War between the US and China - an unpleasant thought, for sure...unless you happen to be a defense contractor. The threat of war could be sufficient to power the US defense industry's profit growth for many years.
We would not be tackling this grim topic - nor engaging in the financial market version of grave-dancing - if the suits and uniforms in Washington understood that China is merely implementing its own version of the Monroe Doctrine.
If you don't remember the Monroe Doctrine from history class, it goes like this: [US] President James Monroe in 1823 put the European powers on notice that if they meddled anywhere in Latin America, the United States would step in to put a stop to it. It was a big 'keep out of our backyard' sign.
OK, it was more subtle than that; an aging Thomas Jefferson congratulated Monroe on achieving a 'cordial friendship with England'. The doctrine was, indeed, a tacit agreement between the United States and Great Britain. The US took a free ride on the Royal Navy. Its ships patrolled the waters surrounding Latin America, keeping the continental powers far from America's doorstep.
The original Monroe Doctrine aimed to keep Europeans away. China's Monroe Doctrine aims to keep the United States from getting closer than it is already.
'The Pacific basin has long been home to the United States' largest trading partners, and Washington deploys more than 320,000 military personnel in the region, including 60% of its navy,' writes Conn Hallinan of the think tank Foreign Policy in Focus. 'The American flag flies over bases in Japan, the Philippines, South Korea, Malaysia, Thailand, the Marshall Islands, Guam and Wake.' The US Seventh Fleet routinely sails near the Chinese coast, to the edge of the "12-mile limit" where international waters end.
No wonder Chinese leaders sense - rightly or wrongly - that they're being encircled.
'China has made it clear that it will not tolerate the threat to its security represented by a foreign military presence at its gates when these foreign forces are engaged in activities designed to probe Chinese defenses and choreograph a way to penetrate them,' writes our acquaintance Chas Freeman, the veteran US diplomat who was President Nixon's interpreter on his groundbreaking visit to "Red" China in 1972.
'There's no reason to assume that China is any less serious about this than we would be if faced with similarly provocative naval and air operations along our frontiers.'
Thus are the Chinese asserting their dominion over the disputed Senkakus Islands. 'China sees the islands as part of its defensive parameter,' Hallinan explains, 'an understandable point of view considering the country's history. China has been the victim of invasion and exploitation by colonial powers, including Japan, dating back to the first Opium War in 1839.'
China also insists it rightly controls a host of islands in the South China Sea - rich fishing grounds and a potential source of oil and gas. These islands, such as the Spratlys and Paracels, are also claimed by... oh, let's run down the list: Vietnam, Malaysia, Taiwan, Brunei and the Philippines. Maybe the Kardashians too, for all we know.
In addition, China has...
- Commissioned its first aircraft carrier
- Developed a whiz-bang stealth fighter jet called the J-20
- Goosed its defense spending by double-digit percentages every year for the past decade (although Beijing's defense budget it still one- fifth the size of Washington's).
A sensible US response would go something like this: 'Hey, China's implementing its own Monroe Doctrine. They want to be in charge in their own backyard. Meanwhile, we're $16.4 trillion in debt. Heck, we owe $1.1 trillion of that to China. Why are we going deeper in debt to keep 60% of the Navy stationed in the Pacific basin? Maybe we should reconsider this whole 'American lake' thing.'
Instead, the US government is doubling down.
'As the war in Iraq winds down and America begins to withdraw its forces from Afghanistan, the United States stands at a pivot point,' Secretary of State Hillary Clinton wrote in Foreign Policy's November 2011 issue. 'One of the most important tasks of American statecraft over the next decade will therefore be to lock in a substantially increased investment - diplomatic, economic, strategic and otherwise - in the Asia-Pacific region.'
In DC wonk circles, this statement of intentions has come to be known as 'the pivot'.
The same month Clinton published that article - with the presumptuous title "America's Pacific Century" - the Obama administration stationed 2,500 US troops on Australia's northern coast for the first time. More encirclement.
This 'pivot' opens up an intriguing investment angle. The US defense industry is positively salivating over the pivot.
As 2012 wound down, the Aerospace Industries Association issued its annual industry forecast. Reuters summed it up like this: 'US sales of warplanes, anti-missile systems and other costly weapons to China's and North Korea's neighbors appear set for significant growth amid regional security jitters.'
Not to put too fine a point on it, the pivot 'will result in growing opportunities for our industry to help equip our friends,' enthused AIA vice president Fred Downey. Orders from Asia will more than make up for a slowdown in buying by those parsimonious and peacenik Europeans.
And even if the automatic cuts in the US take effect, 'contractors such as Lockheed, Boeing, Northrop and Raytheon Co. expect regional demand for their products and services to help them offset Pentagon belt-tightening,' says Reuters.
