Scot Mcphee on Mon, 31 Mar 2008 02:38:23 +0200 (CEST)

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Re: <nettime> Brits in hock--or, Atlas shrugged again

On 27-03-2008, at 8:06 PM, Felix Stalder wrote:

> On Saturday, 22. March 2008, Brian Holmes wrote:
>> Reading a book called "China's New Consumers"--where
>> you find out that by comparison to the West, there really aren't  
>> any--
> Apparently, it's not just because China is, overall, still a poor
> country that there are so few consumers, but a result of government
> policy, at least according to a great article which appeared in the
> Atlantic Monthly earlier this year. Below is a quote, but the whole
> article is worth reading.

Later in that article the author talks about the role of the Chinese  
sovereign funds and the purchase of airplanes and U.S. assets and the  
like. I think it is important to note that the Chinese already are  
apparently trying to use these funds for foreign policy ends. The  
proposed attempt by BHP to buy Rio Tinto being the example. These two  
companies are already the largest suppliers of raw minerals to the  
Chinese manufacturers. Recently BHP has been a bit bolshie about the  
prices it's getting for the iron ore in its forward contracts. The  
Chinese of course certainly don't want to see a situation where all  
their ore has to be bought from the one mega-sized mining monolith,  
and bought nearly enough of RTZ to block at least a complete takeover.  
The Chinese certainly take a 'long view' in their use of their  
investment funds in their materials sources. For example a couple of  
years ago they signed a huge natural gas deal which gave them a 25%  
holding in the extraction company - and access to the extraction  
technologies. It's not that the Chinese lack the natural resources,  
they lack the sophisticated and very capital-intensive technology  
needed to get the stuff out of the ground - my view would be they  
actually value the extraction technology far more highly than the gas  
itself. In 50 years that investment will pay itself off.

You would think though they could divert at least some of their funds  
into some public infrastructure like schools, sewage, and parks  
without completely draining their ability to wield their substantial  
foreign investment clout.

As for the bigger issues, it is in fact a structural issue that the US  
economy for at least two decades has been drawing funds in from all  
over the world. It's a psychology issue - people perceive the T-Bond  
specifically, and the US markets in general as being the most solid  
and reliable investment one can make - the safest bet. Although Bush  
is trying his hardest to break this perception with his general  
incompetence in all areas -- especially his massive deficits to fund  
the most wrong-headed war since 1918 (as well as the financial  
institutions themselves with their ridiculously short-sighted greed  
coming to burn their own backsides and evaporate confidence) -- in  
reality that it will take more than a single President or a credit  
crisis to realign the perceptions and the markets. But when this  
realignment comes - as I think it inevitably must - it will be a  
titanic shift in global power. Not necessarily in China's favour  
either, because I think it's essentially chaotic, that is when the  
system bifurcates and moves to a new zone of stability you can't be  
sure which one of the available zones will be the new settling point.  
For all we know Russia will be the big winner; it's also becoming  
increasingly cashed up and it's major commodities - energy and  
military hardware - will be in increasing demand.

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