China Begins its Buyout of the United States

Yesterday brought news that should alarm everyone in this country. CNN notes that China is investing $3 Billion in Blackstone - a US private equity firm. Why is this so alarming? Let's start by discussing our trade deficit.

This country has a $60 Billion/month trade deficit. That is just not some imaginary figure that has no consequences. It means that we are taking loans from countries like China for that amount every month. We give them treasury bills that are backed by the full faith and credit of the United States government. As the value of the dollar declines, at some point these countries will no longer want to take on more and more of our deficit - like any wise investor they will seek to diversify. These countries will begin to use that money to buy American companies and land - things that have real value.

This presents two problems, the first is quite obvious, namely that we're slowly selling our country's assets to foreign countries - and a Communist one at that. Second, once these countries start calling in our debt the government will be forced to pay off the debt and this could mean large tax increases and/or rapid inflation.

In 2005 China tried to buy the US oil company Unocal for $18.5 Billion but withdrew its offer after stiff political opposition. Now they're getting wiser. They're using these private equity firms to get their feet in the door while still only buying around 10% of the company.

This is only the beginning and the endpoint is quite clear. As I said before, these countries will not continue to take our debt. Since our country doesn't have the money to pay these loans off directly these countries will use our currency to "invest" in the United States. Of course "invest" is a euphemism for "buy" and you can probably guess who will lose in that scenario - the American worker and the middle class...