The AIA didn't put numbers on its forecast, but pressed by Reuters, the industry group disclosed that sales agreements with countries under the US Pacific Command's umbrella grew 5.4% in fiscal 2012 - to $13.7 billion.
Nevertheless, J.P. Morgan recently downgraded several of the big defense-sector names: 'We believe,' said its report, 'that Republicans as a group put a higher priority on spending cuts than they do on preserving the defense budget.'
We have our doubts... but even if that turns out to be true, there's still money to be made from the pivot.
Regards,
Addison Wiggin
for The Daily Reckoning Australia
From the Archives...
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30-01-13 - Joel Bowman
The Unbalancing Act Happening in China's Economy
29-01-13 - Greg Canavan
Marginal Utility: Steps Toward a Better Life
26-01-13 - Jeffrey Tucker
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About the Author
Editorial director of The Daily Reckoning, Addison Wiggin is also the author, with Bill Bonner, of the international bestseller Financial Reckoning Day and a frequent guest on national US radio and television programs. Look for the sequel to Financial Reckoning Day, Empire of Debt (John Wiley & Sons) in October, 2005.
Comment by Jason on 4 February 2013:
The problem with these two decadent, badly-ran superpowers is they spend far too much time telling everyone else what to do while their own nations slide into decay. The USA is literally bankrupt is is more likly to end up having a second civil war. As for China and its idiotic, racist dream of a black-haired, brown-eyed world under Chinese domination is that they would be resisted and ultimatly obliterated by an alliance of enemies if they try the old Tojo-thing. Besides, if China has not conquered the world by 2030, then it will never happen...unless they unleash an army of geriatric soldiers over the top in moterized wheel chairs toting laser guns or something, like bloody daleks because China's population is aging faster than America's and by 2023 China's population will be in decline. It is impossible to build an empire and dominate when your under demographic collapse.
Comment by Ross on 4 February 2013:
There is no single greater thing that the "progressive" US empire relies upon than ignorance and collective memory loss.
This act of disenfranchising China and following the Sun west beyond the US mainland started in the 19th century. Yes we speak of those loonies that have woken up each morning and headed out on their bearing toward those mountains that they believed birthed the Aryans in the north of Persia.
On these pages we've done the "progressive" racist social Darwinism underpinnings and we've done LeGendre setting sail with the Japanese on March 12, 1873 on the course that would have Japan seize Taiwan with US complicity; and the legitimisation of the seizure of independent Okinawa; and the US complicity and double cross practiced upon the Koreans.
We've also done Big Bill Taft and the century of COIN practiced in the Philippines.
We've come some way, but we have further to go to while staying with that course whose settings have been so often restated in deed that only ignorance and Hollywood cheap penny lane tune distraction could deny it.
So where to next? Why not a 1942 map?
http://www.globalresearch.ca/the-post-war-ii-new-world-order-map-a-proposal-to-re-arrange-the-world-after-an-allied-victory/19706
That map is explicit; it says containment of China, occupation of the South China Sea, and denial of all the key navigational routes that would supply latent world power China.
With the intent of defeating Japan's political independence and military power, and the FDR/Hull trickery that hoodwinked Vandenberg into giving them the navigation treaty revocation rights, the vision and intent for the post war order is of contemporary importance. The features of this map of interest are those that reinforce the single linear course on which US imperial policy remains headed today.
The most notable intention marked on that map is the intent of acquiring Hainan Island. Hainan Island is the most significant base from which power can be projected into the South China Sea and from which territorial claims over navigation lanes and resources can be extended.
But let's not leave the story there in a contemporary sense. We should also make careful note of the shade on the map accorded to Sulawesi and Ambon and surrounds in Indonesia. Again the navigational sense comes to the fore. Such a navigational sense was not lost on a US minesweeper seeking to pick its way through a reef / national park to locales the near north; not lost in the macro sense, but yes sadly lost on the command of the US Guardian that is now stuck on that reef and about to be cut up.
The projection of US power has of coarse been cut up in those climes before. An account of this is given in "Feet To The Fire
CIA Covert Operations in Indonesia 1957-1958" by Kenneth Conboy and James Morrison. This was published by the US Naval Institute Press of Annapolis, Maryland in their “Special Warfare Series” in 1999.
Back in those days the CIA had a young reporter of the name Aquino along for their ride and today the grandson is in power. And yes, US power, specifically their military assets and logistical support would be projected from the same Clark Air Base and Subic Bay that is now restarted under Obama's pivot.
The one who was to have their "feet to the fire" was Indonesian President Sukarno and the statement is attributed to none other than the usual suspect Frank Wisner. But don't lose your span of strategic concentration on that map even as we digress into the then contemporary political scene....
