Can't remember where I picked this up, thought it might be of interest. China Hoard: Backhaul & Reverse Mercantilism (or: How to Dismantle a Country Without it Noticing) Recently David R and I have been working on applying the China Hoard theory to China-USA backhaul shipping. Backhaul is the return leg of a shipping route, made cheap because the ship has to return home anyway and it is better to return it full than empty. A scrap industry executive we spoke with noted that container ships that bring Chinese goods to America often go home filled with raw materials. Scrap metal and wood pulp now form a major export sector for America. Metals exports are effectively subsidized by the trade of high-value goods brought from China to the U.S. The return shipping and labor costs are apparently so cheap that the Chinese often buy shiploads of un-separated scrap metal and process it themselves. I am struck by the thought that Western analysts may be looking at the trade flow between the U.S. and China completely backwards. Right now, the primary Western school of thought seems to go like this: We print dollars. The Chinese build products. We buy the products with the newly printed dollars and they ship them to us. The dollars pile up in their Central Bank. Since they have so many of them, they are at a loss for what to do with them and must invest them in our large Treasury debt market, trading one form of paper IOU for another. They then hold the Treasury bonds as bank reserves. They have so many Treasury bonds that they cannot sell many, or the value of the remaining ones would plunge. In summary, we manage to print money, take the real goods, and stick the Chinese with an illiquid bond position ? America wins, China loses. The equation may look different from China?s view. Perhaps their equation goes like so: they use cheap labor as a lure to bring in foreign investors. Foreigners move their factories to China and train Chinese workers ? essentially financing the technology transfer. The trained workers eventually start their own companies and become suppliers to the major Western corporations. As the Western companies outsource more and more layers of production to local Chinese companies, the Western corporations become less relevant. If Lenovo is making the ThinkPad anyway, customers may be willing to buy the same ThinkPad with Lenovo?s name on it. Chinese companies ship goods to America. Americans pay in worthless tokens which are, fortunately, acceptable tender for purchases of commodities around the world. The Chinese buy and stockpile monetizable commodities, especially base metals. The Americans? insatiable market for Chinese manufactured goods subsidizes a cheap backhaul network, making freighting even heavy loads more economical. The ships return filled with scrap metal, wood pulp, coal, and food. If you keep score in metal, the Chinese do very well. Everyone focuses on the flow of Chinese manufactured goods; no one pays any attention to the backhaul shipping. But when China sends over a shipload of newly manufactured goods, America sends back a ship of metal and other commodities. Much of the scrap metal comes from the demolition of buildings and other infrastructure. I have been studying U.S. infrastructure lately, and it is experiencing a steep decline. In 2005, the American Society of Civil Engineers gave America?s public works a grade of "D." America is literally dismantling itself and selling its infrastructure to China to pay for manufactured goods. I termed this trade pattern "Reverse Mercantilism" ("America?s Sharecroppers," 9/15/05, http://www.financialsense.com/fsu/editorials/2005/0915.html). In normal mercantilism, a developed country buys raw materials from its colony and ships back manufactured goods. By retaining the manufacturing skill and charging a premium for the finished products, the developed country retains its dominant position. In this case, the developing country (China) acquires the manufacturing skill, exports manufactured goods, and imports cheap raw materials from the developed country (USA) ? reverse mercantilism. If your goal is to acquire commodities and build an export empire, the backhaul network may be an important part of your strategy. The Chinese are historically brilliant traders and thoughtful long-term planners. I don?t think Western analysts fully understand the trade patterns of Reverse Mercantilism. The Chinese are simply not the fools that Western analysts condescendingly assume they are. To analyze who is in control, follow the money. Jennifer Barry www.discountsilverclub.com Lone Star Silver Exchange jennifer@discountsilverclub.com
Or watching too many Superman movies... http://www.washingtonpost.com/wp-dyn/content/article/2006/09/20/AR2006092001162_2.html
Not you again...you're an idiot. You disappeared from the Cuba discussion when I pointed out that you had no room to speak and neither did your bullshit Harvard review. You know for a fact that only N. Korea has nukes? Did you read that in Harvard review you idiot? Get a clue dumbass.
You know that only N. Korea has nukes? My example was hypothetical you moron. That was clear to anyone except you and the moron doctor who I've already debunked before and who disappeared when I called him on his bullshit. Theoretically idiot, if Iran, N. Korea, Libya, Venezuela, and a few other nations had nukes and were waving them around you'd not be saying money is more important anymore...you're a fool.
I thought #1 is North Korea, and before that it was Iraq... wait, it's gonna be Iran next week... Your best chance is to leave China alone.
Tone done the personal insults.. thanks. I am sure you can make your case without the need to go the personal route.