WhatFinger


Beijing and Tokyo reading him the Riot Act

Beijing and Tokyo calling the shots on American debt default



Washington, D.C. – Who blinked? President Obama did, for all his tough talking. He climbed down from his high perch on the debt ceiling deadlock when he opened up to the Republican proposal of a short-term extension of the debt ceiling and negotiate the rest in the time gained.
Appearances of Obama and House of Representatives Speaker John Boehner, Republican holding on to their conditions notwithstanding, both sides know they must agree or risk global economic turmoil and worse if they fail. Fixing America’s national debt ceiling for the next 12 months would reassure a nervous world the United States will not default on its debt. I don’t know of any single assurance which carries more weight with lenders than the guarantee that the interest on exisiting debt will be paid on time. Smaller economies can fail without tearing down the house. The United States cannot. It is still the world’s biggest economy and the US dollar is the world’s reserve currency. This is a financial framework, architecture in which default and the resultant shock to confidence promises nothing less than catastrophe.

Support Canada Free Press


Old-fashioned though it sounds, confidence is the main pillar in big finance – and America’s present 16.7 trillion in debt is big finance. You can bet your money that Democrats will say it was the Republican Speaker who got off the perch. But please, ignore the predictable noise. The reality is that the United States and thus its president are the endangered species. It is his responsibility to provide a leadership capable of preventing disaster. Foreign holders of America’s giant IOU’s care little about who wins and who loses in American politics. They want the security of American financial and political stability and that means trust in those who govern. “I will not negotiate” Obama insisted until Tuesday. By Wednesday he changed the tone – while still pretending that he did no such thing. Yesterday Obama’s rock shifted. He would negotiate and he and Boehner would fudge their preconditions thing. Good. Adults know – or should know – that playing with default, bankruptcy in plain English, is not permissible. What caused the rock to shift? Who gave the shove? Well, ask in Beijing and Tokyo. Read on, find a few of the essential details down column. Meanwhile, regardless where you stand, expect your views to be challenged. Expect accusations of abandoning principles, selling out. Expect America’s political Taliban on the far Left and far Right to foam and scream. But remember that nobody, no economist, no banker, no national leader can know how default would play out. All the outcomes vary only in severity and global financial catastrophe is the most likely one. Getting even a short-term debt ceiling in place opens possibilities hardly anybody talks about. For instance, what can Obama give Republicans in return for help with the debt ceiling? Granting the permit to finish the Keystone XL oil pipeline all the way from Canada’s Alberta oil sands to refineries in Louisiana and Texas is a realistic example of a win-win deal. Republicans in Congress have supported the project from the start and Obama has stalled it from the day he took office. Republicans see oil as a currently irreplaceable source of energy and Canada as the most dependable supplier of the heavy oil the Gulf refineries need and now get from unstable Venezuela. Obama sees oil as the evil stoking the global warming furnace; and, to be justifiably cynical, as the angel giving wings to his green vote supporters and only he can issue the permit. President Barack Obama has said repeatedly, including on Tuesday “I will not negotiate” until Republicans drop their conditions. They want postponement of ObamaCare and enrollments and budget concessions to be negotiated before getting down to the debt ceiling. Without agreement in time, catastrophe will start unfolding on Thursday, October 17. Obama, the politician, knows he needs to strengthen the position of House Speaker Boehner to make it politically possible for him to tame the Tea rebels in his Republican caucus. What has the president of all Americans done in this direction? I will tell you: He has systematically undercut the Speaker at every turn and refused to toss him a concession on some budget items as a face-saver. What changed Obama’s direction? Try Beijing and Tokyo reading him the Riot Act the other day. China holds $2.3 trillion and Japan $2.1 trillion of American debt. Chinese Finance Ministry officials said China “demands” that the United States keep China’s American debt certificates safe. In Tokyo, officials said the same and pointedly said Japan would “move” to safer currencies. Do not “default,” the Japanese officials said. They were addressing the president of the United States, not the fractured Republicans in Congress. Pile on the International Monetary Fund and the World Bank descending on him right in Washington today and you’ll have a big part of a plausible answer. Translation of what Speaker Boehner and President Obama said 48 hours ago: We’ll escape the noose and sort the mess out over the next few weeks. Stay tuned.


View Comments

Bogdan Kipling -- Bio and Archives

Bogdan Kipling is veteran Canadian journalist in Washington.

Originally posted to the U.S. capital in the early 1970s by Financial Times of Canada, he is now commenting on his eighth presidency of the United States and on international affairs.

Bogdan Kipling is a member of the House and Senate Press Galleries.


Sponsored