A few comments on the story below.
This is just the start of a wave of acquisitions by Chinese firms in the West as the FX reserves accumulated in the Asian Central Banks wash back up on the shores of the developed world.
Geely, a Chinese car company worth $200m USD bought out Volvo for $2 Billion USD. The money of course was fronted by the local government. The former parts units of GM, which still operates several manufacturing sites in Michigan and Ohio are now owned by the Beijing city government. One of these companies, the former Saginaw Steering Gear made machine guns for the American army in WW2, now they have been bought by Beijing.
Everyone is aware that China is rolling over their trade surplus money as well as the printed money they create to keep the USD/RMB peg and buying hard assets. But there is not enough investment to wash up all of this cash, the next focus will be buying real companies in the West with IP. They will convert these reserves ever so slowly into real assets in the developed world, not just commodities.
For decades , Asia has performed the role of diligent worker bee. Without a history of Adam Smith and free trade they saw how easy it was to game the free trade system. To this day, Koreans do not buy Japanese goods and Japanese do not buy Korean goods. Neither one will buy U.S. goods. The stuff they do want , like Hollywood movies, they just take. The U.S. took the brunt of the free trade economic carnage as over 50,000 factories have closed down in only the last ten years. No one can labor arbitrage and transfer price their taxes away like corporate America. We are still #1 in that game.
As the Fed printed money, giant speculative asset pricing bubbles occurred. The U.S. got lazy on their housing bubble and focused on the military industrial complex. Once mighty titans GE and GM became housing lenders with “old world” businesses attached to provide cash-flow for the financing sides of the business. Everyone drank the kool-aid.
Now drink this kool-aid, even printing money is no longer an option for the U.S. government. China will print to keep the RMB peg…and combined with the $3.2 trillion in FX reserves they could buy most of the S&P 500 companies. Japan is also printing money like there is no tomorrow. Facing economic carnage in their own country, they are bound to start acquiring Western firms to compete with China. The U.S. now faces defaulting on their debt quickly or becoming a sharecropper to Asia.
Great article…
I thought the west would print and buy everything in east,and when the east wakes up ,its too late.
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Regarding the last sentence in this article: Please state by what date the U.S. will either default on its debt or become a sharecropper to Asia. Also, please state precisely what it means for one nation to become a sharecropper to another group of nations.
Thanks for commenting Scott.
The U.S. has basically already defaulted on its debts. The federal reserve has become the biggest buyer of U.S. Treasuries through new money creation. In financial history that is considered a stealth default. The interest expense on the debt is current running at 20%, that is with rates on the ten year held artificially low due to fed buying.Imagine a word in which rates go to 2,3,4%. Interest expense quickly ramps up to 50-70% of the total tax income. Japan is close to this situation now. So in essence, Americans for generation will be working to pay off this debt to foreign central banks and our own domestic banks as it consumes a larger and larger percentage of the tax income. Eventually, all these dollars come home as no one has appetite left for more treasuries. Then they buy up anything they can, including productive assets and companies. There is no firm date, today your not a sharecropper, tomorrow you are. It evolves over years and decades.
Your headline is very misleading: You say Americans are to become sharecroppers, and then, in the last sentence, you say that they will become sharecroppers OR that the US will default. Any now, in this comment, you say that the US is already in default, which implies that Americans will not become sharecroppers after all, since it’s one or the other. But then, further in your comment, you say that tomorrow we will be sharecroppers after all. Even in this case, though, it may take decades, which mean that your argument for this supposed sharecroppers scenario is very vague as well as confusing.