The Circle of Crude, Editorial, New York Times 5/2/2006

[Coastie for Truth]

The public derision of Republicans' idea for a $100 gasoline rebate has focused on the desperate political pandering embodied in the proposal. But there's another view that makes it seem even worse. Consider the China angle.

With the nation already deeply in debt — and with Congress angling this week to cut taxes for affluent investors by more than $20 billion — lawmakers would need to borrow $10 billion to make the rebates happen. Since more than 80 percent of the immense borrowing of the Bush years has been from foreigners, it's safe to assume that most of the rebates would be courtesy of foreign lenders, of which China has been one of the most willing.

It’s the circle of crude: China's competition for the world's oil is pushing up prices. Congress piles on more debt to calm angry consumers with a rebate. The increased debt is a prescription for a weaker dollar, which in turn would make imports, including oil, even more expensive.

The United States' huge — and growing — foreign indebtedness and its refusal to curb its appetite for oil risk eroding its position in the world, at precisely the moment when it needs to use its leverage as the world's dominant power to manage the extraordinary repercussions that will come with China's growth. Energy prices and the effect on global warming are only the beginning. China's demand for other natural resources poses new dangers as well, as The Times's report last week on China's planned leveling of the Indonesian tropical forests attests.

[jpak]

1. Can you say "Checkmate"?????

Thank you Gipper, Poppy, Shrub, Lott, Gingrich and the whole GOP cabal...

[dipsydoodle]

2. I'm a bit rusty on economics......

but you'd said "China pushing up oil prices" Thought it was demand pull when the problem is attributable to effectively fixed supply. They are occupying part of a supply, along with India, which the USA is used to having unfettered access to. They are not actually doing anything wrong with respect to oil consumption - they have wrong footed the USA which is a different matter. The situation has not been helped by the US Government being wholly occupied with Iraq whilst ignoring developments across Africa where China now has a firm footing and now by the looks of things South America is next in line. We all know with complete certainty that China has never helped depose a South American left wing government and so I would imagine they are likely to welcomed with open arms.

What China is doing that is wrong is in openly breaching copyrights and patents. I think you'll agree it to be quite farcical for them to access public information through the USGOVPAT site simply for the purpose of copying said patents. The problem is that there's not much you can do about it - the best anyone seems to have managed is to get China's agreement that they won't sell copy goods on your home market. As an aside : if it was ok for Bush to declare that no US citizen could be tried in an International court then it's perfectly understandable China putting up two fingers to any court of law outside of their own borders.

In many respects China is in the position that the USA was 50 or so years ago. The difference is that they are accelerating faster in terms of growth than any other country has been known to do. The sheer volume of their exports
and the corresponding foreign bond and currency holdings they now possess probably already makes them the richest nation in the world in real terms.

I don't think it's so much a matter of America eroding its position - the damage has already been done and digging yourself out ain't quite as easy as falling into in the first place. It doesn't please me to say I reckon you've got hard times ahead.