Today's Stories

May 8, 2008

Sharon Smith
Rockefeller Family Fables

May 7, 2008

Winslow T. Wheeler
Drowning in Dollars

Joanne Mariner
Torture After Dark

Col. Dan Smith
It's Lying and It's Murder: How KBR Electrocuted US Troops

Brian M. Downing
Reports From Foreign Provinces

Andy Worthington
Who are the Prisoners Released with Sami al-Haj?

John Stauber
Pentagon Propaganda Documents Go Online, But Will the Media Ever Report on Them?

Christopher Brauchli
Outsourcing Tax Collection

Nelson P. Valdés
Cinco de Mayo and Cinco de Agosto: Mexican History and Manufactured Identities

Rep. Keith Ellison
High Court Deals Blow to Voting Rights

Dan Bacher
Undam the Klamath, Mr. Buffett!

Website of the Day
Green Porno

May 6, 2008

Pam Martens
The Obama Bubble Agenda

Nikolas Kozloff
U.S. is Promoting Secession in Bolivia

Marjorie Cohn
Under U.S. Law Torture is Always Illegal

Ralph Nader
America's Pay-or-Die Health Care System

Yigal Bronner
Archaeologists for Hire

Brian Cloughley
No Laws for Bush America

Jacob Hornberger
Killing Enemies Without Trial

Walter Brasch
People Who Don't Need People

Paul Krassner
An Open Letter to Michael Moore

Manuel Garcia, Jr.
Running Mates from the Imaginary Plane

Website of the Day
Some People

May 5, 2008

Pam Martens
Obama's Money Cartel

Conn Hallinan
The Syrian Affair

Corey D. B. Walker
The End of Politics

Uri Avnery
Crusader Anxiety: Israel at 60

Dave Zirin
Refocusing Olympic Protest

Corporate Crime Reporter
Wiist's Crusade Against Corporations

Robert Jensen
The Selling and Shaping of Our Souls

Daniel White
What People Want to Hear About in Austin, Texas

Benjamin Dangl
May Day Raid on General Dynamics

Website of the Day
McCain's Pastor of Hate: "Starve. I Don't Care. Starve."

May 3 / 4, 2008

Alexander Cockburn
Has Rev. Wright Cost Obama the Presidency?

Nikolas Kozloff
The Shameful Failure of the Black Congressional Caucus

Diane Farsetta
What the Pentagon Pundits Were Selling on the Side

Tariq Ali
New Labour is Dead

Harry Browne
The USA's Other Island: Irish Leaders and the War on Terror

Wajahat Ali
Pakistan's New Daughter of Destiny? An Exclusive Interview with Fatima Bhutto

David Yearsley
A Challenge to Jeffrey Eugenides

Greg Moses
Salamat, Riad Hamad

William Blum
Rev. Wright, the CIA and the AIDS Thing

Robert Fantina
The Rhetoric of John McCain

Fred Gardner
The Greatest Story Never Told

Dave Lindorff
Blame It On Paraguay: The Bush Family's Bad Real Estate Deal

Seth Sandronsky
Standardizing Learning

Binoy Kampmark
Brown, Boris and the British Council Elections

Howard Lisnoff
The Lost First Amendment

Daniel Cassidy
Slanguage: Paddy Works on the Erie

Bill Moyers
Shrink-Wrapping the Theology of Rev. Wright

Jeffrey St. Clair
Booked Up

Poets' Basement
John Holt / Akbar Khan

Website of the Weekend
Ed Abbey, Patron Saint of the Walker's Rights Movement

May 2, 2008

Andrew Cockburn
Secret Bush "Finding" Widens Covert War on Iran

David Isenberg
The Return of Limited Nuclear War?

Vijay Prashad
Driven to Terror: the Case of the Lackawana Six

William Blum
Spies Without Borders

David Macaray
Shutting Down the West Coast Ports: the ILWU's May Day Strike

Rannie Amiri
Is Sadr City Becoming the Next Gaza?