Of coarse Sukarno was a communist right? Well not quite. The communists were threatening to seize power right? Nope, unless you count an improving performance in a free election in parts of Java and the possibility Sukarno might bring them into a coalition government. So politically what was the issue? Indonesia's entrance into the Non Aligned Movement is the answer. Just like Wisner's bunch of tricks and coup in Iran that had Mohammad Mosaddegh desposed the problem was political independence .... any significant independence was not to be quartered.
But back to the strategic and Sulawesi on that map. The US was up to its neck in their support for Indonesia's nominal independence from the Dutch colonial rule. The long held plan as contained on that map was a carve up between Britannia and the US. The most notable affects upon such a diverse community on the archipelago was the inevitable winners and losers after independence. The greater of the losers was to be the Sulawesi Christians who had enjoyed special privileges under Dutch colonial rule. It was this group that the CIA groomed. Of coarse they did also try their hand on Sumatra with their eye on Aceh in a contest with the Brits but they had difficulty convincing Muslims that they should actually fight their fellow Muslim Javanese and their insurgency was a dud from the get go.
Up there in Sulawesi they did get some traction though. Along for the ride was the Taiwanese, and so we had two paramilitary air forces flown by US and Taiwanese para pilots and ground crew. And yes they killed many Indonesians at the same time as the US were officially providing economic aid to the Indonesian government and the US Embassy in Jakarta enjoyed special privileges. The number of dead as a result of this US sponsored insurgency are up-played by some and yet downplayed by CIA mates like the authors of this work.
And just like Hungary where Wisner had overstepped, this one came undone when a certain intemperate US para pilot by the name of Allan Pope got himself shot down as he bombed and strafed the Indonesian fleet that was on its way to suppress the Sulawesi insurgents and retake possession of air bases taken up by the US and Taiwanese paras.
It ended as badly as badly can be with Conboy and Morrison quoted thus
"Though the other Americans were unaware of the fact, this was not all that he (Allan Pope) was carrying. As AUREV (the CIA's Indonesia revolutionary air force) foreign pilots well knew, they were supposed to fly sterile – without any documentation that could expose their personal backgrounds or links to the US government. For his own reasons, Pope that morning had decided to defy this practice and carry on his person a virtual catalogue of incriminating evidence. In addition to a flight log – which detailed all of his previous strikes – he had his CAT identity card, his military separation file, and a copy of his secret orders for temporary duty on the Indonesia operation. In total he was packing some thirty different items.19
(19. “Testimony of Al Pope.” in Sidang Al Pope. Other items included his pilot’s licence, US Air Force certification, medical certificate, FCC license, and US military money. Of particular interest to the Indonesians was the set of US Military temporary-duty orders dated 21 April 1958, listing the names of eight CAT employees-including Pope-assigned to the Indonesian project.)
……. Pope perhaps had started to realize there had to be limits to his machismo in the cockpit. More likely, he recalled the fate of two CIA case officers who survived the crash of a CAT C-47 downed over communist China in 1952. The two men had flown sterile, allowing the agency publicly to disavow responsibility for their ill-fated mission. Six years later, both were still languishing in a Chinese prison.21 (21. One of the two officers was released in 1971, the other in 1973). As CIA officer Fosmire would later observe: “Pope was not stupid.” 22. (22. Fosmire, interview)"
Eisenhower was caught with his pants down and the Dulles brothers were censured. US power had suddenly lost its slam dunk. The most revealing thing from Conboy and Morrison's book is the revelation that the Indonesian's were one step ahead of them at every turn.
In the South China Sea there is nothing new under the sun.
And where is Australia today? Besides the bases and cultivation of the US for the unstated purpose of warding of of a belligerent and erratic India that is determined to arm itself to the teeth with long range projectable weaponary and logistics assets, we get unrealistic drivel from the products of US engagement like Dibb and Fullilove (the latter's NYT effort follow):
"But Michael Fullilove, director of the Global Issues Program at the Lowy Institute for International Policy in Sydney and a senior fellow at the Brookings Institution, said that addressing China’s recent assertiveness was definitely one of the major aspects of the policy.
Australia views the presence of American forces in the region as a counterbalance to what it sees as China’s sometimes erratic foreign policy, he said.
“Given that we know that rising powers can disrupt the system,” he said, “it makes sense to balance against the risk of future Chinese recklessness by keeping the U.S. engaged in the region. The more that power can be diffused so that it is spread across different capitals, the less likely you are to have unreasonable actions where one power ignores the other’s needs.”
More fun to come with the East West Institute's shenanigans ......
Comment by shortchanged on 5 February 2013:
Despite the detailed and scholarly comments above, why should China embark on a costly and bloody war, they already have the world in its pocket. China exports most of its manufactured goods, although there is a downturn in the markets at the moment, it can afford to wait till the next surge. Its internal problems will be sorted out, whereas the USA is fighting on all fronts, Militarily and Financially, and is bleeding money. Buy gold, China can't get enough of it, must be a clue somewhere there.
