US warships turned away from Hong Kong, by gimleteye

Last week, China denied entry to Hong Kong of the USS Kitty Hawk, an aircraft carrier, and its escort ships. “Beijing has given no reason why it refused the ships entry”, the AP reports. It is quite clear why the ships were denied entry.

It wasn’t about the weather. Unless, of course, the weather has to do with whether China has finished flexing its economic bicepts, rippling from the steroids of US spending at corporations like Wal Mart— a virtual province of China, itself.

The Bush administration, like the Clinton administration before it, has been an unabashed champion of free trade agreements and the miracle of globalization.

As far as the US economy is concerned, mired in a gathering economic storm, the miracle is mostly magic: the redeployment of wealth, capital and jobs to low wage labor nations that have, with astonishing rapidity, discovered that it is not just manufacturing but soft services related to technology and productivity gains that can be captured, too.

We don't make anything. All we do is spend.

World financial markets have voted on this logic: the US dollar is a basket case. That was the discussion caught, perhaps unintentionally, at the recent OPEC meeting where Iran and Venezuela strenuously argued for denominating oil sales away from the dollar.

It is, also, what Chinese financial ministers have said, perhaps unintentionally, about moving their trillion dollar trade surplus into assets denominated in stronger currencies. And why not? They have the upper hand.

In the past, American political leaders have been reliable codependents: China would absorb the falling dollar to prime its own industrial race.

By any economic measure, China has succeeded beyond its wildest dreams. But, also, the Chinese economy is over-heated. A chill in relations with the US serves its own purposes of dampening domestic demand. But there is unease on other fronts, too.

The recent crisis in world credit markets, triggered by the Ponzi scheme of US financial derivatives--tied to the housing and development industry--is orders of magnitude more serious--to foreign investors including sovereign nations--than an anemic dollar. Hundreds of billions of losses are piling up faster than the population clock in Times Square, all in service of US domestic politics.

Anger from this front is also rippling through economic relations between the US and its debt holders. But there's almost a magical silence around this issue from the mainstream financial press. Bloomberg reports that “Global stocks, US futures rise” on increased spending following the Thanksgiving holiday. “The U.S. retail sales data continues to be supportive of a soft-landing scenario,” an Edinburgh financial manager told Bloomberg.

No American voter should be pleased at the cheer that agnostic financial deacons find in spending habits that have turned US consumers into nutrients for Wal Mart.

What we are nourishing is an incredible vanishing act of US power and authority.

The failures of Iraq and Afghanistan are the classic manifestations of hubris, but so is the magically silent economic war in which the US has ceded the upper hand to China.

You don’t need to be clairvoyant to know that was the first though of US military commanders of the Kitty Hawk and its escorts, as they steamed from the safe harbor denied in Hong Kong.