The great and the good of the world are meeting in New York to discuss climate change today. This meeting is intended to clear the air before the Copenhagen Summit in December. Already the signs are that the Europeans and the Asians are annoyed with the Obama administration which, they argue, is foot dragging.
John Bruton, now the EU’s man in Washington, made a thinly veiled attack on the US Senate, suggesting that it only thinks of itself and expects the rest of the world to wait until it sorts out the US healthcare plan.
One country that is not waiting is China and it signalled a major initiative in New York yesterday. But China is not just playing the emission reduction game, the Chinese strategy is considerably more interesting and it reinforces the shift in global power between East and West.
Earlier this year, I spent a bit of time in China filming a new documentary and it is obvious that the Chinese realise the next big struggle will be the war for resources.
The Chinese understand the “peak everything” argument. They are not just worried about peak oil, they are concerned about the fact that the world has run up against the limits of its resources. Their officials were shaken by the spike in oil and food prices last year before the financial crisis hit. In comparison, they seemed to be quite unfazed by the financial crisis. They were much more concerned with the prospect of the world — and therefore China — running out of the hard material which makes the economy tick.
Speaking to some of its top officials, it was evident that they had thought about how they might secure resources and after a few hours talking to them, the strategy became clear.
Many well-placed commentators, particularly those in the financial markets, have been constantly bemused as to why the Chinese would keep lending to the Americans. China is now America’s banker; it holds close to $2 trillion of American government IOUs. It also has the world’s biggest stockpile of dollars in its reserves.
But why would this nation of smart gamblers hold the currency of a country that is busy inflating the value of that currency away?
The answer became clear to me as I walked around the desolate harbour of Port Hedland in the Pilbarra, Western Australia, a few weeks after my visit to China (the documentary is an ABC Australia/RTE co-production). The Pilbarra is the world’s largest iron ore mine. The scale of the place is mind blowing. You can almost taste the industrial economy here in the dust at the back of your throat. This is where China’s iron ore comes from and it is here that we begin the raw material journey for the steel which will end up in cars with ‘Made in China’ stamped on them.
The Chinese used to be happy buying the ore but now they want to own the mines. China realises that it has everything except resources, and in order to secure supplies in the future it must buy the mines not just the materials. So the Chinese government, via its big state-run commodity companies, is buying up mines all over the world from Brazil to Canada, Australia to Africa. And what are they using to pay for these assets? US dollars, of course.
If you talk to anyone in the commodities business, they will tell you that the Chinese are always paying “top dollar”, outbidding all others. Why would they do that?
They do this because the Chinese know the dollar will fall in value over the coming years. They look at Mr Obama’s bailouts and the associated money printing that is going on and they realise they have to lay off their exposure to American risk.
They can’t just simply stop buying American IOUs because to cut off credit to their major client would as a banker make little sense and as a manufacturer make even less sense. China is in a bind unless it can shunt American risk on to someone else.
China needs Americans to continue buying Chinese goods in order to keep the factories of the “workshop of the world” ticking over. So it can’t directly disengage from the US and start buying other currencies with its huge reserves. But nor does it want to become the NAMA of the world, overpaying for worthless assets just to keep the show on the road.
So it takes the dollars and buys real stuff with them, thereby laying off its American exposure and giving the dollars to someone else in return for mines, extraction companies and oil concessions.
For China this hits two birds with one stone.
It can reduce the financial risk of keeping America afloat and at the same time secure the resources it needs to keep its factories open. If the price of commodities goes up, China wins because at least it now owns them.
So, what it loses on the increased cost of raw materials when its factories buy them, it gains because China is also the seller.
All the time the US dollar weakens and so, for its long-term strategy, everything makes sense.
Until its own people begin to spend seriously, which could be a decade or two away, the Chinese have to keep America on life support.
At the same time, they need to secure resources. So they stitch up the rest of the world with dollars, which will be worthless against the Chinese Renminbi in a matter of decades. But in return they will own the most precious of all commodities, the raw materials of the earth, which are being depleted.
Now that’s what I call a Chinese Takeaway.
Pity all we’ll have down the road is debt – No resources or no cash.
