Caution: America Relieves Debt by Hegemony

America now poses two problems to the world: first, its debt crisis and second, the future of its excessive military power — will it decrease or keep bulging? Given that world peace and development, issues that concern China the most, depend on these two problems, a closer inspection of them is necessary.

At present, the relationship between America and Asian countries is like the one between the Han and Qin kingdoms in the old Chinese book “Intrigues of the Warring States.” The story goes like this: Han does not like Qin because it’s too powerful, yet it has to pretend to keep intimate relations with Qin to survive. Poor Han needs money, so it sells beautiful women to Qin for three thousand golden coins, and then Han gives the money to Qin as bribery. Those beautiful women from Han, however, inform the king of Qin that Han does not like Qin and that they do not want to be friends with Qin. So Han does not only lose women and money, but also fails to uphold favor with Qin.

Today, we export our domestic cheap labor force and natural resources, along with our international capital, to America. We do this to trade back loads of U.S. dollars, only to find out that those dollars have to be “withdrawn” from China back to America. America, like the Qin kingdom, takes as much advantage as it can from China, the Han kingdom in this situation, through currency hegemony.

Before the financial crisis, some Chinese scholars concluded, with no requisite evidence available, that China is one of the biggest winners in the process of globalization. Looking at the essence of the relations between the United States and the Asian countries, America is the real beneficiary. It’s true that China holds a favorable position in the process, but just partially.

As the biggest winner in globalization, having surpassed any superpower in history, America’s power has reached its limit, yet its debts came as a great surprise. Financially speaking, America is broke. It’s not as if clear-minded American politicians and strategists have no idea what’s happening in America. They agree, indeed, that the debt crisis is the greatest issue for America’s national security.

America has been building its global network since the 1970s, one in which other countries are unlikely to be able to escape once entered. If someone holds American currency, it’s not because he wants to buy American bonds but because he does not have a better way to ensure the safety of his American dollar asset. Holding U.S. dollars is as good as holding rubber checks. Former Danish Ambassador Müller, now a researcher living in Singapore, said that many Asian countries, especially China and Japan, will have to face America’s “sovereign debt default.”
　
The depreciation of the U.S. dollar is an indirect practice of repudiating debt. Japan lamented that it again had to pay an extra “protection fee” to America. But Japan hasn’t got the worst of it yet; those dollars it lost were gained from the Chinese market, and America has been taking Japan under its wings. But it’s definitely a raw deal for China: we lost our labor force and lent America our money, gained at the cost of the environment, and in return, America threatened China in diplomacy and military ways.

America’s military budget is much greater than any other major country in the world. America has set up about 1,000 (some say 800) military bases around the world and made military alliances to build its global network. However, the long battle line has become the fear of many American strategists, such as Brzezinski, that America may be the first and also the last “global superpower.” The U.S. military is a war machine in a real sense. Hardly is an American president elected when his constituents begin to wonder what his war will be. Kosovo and Serbia were Clinton’s picks, and George W. Bush took care of Afghanistan and Iraq. Now, Americans may be wondering whether Obama will take Iran, North Korea or start a cold war with China.

Such a powerful military machine also puts America in a dilemma: on one side is the heavy debt and on the other is the ever-expanding military power. Financial tycoon George Soros once said, “A declining superpower losing both political and economic dominance but still preserving military supremacy is a dangerous mix.”

It will be tough for America to keep maintaining or increasing its military budget in such a difficult economic situation. However, if it doesn't keep the budget to at least par, the military machine will break down and the most important means America has been using to maintain and enlarge its “national interest” since the second world war, especially since the end of the Cold War, will lose its power, and Obama’s promise of a “new dawn of American leadership” will also seem rather pale.

America, when financially broke, has no other choice but to withdraw the dollars from outside America as much as possible to relieve the debt crisis, resort to expansionary fiscal policies and print currency until it meets domestic restrictions. This action has worsened the situation of world development, since the wealth in many countries, accumulated through painstaking effort, was largely looted away by America before those poor countries could savor the fruits of their work. If America uses military power to solve its own economic problems, world peace will be heavily challenged.