William James Martin
The Carter Coup

Stephanie Westbrook
As Italy Lurches Rightward, a Ray of Hope from Vicenza

Linn Washington, Jr.
A Battle Over Murals in Parisian Ghettos

Anthony Papa
How the Byrne Fund Corrupts Cops and Destroys Lives

Website of the Day
The Serota Petition

May 1, 2008

Michael Hudson
The Fed Sinks the Dollar

Behzad Yaghmaian
Blaming the Yuan for the Deficit with China

Wajahat Ali
The Dark Knight: the Real Rise of Obama

Dedrick Muhammad
Senator Obama, Please Come to Your Senses

Cynthia McKinney
Police in America Can Kill Some People With Impunity

Corporate Crime Reporter
Farm Broadcaster Fired After Ripping Monsanto's Goon Squads

Manuel Garcia, Jr.
The Speech That Might Have Been

Reza Fiyouzat
Stop Obliterating Yourself!

Leigh Saavedra
Suspending the Federal Gas Tax

Tom Semioli
Hollywood Hypocrite: an Open Letter to Michael Moore

Website of the Day
Why Won't McCain Release His Medical Records?

April 30, 2008

William P. O'Connor
The Day I Lost My Innocence

Bob Fitrakis /
Harvey Wasserman
Did the Supreme Court Just Elect John McCain?

Tariq Ali
Storming Heaven: 1968 Revisited

John Ross
Bad Jazz in NOLA: Three NAFTA Leaders Sit It for the Last Time

Glen Ford
Pop Goes the Race-Neutral Campaign!

Joshua Frank
Election Season Piffle: Thinking Outside the Voting Booth

Ashley Smith
Iraq After Basra

Robert Weissman
Medical R&D That Works in the Developing World

Sen. Russ Feingold
Bush's Shroud of Secrecy

Website of the Day
Richard Nixon, April 30, 1970

April 29, 2008

Uri Avnery
The Military Option

Roedad Khan
Why Gen. Musharraf Must Go

Chris Floyd
The Torture Election

Paul Craig Roberts
The Iraq War Morphs Into the Iran War

Dave Lindorff
Invasion of the Pumpheads

Mats Svensson
Mental Barriers in Palestine

Peter Morici
Will the Fed Broaden Its Focus?

Mike Ferner
Inside American Royalty's Security Bubble

John Weisheit
Towing Icebergs to San Pedro

Amit Srivastava
China Olympics, Tibet Crackdown, Coke Profits

Website of the Day
Tom Friedman Gets Creamed

April 28, 2008

JoAnn Wypijewski
On Queen's Boulevard, the Night Sean Bell's Killers Got Off

Mike Whitney
Jeremiah Wright Delivers the Knockout Punch: But Will It Topple Obama?

Iris Keltz
The Fruiting Fig Tree: Memories of East Jerusalem

Steve Niva
The New Walls of Baghdad: the Israeli Model Surges Toward Iraq

David Macaray
CAFTA's Bloodtrails

John Ross
"Adelitas" Shut Down Mexico's Congress

Stephen Lendman
The Politics of Green Scare

Malou Innocent
On "Withdrawing Responsibly" from Iraq

Christopher Brauchli
Want to Learn the Ins-and-Outs of the Slumping Economy? Just Ask Ashley ...

William Kaufman
Michael Moore's Embrace of Obama: a Polemic Devoid of Politics

Website of the Day
Get Your Fix

April 26 / 27, 2008

Alexander Cockburn
Nothing Will Get Hillary Out of the Race

Ralph Nader
A World of Hunger

Peter Camejo
A Crying Shame: the Wages of Left Capitulation

Harvey Wasserman
Making You Pay for the Next Chernobyl--in Advance!

Franklin Lamb
Will U.S. Policy in Lebanon and the Middle East Ever Change?

Wajahat Ali
Fisk Fighting: an Exclusive Interview with Robert Fisk

Mike Whitney
Food Riots and Speculators

Andrew Wimmer
Obliterate Them!

