China Bearing Gifts
Research for Online Investors

by John Dalt

10/4/10

The Greek’s gift of the Trojan horse to Troy allowed entry into the city so it could be taken by the hidden solders when the Roman’s were drunk.  In a turnabout that only Julius Ceasar could imagine, Greece hosted Chinese Premier Wen Jiabao this weekend.

What does a country do when the debts come due, and you need to buy some friends?  The only capital you have left is political.  Chinese Premier Wen brought promises of a $5 billion dollar credit line for Greek companies to buy Chinese built ships, and a commitment for the ChiComs to buy additional Greek sovereign debt.

China will upgrade Greece’s Piraeus port to become a distribution center for Chinese exports to Europe.  Chinese companies will be encouraged to buy Greek products and citizens to vacation in Greece.  Wen targeted trade between the two countries to grow to $8 billion in five years.

What did the Greek government give the ChiComs in return?  Respect for the “One China Policy” (there goes Taiwan).  Greece will back China in any U.N. climate change language that is not favorable to China.

Greece now supports China’s initiative to ‘reform’ the international financial system and supervision of developed country’s economies.  Greece joined China in support of strict adherence to WTO rules and removal of trade barriers.

Greek Prime Minister George Papandreou congratulated Wen for the 61st anniversary of the founding of the Peoples Republic of China.

This all reminds me of the old joke, “Would you sleep with me for a million dollars?”  After the considered answer of “Yes” from the debutante, the cad then asked “How about for five bucks?”  “What do you think I am?” exclaimed the young lady.  The cad replied, “We have already established that, now we are negotiating the price.”

Turbo Tim Geithner and more than a few congressmen should start to understand how the game is played.  We fear they have on their rose colored glasses.  The U.S. administration and congress may not realize until too late in the evening they are about to be used and abused.

What does the U.S. have in political capital will we trade away when our Treasuries are not in demand? Who will buy our debt when it finally becomes obvious we can never repay all the current accounts and honor our future entitlements?

Premier Wen is visiting Belgium, Italy and Turkey this month.  We see more poker chips on the table, with the short stack players throwing in their hands.  The Bluff is over.

We ignore the game at our peril.  Sources for this story are The China Global Times and Bloomberg.

Quote:
Government is the great fiction through which everybody endeavors to live at the expense of everybody else.--- Frederic Bastiat

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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