Comment by Ashim Kumar Chatterjee on 5 February 2013:
US need not fight a war with China after encircling it. US just has to stop buying it's very low technology products to create a glut in manufacturing sector and persuade it's allies not supply coal and iron etc. If manufacturing slides, jobs will vanish creating conditions for internal unrest in China.
Comment by shortchanged on 6 February 2013:
Ashim, I don't think the US has the clout any more, it might think it does, but 'global business' is showing the world whose boss. The US will buy whatever is cheapest, and Wallmart etc will sell, because that is what the people can only afford. Ditto for supplying the minerals and coal, can you imagine the devastation to Aus if it stopped mining. China is building at least one new power station every week, it has its own coal fields, and it 's been stock piling coal for years. It also buys minerals from South America which it stock piles as well, not to mention the 'rare earth minerals' from Africa it is hoarding. Buy gold, I have for the long term, its the only game in town.
Comment by Lachlan on 7 February 2013:
Wonder when the great war will start Ross.
Quotes from the Gomberg map link.
"At the bottom of the map was program is also included in 41 points, which begins with the words "This will be our policy" (Our Policy Shall Be this)"
Point 23...
"23rd The areas known as China, Inner Mongolia, Tibet, Thailand, Malaya, Indo-China and Korea, Shall be unified as a demilitarized, federated "United Republics of China".
Cecil's legacy.
SC, I guess China don't like the idea of point 23.
But I see the, greater political imperative, the US and her mates largely still are "global business" while they have the monopoly on things like violence, oil and money and...
Can we all agree there is a climax brewing in the next few years to decades? I don't necessarily see that the GFC is a great threat to the game and likely is a part of the game itself. More likely threats are non compliant sovereign nations and the individuals within them who are always volatile when systems don't run on time.
"When the President signs this act [Federal Reserve Act of 1913], the invisible government by the money power -- proven to exist by the Monetary Trust Investigation -- will be legalized. The new law will create inflation whenever the trusts want inflation. From now on, depressions will be scientifically created."
-Charles August Lindbergh Sr.
http://fraser.stlouisfed.org/publication/?pid=80
A Money Trust investigation from 1912...."The committee's majority report concluded that a group of financial leaders had abused the public trust to consolidate control over many industries"
Trouble on US soil but not unexpected
http://now.msn.com/utah-sheriffs-association-will-not-back-down-on-gun-control
The game will fail one day because it costs too much and people are never happy for long when it runs out. Money is labour/food etc. Gold too.
Comment by Thuan Anh Lam on 8 February 2013:
Those are Chinese islands. The Airhead American Dogs don't know what you are talking about. Go ahead get ready for war.
The Airhead American Dogs have nothing to stop China ICBMs, intercontinental stealth bombers, intercontinental stealth fighter bombers...and can’t stop the Chinese sinking their aircraft carrier battle groups, nuclear submarines. While China has technologies to stop the airhead American Dogs ICBMs, stealth bombers, stealth fighters...and sink their aircraft carriers battle groups, nuclear submarines with no problems. How can the Airhead American Dogs and their followers confront China and stand a war, nuke war with China. China will destroy the piece of shit USA and its followers with no problems.
Go ahead and hold my comment for editing and blocking. I will send the evil USA and its followers to hell with nukes anyway.
Comment by ross on 9 February 2013:
Lachlan, thanks for that links. It will take some time but I will get through those reports
Thuan Anh Lam, China is being smarter than that... you might try to keep up with their leadership in that respect. Overseas Chinese have also made some bad choices historically and this is part of the mix. The South China Sea undersea and uninhabitable assets will either be carved up according to an agreed formula among the claimants or all the parties will suffer the consequences.
Of particular concern politically, though, is the recent ICJ decision on the Columbia and Nicaragua maritime border. This was a corrupt decision. It drags the ICJ down to the level of the imperial strumpet ICC and will surely be brought forward later as a signature reason to explain the UN's decline in a historical sense in the future.
All the state players know the ICJ decision was corrupt. The two states concerned (under Washington's interventionist eye) have even agreed to set it aside and negotiate the border independently. The issue is the ICJ being fitted up by the US to create a precedent to disregard the traditional fishing ground rights that can extend territorial claims beyond the geographic features. The reason the corrupt ICJ judiciary took it down that path was to establish a precedent to use against China and others. If you want to know why Patagonian tooth fish and stop the whale campaigns are pushed by the Australian executive so belligerently it is this same fishing right claim over ocean territory issue.
Comment by Lachlan on 10 February 2013:
The Gomberg Map was great thanks Ross.
Within the link to the money trust investigation the final link is very good.... for anyone wanting to quantify political/corporate/banking realities.