Tuesday, October 25, 2011

Could China take the United States down without ever firing a shot?

How has the United States boxed itself into an extremely dangerous corner by becoming increasingly reliant on our historic adversary, the Communist Chinese, for critical resources!

As one example, the United States faces the ever-present potential for China to dump the US treasury bonds it already owns on the global financial markets, or to boycott our treasury auctions all together.

Either of these scenarios would have the devastating effect of pushing U.S. interest rates significantly higher, severely damaging an already struggling economy, while increasing U.S. government borrowing costs to unsustainable levels.

China is well aware of the leverage that this reliance on them provides.

Also, as discussed here in the past, China could limit its export of rare earth elements that are critical raw materials in the production of a wide variety of products. including U.S. weapons systems.

Although China possesses only 30% of known global deposits of rare earth elements in the ground, it accounts for 97% of the world supply.

And again, China is very aware of this fact and the leverage that it provides to them.

Both this U.S. financing piece and the natural resource piece would allow China to inflict a severe economic and national security blow to the United States without them ever firing a military weapon!

First, some prior articles from TPC looking at the issue of the Chinese using the global leverage it possesses!

"Recap:

October 14, 2010: China isn't just about the money

October 21, 2010: Update:’ China and rare earth elements part deux

December 29, 2010: Rare earth elements and China: Flash back and now flash ahead

January 19, 2011: US/China summit: It's go time

January 20, 2011: Tit for tat as Apple Computer is targeted

February 17, 2011: China once again signals plan to limit rare earth element exports

Ironically China was mentioned just yesterday morning in the context of the United States depending on past enemies, present enemies and pseudo current friends for critical raw materials and cash.

China, in addition to the aforementioned cash is also the worlds primary supplier of rare earth elements that are so critical to the manufacture of our strategic defense weapons and of various consumer goods..."

Finally, China and rare earth elements right now!

Dateline Beijing, October 20, 2011:

“China's biggest producer of rare earths is suspending production for one month in hopes of boosting slumping prices of the exotic minerals used in mobile phones and other high-tech products.

This week's move by Inner Mongolia Baotou Steel Rare-Earth (Group) Hi-Tech might fuel tensions with the United States and Europe. They have questioned Beijing's decision announced earlier to limit exports while it tries to develop its own manufacturers of magnets and other products made of rare earths…

“…Baotou Steel accounts for 60 percent of China's rare earths production "so the impact on the market supply will be substantial," said Sun Fan, a rare earth analyst for Goldstate Securities in the southern city of Shenzhen.

Sun said that Baotou Steel also plans to buy rare earths to support prices.

"The dual measures of suspension and purchase will offer support for the rare earth prices and make the prices gradually pick up in the future," Sun said.

In China, prices of some rare earths have fallen sharply since June.

The price of neodymium oxide has declined 34 percent to $157 per kilogram, while europium oxide is down 35 percent at $2,904 per kilogram, according to Lynas Corp., an Australian rare earth producer.

Beijing is merging its rare earths producers to tighten control over production, sales and pricing.

It announced in June that Baotou Steel would become the only miner, refiner and seller of rare earths in the northern region of Inner Mongolia, a production center. It said 35 other companies there would be merged or closed…” (Source)

What will the U.S. and Europe do vis a vis this China problem? More importantly, until we ramp up our own production and resolve our deficit issues, what can we do?


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