Chimerica or Greater China?
April 3, 2009 by mlq3
Filed under Daily Dose
Let China sleep, for when she awakes, she will shake the world. -Napoleon
The East is Red! -Mao Zedong (upon reaching the summit of Mount Taishan)
If capitalism is restored in a big socialist country, it will inevitably become a superpower. The Great Proletarian Cultural Revolution, which has been carried out in China in recent years, and the campaign of criticizing Lin Piao and Confucius now under way throughout China, are both aimed at preventing capitalist restoration and ensuring that socialist China will never change her colour and will always stand by the oppressed peoples and oppressed nations. If one day China should change her colour and turn into a superpower, if she too should play the tyrant in the world, and everywhere subject others to her bullying, aggression and exploitation, the people of the world should identify her as social-imperialism, expose it, oppose it and work together with the Chinese people to overthrow it. -Deng Xiaoping (circa 1974, quoted in Time’s The China Blog)
Over the Christmas holidays, a friend recounted, with some concern, having dinner with a Filipina who has essentially abandoned her Filipina identity, adopting, instead, a Chinese cultural supremacist attitude that extends to weeding out what she considers her former, inferior, culture. My friend and I discussed the enthusiasm with which some Filipinos jettisoned their own identity in order to take on the characteristics of a culture they viewed as the “up-and-coming-one,” and hence, superior. No different from the worship of Spanish culture in the past, I suggested; and in the case of today’s Sinophiles, no different from the debates on Asiatic Monroeism in the 1930s in the wake of Japan’s expanding prestige and power in the region, and the Japanophiles during the War. In the case of China, as far back as the 1920s, the rise of Chiang Kai Shek’s Nationalist government led to proposals, in the Philippines, to orient the independence movement towards China, in an effort to counterbalance American influence.
Since the closing of the US bases and the banishing of the Philippines to the periphery of American strategic and other concerns, Filipino leaders have been at a loss to make up for their shortcomings at home no longer being lavishly subsidized by Washington. When the United States started showing concern over the resurgence of China, in the late 1990s, Filipino leaders sensed an opportunity (shared by many countries in the region, also nervous over the growth of China) to reburnish old alliances with Washington.
The problem was that Washington blew hot and cold, and after courting Asean governments (Singapore and Thailand, most notably), during the Bush, Sr. and Clinton years, the Bush, Jr. years saw a dwindling of American interest in the region, which it seemed content to delegate matters to Australia as far as the Western presence was concerned. The Americans oriented themselves, primarily, towards neutralizing Islamic Extremism (see this Japanese article, Hu Jintao’s Strategy for Handling Chinese Dissent and U.S. Pressure from 2007, on the lack of American interest in the Chinese ploy to assert Beijing and Washington as the ultimate arbiters of Taiwan’s fate).
The Philippines, having achieved favored nation status by climbing onto the Coalition of the Willing bandwagon, promptly hopped off for domestic reasons, and this led, in turn, to the government playing the “China Card” as a foil to Washington. A kind of modus vivendi ensued, in which Washington remained content with focusing on Mindanao, while making noises from time to time to remind Manila not to fall too firmly in Beijing’s pocket. But the pockets of Beijing are deep, and somehow, despite domestic crises, Manila and Beijing’s relationship seems to be fairly stable.
This has raised repeated questions about how the Philippines will be affected by the rise of China to, potentially, Great Power status.
This detail (below) of a wartime American speculative map (found at Strange Maps) shows how the Americans envisioned our region as victory seemed imminent in World War II. The Philippines was portrayed as an American protectorate, with added territory from the then-Dutch East Indies. Note how Indochina and Thailand are given over to the Chinese sphere of influence, while Burma belongs to an undivided India’s sphere of influence.
From the same site (see China as a World Power: How Big?), comes this map, showing China’s potential sphere of influence in the world:
In the case of a “Regionally Dominant Greater China,” the Philippines lies just outside the informal borders of China; in the case of a “Greater China as a Global Power,” the Philippines lies firmly within the Chinese sphere of influence. It’s interesting that in the New World Order Map, the “United Republics of China (URC)” was envisioned by the Americans, even then, as federation composed of China, Korea, Indochina, Thailand and today’s Malaysia.
Back in 2008, I’d pointed to Waving Goodbye to Hegemony, and it’s well worth reviewing what Parag Khanna said was taking place:
Aided by a 35 million-strong ethnic Chinese diaspora well placed around East Asia’s rising economies, a Greater Chinese Co-Prosperity Sphere has emerged. Like Europeans, Asians are insulating themselves from America’s economic uncertainties. Under Japanese sponsorship, they plan to launch their own regional monetary fund, while China has slashed tariffs and increased loans to its Southeast Asian neighbors. Trade within the India-Japan-Australia triangle — of which China sits at the center — has surpassed trade across the Pacific.
