What China’s direct computer link to US Treasury means

Published on Pambazuka News, Horace Campbell, June 14, 2012.

The fact that China has been given a terminal to buy US debt directly, bypassing Wall Street, must be viewed in the context of the “architecture” of global capitalism which is a product of recent decades of the rise of financial-driven capitalist globalization.

INTRODUCTION:  

The news in May that China can bypass Wall Street when buying United States government debt in what is the Treasury’s first direct relationship with a foreign government was reported by Reuters and carried by very few of the mainstream press. This announcement came at a moment when the depth of the Eurozone crisis was dominating the headlines and creating panic in international markets. Though this arrangement has been in place for about one year, it was only in last month that Reuters revealed in its report that for the first time ever the US Treasury system granted China direct computer link to its auction system (Reuters). http://www.reuters.com/article/2012/05/21/us-usa-treasuries-china-idUSBRE84K11720120521  … //

… SHORT TERM IMPACTS ON THE RELATIONSHIP BETWEEN US AND CHINA:

When Wall Street crashed in 2008, long term imperial strategists such as former National Security Advisor Zbigniew Brzezinski proposed the Group of Two (G-2 or G2) to reflect the special relationship between the United States and the People’s Republic of China at a moment of crisis. China has acted in its own interest and has been building up its economic strength within Asia while building new relationships with countries called BRICS and within the wider context of supporting a G20 formation to promote dialogue for the reform of the international financial system. It is within this new wide ranging platforms that one need to grasp the Strategic and Economic Dialogue (S&ED) between the United States and China. http://goo.gl/ttJG1

It was not surprising that it was in London in April 2009 at the height of the anxieties over the future of Wall Street and Western capitalism where President Barack Obama and President Hu Jintao announced the establishment of the S&ED. Henry Paulson and the Bush administration had initiated a low-key mechanism for consultation called Senior Dialogue so that the neo-cons could continue their belligerent rhetoric against ‘overvalued Chinese currencies’ while quietly pleading with the Chinese not to take any precipitate action in relation to their holdings of US Securities. President Obama and President Hu understood the need to go beyond grandstanding and established a mechanism where high-level representatives of both countries and their delegations will meet annually at capitals alternating between the two countries. This arrangement started in 2009 and the fourth session was recently concluded in Beijing May 3-4 2012. At this 2012 meeting the “Strategic Track” consisted of deliberations between Secretary of State, Hillary Clinton and Chinese State Councilor Dai Bingguo . The “Economic Track”consisted of deliberations between. US Secretary of the Treasury Timothy Geithner and Chinese Vice Premier Wang Qishan. The level of seriousness of these meetings is manifest in the fact apart from the principals there are usually over 20 officials of Cabinet-rank from each side who meet face-to-face and to discuss a range of substantive issues.

As the economic crisis deepened, in 2011 the Chinese and the Obama administration agreed on a strategic framework for “Promoting Strong, Sustainable and Balanced Growth and Economic Cooperation.” The agreement stated that,

“The United States and China affirm that both countries will, based on common interest, promote more extensive economic cooperation, from a strategic, long-term, and overarching perspective, to work together to build a comprehensive and mutually beneficial economic partnership, add to prosperity and welfare in the two countries, and achieve strong, sustainable, and balanced growth of the world economy.”

This agreement involved deepening people-to-people relationships and was followed by the confidence building measures inspired by the visit of Vice President Joe Biden to China in 2011 and a subsequent visit by Vice President Xi Jinping to the White House in 2012.

Despite these and other confidence building measures and the extensive plans laid out in the framework for strong, sustainable and balanced growth, there were sectors of the US body politic that continued a steady invective against China. The rhetoric was on full display in the saga of the Chinese lawyer Chen Guangcheng. With the usual anti-Chinese rhetoric, the corporate media of the United States had a field day about the escape of this campaigner from house arrest and his arrival at the US legation in China. One could see bungling efforts of the US government to clean up the mess by dispatching Kurt Campbell to Beijing to find a solution before the strategic and economic dialogue talks began. Southern Africans will remember Kurt Campbell when he was opposed to African Liberation and wanted accommodation with apartheid.

It was this same Kurt Campbell, now Assistant Secretary of State for East Asian and Pacific Affairs, who was sent quietly to find a solution. However, the Obama administration was in a fix. It was in China to plead with the Chinese not to sell Treasury Bills while for the home audience, the media was seeking to overshadow the mission of Tim Geithner by focusing on Chen Guangcheng.

