Blood in the Water
NAFTA was resisted by the right (Pat Buchanan), the center (Ross Perot), the left (Ralph Nader), and even by a top libertarian (Murray Rothbard). But once thousands of factories and millions of jobs began pouring into Mexico from the USA, and fat profits rolled into oligarch coffers – it was too late. Blood was in the water, and a feeding frenzy of more “free trade” developments quickly followed.
The “Asian Flu” Financial Crisis of 1997 had a similar effect as the Latin American Debt Crisis. Countries with shattered economies such as South Korea and Thailand turned to David Rockefeller’s “Export to America” plan, and with the help of the “General Agreement on Tariffs and Trade” (GATT), even more cheap products poured into the USA.
The USA’s economy is huge, and while NAFTA and GATT cut deep, they weren’t enough to bring us down. However, the death blow came on December 11, 2001 when the USA brought China into the World Trade Organization. Prior to that, “free trade” with China was contentious because it was a communist country that perpetrated numerous human-rights violations, including the Tiananmen Square Massacre. Multinationals couldn’t be sure about making investments in China because Congress might sever relations.
Admission into the WTO dispelled those worries, and made China a sure thing. The multinationals dove in, and with its gigantic, impoverished population, China was able to “accept” a much larger chunk of our industry than Mexico ever could. Less than a decade later, the USA’s economy lay in ruin.
Unlike the OPEC nations, the Chinese did not leave their cash on deposit with western banks. Instead, they invested it themselves, and it was their particular choice of investment that determined the precise characteristics of America’s fall.
Offshoring Caused the Financial Crisis of 2008
“The financial industry’s agenda – deregulation, free trade, and low taxation – has dominated the nation during the past thirty years.”
-Judith Stein, Pivotal Decade, (Kindle 5774)
Some people blame the financial crisis on rogue bankers; some blame the government backing of subprime loans, and some blame Alan Greenspan for keeping interest rates too low. However, the finical crisis would have never occurred at all if trillions of dollars had not been gouged out of the middle class and sent to China.
Think about what happens when General Electric moves a lightbulb plant from Ohio to China: they fire their American workers and stop paying them. Those dollars are no longer spent by the American workers in the USA, but rather go to China. Now think about what happens when that scenario is repeated for tens of thousands of factories: a huge economic tidal wave is created.
And what did the Chinese do with their newfound wealth? They were very conservative; they invested in what were the safest instruments in the world: U.S. government bonds. However, the U.S. government doesn’t issue bonds to satisfy the demand in the bond market. It only issues bonds when it needs to borrow money. If the budget is balanced, as it was during the Clinton years, the government simply doesn’t need to issue many new bonds.
Of course, GE also made huge profits in this example by reducing its payroll. And corporations also put cash into government bonds.
So, one of the consequences of offshoring was to dramatically increase the demand for government bonds. What did the Chinese do with their trillions of dollars when there weren’t enough treasury bonds to go around? They bought the next best thing: mortgage bonds from Freddie Mac and Fannie Mae (“agency bonds” or just “agencies”) because they were backed by the U.S. government.
That flood of money dramatically depressed interest rates, and blew up the housing bubble. The vast size of the U.S. housing bubble was directly proportional to the amount of money extracted from the hides of middle-class households by offshoring.
The flaws in our banking system would probably not have been fatal absent this vast re-engineering of the U.S. economy. And there would have been no crisis because American workers spend their money differently than the Chinese. We are notorious spenders and the Chinese are notorious savers. Think of a union auto worker. What did he do with his paycheck? Buy treasury bonds, or a new boat?
In a 2005 speech, Ben Bernanke dubbed this phenomena as the “savings glut.” Of course, China and other countries also build-up dollar reserves by simply purchasing dollars in the foreign-exchange market. That keeps their own currencies weak, and exports to the USA going strong. So, it’s not just a cultural preference, but also a premeditated, mercantilist, economic attack on the USA.
Perhaps Alan Greenspan did keep rates too low for too long. However, that was right in the middle of the mass exodus of factories and jobs to China. Can Greenspan be blamed for using a traditional economic-stimulation method that had historically worked well in our relatively closed-borders economy? The simple fact is that Greenspan would not have kept his foot on the gas pedal so long if the multinationals were not transferring all the jobs to China.
And when Greenspan finally did raise rates, long-term rates stayed low. The housing bubble defied Greenspan’s attempt to pop it because of the tidal wave of middle-class money that was being redistributed through China. That was Greenspan’s famous “conundrum.” However, even if he had figured out the cause, could he have done anything about it? After all, the Fed has no control over trade policy.
To this day, many people blame our lackluster economy on the financial crises. They say that recessions caused by banking crises require more time for recovery. Many complicated theories have been put forth. But why don’t we just use Occam’s Razor and look for the simplest explanation? The jobs aren’t here because we sent them away!
The globalists tampered with the natural order of things, and caused a huge financial catastrophe, mass unemployment, and mass poverty in what had previously been a fabulously wealthy nation.
Of course, as we saw above, Wall Street bankers are far from innocent. While the subprime-mortgage crisis was a consequence of globalization, it was David Rockefeller of Chase Manhattan Bank who could fairly be named the “Father of Globalization.”
Rockefeller’s dumb loans lead directly to the Latin American Debt Crisis of the 1980s, which was very similar to the subprime-mortgage crisis of 2008. Back then, it was OPEC, rather than China, that gouged a huge amount of money from consumers in the USA. Like the Chinese, OPEC sent their money back to the USA in a huge tidal wave, but instead of it going into bonds, it went into bank deposits. The banks then immediately squandered the money by loaning it to Third World nations like Brazil, Mexico, and Argentina. Just like they totally miss-managed the wave of money that came in from China thirty years later.
The moral of the story is that it is imperative that we prevent these mass extractions of wealth from consumers. The damage to individuals is bad enough, and the banks have proven, more than once, and in spectacular fashion, that they have no clue how to manage the tidal waves of “liberated” middle-class funds. Perhaps the middle class has been so deeply damaged that there can be no more such tidal waves. Or maybe the privatization of Social Security will be that last great looting spree for the American Oligarchy. Time will tell.
The Oligarchy came out of the Great Recession smelling like a rose. Their captive government in Washington bailed them out, the middle class failed to rebel, and the Oligarchy even got more “free trade” deals with South Korea, Colombia, and Panama. And the Oligarchy can soar even higher simply because there is still meat on the middle-class bone to be picked.