David Yearsley
Nero, Frederick the Great, Nixon ... They All Did It Better Than Clinton

Greg Moses
Chicago: the Stupid Experiment

Ron Jacobs
Walking the Lonely Road

Robert Fantina
Bush v. Carter: Let History Judge

Missy Comley Beattie
Introducing President McCain

Linn Cohen-Cole
The Criminalization of Raw Milk: a Mennonite Farmer is Hauled Away

Paul Krassner
Remembering Ruben Salazar

Jeffrey St. Clair
Booked Up

Poets' Basement
Buknatski, Khaiyat, Lair, and Kowit

Website of the Weekend
Justice for Sean Bell

April 25, 2008

George Ciccariello-Maher
Embedded with the Tupamaros

Dave Lindorff
The Bitter and the Biased: How Clinton Courted Racists in Pennsylvania

Franklin Lamb
The Israeli Project Has Failed in Lebanon

Alan Farago
Hacking the Development Code: the Politics of Zoning in Florida

John W. Farley
Syiran Nukes: the Phantom Menace

Kathleen M. Barry
Some Questions for "Femininists for Clinton:" Is There Really Any Difference Between Hillary and Condi?

Mohammed Alireza
Cowboys and Iranians

Nick Dearden
Haiti and the Black Hole of Debt

Carmelo Ruiz Marrero
Why Biotech is Betting on Biofuels

Bruce Springsteen
Farewell to Danny

Website of the Day
It's Bigger Than Hip Hop

April 24, 2008

Linn Washington, Jr.
Duplicity Demeans Clinton Campaign (or When Bill Praised Farrakhan)

Franklin Lamb
Bush to Nasrallah: an Offer Hezbollah Cannot Refuse?

Jennifer Van Bergen
The High Crimes of John Yoo: the President's Executioner

Joanne Mariner
U.S. Hypocrisy and the Malaysian Guantánamo

Mark Engler
Trade Politics and the Battle for the Soul of the Democratic Party

Dave Lindorff
The Politics of Obliteration: Hillary's Monstrous Threat

John Blair
Obama's Missed Opportunities in Evansville: Did He Even Know It Was Earth Day?

De Clarke / Stan Goff
Politics is Food is Politics

Binoy Kampmark
Bowling for Boris: the Tories, Red Ken and the London Mayoral Race

Philippe Marlière
Sarkozy and the Specter of May 68

Peter Morici
The Bank of England Misses the Point

Website of the Day
Fair Food Nation

April 23, 2008

Cockburn / St. Clair
Straggling to Denver

Vijay Prashad
McCain's Mask

Paul Craig Roberts
What the Iraq War is About

Stephen Soldz
The Involuntary Drugging of U.S. Detainees

Laura Santina
Hillary: Another Feminist Perspective

John Stauber /
Sheldon Rampton
Pentagon News Networks

Dave Lindorff
What Double Digit Win? Media Round Up in PA

George Ciccariello-Maher
Radical Chavismo Growls a Challenge

Ralph Nader
Andy Stern's Rackets

John Weisheit
Rearranging Deck Chairs at Glen Canyon Dam

Website of the Day
Wal-Mart's "Cost of Admission"

April 22, 2008

David Isenberg
Spinning Saddam's Linkages

Stan Cox
The Political Economics of Greenwashing

David Macaray
Memo to the Clinton Campaign: They Are Still Murdering Labor Unionists in Colombia

Jeff Birkenstein
Playing the Opposite Game: Or Why Can't I Sell Out?

Mike Whitney
Memo to Bernanke: Enough With the Rate Cuts, Already!

Nikolas Kozloff
Bush's Paraguayan Fiasco

Floyd Rudmin
From Lhasa to Bilbao: Journey of a Double Standard

Carlos Villarreal
Why John Yoo Should be Dismissed From Boalt Law School--And Prosecuted

Ray McGovern
What About the War, Pope Benedict?

Michael Gould-Wartofsky
El Barrio Fights Back Against Globalized Gentrification

Robert Ovetz
A Fish Tale

Pat Wolff
Rightwing Power Grab in Cornhusker State

Website of the Day
Defend the Rutgers 3!

April 21, 2008

Bill Quigley
The U.S. Role in Haiti's Food Riots

Uri Avnery
The Lion and the Gazelle

Dave Lindorff
The U.S. Economy and the Costs of War

Wajahat Ali
Finding Osama Bin Laden with Morgan Spurlock

Andy Worthington
Hollow Gestures at Guantánamo

Robert Jensen
The Sorrows of Race and Gender

Ron Jacobs
Clampdown at Evergreen

Dan Bacher
The Great Salmon Closure

Harvey Wasserman
Where's George?

