According to legend, Dutch traders purchased Manhattan Island from the Indians for a few dollars worth of glass beads. Although there is no historical basis for the story, it illustrates the notion that, through ignorance, something of great value can sometimes be lost in exchange for something of little value.
But would anyone actually be stupid and short-sighted enough to trade capital for trinkets? Would anyone exchange irreplaceable resources for essentially worthless junk?
The U.S. trade deficit in 2009 was about $350 billion. China accounts for over 80% of the non-oil deficit. That means, of course, that we transferred over $350 billion more to foreign countries than they transferred back to us. That enormous sum, which represents just one year and continues to grow, enables the foreign governments and foreign central banks to take their vast accumulations of U.S. currency, and exchange it for things like American real estate and shares in American corporations. It enables them to accumulate reserves of gold and other commodities, using U.S. dollars. It enables them to expand their production and productive efficiencies, driving more and more American companies out of business, as American consumers gobble up cheap imports. The threat of dollar dumping by countries like China is like a loaded gun held to the head of the American economy.
And what are American consumers buying from Chinese manufacturers? Everything, it seems. But mostly the cheaply made junk that fills the shelves of stores like Walmart. We just can’t get enough of it, it seems. We are addicted to shopping, buying and hoarding more stuff than we could possibly need.
We are trading capital for trinkets. We are trading Manhattan Island for Walmart beads.