There’s strategic thinking for you. :(
David, your reading tea leaves when you ought to be ‘blowing the whistle’ on NAMA, in my humble viewpoint. China have to spend the dollars on something, anyone with an ounce of common sense will buy smart when responsible for 1 billion china men and women. Interesting though, china are buying up Gold all over the shop, so, this may indicate their fear on dollar demolition due to printing press bonanza is more intense than your article hint’s. China were duped by USA into receiving dollars as payment. China underestimated the scope and scale of skullduggery afoot with the powers… Read more »
I have to wish the Chinese well. While not being a supporter of some of their techniques, they have managed to keep nearly 2bn people alive and get them hauled into the 21st century. It’ll take time and who knows, maybe they’ll have a better and more just system of government in the coming decades. One to one in dealing with Chinese here in Ireland, my comment would be, we need another few 100 thous of them. They are traders and farmers by nature, they work hard and they are decent. I’ll have more of that please. The one thing… Read more »
Excellent article. Very accurate. Meanwhile we are wasting the wealth of our societies trying to sustain corporate elites and the bankrupt real estate ponzi sector. The Chinese, plus the South Koreans, etc.. are chasing the raw physical resources that they will need for the manufacturing complexes. They aim to have the raw materials necessary to power their manufacturing sectors and be able to control the entire value chain process. America will have McJobs and burger flippers. Europe will have more bureacrats and continually rising youth unemployment. Britain will have celebrity this and celebrity that. But Asia will have the wealth… Read more »
Hi David, interesting stuff. Probably a naive comment, but one wonders: If the numbers you quote are true, then China has in the last year about quadrupled its ownership of US foreign debt and represents the bulk of that debt. It seems at least possible that the Chinese are now spending dollars like mad in order to encourage dollar deflation, rather than in spite of it. The US and China need to keep the debt-trade merry-go-round working, so on the one hand the Chinese are massively pumping up the US economy and on the other helping underscore the Fed’s QE… Read more »
It seems that the Chinese authorities, unlike Brian Lenihan, have a real grasp of that elusive concept….. Long Term Economic Value. Another of Brian Lenihan’s fortes is in reading the details. Here are (rather censored as you can imagine) details of what Dell can expect for pulling out of Limerick… http://www.irishtimes.com/newspaper/breaking/2009/0923/breaking33.htm The IT tells us there were protests from the Irish government. Did they send over Willie O’Dea to have a stab at preventing the polish government from doing what the IDA does on a regular basis ? Maybe O’Dea threatened to go on hunger strike outside Brussels. More like… Read more »
Resources a la Chinoise – We all came to Ireland because it had resources and we made a good life here after leaving where our forebears came from.We have lots more resources that we have not developed but we can if we partner with a ‘third party’. That is one of the strategic reasons why our island is needed in the EU .Essentially , the elite in Brussells have their cake for nothing . A Chinese takeaway in Ireland would pay off all our debts to all banks if you think about it.We need a new mindset and not allow… Read more »
Folks, there appears to be an absolute wealth of material here, for those who might like a little economic “digging”:
Oh, yeah: China scares me. Massive population, massive wealth, massive accumulation of world natural resources, massive disregard for its own people, massive disregard for human rights and massive weapons.
What’s all of that a recipe for?
good article… been banging on about this for years, the great game is all about resources, which are getting ever more scarce. Worth keeping that in mind as we are consumed with NAMA… At its core, NAMA (leave out the corruption) is a big paper game with spreadsheets where money is taken from one column and put in another, and then another and another for 10 years… The net change is a couple of thousand property developers, and banksters emerge with their personal wealth somewhat intact while the bill is being paid by the population… There may be other net… Read more »
Hi again Lads & Ladies, Good to see you all again at the coal face — so to speak. Our government have started to build a link between Wales & Ireland to export & import electricity. http://www.irishtimes.com/newspaper/breaking/2009/0915/breaking48.htm A blind man could see this entails importing nuclear energy — from the UK & Sellafield etc. 20% of the UK’s energy is nuclear. http://www.niauk.org/ I have no doubt that these facts are lost on our green “Green Party.” This received little media coverage. But is another important Irish Chapter in the Global big picture on resources. I don’t know if this is… Read more »
DavidÂ´s article is irrefutible and worrying. If we all have Weimar Republic Deutchmarks in our wheelbarrows in America and Europe,in a few years time, China will be a bigger loser than at present. No more cheap flat screen TVÂ´s etc etc for the west? Property will be king again , in Ireland & America when the hurricane is over.(if it ever ends) That will be good for NAMA. I think we live in times the outcome of which nobody can now predict as every action (printing money) has a reaction and a knock on affect which is not entirely predictable.… Read more »
David, Is your article hinting at Ireland’s natural resources? That government should be forced to retrieve them fot the Irish people?
