History of Chinese Trade and Money

[Joanne98]

October 27, 2008
Elaine Meinel Supkis




During the last few weeks, I have read many commentaries trying to explain the current mess that world trade is in today. Virtually no one seems to understand the trap we are in is due to trade imbalance, not banking difficulties. The banking problems grew out of the trade problems. And worse, the trade problems grew out of the difficulties of the US empire funding its military arm via debt, not taxes. Also, I wish to talk about the history of China's money. For China was the inventor or leader in the use of currencies, paper fiat money and global trade relative values. It is also a tragic history which is even more important.



The Tariff and Barrier debate goes back to the founding of the US Congress.

In 1789, our first year under the new Constitution, Congress passed the first tariff, primarily for revenue purposes. Forbidden by the Constitution to tax exports (goods leaving the United States), Congress had power to tax imports (goods entering the nation).
*snip*
As a means of protection, however, they gained importance. Because of a sectional depression in the early 1820s, tariffs became the dominant issue. In the North, manufacturers and farmers alike favored such a tax. Agricultural prices had nosedived; wheat growers in Pennsylvania and sheep ranchers in Ohio went out of business in large numbers. Industrial workers lost jobs as textile and iron works factories closed.

As these conditions prevailed, the Tariff Act of 1824 was passed, imposing duties on items not previously included and raising rates from 25 to 37 percent of the value of imported goods. Unlike previous tariff issues, this one restricted more goods on the basis of protection than of revenue.

As an advocate of the protective tariff, Senator Clay expressed a view that has been propounded generally throughout our history. To encourage home industry, he claimed, it was necessary to keep out foreign goods that competed with domestic industries.

Unloading their warehouses after the War of 1812, the British had been dumping goods in the American market below their cost, causing the shutdown of many factories. Only a tariff, claimed the Senator, could protect American workers and factories.


The global depression following the Napoleonic Wars was like all subsequent depressions which always follow on the heels of all major international struggles between great empires.

The fact that this always happens is something our ancestors were very aware of...they discussed this after WWII extensively and the moves by the US under Truman like the Marshall Plan and Bretton Woods I was an attempt by the US victors to try to avoid a post-war contraction.

Whether an empire wins or loses a war, these depressions always follow. Since this seems to be an iron rule in economic history, it should get more respect! Worse than this, if an empire slowly bleeds to death in colonialist wars that are futile and bring in very little loot, this causes really grinding depressions as the war spending uses up all available credit.

Russia and America's Cold War spending is a fine example of this. 'But the US didn't go into a depression after winning the Cold War,' people say in wonder. Ah! Something terrible happened after we won the Cold War! Not only are we being shoved into one confrontation after another with the very same determined fighters who fought the Soviet Union until it went bankrupt.

We also were savaged by global trade rivals who have utterly penetrated all our markets, depressed our wages and driven our entire economic system into deep debt.

Depressions are not when there is no lending. Depressions are when borrowers can't take on any more debt!

This seems rather simple, I would suggest. Just as small homeowners and small businesses can't soak up any more debt, so do countries. There is a set limit on the amount of debt one can accumulate. A noted feature of all bankruptcies is how the desperate business or individual would go restlessly about, seeking more and more loans. All, in a forlorn hope of using debt to pay debts and thus, put off the day of reckoning.

This never works. This is also why lenders charge people deep in debt higher points. The point spread is for the risk of bankruptcy.


'But haven't interest rates mostly dropped since Reagan?' people ask, justifiably.


This is where it gets most interesting: most sellers of goods will happily bankroll purchases so long as the buyer keeps buying. The US was the world's biggest creditor nation after WWI. For half a century, from 1914-1964, the US had to pull several major empires out of flames of their own making. These incendiary global ruler-wannabes were France, Germany, Italy, Britain and Japan.


Because we opposed the massive, growing empire of the Soviet Union, we generously rebuilt the industries and banking systems of our top trade rivals. We figured, this would make it harder for the communists to win power. We even allowed the French and British imperialists to continue ruling much of the earth! This was a very foolish foreign policy. Although many of these nations finally, and sometimes, very violently, overthrew their European rulers, the US insisted on propping up colonial governments which is why our creditor nation status vanished by 1964.

Continued>>>
http://elainemeinelsupkis.typepad.com/money_matters/2008/10/history-of-chinese-trade-and-money.html