At the same time, a set of Asian security and diplomatic institutions is being built from the inside out, resulting in America’s grip on the Pacific Rim being loosened one finger at a time. From Thailand to Indonesia to Korea, no country — friend of America’s or not — wants political tension to upset economic growth. To the Western eye, it is a bizarre phenomenon: small Asian nation-states should be balancing against the rising China, but increasingly they rally toward it out of Asian cultural pride and an understanding of the historical-cultural reality of Chinese dominance. And in the former Soviet Central Asian countries — the so-called Stans — China is the new heavyweight player, its manifest destiny pushing its Han pioneers westward while pulling defunct microstates like Kyrgyzstan and Tajikistan, as well as oil-rich Kazakhstan, into its orbit.
And the process is continuing.
All right, so apparently Deng Xiaoping did not say “to get rich is glorious,” but the China’s that emerged since Deng was at the helm has come closer to the kind of Great Power he warned about, when still toeing the Cultural Revolution line in the 1970s. The rise of China, too, has been put forward in the context of the decline of the United States. But what if they’re joined at the hip?
Niall Ferguson’s been plugging the concept of “Chimerica” in his book, “The Ascent of Money: A Financial History of the World” (Niall Ferguson).
Here’s more on the themes of his book and “Chimerica”:
Aside from “Chimerica,” there’s even, as Brad Setzer proposed on December 21, 2008, Chieuropa.
Europe is part of the equation: Chimerica only works, in some sense, if China lends the (large) surplus it earns with the non-Chimerican world (and Europe in particular) to the US, allowing the US to run a deficit with the non-Chimerican world.
On one hand, cash-rich, China has continued going shopping, essentially buying futures in minerals and oil for when times get better; there’s also the effort to start building up the Yuan as a Reserve Currency, see China to Boost Yuan Swaps, Payments on Dollar Concern.
In “Inside the Red Mansion: On the Trail of China’s Most Wanted Man” (Oliver August), there’s a scene where the author talks to a Chinese citizen who remarks that China’s mistake was that it confused paper with power; that is, it bought American debt but in the end, even though it ended up holding vast amounts of that debt, the Americans, indebted as they are, still held on to the tangible manifestations of power: China might have paper, America continued to possess nuclear aircraft carriers for projecting influence -even to China’s shores.
So, the game plan seems to be:
1. Strong currency, strong country. Build up the Yuan.
2. Rich country, strong country. Use the vast amount of cash reserves to get plugged into the economies of many nations.
3. Armed country, strong country. (see Tony Abaya, on the Chinese buying the HMAS Canberra for scrap, but making blueprints for future reference.)
Ferguson in his documentary mentioned how “crisis-free” China’s growth has been. That was before recent news that 20 million migrants have lost jobs, China says. There therefore remains the serious problem of maintaining internal peace.
Back in 2007, Cheng Li (see China’s Inner-Party Democracy: Toward a System of “One Party, Two Factions”? ) pointed out the era of party purges seems over and instead,
For the first time in the history of the PRC, the ruling Party is no longer principally led by a strongman, such as Mao or Deng, but instead consists of two competing factions or coalitions. These two factions cannot be divided along typical ideological lines, such as liberals versus conservatives, or reformers versus hardliners. Rather, a more accurate set of labels would identify the two factions as the “elitist coalition” and “populist coalition,” with the former led by ex-President Jiang Zemin and current Vice President Zeng Qinghong and the latter by President Hu Jintao and Premier Wen Jiabao. These new factional dynamics have three main features: (1) the two coalitions represent two different socio-political and geographical constituencies; (2) the coalitions have contrasting policy initiatives and priorities; and (3) they compete with each other on certain issues but are willing to cooperate on others.
Now in this more recent article, China’s Team of Rivals: Cheng Li says,
Of the six members of the fifth generation serving on the Politburo today, three are tuanpai and three are princelings. The policy differences between these factions are as significant as the contrasts in their backgrounds. To a great extent, their differences reflect the country’s competing socioeconomic forces: Princelings aim to advance the interests of entrepreneurs and the emerging middle class, while the tuanpai often call for building a harmonious society, with more attention to vulnerable social groups such as farmers, migrant workers, and the urban poor….
Despite their many differences, the fifth generation of tuanpai and princelings share a common trauma: They are part of China’s “lost generation.” Born after the founding of the People’s Republic, they were teenagers when the Cultural Revolution broke out in 1966….
If there is another event that approaches the importance of the Cultural Revolution in the lives of these men, it is undoubtedly the Tiananmen Square incident in 1989….
