By John F. Di Leo, Opinion Contributor
“Money is Fungible.”
We may disagree about all sorts of things in economics, but not this one. It’s one of the fundamentals.
If you have a thousand dollars, you can buy something that costs $1000, or you can buy a hundred things that cost $10 each, or a thousand things that cost $1 each — or you can put your $1000 together with other money you already have, to buy something that costs more.
This is so obvious it doesn’t seem worth bothering to mention, right?
But it is necessary to delve into this issue, much more seriously than we usually do, because our shortsightedness about international trade has paved the way to all sorts of problems – problems, in fact, that may already be too far gone to fix.
As voters, and perhaps as economists too, we like to think of money in international trade as going back and forth in exchange for goods.
We may buy televisions from China, paying China $50 for the flatscreen that the big box retailer charges $150 for, but when we pay them $50 for that TV, the Chinese can’t eat or drink that $50; they have to spend it. So they will buy $50 worth of something else from us. Maybe raw materials like cotton or iron or — maybe finished goods like plant machinery. But they have to buy something, otherwise that $50 is useless to them. It’s American currency. They have to turn it into another purchase.
Economists will quickly point out that they don’t have to buy anything directly from us; they could trade those fifty dollars to some other country, buying wine from France with it, for example. We’ve always thought that was fine too, because then France has the $50, and again, they have to do something with it. So maybe the French will spend the $50 on something from the USA. Or maybe they’ll spend it on something from Spain, and then Spain will have the $50. Eventually, someone will buy something from the USA with it. And that’s fine with us.
Under this theory, there really cannot be a true trade imbalance, because eventually, all your imports even out to exports. Our country’s dollars are useless overseas, until someone buys something from us with them. The entire theory of free trade is dependent on this concept.
Oh, they might wait until the dollar is weaker, and sit on the money in a bank for awhile; that’s all right. They may buy bonds and sit on those treasury notes for a couple years, essentially buying some of our crushing national debt; Americans may think we’re fine with that too.
The problem is, all this doesn’t tell the whole story.
In fact, when we say money is fungible, we’re not just talking about bank accounts and physical goods. It’s true that the money we spent on imports is going to eventually come home, but it may not come home as either debt or cargo at all. There are other ways to spend it.
As China has succeeded in putting whole industries out of business, all over the world, becoming the global manufacturing powerhouse that it is today, China has found that it needs fewer and fewer imports from the rest of the world.
So, when China gets those billions and billions of dollars for their $50 TVs and their $50 tires and their $5 shirts and their $3 board games and their $8 water pumps and $3 lithium ion batteries – they have more US dollars than ever (and Euros, and Canadian dollars, and Pounds Sterling), with fewer and fewer temptations of foreign goods to spend it all on in return.
This might naturally cause them to raise prices for the goods they export, but there are other ways to spend all that money, other ways that don’t help us at all and in fact do incredible damage to the world’s balance of power.
For example.
Farmland: China has been spending a fortune on the acquisition of agricultural lands all over the world. By some counts, Chinese interests now own at least 400,000 acres of U.S. farmland alone. At least eight U.S. state legislatures have passed laws to limit such purchases to foreign interests, at least to known enemy interests, in 2023.
Residential Real Estate: If you or a family member has been house-hunting in 2023, you may have encountered an unusual type of competitor for the houses you like. Flush with cash, Chinese investors are bidding well above the asking price, paying cash, and driving up prices in an already challenging year for homebuyers. On the one hand, it’s an investment – China always thinks in the long term – and on the other hand, it’s a place to be lived in, by the Chinese citizens they send here.
(PS: When studying this issue, remember that the truth is much like an iceberg; China looks like it’s only 6% of the foreign investment in American real estate, but many of the non-Chinese foreign conglomerates buying up our homes are partially or largely controlled by China as well).
Commercial Real Estate: China has been buying up properties all over the world for years, especially in the logistics sphere. As just one example, the Chinese operate approximately 100 seaports in over 67 countries outside China, either as outright port or berth owners or as contracted port managers with longterm contracts.
