lasting peace. [That’s a lie: the USA has done a lot for refugees, for example in Syria. China has done nothing.]
Moreover, instead of honoring its duties as a responsible leading power, a self-serving Washington has abused its superpower status and introduced even more chaos into the world by shifting financial risks overseas, instigating regional tensions amid territorial disputes, and fighting unwarranted wars under the cover of outright lies.
As a result, the world is still crawling its way out of an economic disaster thanks to the voracious Wall Street elites, while bombings and killings have become virtually daily routines in Iraq years after Washington claimed it has liberated its people from tyrannical rule.
Most recently, the cyclical stagnation in Washington for a viable bipartisan solution over a federal budget and an approval for raising debt ceiling has again left many nations’ tremendous dollar assets in jeopardy and the international community highly agonized. [Strange English; poor PRC with its “tremendous $ assets”.]
Such alarming days when the destinies of others are in the hands of a hypocritical nation have to be terminated, and a new world order should be put in place, according to which all nations, big or small, poor or rich, can have their key interests respected and protected on an equal footing.
To that end, several corner stones should be laid to underpin a de-Americanized world.
For starters, all nations need to hew to the basic principles of the international law, including respect for sovereignty, and keeping hands off domestic affairs of others.
Furthermore, the authority of the United Nations in handling global hotspot issues has to be recognized. That means no one has the right to wage any form of military action against others without a UN mandate. [Agreed, yet not every regime is acceptable: Chap VII of the UN.]
Apart from that, the world’s financial system also has to embrace some substantial reforms.
The developing and emerging market economies need to have more say in major international financial institutions including the World Bank and the International Monetary Fund, so that they could better reflect the transformations of the global economic and political landscape.
What may also be included as a key part of an effective reform is the introduction of a new international reserve currency that is to be created to replace the dominant U.S. dollar, so that the international community could permanently stay away from the spillover of the intensifying domestic political turmoil in the United States.
Of course, the purpose of promoting these changes is not to completely toss the United States aside, which is also impossible. Rather, it is to encourage Washington to play a much more constructive role in addressing global affairs.
And among all options, it is suggested that the beltway politicians first begin with ending the pernicious impasse.”
Lots of true statements, yet colossal hypocrisy. Let’s not talk about Tibet, or Xi Quiang. Or even of the plutocrats in power in China. Xi owns about half a billion dollars, the preceding Prime Minister, 2 billions, and the just condemned Bo Xilai had impressive properties all over Europe and a child at Harvard, driving a Ferrari.
Let’s just talk coal: the People’s Republic of China is the world’s largest consumer of coal, using more coal each year than the United States, the European Union, and Japan combined. More than half of the coal burned in the world is burned in China. Half of China’s power generation capacity to be built between 2012 and 2020 will be coal-fired.
The end result is a guaranteed disaster, rising seas, and that means war.
And who can make war better than the USA?
This explains why the bonds of the USA will always be desired, default or no default. One always want to be bonded to the strong, even if it means bonded by the strong.