Forget Al Qaeda - It's China

We've spent trillions the past 9 years in the name of Al Qaeda - whether it's hiring thousands of TSA workers to frisk passengers at airports or fighting two wars, while at the same time, the biggest threat to America's future (other than reality television) continues to grow unabated with the blessing of the Obama Adminstration - and the Bush Administration before that.

That threat - China. In 1992 Ross Perot warned Americans about that giant sucking sound coming from Mexico, as in jobs would be sucked into Mexico due to the impending approval of NAFTA. Perot was half right. 20 years later the giant sucking sound is coming from China - where American companies like Apple are using the world's cheapest labor to build products that Americans would have built 20 years ago. Apple's contractor in China has over 400,000 on the payroll, many of whom are busy making Apple's latest creation, the iPad.

Why China? Because China is manipulating its currency, which allows companies like Apple to make their products for a fraction of what they would cost if made in the U.S., or even in Mexico. China artificially devalues their money, which makes everything they produce 30% to 40% cheaper than it should be. In July China's total trade surplus was $28 Billion. Can you guess how much of that surplus was with the U.S.? How about $26.8 Billion. (Mexico's monthly surplus with the U.S. is a comparatively paltry $6 Billion) Did I mention that China has no national minimum wage.

What's the result? Companies like Apple are making their products for pennies on the dollar and then selling them for huge profits. Apple is currently sitting on $40 Billion cash reserves, at least some of that is derived from embracing the chinese labor model. I don't blame Apple - companies like Apple are working within the current rules.

So why does this matter? Well, have you heard the term 'jobless recovery'? Welcome to the Chinese-driven U.S. economy. Cheap goods are great if you have people who have enough money to buy them. And that's the problem, if we don't begin creating jobs - eventually Americans will stop buying iPads.

What to do? The Obama Administration needs to enforce current trade rules and quit looking the other way. There has never been a better time to make this move. The naysayers remind us that China is our largest creditor and that upsetting them could cause China to stop buying up U.S. bonds. Don't buy that argument. The Euro is dropping against the dollar, so the Chinese should still continue to buy our debt for the foreseeable future.

It's time for the Obama Adminstration to step up and deal with China. Our future prosperity depends on it.