Danny Alexander
Remembering Danny Federici

Website of the Day
Save Our Taco Trucks!

April 19 / 20, 2008

Alexander Cockburn
McCain: What Really Happened When He Was a POW?

Patrick Cockburn
A New Struggle is Beginning in Iraq

Wajahat Ali
Zinn Speaks

Andrew Wimmer
Papal Benedictions

Rev. William E. Alberts
Jeremiah Wright and America's Continuing "Separate and Unequal" Societies

David Rosen
Texas Two-Step: The Polygamy Raid and the Regulation of Sexual Life

Robert Fantina
McCain Detests War?

Ramzy Baroud
The Politics of Armageddon: McCain's Pastors and the Middle East

Saul Landau
The No Escape Clause on Iraq

Dr. Susan Block
Raelians, Aliens and Evolution

David Yearsley
Suitcase Arias and Ithacan Jazz

Phyllis Pollack
On the Red Carpet with the Rolling Stones

Jeffrey St. Clair
Booked Up

Poets' Basement
Hartz, Newberry and Khaiyat

April 18, 2008

John Ross
The Bush Legacy: Losing Latin America

Dave Lindorff
Courage and Conviction: In Praise of Bill Ayers

Dan Glazebrook
An Interview with Robert Fisk

Carl Finamore
A Look Inside the Hangars

Rannie Amiri
J Street: Do We Really Need Another Pro-Israel Lobby?

Richard Morse
A Creepy Roadblock at Midnight

Ko Young-dae
CONPLAN 8022: Inside Bush's Nuclear War Plan for the Korean Peninsula

Farooq Sulehria
A Himalayan Surprise

April 17, 2008

Michael Hudson
Hillary Joins the Vast Rightwing Financial Conspiracy

Robert Bryce
The Ethanol Apologists

Kathy Kelly
Weary of War? Don't Collaborate

Madis Senner
The Carrion Feeders' Ball: How Hedge Funds Reap Billions Off Economic Misery

Peter Morici
The G7, the Banks and GE

Ron Jacobs
Washington, al-Maliki and the Militias

William S. Lind
A Confirming Moment in Basra

James Murren
Obama's Disconnect with Small Town America

Ben Terrall
Losing Haiti

Walter Brasch
Political Log Rolling in Clinton County, PA

Website of the Day
Stealth Attack: Homegrown "Terrorism" Bill

April 16, 2008

Bill Kauffman
The Candidates from Nowhere

Roxanne Dunbar-Ortiz
Colonization and Massacres

Saul Landau
How to Leave Iraq

Peter Morici
McCain's Economic Plan: GOP Out of Ideas (But So are the Democrats)

Eric Toussaint /
Damien Millet
Bankers Saved, Human Rights Sacrificed

Jeff Ballinger
Inside Nike's Asian Sweatshops: Squeezed Vietnamese Workers Strike Back

David Macaray
Union Strikes and Replacement Workers

Gary Leupp
Electoral Revolution in Nepal

Richard Morse
The Food Riots in Haiti

George Ciccariello-Maher
Einstein Turns in His Grave

Dave Lindorff
Letters from the Bitter Belt

Website of the Day
Surviving Prozac

April 15, 2008

Ralph Nader
The Politics of Distraction in an Age of Gotcha Capitalism

Uri Avnery
Manifest Destiny and Israel

Brian Cloughley
Arrogant Lies

David Price
Outrageous Pre-Tour de France Ban

Joe Bageant
Bitter America: Media Shit Storms and Heartland Reality

Steve Early
The Purple Punch-Out in Dearborn

Mats Svensson
To Create Something from Nothing: the Making of a Palestinian State

Michael Donnelly
Dead-Eye Hil and the Elitist

April Howard /
Benjamin Dangl
Dissecting the Politics of Paraguay's Next President

Laray Polk
Let's Not Put the Torch in a Bubble

Charles Modiano
What Does a Woman Have to Do to Get on the Cover of Sports Illustrated?

