Letter authored by Karl Denniger, The Market Ticker. Corrections by me.
Yesterday you undoubtedly saw my letter to The Chinese Premier. Today, it's your turn.
You could have made quite a splash over there in China - and made a difference for all Americans. But instead, you did nothing of the sort - you simply continued the sell-out that has been going on for the last two decades in the so-called "strong relationship" between China and America.
That "strength" has included selling China advanced radar technology allowing them to shortcut 20 years of development time off their ICBM targeting, making their nuclear weapons far more lethal to potential targets - including targets in the United States. It has included turning a blind eye to the blatant and outrageous technology rip-offs that go on over in that nation every day. You won't see them because your Presidential Motorcade will never be allowed in the street markets found all over the nation, but if you were, you'd see literal millions of unlawfully-made copies of US-created software and music sold openly while the cops stand by to protect the vendors instead of enforcing internationally-agreed to laws that the Chinese pay only lip service to. And it has included granting virtually tariff-free "trading" status to a nation that forces poor farmers off their land and into sweatshop factories, away from their families where they are paid a buck a day in US equivalent wages, turning out products for sale in the US.
And let's not forget who these companies are. They're the WalMarts, Apples and Nikes of the world - many of them huge American firms. Oh not directly - that would bring these firms under US labor and regulatory stricture. No, they're "independent companies" owned by Chinese slave-drivers who instruct their employees to lie when the "auditors" from WalMart and Apple show up, telling them to a single employee that they're "complying" with reasonable wage and hour laws under penalty of losing their job, being blacklisted forever and literally starving to death. Since there are no whistleblower protections in China (it is, after all, a Communist government) the big US companies can claim to be "responsible" while in the background you hear the slave-driver's whip crack - and everyone smiles (except the Chinese worker who is being outrageously exploited.)
You ought to know something about this, given your heritage. Kenya featured prominently in the global slave trade until the British put a stop to it. There's nothing like a bit of history to screw up the revisionism that finds its way into American Politics, is there?
You ran on a populist platform and won on the basis of "hope and change." But hope and change is not working at WalMart while offshoring the production of our various consumer goods to China where the replacement for our US workers are paid a buck a day. Indeed, many of the 8 million American jobs lost since the top of the employment market in mid-2007 will never come back, simply because the small and mid-sized businesses that once dotted the landscape have been destroyed by this "offshoring" activity. It is clearly not possible for a US supplier or vendor to compete with $1/day wages or anything approaching it, yet this is the "competitive supplier" environment over in China and elsewhere.
The Truth is that America and China are locked in a deadly embrace. They're not buying our Treasury Debt to be nice or "support" us. They're buying because we have exported our inflation to them for more than two decades, and they're desperately trying to prevent it from destroying them. See, when you make $1/day (or $2/day) inflation is the difference between eating and not eating, and hungry people have a habit of reaching for pitchforks. Since there are about 1 billion of them (ordinary Chinese) and a much smaller number of military and leadership, well.... you do the math.
But that "buying" of our Treasury Debt has fueled your (and your
Republican Democratic cronies) desire to spend beyond all reason. This distortion has allowed the government to blow money it does not have for more than a decade without watching interest rates ratchet inexorably upward, as happened to Bill Clinton and those before him.
The problem is whatever can't continue forever won't, and if you've been induced to borrow "interest only" (as our government always has) and the interest rates start to rise you can be bankrupted even if you stop borrowing. Your refusal to recognize that nobody can survive for long when you take in only half of what you spend, borrowing the rest, is an outrage and insult to anyone with an IQ larger than their shoe size.
Speaking of outrages, let's go down the list of current ones. We can start with the SIGTARP report on AIG and their counterparties. While AIG might have been free (under the law) to sell "insurance-like contracts" with no capital behind them, there is nothing that forced The NY Fed (and The Federal Reserve generally) to allow regulated bank-like entities to purchase those swaps and count them as "money good hedges." Yet the very boob who apparently did that, along with intentionally overpaying counterparties, was appointed by you to head the Treasury. I suppose none of us should be surprised at this revelation by Mr. Barofsky, given that one of Timmy's qualifications to head the
Internal Revenue Servive Treasury was that he didn't even bother paying his own taxes. You do realize the example this set for other Americans, right? Is that wise, given that the government is undoubtedly going to try to extract more and more tax money from the rest of us in the years to come?
Then there are people like Lloyd Blankfein, who yesterday "apologized" for "participating in things that were clearly wrong." I know you created a "government-wide task force" as of yesterday to "fight financial fraud", but somehow I doubt we'll see the person who made a public admission yesterday of "participating in things that were clearly wrong" in the dock. Indeed, yesterday we were treated to a revelation that Sacramento is suing a bunch of banks for bid-rigging and kickbacks - suspiciously similar to what apparently happened in Jefferson County Alabama, in which JP Morgan/Chase agreed to a fine and "foregone profits" of nearly three quarters of a billion dollars - while "not admitting guilt." Pardon my cynicism, but I've yet to see anyone willingly hand over nearly 3/4 of a billion dollars unless they're concerned that they might lose a lawsuit or worse, be found guilty in a criminal trial. It would seem to me that this "task force", if it really is intended to do something productive, would start at the top - with Racketeering prosecutions aimed at our largest financial firms. But that's not going to happen, is it?
