One of the enigmas of U.S. trade policy is the willingness of policy makers to allow China open access to U.S. markets while China throws up many obstacles to American imports. This has predictably led to the US China trade imbalance becoming an issue in the U.S. Presidential Republican campaign. In an interview on Fox News on February 2, 2012, Republican Presidential front runner, Mitt Romney, declared:
On my first day in office, I will label China a currency manipulator and under US law once that label has been affixed the president is able to apply tariffs to any of their goods … Iâ€™ve made it very clear to the Chinese thatâ€™s where weâ€™ll go if they continue the practices theyâ€™re pursuing right now.
Romneyâ€™s get tough on China rhetoric impressed Donald Trump who promptly endorsed Romney for the Republican Presidential Primary. According to Trump: â€œI love what Mitt was saying about China and the rest of the world, which is just absolutely ripping us off and trying to destroy this nation with a smile. And I think that Mitt Romney really sees China for what they are.â€
It is a fact that China maintains a huge trade deficit with the U.S. The exchange rate of Chinaâ€™s currency, the Renminbi, is kept artificially low making it very difficult for U.S. products to compete with cheap Chinese imports. Imports of Chinese products have devastated the U.S. manufacturing industry. To make matters worse, China establishes tariffs on a range of key U.S. export products, such as automobiles, making it even more difficult for the U.S. to reverse the trade deficit which continues to grow. Compounding the issue is Chinaâ€™s flagrant violation of intellectual property laws where Chinese firms pirate many U.S. products with almost total impunity thereby removing another means of balancing the trade deficit.
The trade imbalance has led to China accumulating vast reserves of US dollars, becoming the biggest purchaser of U.S. treasury bonds, and becoming Americaâ€™s chief creditor. According to the U.S. Treasury, as of November 2011, China held 1.1 trillion dollars in U.S. treasury securities. All this has U.S. Republican presidential candidates and many economists speaking out loudly against China and calling for retaliatory measures such as tariffs, getting tough on Chinese violation of intellectual property laws, and pressuring China to revalue its currency. So are Romney, Trump and a host of prominent economists correct about China? Do they make a compelling case for abandoning a bad China trade policy?
The problem is that what Romney, Trump and other China trade policy critics miss is that the trade deficit is not a result of a poorly thought out U.S. trade policy. In fact the U.S. trade policy with China has been meticulously thought out. There is growing evidence that it is payback for the CIAâ€™s decades long covert use of Chinaâ€™s â€œblack goldâ€ â€“ gold that does not appear on any international gold registry. Chinaâ€™s â€œblack goldâ€ has been hidden for over six decades in order to fund a globally coordinated set of covert projects hidden from public view by the CIA and a consortium of national intelligence organizations and transnational corporations â€“ a global Manhattan project.
Two very recent court cases and a June 2009 incident on the Italian/Swiss border involving high denomination 1934 Federal Reserve notes reveal a remarkable historical fact. During the Second World War era, vast quantities of Chinese gold reserves were either looted and hidden by the Japanese Imperial Army in the Philippines, or transferred by the Chinese Nationalist government to international safe havens. The biggest beneficiary of this vast historical movement of â€œblackâ€ gold was the U.S. government which arranged for a significant portion of Chinaâ€™s â€œblackâ€ gold to be transferred into the US. Federal Reserve system, and Federal Reserve bonds and/or notes issued in return.
The holders of these high denomination Federal Reserve bearer bonds/notes â€“ often the descendents of Chinese/Asian royal familiesâ€“ could only redeem these bonds after lengthy periods of time, e.g., five decades. As a safeguard to ensure the â€œblack goldâ€ would not become publicly tradable, the Federal notes/bonds were printed with spelling errors and other abnormalities that would make them appear fraudulent. Attempts to redeem these bearer bonds have been unsuccessful. This has led to court cases and financial incidents that have drawn media attention over the high denomination bonds in dispute and their validity. Most public media attention wrongly concludes that these bonds are fraudulent as outlined in a recent Bloomberg article focusing on bonds found in the Philippines. Two recent court cases citing meticulous fact checking and documentation of these high denomination 1934 bonds, suggest otherwise.