When Hilary arrived for the meeting, the saga continued and Hilary Clinton attempted to play to the US audience. The Chinese told the US that Hilary could take Chen Guangcheng so that they could focus on the serious business of stabilizing the frayed system. In fact, the Chinese leaders had to rebuke Hilary Clinton by stating in the China Daily that she should not say one thing to the media in public which contradicted the undertakings in private. China had agreed that Chen Guangcheng could leave China and go to the United States. The way in which the Chinese handled the relations exposed a superior grasp of the risks at hand, far beyond the grasp of Hilary Clinton. Timothy Geithner who had a better understanding why the United States had to manifest more humility remained quiet in the face of the grand standing and press conferences that were being given by Hilary Clinton.

THE IMPORTANCE OF THIS ARRANGEMENT FOR WORLD PEACE: … //

… CONCLUSION:

The fact that the mainstream media has kept this new arrangement from the public is not surprising. This is because the ‘mythology’ of US strength and ‘prosperity’ is needed globally at the moment in order for the system to function, especially in the face of the collapse of the Euro. The absence of media discussion and information about China getting its own terminal and the evolution of the new financial architecture (less dominated by the US and West) really helps sustain the “mythology” of US hegemony and exceptionalism in the minds of Americans and many in the world.

However, if there was a serious discussion of international economic relations in the United States, how exceptional can Americans think of themselves if they knew that underneath their “strength” is the fact that US must beg and borrow from other nations to sustain itself and hide the reality of how bankrupt and hollow the society has become over the last few decades of the neo-liberal financialization of the US and global economy which has only benefited the 1%?

Our ongoing effort to highlight the depth of this capitalist depression is to be able to keep making the linkages of the interconnected nature of the crisis. This week we can firmly link the story of China getting its own terminal to the recent report of how much “wealth” US families have lost during the recent financial crisis caused by Wall Street, http://goo.gl/VtQ5c, which actually further shines the light on how “imaginary” and “unsustainable” the actual last few decades of America’s “prosperity” which Clinton and others love to reference as examples of American superiority.

The fact that the People’s Republic of China has been given a terminal to buy US debt directly and bypassing Wall Street must be viewed in the context of the “architecture” of global capitalism in the current period of history which is a product of the recent decades of the rise of “financial” driven capitalist globalization. When seen in terms of “architecture” having the terminal can be placed in the larger context of the many steps taken by China, the US and the EU to both sustain the some central elements of the current system (like US dollar as the world’s reserve currency) by actually evolving it with the introduction of new features (like China getting its own terminal. Other new features which be seen as both sustaining the overall system by “evolving’ it include the planned BRICS Development Bank, the bilateral currency swap arrangements, the Asian regional CMI liquidity fund, etc.
It is imperative that there are plans for the acceleration of the African Monetary Union and for the African Central Bank. What we want concerned economic planners to realize is that while the neo-conservatives focuse on individual variables which reflect sustaining the current system (like oil still priced in US dollars), people and nations should be more forward looking and understanding how the architecture (previously dominated by the US and the West) is evolving in ways (less dominated by the US and the West) which can open new opportunities for structural transformation in societies if people have the vision and desire for change.

Just as Wall Street collapsed in 2008 and the Euro is collapsing, we are witnessing the evolution of a new architecture before our very eyes. If today less than 10 per cent of Chinese trade is indexed in the RMB, what will the international financial system be like when over 50 per cent of Chinese trade is indexed in the RMB? In the short term, progressives must support the avoidance of war, but in all parts of the world a new mode of economics is needed to shape the multipolar world of the 21st century. (full long text).

Links:

Krise im Euro-Land: Lagarde stimmt Euro-Untergangsszenario zu, 12. Juni 2012: Die Schuldenkrise in Europa spitzt sich trotz vieler Milliarden-Interventionen weiter zu. Der US-Investor George Soros hatte dem Euro kürzlich noch drei Monate gegeben. Dem hat nun IWF-Chefin Christine Lagarde indirekt zugestimmt: George ist gut darin Deadlines zu setzen. Das ist gut. Die aktuelle Situation benötigt diese Aufmerksamkeit …;

Gauche grecque et Europe démocratique, Publié dans attac France, par Collectif d’intellectuels européens, le 5 juin 2012 (En 2012, adhérez à Attac).

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