What are they?
North Sea Oil and gas?
The “Shell to Sea” resource that was given away by Ray Burke, for a back-hander?
Irish fisheries and the EU fishing limits?
Agriculture/ extremely fertile land?
Spirit of Ireland Wind energy and Hydro-electricty?
All abandonned to corruption and Property speculation.
Time to insist upon taking them back?
Sorry, folks, I had intended upon including our “human capitol” in that list of resources, but forgot.
The Irish people are our greatest natural resource.
Let us educate them as well as we possibly can in as many disciplines as we can (there are many “intelligences” – doesn’t all have to be academia), and raise our children wisely, to be confident and secure in themselves.
Teach them to apply the hermeneutic of suspicion to everything they hear in the media or from government.
Our people, as our greatest resource, have been brainwashed and must be “retrieved”, as well.
Folks, I have been helping to put this together with Gavin Sheridan this evening (http://www.gavinsblog.com/)
Have a look at all of our Dail TDs; a compendium of what they do, what they used to do and some you never even heard of, though you are paying them:
Great article. Your thinking on human nature and the great games we play for power and domination is always interesting, credible and entertaining . China like the US and all countries have there strengths and weaknesses. Your analysis shows China is handling there weaknesses extremely well. To decipher the US tactics for handling its own weaknesses I would need to borrow your brain. Sadly when one country gains to much superiority economically, the guns usually appear. Many published military doctrines predict the wars of the future to be about resources. World beware, its reasonable to think that the major powers… Read more »
The world uses 20 times more iron than all the other metals combined, so we are still in the Iron Age. We are not about to run out of iron as it is the fourth most abundant element in the earth’s crust. It is a mistake to make decisions in a prolonged recession based on scare stories about natural resources. I suggested here months ago that the government should be stockpiling copper and other coinage metals that will always have practical uses, regardless of whether we detach from the euro. (Which at present seems rather unlikely.) Nobody responded to the… Read more »
@DMcW: ‘But in return they will own the most precious of all commodities…..’ No they won’t. Because that commodity is H2O.Water is Life. Including ‘the economy’. China faces potential oblivion unless and until it awakes from its’ current stupefied trance whereby it imagines the relocation of American Capitalist Manufacturing + Pollution to its’ river deltas equates to a long term Sustainable Strategic Plan. It doesn’t. No matter how many webcasts fraudulent ‘sinophiles’ like Jim Rogers broadcast from the safe air of Singapore. China appears to be doomed. Once you factor in water, food, air and demographics: There has been no… Read more »
A related post from the Telegraph on China’s apparent gold acquisition policy is at http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100000821/china-bernanke-and-the-price-of-gold/ and is well worth a look.
China’s also playing a dangerous game with its own economic stimulus (rumoured to be much higher than reported). Local government is spending pretend money and running up huge bills. That can only go on so long before the piper has to be paid. Unrelated: thank God for that new interconnector to Wales. If we are too dumb or too sanctimonious to realise we desperately need a nuke on our own territory, at least we can buy nuclear electrons from the UK. Assuming, that is, the Brits themselves have the good sense to do a massive build-out of nukes before Putin… Read more »
its all correct till the energy wars of the 21 century , then its whos got the biggest gun that will count most.
I received this link from someone this morning. I think the comments at the end are also quite interesting.
