We saw the Chinese swoop in and grab a bargain from the increasingly isolated Russian dictator. Desperate to show the oligarchs that he’s still the man in charge, the Russian dictator agreed to develop gas reserves for sale to China that, by all reports, was a steal for the Middle Kingdom. China like Russia has competing sides that must be placated by leadership. This time the hard liners in the Red Army would have been the ones celebrating. But that celebration my not be a long one.
China having finally if not officially conceded that Mao and Marx were equally wrong about economics continues to act like a Stalinist state. The Chinese Red Army, that still holds much of the power, would have been thrilled seeing China’s long term goal of being the dominant world ruler advanced by doing anything to show they can stand up to the old adversary and ‘Paper Tiger,’ the United States. But in a nation that has enjoyed unprecedented trade surpluses with the U.S.,the economists who have to keep the Chinese economy in balance, must be getting a bit nervous.
First, U.S. politics will react to the Russia-China merger as evidence that both countries must be reigned in. The more extreme elements of the GOP the so-called ‘Neo-Cons” will use it as another excuse to build an even more powerful U.S. military. This will put economic pressure on both China and Russia that will try to keep up. The simple fact is that the rejection of both Chinese and Russian exchange students that will soon commence will slow these nations’ ability to transfer technology from the U.S. to their arms industry.
Second, now that China can be perceived as aligned with a dangerous and murderous dictator, U.S. politicians in both parties will now be free to impose sanctions on China for its currency manipulation and its trade imbalance. The first moves will seem modest but will signal to external capital markets that the Chinese party is coming to an end.
Third, the brutal and at times unbalanced persona of the Russian dictator will give two divergent U.S. political forces common ground. The militarists in the GOP for the fist time will find an issue that they and U.S. left can agree on. In the end the U.S. will adopt trade policies that are advanced as “bringing our jobs home.” China, that now makes the large share of U.S. consumer goods will have to focus their efforts in the Russian market as the U.S. dries up. In the absence of U.S. markets, China’s Communist leadership will have to find a plan continue to stand as the great force in development of a better life for the Chinese people selling TV’s to the Russian people who because their wealth has been stolen by a class of oligarchs remain poor, earning an average of $9,000 per year. In the end, China political forces will erupt, as they have historically erupted when the Emperor fails. China will return to the status of a colony dominated by Russia that can forcing the Chinese to pay for the new opium supplied by their former colonial master in the form of Russian natural gas while Japan continues to make products welcome in the U.S. and laughs all the way to the bank.