America is on sale and China keeps stepping up to the plate.
This week we learned China holds a record $1.31 trillion of our nation's debt after adding $12.2 billion in December (they're closely followed by Japan at $1.18 trillion).
The news was greeted with the usual outrage and questions over what kind of leverage does this give China over America. For years, it appeared that China has been able to manipulate its currency and the rules, because it supports profligate government spending.
Many wonder: what happens if China cuts off the spigot?
I've come to the conclusion that they're not cutting off the spigots; in fact, they're just getting started. The Chinese want to own it all- lock, stock, and barrel. The ambition of China isn't going to be contained by a Great Wall, mountains, oceans, different languages, or xenophobia; which no longer matters, to trump the needs of spendthrift nations that have squandered their own wealth. Ironically, this same script has been playing out between China and the West for centuries, with the tide swaying back and forth. There was a time when China only sold its most prized possessions to (mostly) British citizens in return for their silver.
The trade saw so much silver sent to China that other European nations became alarmed, while the work load was too much for indigenous mine-workers in the New World, this sparked demand for more rugged workers from the continent of Africa. There are two versions of what happened next, but the introduction of opium into China, as a cure-all began a reversal of silver flow out of the country and back into the coffers of Great Britain. Eventually, there would be a revolt ignited by Chinese leaders burning 20,000 chests of opium. The loss of that war triggered a series of wars and misfortunes that left China a wreck.
It all accumulated in the Boxer Rebellion: an uprising of peasants against their feeble Chinese rulers, but also against Western civilization, including Christianity. In order to fight back, China needed help from Japan and Western nations at an economic toll, which explains how debt destroys. China owed an indemnity of $335 million in silver and additional interest payments in gold.
This debt accumulated until December 31, 1940 at $700 million.
Boxer Protocol (debt):
* 29% Russia
* 20% Germany
* 16% France
* 11% UK
* 8% Japan
* 7% US
* 2% Belgium