Tuesday, July 19, 2005

The Blather Over China and Oil

Some of the wackier types in Congress are all worked up about the Chinese government's oil company trying to purchase Unocal.

They claim the purchase will threaten national security by giving a foreign government (and a commie regime, to boot) an economic lever that, if pulled, could stun the U.S. economy and bring democracy to its knees.

Nonsense - as usual. Not only is Unocal petroleum production a drop in the barrel, Congress has already handed the Chinese government an economic weapon of far larger caliber.

Let's take Unocal off the table immediately. Its domestic production is about 58,000 barrels of oil a day. That's about 0.8 percent of overall production and about 0.3 percent of daily consumption. Because oil is a globally traded commodity, such a shortfall could be easily replaced. So, even if the Chinese government shipped every single ounce of Unocal crude off to Shanghai, U.S. highways would still be jammed with SUVs with fuel left over for the tanks and planes needed to repel a Chicom invasion.

Anyway, there is a much bigger threat at hand.

Each year Congress raises the ceiling on the overall national debt, which as of July 19 amounted to $7, 860,109,040, 549.45. In March of 2005, China owned about $224 billion of that - slightly more than the cost of Iraq war to this point. That's money owed in U.S. dollars to the same Chinese government being kicked around the halls of Congress at the moment.

Fast forward about a year. Chinese Premier Wen Jiabo is still smarting from Congress' opposition to the Unocal deal. Then he discovers the nickname President Bush assigned him and it's even more offensive than "turdblossom," the monicker given to presidential adviser Carl Rove.

Wen throws a fit and starts an undeclared war - but leaves his soldiers in their barracks. Instead, he starts dumping his stash of U.S. government bonds on the market in great big chunks. Prices plunge and the Chinese government loses billions of dollars. But lots of other folks lose too because $3.3 trillion of U.S. debt is held by investors; state, local and foreign governments; and individuals.

Can we say global economic chaos? Yes, we can. And all because Congress turned over great power to a tiger and then twisted its tail over a trivial business deal.