With regard to the mother of all bailouts, my first question was:
Any future lenders will [..] ask for higher interest rates. Will they have additional conditions on top of those?
[…]
Who will finance Paulson’s plan (or any other plan of this size) and under what conditions?
Today Bush called the prime lender to the U.S. and asked for the big loan. With polite language the Chinese revealed their ‘additional condition’.
It is a nice, small but productive island Beijing wants to reunite with the fatherland for quite a while. Until now U.S. interests prevented that. But now things may have changed.
Chinese, U.S. presidents talk over phone about ties, U.S. financial turmoil
BEIJING, Sept. 22 (Xinhua) — Chinese President Hu Jintao and his U.S. counterpart George W. Bush discussed bilateral relations and the financial upheavals in the United States in a phone conversation on Monday morning Beijing time.
[…]
Bush briefed Hu on the latest development of the U.S. financial market, saying his government was well aware of the scope of the problem, and had taken and would continue to take necessary measures to stabilize the domestic and world financial markets.Hu hoped the measures would soon take effect and lead to a gradual recovery of the financial market, which he said not only serves the interests of the United States, but also those of China, and benefits the stability of the world financial market and the sound development of the world economy.
The Chinese president also praised the good momentum of the development of the Sino-U.S. ties in recent years in various areas.
He said China is ready to work with the U.S. side to intensify dialogue, exchanges and cooperation, and properly handle issues concerning mutual interests and of major concern, particularly the Taiwan question, in a bid to push forward the sustained and steady development of the Sino-U.S. constructive and cooperative ties.
Translated from diplo-speech: "Give us Taiwan and you’ll get the loan."
Taiwan will not be the only ‘additional condition’ in this deal but for China it is the premier one.
Taiwan’s GDP is some $700 billion, about the amount the U.S. needs for the current bailout. A good deal for Beijing even if the dollar falls and the big loans never gets repaid. A war over Taiwan would be more expensive.
Bush will now have to brief Congress leaders and will need to get some consensus within the U.S. foreign policy establishment on this issue. I doubt that China is dumb enough to hand the money over without having some bi-partisan guarantee.
Such a sell out of an area of interest to finance wars is not unprecedented. Bush can finally compare himself to Napoleon.
Will the U.S. agree to the Chinese condition and sell out Taiwan for the big loan it needs?
My bet is yes.
Yours?