Speaking of "OCCE" (operating a continuing criminal enterprise), what about drug companies? There's a bit of a problem there too, no? Are not the drug companies one of the beneficiaries of your alleged "Health Care Reform"? After all, you're not going to strip them of their re-importation protection, are you? Why not?
Far more important however is where a "gentlemen" (Kindler) wound up after not one but two criminal guilty pleas by Pfizer for the same crime. He was elected to the board of the NY Fed. Are you as proud of Pfizer's record as is Mr. Kindler is as their former CEO and General Counsel? It appears so - not only does your "health care" proposal not bar deals with drug companies that have twice pled guilty to the same felony, not only is Pfizer still operating as a corporation (where any "natural person" who did the same sort of thing would be sitting in the hoosegow) but in addition you've sat back silently while their CEO is appointed to one of the chief banking regulatory positions in The United States!
Here's the problem at the end of the day Mr. President.
You were elected on a platform of "Hope and Change." In point of fact the only change we got is the change at the bottom of our pockets - all the rest of our money has been siphoned off by the very same robber barons and banksters that have corrupted our nation for decades. You've done exactly nothing to prosecute them for their previous actions or prevent them from doing the same things in the future. Nearly a year after your election Citibank served upon the American people a 29.9% "rate jack" on their credit cards - an "atomic bird" served up by one of the largest financial firms in The United States, and one that the government now owns a large stake in. This was a slap in the face of Americans by THE GOVERNMENT - that is, YOUR ADMINISTRATION.
You claim to be for the working class people in this country, yet you bow down to China paying people $1/day to assemble junk products, from capacitors that explode (found in literally millions of pieces of electronics) to melamine-laced "food products" to poisonous toothpaste to corrosive drywall that destroys wiring, plumbing, and, allegedly, the lungs of US Citizens.
We continue to hear that we "must reform health care" yet just recently Pfizer pled guilty to a criminal felony that it previously, years ago, pled guilty to before. Nobody went to prison, and the fine levied was less than 1% of the firm's market capitalization. A mere cost of doing business. These are the "engines" of Americans' health you wish to protect with laws that force we the people to pay for the development of drugs and medical devices that are then used worldwide - without the rest of the world paying "their fair share" for the developments that save their lives. We're a generous people but don't you think such charity should be by choice rather than extracted at gunpoint?
You refuse to step in and force The Fed to be audited, even though you could get behind Representative Paul and demand it happen. Why? Is it because you're protecting the very people who ripped us all off? There are those who believe the true purpose of your Chinese trip is to find a way to pry open the doors in China so our Banksters can loot them, since the blood all seems to be gone from Americans - the vampires simply drank too much and killed us all. There's one small problem with that plan, if indeed it is your intention - in China they shoot people for the sorts of things that the banksters did over here. Call it a "feature" of Communism if you'd like.
Let's face it: America may need some protectionism. Americans can't be expected to compete with $1/day - or $2/day - in wages. While this "looks good" for a little while as prices come down just as business profits look good when you fire people in the quarter you do it (witness the last two quarters of "earnings") those employees who lost their jobs can't buy anything in the future, as their income has evaporated! They wind up on the dole, and this drives our budget deficit from 20% of our Federal Budget to roughly 50%. The pegs and forced buying of Treasuries that have allowed this to happen won't last forever, and when (not if) they snap they will force a Federal Government default. Thus, my statement in the open letter to China's Premier - we're not going to pay you.
Some have claimed in comments I received that my views in that letter are some sort of jingoistic orgasm. Nothing could be further from the truth; my views are simply an expression of mathematical fact. Math is the only true science.
Speaking of the math, I'm sure you're aware that about half the nation loved you at the time of your election and the other half hated you. That's a "feature" of American politics, of course. But I would be concerned for your job security down the road if you don't change course. After all, the SEUI and UAW both were strong supporters, as were the "ordinary people" who bought into your "hope and change" mantra.
The problem is that you haven't kept any of those promises. Your "stimulus" didn't, your "Recovery Czar" has refused to certify the jobs "saved or gained" numbers (that's because they're flat lies, as is obvious from the employment situation report's household survey) and a huge stock market rally aside, there hasn't been any real turn in the economy. Instead Wall Street is feasting on the destruction of the dollar, which is a direct consequence of your policies - spending more than one makes eventually destroys confidence in the strength of your balance sheet, and the puerile acts of a Fed Chairman who you claim to support for re-appointment in his futile attempt to keep the musical chairs game going isn't helping matters. You could stop this tomorrow by demanding that Bernanke raise rates to a mere 2% immediately or you'll replace him with someone who will - after all, his reconfirmation has not yet occurred, and your nomination can be withdrawn.
Best of luck to you Mr. President - from where this commentator sits, given the underlying realities of the economy and exploitation of our working class and your willful blindness to the mathematical realities of our fiscal and economic situation, you're going to need it.