Long before the COVID-19 crisis, the Chinese have proven time and again that they cannot be trusted to safely produce drugs. From January 2007 to March 2008, at least 81 Americans died from a contaminated heparin, which is a blood thinner. This drug was contaminated because the Chinese manufacturer was not subjected to the standards of an American company.
In 2020, the Food and Drug Administration forced five drug companies to recall contaminated metformin, which is used to treat type 2 diabetes. In 2018, the FDA recalled millions of blood-pressure pills. In both cases, the drugs were contaminated by N-Nitrosodimethylamine, which is a carcinogen.
On August 6, 2020, President Trump issued an executive order to reduce our dependence of foreign manufacturers for essential medicines in the COVID-19 crisis and minimize potential shortages in the future. Currently, 72% of our Active Pharmaceutical Ingredients (API) are produced abroad.
Dr. Charles Richardson, inventor of the Total Artificial Heart and entrepreneur, believes that continuous flow chemistry can give us scalable technology to producing APIs domestically. This technology, combined with Trump's executive order, and the recent legislation to force China out of our capital markets may give us the chance to secure our medical supply chain much sooner than we could have expected.
President Reagan's two-prong strategy against the Soviets required economic warfare to reduce their oil revenues while forcing an arms race to bankrupt them. Building up our medical supply chain is the equivalent of President Reagan's military build-up to deter the Soviets. Dr. Richardson is today's equivalent to what Defense Secretary Caspar Weinberger was against the Soviet threat.
While securing our medical supply chain is vital, we cannot win this Cold War against China by just playing defense. According to Roger Robinson, while the Soviet economy was vulnerable to lower oil prices, the Chinese economy is heavily dependent on access to the international capital markets.
In 1982, Roger Robinson left his job at Chase Manhattan for a chance to work at the National Security Council. He was vice president of Chase Manhattan's Division responsible for banking in the Soviet Union and Eastern Europe.
When Robinson entered the National Security Council, the Soviet Union only had $32 billion dollars a year in hard currency earnings. They made that income from only four sources: oil, natural gas, gold and weapons. Oil and natural gas made up two thirds of their earnings.
The Soviets also spent $16 billion dollars a year more than they made in hard currency earnings. The Soviets went further into debt every year and it was financed entirely by Western (mostly European) governments and banks.
At the time, the Soviets were trying to finance a deal to build two pipelines from Urengoy gas field in Siberia all the way to Western Europe. This is currently the world's second largest natural gas field.
According to Robinson, this deal would have doubled the Soviet Union's hard currency earnings and it would have made Western Europe dependent on Soviet natural gas. In the '80s, the United States had a monopoly on technology that could drill through permafrost. With that advantage, the Reagan administration was able to kill one of the pipelines. Most importantly, the Reagan administration convinced the Saudis in 1985 to increase their oil production.
In 2007, former Russian Prime Minister Yegor Gaidar acknowledged that the decision from the Saudis in 1985 to quadruple their oil production cut approximately $20 billion dollars annually from the Soviet Union's hard currency earnings.
If President Reagan were still alive, he would hire Dr. Charles Richardson and Roger Robinson. In 2019, Roger Robinson said, "The trade war is hurting China — this is positive and long overdue. But the Chinese can manage it. What would hurt them immeasurably more would be any contraction in their access to our investment dollars."
The two largest stock exchanges in the world are American: the New York Stock Exchange ($30.1 trillion), and the NASDAQ ($10.3 trillion) in July 2020. The third largest is the Tokyo Stock Exchange at $5.7 trillion.
The Congress is likely to pass a bipartisan piece of legislation called the Holding Foreign Companies Accountable Act. This will require companies listed on our securities exchanges and over-the-counter (OTC) markets to comply with the Public Company Accounting Oversight Board's (PCAOB) audits for three consecutive years.
It is highly unlikely that any Chinese company could withstand that level of scrutiny. Chinese companies in our exchanges have a combined market capitalization of over $1 trillion dollars.
In the past China used its foreign currency reserves as a way to avoid due diligence. In 2020, China had over $3.3 trillion dollars in foreign currency reserves.
It's not clear that the Chinese can use these reserves due to the growing number of non-performing loans within their banking system. Even before this crisis, the official number of NPLs was 1.8% in 2018. Unofficially, it is believed that the percentage of NPLs is much higher.
The Chinese banking system had $40.6 trillion dollars in combined assets in 2019. It's possible that the real scale of NPLs exceeds their foreign currency reserves.
We must exploit China's dependence on American capital markets because COVID-19 has killed over 180,000 Americans. We must avenge their deaths by using financial pressure to peacefully bring down the communist regime in Beijing.
Robert Zapesochny is a researcher and writer whose work focuses on foreign affairs, national security and presidential history. His work has appeared in a range of publications, including The American Spectator, the Washington Times, and The American Conservative. For several years Robert worked closely with Peter Hannaford, a senior aide to Ronald Reagan, as the primary researcher on four books and numerous columns. Robert has also worked on multiple presidential, national and statewide campaigns, including as a field office staffer for the Bush-Cheney campaign. Due to his own Russian-Jewish heritage, Robert has a keen interest in the history of U.S.-Soviet relations. In 2017 he was the co-organizer of an effort that erected commemorative statue of Ronald Reagan and Mikhail Gorbachev in Moscow. Robert graduated with a major in Political Science from the University at Buffalo, and received his Master's in Public Administration, with a focus in healthcare, from the State University of New York College at Brockport. When he's not writing, Robert works for a medical research company in Rochester, New York. Read Robert Zapesochny's Reports — More Here.
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