Friday, January 15, 2010

External National Assets

External National Assets

Colonialism wasn't, mostly, about countries deciding to conquer colonies. It usually started with the colonial power buying assets, trading rights, etc, in the 3rd world country. Then some bad stuff would eventually happen. The assets would be attacked by the local government, or the local government would be unable to prevent others from attacking it. Either way the colonial assets would receive military protection, and the military would get into little fights and nearly always win and keep expanding.

We have to look at China's current attitude with concern. They are buying up assets around the world: companies, land, rights to raw materials. They are also buying US Treasury bonds. Their attitude to that might be indicative. They have expressed concern and complained about the US printing money and hence potentially eroding the value of China's investment. This is incredibly silly and ignorant, since monetary policy is an internal matter and in this particular case America has no choice but to print money to reduce the value of unfunded liabilities. If China doesn't like it then they should sell the Treasuries (which America would be forced to balance with more printing).

China can't, of course, influence America's monetary policy. But the fact that they feel belligerent about that really makes you wonder what will happen when, inevitably, bad things happen to their other external assets, or to Chinese people working on this external empire. The most dangerous ones will be long term contracts for oil and other energy when Peak Oil starts to bite. It seems that war over significant oil assets anywhere will have a Mutual Assured Destruction character once Oil gets scarce and expensive: Knocking out any bit of supply will then be very serious.

China needs to get its mind into gear and become part of the solution, instead of imagining that it can build a wall to protect itself from world-wide problems, and thus make those problems worse for everyone else.