US debt to China to blame for N. Korea test?
But in a booming economy, a continued deficit of $248 billion is hardly chopped liver, as the analysts in New York's delis say. And when those deficits result in stacks of IOUs held by China, America's diplomats are forced to walk softly, lest they antagonize so large a creditor.(HT: Sullivan) I don't usually quote the Weekly Standard, but this guy has a point. How do you take a tough stance towards someone when you're dependent on them for credit or oil? Just another example of Bush making America weaker. These things have got to be turned around.
It is this fiscal situation, this unwillingness to rein in spending so that the boom in tax receipts can be used to provide support for American diplomacy, that has made it impossible for America to have an effective foreign policy. Indeed, it is arguable that George W. Bush has presided over the largest decline in America's ability to influence world events since, well, since the 1920s, when we decided it was in the nation's interests to let the world take care of itself while we partied at that era's equivalents of today's discos--the jazz joints and speakeasies that offered solace to the Wall Street crowd after a hard day of share-price manipulation.
China has a lot of leverage with North Korea: by cutting off food and oil shipments they could cripple the regime. But we don't have a lot of leverage with China. If they wanted to start holding Euros instead of dollars, they could inflict a lot of damage on our economy. (Of course, this would be very bad for them, because then we wouldn't buy as much of their stuff. As China's regime justifies its authoritarianism by delivering rapid economic growth, any economic move against the US would put their own stability in grave danger.)
Of course, with North Korea threatening another test, even China may decide it's had enough with its weird and defiant ally.