Predators want to kill you and eat you right there on the veldt. Parasites, by contrast, want to keep you alive, the better to serve as a parasite paradise, a cozy haven where they can grow at their own pace, suckle on your moist, nourishing tissues, multiply their numbers and finally, one way or another, pass those numbers along. The New York Times, "In Parasite Survival, Ploys to Get Help From A Host," 06-26-07.

Annals of the Class War

July 10, 2007

The Class War: How The Enemy Reports It

he US economy is hemorrhaging dollars due to the unexpectedly high cost of its military aggression, carried out under the cover of a "war on terror." The question for the US elites is: where to apply the tourniquet.

The two possibilities are:

  1. Stop the Wars
  2. Cut Consumption

Since the US non-rich buy a significant fraction of their goods from China through the intermediaries of mass-marketers such as Wal-Mart, the ideal place to implement the "Cut Consumption" solution is to convince China to raise the value of its currency relative to the US dollar.

It's ideal because the link between store prices and the yuan-dollar exchange rate is hidden from the consumer and thus the State's responsibility for the rising prices is concealed. Furthermore, it conceals the State's class-based decision to shift the burden of its military aggression to the non-rich.

The description of the problem and the implementation of the solution as it is seen from the other side in the class war can be read from the appended New York Times report.


July 10, 2007

U.S.-China Trade Gap Hits New Record


BEIJING, July 10 - The politically sensitive Chinese trade surplus surged to a record $26.9 billion in June, potentially heightening tensions with the United States and increasing pressure on Beijing to allow its currency to appreciate.

The figures suggested that Beijing’s incremental adjustments to the value of its currency, the yuan, have so far done little to alter a trade picture that has alarmed American lawmakers and some business interest groups in Washington.

Some of the increase in its surplus may have resulted from a push by major Chinese exporters to ship goods before the expiration of government export tax rebates on July 1, a step Beijing has taken to reduce incentives for domestic companies to produce energy-intensive goods for the global economy.

But the hefty surplus, which increased 27 percent compared to June 2006, also reflected the slowing pace of growth in imports. Imports in June expanded at a relatively anemic 14 percent compared to the year before.

The yuan has been allowed to appreciate by just over 9 percent since China broke the currency’s fixed tie to the United States dollar two years ago. The Bush administration and some members of the United States Congress have pressed Beijing to allow the yuan to rise at a much faster pace, with some claiming that it should be allowed to appreciate by a third or more against the dollar.

Several leading senators are backing legislation that would allow American companies to request steep anti-dumping duties against countries that keep their currencies artificially undervalued to gain a trade advantage. If the measure were enacted, China would likely be the major target of such petitions.

The export surge also comes as China has faced heavy pressure to crack down on companies that export counterfeit or shoddy goods that have led to safety problems in the United States and other countries.

Chinese exports of poor-quality seafood, tires, toothpaste and medical ingredients account for a small fraction of its total exports. But the quality problems have added fuel to charges that its companies disregard international rules and standards.

The overall Chinese trade surplus for the first six months was $112.5 billion, up 84 percent from a year earlier. Its total trade surplus for 2006 was $177.5 billion.

Export-driven growth is unusual for a major, continental economy like China. Similar economies usually rely more on domestic investment and consumption than on exports to stimulate growth.

Goldman Sachs estimated that the Chinese export surplus in the first half of the year equaled about 8 percent of its gross domestic product in the same period. Its surplus in the first half of 2006 equaled 6.3 percent of gross domestic product.

On the whole, China also depends more on domestic investment and consumption than on exports to generate its growth. But no large economy in recent history, including Japan in its productive heyday, has had such high trade surpluses relative to total output, Goldman said.

"This level of trade surplus is unprecedented for China or any other major economy in the world," Hong Liang, an economist for Goldman in Hong Kong, said in a research note. "This again highlights the ineffectiveness of the policy tinkerings that have so far failed to tackle the root cause of China’s bloating trade surplus: the significantly undervalued currency."

Some Chinese officials and private-sector economists said that they expect exports to cool in the second half of the year. Export tax rebates adopted in the late 1990s to stimulate the then-slumping Chinese economy have been phased out for many sectors.

But the Chinese central planning agency, the National Development and Reform Commission, has forecast a total surplus of at least $250 billion in 2007, which suggests continued rapid growth of exports and slower growth of imports.

Unlike in the first part of this decade, China now has a large trade surplus with many of its trading partners, including the European Union. Previously, its trade surplus was attributable mainly to its oversized gap with the United States.

Its surplus with the United States reached $14 billion in June, while that with the European Union hit $11 billion.

Even so, many economists argue that China is serious about reducing what it calls imbalances in its economic development, including its trade surplus.

Chinese leaders have repeatedly pledged to raise domestic consumption as a source of economic growth, relying less on investment and net exports.

"The government is taking significant steps to discourage exports of goods that consume resources that China does not have," Andy Rothman, an economist with CLSA Emerging Markets in Shanghai, said.

But he said those measures are aimed more at fixing China’s energy and environmental woes, and not specifically at reducing its trade surplus.

Over time, he said, trade should come more into balance, but possibly not quickly enough to ease tensions with the United States.

"The problem for China is that there is very little it can do in the short term to reduce the size of the U.S. trade deficit with China," he said.

Rothman said that the value of the yuan is not the most important factor in the Chinese trade picture. United States exports to China have increased by 188 percent since 2001, a much faster rate of growth than the United States has had with any other major trading partner, despite what some economists argue is the yuan’s artificially low purchasing power.

"This is a very long-term structural problem that the Chinese are as eager as anybody else to fix," Rothman said. "But we have to recognize that it will take more time."