A Declassified Jon Huntsman On China’s Terror Of A Gold-Pegged Dollar

While last night’s quid-pro-quo from Chinese officials will likely be remembered as the start of escalating trade wars, Wikileaks has uncovered a declassified cable from John Huntsman indicating China’s clear understanding of the growing tension and comprehension of the ability of the US to entirely destroy it economically with one swipe of the Presidential pen via a massive devaluation of the USD or repegging to gold.
Evidently, while we may be used to seeing Jon Huntsman spew truisms and political one liners, there was a time when he actually had something interesting to say:

a. “Sino-U.S. ‘trade war’ is heating up again”
The Shanghai-based Shanghai Media Group (SMG) publication, China Business News (Diyi Caijing)(02/08)(pg A1): “The United States provoked a trade war again by imposing high anti-dumping duties on Chinese-made gift boxes and packaging ribbon.  This once again shows that 2010 is off to a difficult start for Sino-U.S. relations.  It also reflects that, because of the mid-term elections, Obama is eager to prove to the American voters that the U.S. Administration’s China policy is tough so as to restore his declining support rate. Yao Jian, the Ministry of Commerce spokesperson, issued a statement on February 1, saying that following the financial crisis American trade protectionism has risen.  China has become the biggest victim of the U.S.’s abusive implementation of trade remedy measures.

But more critically in terms of actions taken perhaps:

b. “The United States no longer sits still; it frequently uses evil tricks to force China to buy U.S. bonds”
The Shanghai-based Shanghai Media Group (SMG) publication, China Business News (Diyi Caijing)(02/08)(pg A7): “This time the quick change of the U.S. policy (toward China) has surprised quite a few people.  The U.S. has almost used all deterring means, besides military means, against China. China must be clear on discovering what the U.S. goals are behind its tough stances against China.  In fact, a fierce competition between the currencies of big countries has just started.  A crucial move for the U.S. is to shift its crisis to other countries – by coercing China to buy U.S. treasury bonds with foreign exchange reserves and doing everything possible to prevent China’s foreign reserve from buying gold.
The nature of such behavior is a rogue lawyer’s behavior of ‘ripping off both sides’: taking advantage of cross-strait divergences, blackmailing the Taiwan people’s wealth by selling arms to Taiwan, and meanwhile coercing China to buy U.S. treasury bonds with foreign exchange reserves and extorting wealth from the mainland’s people. If we [China] use all of our foreign exchange reserves to buy U.S. Treasury bonds, then when someday the U.S. Federal Reserve suddenly announces that the original ten old U.S. dollars are now worth only one new U.S. dollar, and the new U.S. dollar is pegged to the gold – we will be dumbfounded.
Today when the United States is determined to beggar thy neighbor, shifting its crisis to China, the Chinese must be very clear what the key to victory is.  It is by no means to use new foreign exchange reserves to buy U.S. Treasury bonds.  The issues of Taiwan, Tibet, Xinjiang, trade and so on are all false tricks, while forcing China to buy U.S. bonds is the U.S.’s real intention.”

And since this memo, Gold has risen 105% and the USD (measured by DXY) is unchanged – that is all.