Home > China, Food, Food Crisis > The Chinese government started stockpiling food 3 years ago: What has the US government been doing beside spending money we don’t have?

The Chinese government started stockpiling food 3 years ago: What has the US government been doing beside spending money we don’t have?

March 1, 2011

nowpublic.com

I wrote this three years ago, when the Chinese were reportedly stockpiling food in their cities. The world economic and political situation has worsened. With rising food prices, massive unemployment, union protests and government debt driving states to the brink of shut down and bankruptcy, the situation has worsened–and we owe the Chinese more than ever. ED.

by Monica Davis

Rumor has it that the Chinese government is advising its cities to start stockpiling food and fuel.  The government news agency reports that the central government has told the largest cities to stockpile at least two weeks of food, until the world economic turmoil caused by the banking industry’s foreclosure woes slows down.  Lots of luck on that.

With China’s exposure in the twitchy American financial markets, it is no wonder that the Chinese are getting nervous.  They have a lot at stake in the American economy, as do many foreign investors, past and present.

In a historical analysis of foreign investment in the United States, one writer notes that:

IN THE ’80s and ’90s, cash-rich Japanese firms acquired and invested in
a cornucopia of businesses and other U.S. assets. Now, Chinese
companies are becoming increasingly active in buying, merging with and
doing joint ventures with smaller U.S. companies, and experts say it
looks like the beginning of another wave of Pacific Rim investment. (Mark Hendricks, Entrepreneur, 2005)

They are also major purchasers of US currency, having billions invested in American stocks, bonds and currency.  Simply put, what the Chinese government does affects the economy of the US and vice versa, as this article in US News and World Report   explains:

Every economist will tell you that China’s surging economic growth has a direct
effect on U.S. consumers. But how, exactly? Sure, cheap Chinese imports help
lower our shopping bills. But Communist Party ministers in Beijing also touch
the average American through more abstruse things, like what they do with
foreign-exchange reserves and currency valuations. (12-04-06)

For the Chinese, as well as for the rest of the world’s economies, it is all about making money and making your money work for you.  This is why the Chinese government is so heavily invested in the United States, and it is also why what the Chinese do with their money, how and where they invest it, affects both the economy of the United States and the people living, breathing and working within the American economic system.  Hence, the Chinese, like any other individual, company, or government, wants their money to do more than merely exist.  They want their money to grow in value, and so they invest it.

They want to invest the money, so they can make money on it. And they’ve been
buying huge amounts of U.S. government securities. They have about $1 trillion
in foreign-exchange reserves. About 70 percent of it goes into U.S. securities.
About half of that is U.S. treasury securities, with other investments in things
like Freddie Mac and Federal Home Loan Bank Board securities. (Ibid)

Now, with at least $750 billion dollars invested in the American economy, and economy which is currently writhing in the throws of a major mortgage meltdown, which threatens banks around the world, it is easy to see why the Chinese are  a bit uneasy over the twitches in the US economy.

Our military is currently stretched in two wars, costing at least a trillion dollars so far.  If you want to do the math, it could be said that the money foreign countries invest in the US help the nation pay for wars and programs which would otherwise bust the bank.  Foreign investment has been very good to the United States, despite the more xenophobic rantings of many of American nativists.

Without the luxury of massive foreign investment in the  nation, how else could we afford some of our most expensive military operations?  Without the billions of dollars in Chinese, Japanese, Russian, French and British investments, where would the US Treasury find the funds for the war/wars/police actions/peace keeping forces or what ever euphemism you want to use for a military expedition on foreign soil?

When it comes to the integrity of the nation’s money, the Chinese aren’t playing around.  A recent article in a finance magazine notes that the Chinese are in the process of hiring a money manager for their trillion dollar foreign investment fund.

A giant new Chinese sovereign-wealth fund is moving ahead with plans
to start hiring outside money managers, something analysts expect will
become more prevalent in a rapidly growing $2 trillion-plus mark. (Marketwatch)

If the US is to maintain its world power “empire” status, it needs all the money it can get, for historically, nations and empires bit the dust when their appetites for conquest and glory could not be matched by their economies, especially when citizens started foaming at the mouth over how much of the nation’s treasury was being diverted to “the king’s war.”

Think of how many European kings lost their heads over foreign wars and profligate spending?  How many peasant uprisings were unleashed when the common folk tired of onerous taxes?  War, taxation and civil unrest have been the downfall of empires since time immemorial.

In 1987, Yale historian Paul Kennedy published The Rise and Fall of the Great
Powers,
in which he argued that “military overstretch” – where conquering
nations engaged in more foreign military adventures than their economic
resources could support – led to the eventual decline and fall of empires. (Marketwatch, Murray Coleman, “New $200 billion China fund opens bids to outsiders”, 12-13-07)

Responding to fears that foreign countries might be able to dominate certain portions of the American economy, Congress has passed legislation restricting foreign investment in certain key areas.

The Exon-Florio provision is implemented by the Committee
on Foreign Investment in the United States (“CFIUS”), an inter-agency
committee chaired by the Secretary of Treasury. CFIUS seeks to serve
U.S. investment policy through thorough reviews that protect national
security while maintaining the credibility of our open investment
policy and preserving the confidence of foreign investors here and
of U.S. investors abroad that they will not be subject to retaliatory
discrimination.  (EXON-FLORIO PROVISION)

Simply put:  we want your investment, not your hand around our economic throat.   And so it is that in the whirlwind of fear about foreign investment, it turns out that this nation could not survive without it.

Ironic, isn’t it?

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