Website of the Day
The $3 Trillion Shopping Spree

April 14, 2008

Carl Finamore
Airline Deregulation Makes a Hard Landing

Michael Hudson
A Trillion Dollar Rescue for Wall Street Gamblers

M. Shahid Alam
Hizbullah's Big Win: Has Israel Finally Met Its Match?

Patrick Cockburn
A Cleric, a Pol and a Warrior

Paul Craig Roberts
Petraeus Sets Up Iran

Joanne Mariner
Redition to Jordan: What Happens When the Gloves Come Off?

Martha Rosenberg
Suicide and Cymbalta

Dave Lindorff
The Bitterness Thing: Is Obama Channeling Nader

P. Sainath
Hot Messages to Sex Dancer Doom Condi's New Finnish Pal

John V. Whitbeck
On Hypocrisy Over Tibet: a Personal Reflection

Website of the Day
Spying on Environmental Groups

April 12 / 13, 2008

Alexander Cockburn
Olympic Torch Toasts US Candidates

Patrick Cockburn
Warlord: the Rise of Muqtada al-Sadr

Mike Whitney
Want to Save the Economy?

David Yearsley
Film Scores and Westerns: the Stealth Cavalry of Empire

Robert Fantina
Bush's Brand of Morality

Conn Hallinan
Another Defining Moment in Iraq

Bill Hatch
In Praise of Hippies and the Counter-Culture

Ramzy Baroud
The Basra Battles

George S. Hishmeh
Back to Square One

Ron Jacobs
The New New Left in Latin America

Nikolas Kozloff
Olympic Torch in Buenos Aires

Charles Thomson
The British Prime Minister and the Tate's Tin of Shit

Alexander Billet
The Disney-fication of CBGB

Missy Beattie
Huffing and Puffing to Failure

David Michael Green
America's Jones for War

Seth Sandronsky
Education Entrepreneurs

Prairie Miller
Meeting David Wilson

Jeffrey St. Clair
Booked Up

Poets' Basement
Ko Un, Ibn Salma and Greaves

Website of the Weekend
Americans United for Palestinian Human Rights

April 11, 2008

Nikolas Kozloff
The Clintons and Their Sordid Colombia Advocacy

Wajahat Ali
Revenge of the Ghetto Nerd: an Exclusive Interview with Junot Diaz

Sharon Smith
Let Them Eat Ethanol!

Yigal Bronner / Neve Gordon
Digging for Trouble: the Politics of Archaeology in East Jerusalem

Alan Farago
Eating South Florida

Dave Lindorff
On Waking Sleeping Giants: Lessons for America from China

George Wuerthner
Money for Nothing? The Problems with the Conservation Reserve Program

Christopher Brauchli
Prostitutes Don't Do Funerals

Website of the Day
Animals Explain the Insurance Industry: a Health Care Video

April 10, 2008

Mathieu Vernerey
Tibet for the Tibetans!

Elizabeth Schulte
Slavery in the Fields

David Macaray
Labor Unions Will Never Get a Fair Shake

Ashley Smith
The Rise of Muqtada al-Sadr

Peter Morici
Driving Up Debt and Dragging Down Growth

Jacob Hornberger
The Military's Distintegrating Family Life

Harold Austin
Snitch or Else: Prison Officials Threaten Gang Drop Outs

Website of the Day
Hillary: the Wal-Mart Videos

April 9, 2008

Paul Craig Roberts
The Fading American Economy

Winslow T. Wheeler
Congressional Theater: the Petraeus / Crocker Hearings

C. Hand
Why Dave Marash Left Al Jazeera

Paul Krassner
Sex and Violins

Paul Wolf
Colombian "Magnicidio" Remains a Mystery After 60 Years

Wajahat Ali
Alien Invasion!

Karyn Strickler
Lost in the Fumes: the Sierra Club Sells Out to Clorox

Dan La Botz
Confronting the Economic Crisis

Eric Walberg
The Shadow of Munich: Another NATO Flop

Robin Millenthal
Enough Already! Growth and the Tar Sands Economy

Website of the Day
Conservative Nanny State

April 8, 2008

Mike Whitney
Should Khalid Sheikh Mohammed be Set Free?

