Manila Times 

Obama

This has ensured that recent plans announced by the Bush White House are really the results of joint deliberation and united decision-making. And this is why Mr. Obama has vowed to honor President Bush’s market interventions when he assumes office and pushes for his own team’s coordinated plan of action for the American economy.

The Bush and Obama economic teams are agreed that much more—than the original bailout plan costing US$700 billion—must be done.

On Tuesday, the US Federal Reserve said it would release the gargantuan sum of US$800 billion dollars into the economy in a bid to hasten the return to stability of the financial system. Of that amount US$ 600 billion will be used to purchase mortgage securities. Earlier US$ 200 billion was already announced for asset-backed securities held by banks. This will help American consumers get loans from banks that have been made stingy by the crisis.

The aim of all these efforts is to thaw frozen credit markets, promote liquidity and reduce the costs of loans for the housing market. The last-mentioned is the core of the economic cataclysm in America that has also happened in Western Europe—and then convulsed the whole globe.

This and the coming years’ US stimulus packages and programs—to rescue the tottering automotive industry, to pour money into national and regional banks, to support banks that will support families unable to pay for their housing loans and need loans for their children’s food, clothes, schooling and health needs—will need massive funding.

All these bailouts and moves to keep the American economy stable and actively in operation cannot be financed by the US treasury and the Federal Reserve by just printing more money. Doing that will cause the value of the US dollar to sink. And that would bring about the collapse of the whole American system. Which would then mean the collapse of the largely US-dollar-anchored global economy.

Where should the USA then get the money—the 1 to 2 trillion dollars—needed this year and next to finance the government’s budget deficits necessary to restore the US economy and financial system back to normal health and stability?

The US government of the Obama presidency would have to borrow from those who have the wealth.

And the one country that is wealthy enough to fund the American recovery is China.

China in fact is now America’s largest foreign creditor. It surpassed Japan last September. The government of China—being the US government’s largest creditor—is already America’s banker.

Obama and the US future with China

By now, Mr. Obama has probably been impressed by the power of China to save the US economy.

But will China continue being America’s banker? The People’s Republic has launched its own expensive stimulus programs to keep Chinese consumers active buyers of Chinese-made products and thereby ensure that China’s economic growth does not decline below the still-impressive 7 percent level (down from the 2007 rate of 12 percent). With 7 percent growth, China will still be the most dynamic economy in the world.

China can afford to go on funding America’s deficit spending. It has US$2 trillion in reserves. The USA’s foreign reserves is only $73 billion. China will benefit from financing America’s economic recovery and strength because Americans are the biggest buyers of Chinese products.

Therefore, China should be a major item on Mr. Obama’s economic radar screen.

It was unfortunate that Mr. Obama did not have President Hu Jintao in the first set of world leaders to contact among those who sent him congratulations. But he did finally call President Hu.

More than friendship but real partnership with China must become the future President Obama’s foremost foreign policy goal—if only because America needs China’s US dollars!

He should no longer be of the protectionist and less-than globalist mindset that allowed him to voice the angry words against China that he spoke while he was a senator and the Democratic Party candidate for president of the United States. Vice-President-elect Joseph Biden had obviously not been of much help to him in this.

One of the future President Obama’s most fundamental tasks is to forge much closer relationship—one of partnership—with China.

In its preoccupation with Iraq, and with some strong anti-China people among the leading White House advisers, the Bush administration neglected China and for that matter Asian relations.

It is in the best interest of the United States—and eventually of the whole world—for China to rescue the USA from its life-and-death economic and financial problems.