Who is the Greatest Currency Manipulator (Part III)


Rod P. Kapunan

Part III

Effect of an Inflation Based Economy

Admittedly, the prices were kept low because of increased money supply.  But this has only generated the lending of money to live up to its purpose in the economy.  That in effect substituted production as a means to create wealth.  Profit from lending and the imposition of interest to anything of value became necessary  because of inflation.     This encouraged stock speculation, borrowing from collateralized debt obligation, and made the business of hedge funds lucrative.

New tax laws were enacted as counter-measure to the inflation battered economy.  The value added tax (VAT) and the arbitrary zonal valuation of property, adjustment in toll fees, terminal fees, franchise and other forms of services were justified because currency has to cope up its eroded value, although in the reverse the government tightened interest rate to ease  lending that  increased further  money supply.

Ultimately, even if the US wished to revert to the  conventional monetary  as that  China did  to control and bring down the prices of goods and regain its competitiveness in the market, that would still not be possible because its economy is umbilically connected to maintaining its war machines.    As a superpower, a great portion of the wealth it generates is siphoned towards the enforcement of its war efforts.   The US has built an unprecedented empire based on war economy.  It is not only the actual productive forces, directly or indirectly, that is diverted to enforce its war efforts, which is economically degenerative, but erodes an even greater portion of the people’s income directly by the tax they pay and indirectly through VAT and other forms of fees that were once considered part of the welfare and social services respectable society is committed to provide to its people.

For one the US as of 2016, spend a total defense budget of $598 billion followed by China with $145.87 billion.   Followed  in billions of dollars by  Saudi Arabia –  $81.8,  Russia – $66, UK –  $56, India –  $48, France –  $47,  Japan –  $41, Germany – $37, South Korea – $34, Brazil $24, Australia $23, Italy, $22, Iraq 21, and Israel $19.  The defense budget of the US is almost as much as the defense budget for the next 14 countries which stand at $673 billi0n.   It also spends something like $53 billion for its intelligence.  Only a trickle of its defense budget redounds to the benefit of mankind.

Fear of Being Economically Overtaken 

The statement made by incoming US Secretary of State Rex Tillerson that China should be prevented from occupying the artificial islands they built in that part of the South China Sea and the plan of President-elect Donald Trump to revise the one China policy is  revealing that the US is  trying to find an excuse to wage war with China. Many political pundits have concluded that war is inevitable because the US is demanding something which is non-negotiable.

As far as China is concerned, the Taiwan issue if part of its core interest that would tamper the China-US Communiqué in 1972 for which the US recognized that there is only one China.  On the other hand,   the issue of preventing China from occupying the artificial islands it built in the South China Sea is tantamount to telling it to vacate those islands which it considers part of its territory.  Those islands were all existing except that they were expanded through reclamation which China has a legitimate right to do.

Maybe logic and reason would be viable  if geographically that group of islands constituting the Spratly islands are located off the coast of Hawaii, Alaska, or California or in the case of the British occupied Malvinas off the coast of Argentina.  These are islands off the coast of China although at the opposite side, they are equally off the coast of the Philippines and Vietnam.    These two issues are something that China will never allow to be negotiated for the purpose of revising and amending the status quo for which it has an undeniable and legitimate right.  China would not even allow them to be put on the agenda.

In that one could see that the US is merely looking for an excuse using a rather flimsy alibi to start a military confrontation which could have a catastrophic and unimaginable consequence.  US policy makers should understand that they are in effect demanding an unconditional surrender.   China will never give in even if intended as a gambit to pressure it to come out with an alternative to break the impasse; like suggesting to it to  drastically revalue the renminbi to prevent it    from eventually overtaking the US as the world’s leading economic powerhouse.

The neoliberals from both the Democratic and Republican parties who did their best to sabotage his candidacy and even derail his victory, still believe they could  influence Trump to adopt the same confrontational approach  to prevent China from becoming the world’s  leading economic power.  They hope Trump would observe the same stereotype fear that once economic power is wrested, it could well be a matter of time that the US global empire will wither. The US fear that many of its allies would soon gravitate towards China, this time re-defining  their interest by  disengaging from the US hegemony.

If the Pax Britannia at the turn of the 20th century was overtaken by the Pax Americana, and the British peacefully accepted the new power equation.  Maybe the US could equally accept such realism and make an epoch that finally mankind  value its existence more than the glory of power.   By then Americans can be said to have acknowledged that nuclear exchange could well lead to the extinction of the human race.

China is not demanding a military parity or even seeking to achieve a military superiority.  It is merely seeking to make itself economically prosperous not in anticipation to possible US aggression but to improve the lives of the Chinese people, and leading by example of sharing the bounty of its prosperity to countries that remain poor.    Russia was also able to peacefully accept that after the collapse of the Soviet Union that it is no longer a superpower.  The Russians never made any agonizing trauma about the loss of their status.  Rather, they accepted it gracefully because they understood the consequence of nuclear war that nobody will reap to enjoy the fruits of victory or feel the sadness of defeat.  They positively accepted it by diverting much of their resources to improve their lives which is exactly what the Chinese has been doing.  Both have significantly succeeded.

The US has only to concede of lowering its pride of losing its status as the leading economic power, but nothing of it would affect its core interest like being threatened or tested of its mettle to protect its territorial integrity.  The doors remain open for peaceful co-existence, unless Trump will allow himself to be influenced by warmongering policy of his neoliberal predecessors. China remains persistent in offering cooperation with the US, an implied way of giving President Trump a way out from a possible confrontation.

Although it can be said that the Chinese were the first to apply the soft power approach in pursuing its national goals, the modern exposition of this political doctrine was recently propounded by American political scientist, Joseph Nye, Jr. To quote what he prophetically said: “… soft power…  is the ability to get what you want through attraction rather than coercion or payment.  It arises from the attractiveness of a country’s culture, political ideal, and policies.  When our policies are seen as legitimate in the eyes of others, ours soft power is enhanced.”

Of course, there are factors that prevent the US from reducing the cost of their products to restore once more its competitiveness in the global market.  But China or Russia have nothing to do with their debacle. The US, is extraordinarily spending much to keep intact its military superiority.  While it  ushers in the thirst for power, in the long run military superiority, which at present is a white elephant doctrine, is most debilitating to the US economy.   Unemployment is high, wages remain stagnant, many of its infrastructures decaying, its standard of living steadily declining, peace and order deteriorating, and moral values substituted for economic survival.  As one  old Chinese proverb would put it: “power fuelled by wealth is self-defeating.”  It does not induce respect because the first to be deprived of their wealth are the owners.   (rpkapunan@gmail.com)

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