Nikolas Kozloff
Bush Bullies Congress on Colombia Deal

Greg Moses
Migrant Detention in South Texas

Joshua Frank
The Other Military Draft

John Ross
Mexico City's Urban Tribes Go on the Warpath Against EMOS

Michael Donnelly
Hillary's Western Swing

John V. Walsh
Why Obama Lost Massachusetts

Jeff Nygaard
Health, Security and Mandates

Bill Piper
Last Shot for a Bush Legacy?

Sen. Russ Feingold
Legal Representation and the Death Penalty

Website of the Day
Catonsville 9, Forty Years Later

April 7, 2008

Ishmael Reed
The Irish Black Thing

Harry Browne
Irish Peace Activist Acquitted; Deported

Uri Avnery
Tibet and Palestine

Lenni Brenner
Obama's Constitution, His Pastor and His Unbelieving Mom in Heaven

Ayesha Ijaz Khan
America Must Respect Pakistan's Democracy

Robert Fisk
Fearful Lives in the Land of the Free

Edwin Krales
Ensuring the Success of Fascism in Spain: the US Corporate Role

Chris Genovali
Vancouver Island's Dwindling Ancient Forests

Website of the Day
LA Artists Against War

April 5 / 6, 2008

Alexander Cockburn
Did the Elites Want MLK Dead?

Ramzy Baroud
There are No Checkpoints in Heaven

Ralph Nader
Runaway Bailouts

David Yearsley
How Scott Joplin Had Wall Street Down

Saul Landau
Sex Politics in America

Paul Craig Roberts
The Petraeus and Crocker Show

Lawrence Korb / Ian Moss
Rev. Jeremiah Wright, a True Patriot

Seth Sandronsky
Meet America's Promise Alliance: Colin Powell's New Gig

John Ross
La Cumbia de la Doctrina Bush: Colombia Kills Four Mexican Students in Ecuador Bombing

Robert Fantina
McCain, Republicans and Family Values

David Michael Green
Back to Disaster: Hoover at Home, Tet Abroad

Missy Beattie
McCan't

Patrick Bond
Vultures Circle Zimbabwe

Dr. Susan Block
The New American Pot Dealers

Phyllis Pollack
The Stones Meet the Press

Adam Engel
The Boobus in the Lie

Jeffrey St. Clair
Booked Up

Poets' Basement
Diamand and St. Clair

Website of the Weekend
Richard Pryor Goes to the Gun Shop

Subscribe Online

Will the Debt Cyclone Topple the Colossus?

China's Paper Feet

By KENNETH COUESBOUC

Over the past twenty years, China has applied the ideal model for the accumulation of capital. A model inaugurated in modern times by England during the industrial revolution, when the cotton-mills put out of work the millions of Indians who were spinning by hand, as had their ancestors since prehistoric times (cotton was originally cultivated in the Indus valley). A model that can counterbalance for a time the inherent contradiction of capitalism, by exporting consumption and importing investments. Instead of distributing value as wages to the workers, so that they may consume the produce of their labour, the produce is exported and consumed by others, and its value returns in the form of investments. China exports consumer goods and, in exchange, imports raw materials and technology. This means that other nations export raw materials and technology and, in exchange, import consumer goods. The Chinese do not consume goods they have produced, whereas other nations consume goods they have not produced. This is the perfect situation and China has benefited from it on an unprecedented scale. But, now that the consumer nations are in trouble, how will China manage a slump.

Raw materials and technology are investments that need the transforming power of labour and the value added by work to be consumable. Entering the production process, they acquire or transmit value until the final consumer stage. For example, machines and plastic pellets are exported by the US to China, and toys are imported back. But the toys contain the value of the machines, the pellets and the work applied in making them (for simplicity’s sake this work includes the buildings, the energy supply, etc.). So that the value of the toys produced is always superior to that of the machines and pellets. Value for value some of the toys stay in China. And, for the same investment in machines and pellets, the US gets fewer toys, albeit at a lower price than those produced at home. And, being cheaper, the imported toys take over the home market.

