Who’s Drivin’ That Train

And, back on the The City of San Francisco line, as promised, another attempt to drive all metaphors neatly into the ground with this from Zero Hedge this morning.  As may be obvious, globalism has made for strange bedfellows, errr, passengers. 

In the end, the degree to which we’ve lost sovereign control to our foreign creditors might well prove to be our undoing.  As noted in the original Bloomberg article referenced by ZH, Hank Paulson’s soon to be released memoir discloses that “Russia urged China to dump its Fannie Mae and Freddie Mac bonds in 2008 in a bid to force a bailout of the largest U.S. mortgage-finance companies.” 

Apparently, Russia made good on the threat by selling their $65 billion holdings of GSE securities, in advance of the September 2008 takeover.  The Chinese, inscrutible as ever, declined, that time at least.  Not that it mattered a great deal in the end.  If the purpose (or hope) was to shake confidence in US markets and/or demonstrate to our government just how exposed we were (and continue to be), well, to quote GW, “mission accomplished”. 

The report doesn’t suggest that Russia’s selloff triggered subsequent events or even whether Chinese participation would have magnified those effects.  It does, however, remind the us that these events took place during the August Olympic Games in Beijing, which coincided, you may recall, with the Russian war with neighboring Georgia.

All of which serves to underscore the notion that this but one of the ways that wars are fought in this modern age of globalism.  (We’ll look at Cyber Warfare at some point in the future.)  Some might argue that China’s dependence on US markets have, thus far, actually “saved our bacon” and that might well be true.  It is also reasonable to assume that China wasn’t then (or isn’t yet) ready to play those cards.  They are in their hand, however.

Regardless, to the extent that we continue beg the world to finance our insatiable appetites, we should understand the extent to which we are mortgaging our independence.  Seems obvious, but the same principles apply in our own lives too.   

Harry Tuttle

Trouble ahead, Lady in red,
Take my advice you’d be better off dead.
Switchman’s sleeping, train hundred and two is
On the wrong track and headed for you.

– Casey Jones

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