ìGreat Walls of Unknowns,î by Robert J. Samuelson, Washington Post, 26 May, p. A27.
The first paragraph says it all:
ìThe question about Chinaís economy is no longer what it will do to China but what it will do to the rest of the world. It may invigorate the global economyóor destabilize it. We donít know. Until recently, Chinaís movement away from a Stalinist and backward society was mainly a story about what kind of country it might become and what political role it would play in the world. Now Chinaís size and relentless economic growth (averaging 9 percent a year since 1978) have combined to create a global goliath. Itís having huge and barely anticipated economic spillover effects elsewhere.îI beg to differ. Chinaís rising impact on the world and its rule sets are a stunner to the media, most politicians, and the Pentagon (who spends all its time counting the People Liberation Armyís platforms and little else), but it was easily foreseen by the Wall Street players I spent several years interacting with in the late 1990s and early 2000s. That was the NewRuleSets.Project I ran with bond-trader Cantor Fitzgerald. Wall Street has been predicting this impact for years. Why? They are the experts at anticipating the ìeverything elseî that we military strategists tend to ignore as we plot our brilliant future wars against brilliant future foes.
China is the prime suspect as far as the Pentagon is concerned, so we spend a lot of time projecting the tremendous growth in PLA capabilities over the next two decades, essentially ignoring the reality that the only way Beijing can afford to spend that money on the defense budget is because the Old Core is pouring $40 to 50 billion dollars of foreign direct investment funds into its economy every year. Is Beijingís communist leadership under the illusion that the Old Core is going to pay for an outwardly aggressive PLA?
If you believe in that sort of thing, maybe you think the rest of the Core is going to keep buying U.S. Treasury bonds indefinitely in order to pay the Defense Departmentís growing top line no matter how much we piss off the rest of the world with how we use it.
As I say in the book: Today there is only war within the context of everything else and the idiots who sometimes pretend it can be waged without reference to the world at large. I say, follow the long-term money (FDI, sovereign debt, government deficits, defense budgets), because they reflect the dominant and ever-changing rule sets that define globalization.