When the toys were made in the US, a certain investment in machines and pellets resulted in a certain amount of toys. Now that the investments are exported, less toys are imported value for value, as they contain the value added by work. To maintain the amount of toys supplied, the exported investment musts increase constantly to compensate the difference in value. The making of toys is outsourced to China and those employed to make them in the US lose their jobs. But the production of machines and pellets must increase, and so the workers change jobs, from making toys they pass to making machines and pellets. Except that these productions are less labour intensive, so that only a few keep an industrial job and the rest can only provide services.

The entrepreneur (this one represents a whole sector) does not see things this way. He exports machines and pellets and imports cheap toys of the same value, and he puts the local production out of business with low prices they cannot match. As long as his business is expanding, he exports a growing quantity of machines and pellets and imports all the toys produced. The growth in exports compensates the difference in value explained above. This continues until he controls all the market. At which point growth in the production of machines and pellets for export stops. But, as soon as the exported investments stop growing, the value of the toys exceeds the value of the investment and a part of the toys stay in China. But the Chinese, who have no use for them and no demand, sell these extra toys on the world market in competition with the entrepreneur at the origin of the process. Hence the obligation to control the whole production, and hence the continual succession of lawsuits over copyrights. And, as the value of the machines and pellets he exports is insufficient, he pays the difference in currency.

Outsourcing the production of toys leads to a trade deficit, because the value of the toys produced exceed that of the machines and pellets. But the deficit also applies to supply and demand for toys on the US market. As more value is coming in than is going out, more value is being consumed than is being produced. The importer pays the difference with currency. The consumer pays the difference with credit and debt. So the consumer borrows to buy toys, and the entrepreneur passes on this debt to the Chinese in the form of currency (a promise to pay). And the currency is used to buy US Treasury bonds, thereby filling the budget deficit. So the consumer’s borrowing pays the government’s overspending, and the Chinese are holding the paper. But, now that consumer borrowing is waning and governments are overspending more than ever, the Chinese may become wary of bonds and prefer stocks. And that leaves no one to refund the treasury deficit. However, not even the Chinese would consider leaving the US Treasury out on a limb. Though interest rates will have to rise considerably to make the T-bonds attractive enough in an inflationary situation.  

China’s sovereign funds will be obliged pick up the US Treasury’s debt, but this will not be enough to regenerate consumer demand. So that China will export less consumer goods. Will the Chinese close factories, or can they turn production around and open up the Chinese market to mass consumption? Will they try to deal with mass unemployment, or can they distribute wealth by increasing wages and allowing the work force to consume the produce of its labour? Can the Chinese consumer take the place of the failing consumers of the world? An improbable solution, as the two options are not equally practicable. The unwritten laws that regulate the accumulation of capital only allow the first choice. Capitalism has a time for expansion and a time for concentration. And the function of recessions is to condense the dispersed wealth of growth, gathering it into a few hands.

As China reduces exports for lack of demand, imports will diminish accordingly. Fewer toys need fewer machines and pellets. And so it will be the world over. We are about to witness the first slump of the post-Cold War era. The first depression to have a really global dimension. And the world’s financial system is so overstretched, with debts piled on debts like a house of cards that it could collapse quite suddenly. Ever since the start of the subprime crisis last summer and the subsequent credit crunch, the official discourse has repeated endlessly that the “fundamentals are sound”.

It assures us that there is no reason for alarm because the upheaval concerns exclusively certain banks or, at the very worse, the banking system. Those who govern our destinies may believe their own spin, or it may be wishful thinking or, more likely, a voluntary misrepresentation. But it is gradually becoming apparent that those assurances are false, and that over borrowing is universal.

Governments as well as house-owners, consumers and investors, all have borrowed far more than they should and their spending spree has left a wide paper-trail all around the planet. Far too much paper for it to keep its value.

Can this gigantic structure built on consumer debt weather a category 5 financial storm? Or will stagnation and inflation bring down the Chinese colossus, with fatal consequences for the declining euro and dollar empires? Will its paper foundations turn out to be quite worthless?

Kenneth Couesbouc can be reached at: kencouesbouc@yahoo.fr