Hi David, Its good to take a break from our own navel-gazing of NAMA, Bord Snip, Tax report, government deficit, economic recession and look at part of the bigger global picture with China. China is an interesting and major “cog” in the internationalised globalised trade world. Yes, China is buying US debt, and yes, it is concerned about the supply of resources. But its growth is coming at a cost to many of its people. There have been food shortages, many are entrapped in slave-like conditions living within factory “villages” working 6 days a week, 10 hours a day. At… Read more »
Land in Atlantis – We Westlanders are living in a land in the atlantic – do we ever see that in our subconsciousness .We are surrounded by sea completely and most of that is a massive Ocean that is very very deep and unexplored and ‘Full of Resources’ and we own a very large chunk of it .Lets put all our energy into this Big Opportunity and stop making a secret that it is not there .It is there and much more in fact a lot more , more than we need .Why are we afraid to get it ?Can… Read more »
Exactly David, you were blowing the whistle on the financial collapse, and now you seem like all the other finance “guides” to have shut up as if it has all gone away; all we have to do is find a way to get people to invest, plan, build for the future. I think (you’ve lost the plot) ye’re all getting a little ahead, like the recession has ended in France, Germany, Japan my foot. Nama has got to (go) be a clear No (biting the hand that feeds or nor) to the Government, that and No for the Lisbon Treaty.… Read more »
Agreed Paddy, the diaspora is nonsense and indeed racist. I will not hold it against someone if they are not from Ireland, obviously there is a connection with a fellow Irish man but hopefully we will stand on our merits rather than some form of genetic nepotism. China are doing well and taking the environment seriously but China is composed of indivual people and their government is corrupt and barbaric. I would rather live in Ireland than be part of the Tibetan oppression, fulong gon oppression, etc. The big story recently was about a woman who is facing the death… Read more »
For those who seek to move from praise for the corporate to the real, then the following should be of interest, but it comes with a health warning, it may alter your state of mind and burst the convenient bubble………..
Chinese Noodles a la Michael O’ Leary – Prime time tonight bring together Leo the Lion and the little smelly Fish . It’s easy to guess who will win unless rte place a smoke screen to limit the impact of the carnal revenge.World Impact in interesting times .
Posters, Roddy Molloy X-FAS lotto winner, 1 million in taxpayers monies stuffed into his pockets down his trousers and into his socks. Now, roddy is not the only public funds swag bagger. How deep and rotten does the Great tax payers monies swindle go..!!!!!!!!!!!!!!!!!!!!!!! Ireland is not a functioning democracy and comparing it too china is apt. Ireland is a gombeen dictatorship, a non functioning democracy, a democratic dead parrot. Ireland is a mutant strain of neo feudalism and all must stop viewing it as a democratically run society which is mind control programming and see it for what it… Read more »
One of the models used by crony elites operating at the controls of constitutional democracies (in theory).
Posters, taking bets Ganley will wipe the floor with o ‘ Leary and his big dumbo truth bearer blindspot, tonight on Gombeen T,v / RTE 1
Water Falls – I am reminded of the Jungle Lion ( Ganley) pawing the water as he reaps the large fish jumping ‘in the ryanair’ ( O’ Leary ) to devour with satisfaction and proving what a great Leader he is .
My bets are on Ganley too.This could be the new flight path to the Airport Terminal of Independence and Democracy.
Private Request :
As it is fitting today to celebrate the occassion of Arthur Guinness worldwide I want to mark it too to record that my great great grandfather John ( Gameskeeper ) and grandmother Sarah ( House Cook ) are both buried on the private grounds in Elveden Hall where the Guinness family now reside.
posters, did anyone notice on newsnight bbc 2 since monday this week, the use of New World Order graphic on screens backdrop every night this week for the piece on UN / obama / G20 schmoozee. Rumours around the G20 are going to announce some type of world government next two days. Rumours around G20 going to announce something to do with a new type of world currency set up. Plus, isn’t it rather bizzare a 13 year old indian girl given a speech at UN to world leaders about climate change,..??!! Also, isn’t it bizzare G20 are meeting in… Read more »
Attention citizens of Earth…. Your planet is scheduled for demolition to make way for the hyperspace expressway….. We regret any inconvenience this may cause…. Have a nice day….”
Ayes & Nayes – I am happy with the No team presentation made on Prime Time tonight their opposition side were clearly rattled.
