China Rises to Dominate This Century, As Right-Wing Conservatives Lead America Into a Crumbling Economic Sinkhole

THE BUZZFLASH EDITOR'S BLOG

By Mark Karlin

If the 20th Century (particularly the second half) was the American Century, it looks as if the 21st Century will be the Chinese Century (with India and possibly an economically resurgent Japan coming in as runners-up).

With all the dithering over a couple hundred million dollars in A.I.G. bonuses released last Friday, we have forgotten the larger significance of the conservative "Reagan Revolution" that unleashed the nuking of the American Economy as the Phil Gramm School of Economics gleefully turned our financial institutions into gambling casinos for greed and incompetence.

In China, if some A.I.G. or other financial institution executives caused what is expected to be two trillion dollars in losses due to -- in large part -- overselling default swaps and derivatives, they would literally be shot, not given bonuses.

We hardly sanction capital punishment for financial malfeasance -- even if such actions have nearly destroyed the American economic infrastructure -- but the indignation against the awarding of bonuses to the very people that gambled away our economic future without assuming any personal risk obscures the fact that the Bush/Obama administrations allowed hundreds of billions of dollars in our money to be paid out to foreign and domestic financial institutions to cover what are basically gambling debts.

That Bush, Paulson, Bernanke, Geithner, and Obama did not even try to negotiate cents on the dollar instead of paying the full casino I.O.U. is what really symbolizes the decline of America as a world economic force.  What conservative means is a return to the age of the robber barons.

We hear from Geithner, the head of A.I.G., and the Obama White House that contracts could not be broken. But of course they can, when a company has cratered our economy and played fast and loose with whatever minimal regulations existed. This was not a loss in real goods production capacity; this was a paper loss due to guys who went to the poker table, bet the house, and lost. Then they come to the taxpayers and say, "You must pay our losses and give us bonuses or we will not tell you what happened so that you can figure out how to salvage a few crumbs."

A much overlooked column posted the other day in the Chicago Tribune pointed out that the head of A.I.G., Edward Liddy, broke exactly such types of contracts -- on a massive scale -- when he was head of Allstate Insurance:

"Quite frankly, AIG's hands are tied," Liddy, AIG's chief executive, wrote in a letter Saturday to Treasury Secretary Timothy Geithner.

What ever happened to the Liddy who went after Allstate agents a decade ago like a scythe through chaff? No cautious legal counsel stopped him then.

The agents sued. The Equal Employment Opportunity Commission sued—twice. Liddy fought those lawsuits, and Allstate has won at every stage.

Michael Lieder, the lawyer who represents the 6,000 Allstate agents, is struck by Liddy's newfound respect for the power of employment contracts.

"The positions he is taking at AIG are in direct conflict with the positions he was taking with regard to our clients," Lieder said.

This time around, a little of the old Ed Liddy would go a long way toward arriving at what is right for AIG and the taxpayers who essentially own the company.

Liddy likely has the power to fire AIG's bonus babies on the spot. Employed as they are on an at-will basis, he can simply let the whole lot of them go, say compensation experts familiar with AIG's structure.

The Obama White House, including Geithner and David Axelrod, are using the same phony "contractual obligation" excuse that didn't seem to bother Liddy one iota when he was head of Allstate -- and his actions there passed legal muster since not one axed bonus baby has won a lawsuit against the firm.

But the bigger issue remains that the Bush and Obama Administrations let Paulson and Geithner pay off full dollar on the gambling debts that were accumulated under the "see no evil" eyes of the S.E.C. under Bush.  When companies go bankrupt, they end up, if there are any funds left, paying court-ordered pennies on the dollars at times.  The U.S. was essentially on the verge of bankruptcy.  The Obama Administration/A.I.G. legalese about contracts when you are dealing with something as snake oilish as default swaps, derivatives, and hedge funds that shorted the housing market is just a lot of bunk that basically defrauds us as taxpayers.

What about the U.S. government "contract" with its citizens who are paying the bill?

Which brings us back to China and Thom Hartmann's exclusive BuzzFlash book review of In the Jaws of the Dragon: America's Fate in the Coming Era of Chinese Hegemony:

What if the Chinese have perfected a neo-Confucian system (with surprising resemblance to Machiavelli’s “The Prince”) that melds an oppressive and fascistic state with laissez faire capitalism, creating greater strength for both than has ever been seen before on Earth? And they are using this to both co-op and change our values, to take over our corporate and economic system, and to ultimately gain control of our political system? What if they were already well over halfway to that goal?

It all sounds a bit far-fetched to somebody raised on a steady diet of American corporate news. But the corporate news in this country is coming from the very corporations that are profiting from and empowering the Communist Chinese new Reich. We’ve been intentionally deceived, by “useful idiots” like Tom Friedman and openly staged news events like those surrounding the Yasukuni shrine “controversy” or the Sino-Japanese “war” over the Senkaku islands.

In the Jaws of the Dragon: America’s Fate in the Coming Era of Chinese Hegemony is one of the most powerful, shocking, well-written, solidly documented, tear-the-scales-from-your-eyes books I’ve read in more than two decades. If you have any concern whatsoever about the future of American democracy, about peace in the world, about your own personal economic and political future, you must read this book.

China has so much surplus capital that they basically own around a quarter of the American debt.  The other day, China officially and loudly let it be known that it was concerned about anymore loans to the U.S. and whether we would be able to repay them.  In short, despite the "Country First" boasting of certain American politicians, China and a host of other nations own our butt because we are in such massive and growing debt.

China's economy is geared for the future -- not the mythical "Reaganesque" past of the Robber Baron age.  According to Jaws of the Dragon, China discourages consumption, encourages savings, and uses the accumulated national surplus to build a staggering fund that can assist in buying assets worldwide for the nation, while still leaving billions and billions in the bank, and investments and loans to massively indebted nations like the U.S.

The devastatingly destructive Wall Street economy of Geithner, Paulson, Bush (and, we have to say this, Obama is letting Geithner and A.I.G. get away with unnecessarily handing out hundreds of billions of dollars -- that we are borrowing from the likes of China -- to pay off rogue Wall Street "games of chance" scams), along with our advertising and economic emphasis on consumption and the accumulation of debt, is the mirror opposite of the robust economic system that is propelling China forward.

The U.S. economy, under the Reagan doctrine that carried on, even through the Clinton years, is primarily composed of abandoning production in favor of Wall Street "paper" gambling (for real dollars), a frenzy of consumption (although most of the goods consumed are now manufactured overseas -- in let's say China, for instance), and the reliance on gargantuan personal and national debt.

In this battle of economic strategies, the Chinese have already proven that they are financially advancing forward at a snowballing pace, while we are imploding from "conservative" theories of finance.

Last night, we were watching "The Daily Show," and Jon Stewart had Nandan Nilekani, author of a book on modern India, on.  Jon Stewart's first question to him was something like, "So, who is going to be America's overlord, India or China?"

Stewart, as usual, gets it.

Meanwhile, the three-ring circus surrounding the bonuses at A.I.G. continues, as China walks away with our prosperity.

THE BUZZFLASH EDITOR'S BLOG

Also Read These Related BuzzFlash Editor's Blogs:

Wall Street on Welfare: The Taxpayers Pick Up the Trillion Dollar Tab for Riverboat Gamblers on the Dole
http://buzzflash.com/articles/node/7894
and
Wal-Mart, Wall Street and W: Three W's That Sank the American Economy and Boosted China
http://buzzflash.com/articles/editorblog/200