In this space I’ve often tried to draw a line from fiscal policy to national defense policy to show folks that having fancy tanks and planes doesn’t amount to much if you are constrained by political and economic factors. For example, if China invaded Taiwan tomorrow, would we fulfill our obligation to defend it, or would we calculate the economic and financial harm involved and simply let Beijing have it?
Today at Breakingviews.com, John Foley sums up some of the recent evolution in the US-China relationship:
“Friction has been building. Chinese premier Wen Jiabao has made barbed remarks about other nations’ profligate spending habits, and mused on a devaluation of the dollar. Coca-Cola, an American icon, was blocked from buying a Chinese fruit-juice maker for no good reason. The central bank governor even proposed replacing the dollar as the world’s de facto reserve currency, a further slap to Uncle Sam.
“Censorship, protectionism and criticism may raise eyebrows in the West – but they’re unlikely to do much more. That’s because in the great global imbalance, China is the lender, and the US the borrower. China still needs the rest of the world, but it can increasingly dictate the terms, online or off.”
The point: a country not in charge of its finances doesn’t control itself or its destiny.
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