China and it’s human rights IS JUST MORE WEST SPINNING . I have also been there still do business with the place and my now ex girlfriend lived in accomadation provided by her boss had a mobile phone dressed well ate well drank well and worked with only two days off each month for a take home salary for her tele sales / expo assistant role a total of $35 us. Her only humbling was it was going to take her two years to save to visit England London as been of Eastern thinking she Works for her Rewards. Here… Read more »
Several issues going on the G20 that are not being reported heavily. i) Obama and the US Administration are furious with Gordon Brown and Peter Mandelson over the Lockerbie release, and oil deals for British interests. Brown is being sidelined in his various attempts to some sort of PR victory out of the summit. (Brown always tries to use these type events to raise the profile of British intertests, and engages in PR stunts). The Americans are having none of it. Brown’s efforts to get some sort endoresement from Obama for the voters in Britain are amounting to nothing. Expect… Read more »
Folks, sorry for the OT post. I just read this on the blog of the otherwise normally quite filthy Maxi Cane:
It seems relevant to a discussion on Globalisation and Ireland’s place therein.
Watched the debate last night on Prime Time. Cannot see any links in utube. O’Leary vs. Ganley was priceless. O’Leary provided the jibes – ” you got 20000 less votes than Dana!!!” he then said “what’s ‘all kinds of beautiful’ about that ?”. For a second it looked like O’Leary was going to start signing. He didn’t. Ganley got a dig in concerning Michael O’Leary’s motives, the RyanAir takeover of Aer Lingus, the EU Commision blocking him, and his flying around with the EU transport commisioner. O’Leary really was caught with his pants down. O’Leary failed to do his homework… Read more »
LISBON and NAMA are furthering Ireland along into the global governance plan underway and now outing itself at the G20 pittsburg get to together.
Folks, I noticed in that series of “debates” that the No side people were the only ones quoting the actual treaty and referencing actual articles; the yes side never does this. Also, Miriam did her usual trick last night of telling Joe Higgins not to go into detail – she is afraid of “losing” us thick viewers – so detailed debate is deliberately stifled. (On a personal note, I am on the farm in Bruree, Co. Limerick with no broadband, so I am trying this site on a dial-up connection for the first time ever; hope it works. Of course,… Read more »
What We Owe Other EU Member States http://bit.ly/2xDju
NEWSNIGHT BBC2’s headline………
“THe G20 promises us a new world order but is iran the ,,,,, blah blah”
Excuse me, i never was consented on whether i want a world government or not.
@David…I’m sure when you landed at that airstrip inland from Port Hedland you were suitably impressed by the scale of this Martian Landscape,with the huge trains with countless carridges carrying ore to the Port area for loading onn to the large cargo ships.I wonder while you were walking around deliberating on the great Macro issues of the World,did you have time to observe the quality of life that comes with living and working in such an enviornment?? You see the conclusion you arrived at might not necessarily be correct. I think if you had taken the time to head back… Read more »
Dryson ,Drag & Suck :
Today the pull begins and peaks on the 4th Oct and tonight’s World Champion fight in Dublin may show it .What is weak will leave and disapear and what will win will do so with vengence and be seen to show that .Emotions will run high and time will appear to run faster and people will trip and fall in that process ..Real Time does not move fast and only those that hold it close will understand that .Slow Down this week ahead and you will feel yourself a winner .
East meets West & the noodle dances to the fiddle . We are now beginning to watch how the inverse reverses and how Plato eats out of the hands of Confucius and vice versa Confucius does a riverdance. The power of now shows that a deep social and economic tetronic plate is shifting deep under the Atlantic and the hunger for Wisdom grows in search of direction and a new purpose.The compass is changing rapidly and soon our natural clocks will become confused and disaray.We are on the edge of the middle of a circle and in front of us… Read more »
Site down for about 12 hours during the day which most people have free…….is there some form of pressure being applied externally or am I becoming paranoid.
Was there a march this afternoon, no report of it on rte website. Any details? Tim? anyone?
colin -in-exile – see entry no 44 on 22nd sept 2009 – a Moon Wobble event caused the site collapse
A fair amount of hype and advertising was focussed on Arthur’s Day. So as to give the lemmings plenty of encouragement for showing up for an event that did not come to the scale predicted by the hype, “official” coverage has no begun. Those who obey are always treated like children and praised for their obedience. Look….the streets were packed… http://www.independent.ie/national-news/arthurs-day-celebrations-in-dublin-1897124.html?start=11 What concerns me more is the fact that this “positive reinforcement” which is used by maternal figures, actually works on twenty-something adults. And this works. Yes that is right it works. In fact it is very succefful. If finds… Read more »