Haifa in Israel, Piraeus in Greece, Aden in Yemen, even the mega-port of Singapore, are now operated in full or in part by the government of China, with local Customs authorities working hand-in-hand with China as cargo flows in and out, as if they were allies. This is strictly commercial, of course, not military.
But all it takes is the docking of a naval vessel to turn a commercial port into a navy port. There was a time when Britain was a global naval power, then the United States took its place in the 20th century. If China wanted to make such a declaration, it wouldn’t take much, would it, with all the operations already in place.
Corporate ownership: Foreign ownership of businesses is nothing new. We have seen American holding companies buy European manufacturers and vice versa for centuries. Work in the business world long enough, and you’re almost certain to have worked for as many foreign conglomerates as American employers (Full disclosure: over his long career, this author has worked for conglomerates based in Sweden, Germany, Austria, Ireland and England, as well as the United States). But there is a difference between working for a foreign conglomerate based in an allied country and working for one based in a hostile country.
It’s notoriously difficult to identify the true controlling owners of publicly traded companies today, but the Chinese now own controlling interests in countless “American-seeming” conglomerates, from movie theatre chains to manufacturers, from hotel chains to distribution companies, from internet providers to food producers.
Colleges and Universities: China delights in paying “full freight” – the cost of out-of-state tuition – for Chinese students placed in research universities all over the United States. Students not only gain access to the best professors and the most cutting edge information; they can power through the track to become teaching assistants, doctoral candidates, and professors themselves, with research projects to work on, and every opportunity to gain the latest technology for their superiors in China.
Is this a problem?
It wouldn’t be, if China were just any other country. This may sound like xenophobia, but it truly isn’t.
China is much more like the Soviet Union before the fall of the Iron Curtain, but we don’t appear to realize it. China positions students in research universities, puts military police in seaports and logistics parks, places engineers in manufacturing plants, and they all send information back to Beijing. It isn’t even necessarily accurate to call them spies; from their perspective, they’re employees, agents, serving their employers back in Beijing.
We have a system of laws to address this sort of thing, known as the United States Export Controls, designed to keep materiel and technology out of the hands of hostile foreign governments — but the problem is, these controls are simply not rigorous enough, not well-known enough even, to defend against an enemy as enormous and as devious as Mainland China has proven to be.
China’s tentacles are all over our economy; our academe; our science sector; and our geography. We have seen evidence of China’s blatant bribery and spying operations all over our own federal government. And it only stands to reason that if they have done this in the United States, they must be similarly entrenched in dozens of other countries as well.
You know the old saying: “Generals are always fighting the last war.” It may be that this is the truest example of that old line.
We worry about China attacking Taiwan or its other neighbors on the South China Sea. We are scared to death that China will one day use its military, its biological weapons, and its nuclear arsenal to take over the United States.
But perhaps that’s the last war, and what China is doing today is quietly marching to victory in a war we don’t even know we’re in. With so much control of the transportation infrastructure, the manufacturing and distribution industries, our colleges and communications, anyone keeping score can tell that we aren’t winning.
(Aside: A question… are you reading this on a desktop, a laptop, or a cellphone? Where was it made?)
Some states are waking up to this threat. Some politicians, some businesses, even some in the media, are finally recognizing it. But will enough of us realize it, and do something about it, in time?
That may be the question of the age. And it may be something we need to resolve on our own, in the private sector, without hoping a heavily compromised government will get around to doing anything about it in time.
Copyright 2023 John F. Di Leo
John F. Di Leo is a Chicagoland-based trade compliance trainer and transportation manager, writer, and actor. A one-time county chairman of the Milwaukee County Republican Party, he has been writing regularly for Illinois Review since 2009. Follow John F. Di Leo on Facebook, Twitter, Gettr or TruthSocial.
A collection of John’s Illinois Review articles about vote fraud, The Tales of Little Pavel, and his 2021 political satires about current events, Evening Soup with Basement Joe, Volumes One and Two, are available, in either paperback or eBook, only on Amazon.
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