These events taught the fifth generation two lessons: First, they must maintain political stability at all costs, and second, they should not reveal their fissures to the public. Although these leaders wear their differences on their sleeves, there is solidarity at the highest level, inspired by past unrest, to avoid any sign of a split in the leadership, which would be dangerous for the party and for the country….
…Barring something entirely unexpected, though, the populist policy platform will prevail over the next three to four years, and the ongoing global financial crisis will likely push Chinese leaders to increase government intervention in the economy. Yet there may be a swing in the opposite direction in 2012 as princeling Xi Jinping succeeds Hu Jintao, similar to the transition from Jiang to Hu.
RGE Monitor on February 4 noted,
IMF: Asia’s growth forecast for 2009 reduced to 2.7% with further downside risks. Developing Asia will grow 5.5%, the slowest pace since 1998. China will grow 6.7% though an additional stimulus package could help China reach the 8% target. India will grow 5.1% while South Korea’s growth will contract by 4%. The region may expand 6.9% in 2010. Given high trade and financial linkages, Asia will recover (rapidly) only when global recovery begins. But improved fundamentals and considerable room for counter-cyclical policies are pluses.
What the hell does that mean? Two blogs I find essential reading are China Financial Markets ,which covers the present-day economic development of China (two recent entries, as a sampler: Did China experiencing January hot money outflows? and Trade, CPI and other numbers came in this week, about whether the global crisis is seeping into China’s “real economy”), and Frog in a Well, where all sorts of historical topics concerning China are explored.
For us, there remains the question of how, exactly, do we define our national interest? Does a consensus exist? Could one be put together?
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TheEQualizer on Fri, 3rd Apr 2009 12:47 pm
When China sneezes, the US could catch a cold.
J_AG on Fri, 3rd Apr 2009 2:43 pm
Who wants to tangle with the dollar?
The United States imported $2.5 trillion worth of goods in the year 2008. That is the equivalent of the entire GDP of Asean plus India with a little of Africa. It is more than 2/3rds of the entire Chinese economy.
American owned assets in the global economy amount to $17 trillion before the crisis. Foreign owned assets in the U.S. economy amount to $20 trillion before the crisis.
The dollar comprises slightly over 60% of the worlds reserves. The rest are in Euros, Yen, Swiss franc and Pound. The world would love the renminbi to become fully convertible.
But that would mean exposing China’s monetary policy to external forces.
“That there is an element of theatre to Beijing’s proposal can be deduced from several factors. First, few people, not even Mr Zhou, can really expect the SDR to play the role of über- currency. To be credible, the issuing institution, the IMF, would have to run a central bank. It might also need, with due respect to the Swiss franc and the Japanese yen, to back its currency with an army and navy.”
“Second, it is clear that China’s currency ought to play a bigger international role. But the main obstacle to that is not in Washington. If China’s currency were fully convertible, other countries would doubtless already be holding a small, but respectable, proportion of their foreign reserves in renminbi, much as they already do with the euro and the yen. Mr Zhou’s remarks offer the faintest hint that Beijing may consider convertibility marginally sooner than many have been assuming. But fears of capital outflows and wild, export-damaging swings in the renminbi mean that is still likely to be years away.”
“Third, Beijing’s nightmares of a sudden fall in the dollar depleting its foreign reserves are overdone. It is true the government has been heavily criticised for ill-timed purchases of equity stakes in western banks. But China’s holdings of US Treasuries are not an investment. Unless Beijing is seriously considering selling down its US assets, a fall in the dollar would produce purely theoretical losses.”
“That leads to the final point. Mr Zhou’s paper distracts from the fundamental point that China would not have huge dollar holdings if it had not pursued specific policies – namely export-led growth predicated on a competitive renminbi.”
“Shortly after his paper on the end of the dollar, Mr Zhou published his thoughts on high savings rates, the flip side of US borrowing. China resents suggestions that its “excess savings” are linked to excess spending elsewhere. In his paper, Mr Zhou argues that, contrary to mechanistic arguments that savings rates can be influenced by policy, the Chinese propensity to save has cultural roots, specifically a Confucianism that “values thrift, self-discipline … and anti-extravagancy”.”
“Such deep-seated habits are, by definition, extremely hard to change. The message is clear. It is America that must budge”
http://www.ft.com/comment/columnists/davidpilling
Transcript: FT interview with Manmohan Singh
Published: March 31 2009 20:23 | Last updated: March 31 2009 20:23
“James Lamont, south Asia bureau chief, Alec Russell, world news editor, and Amy Kazmin, the south Asia correspondent, interviewed Manmohan Singh, the prime minister of India, in New Delhi on March 29 2009.”
“FT: Do you agree with China on the failures of the global monetary regime and the case for a new reserve asset in place of the dollar?”
“Manmohan Singh: Well these are not new issues. I was associated with the first committee of 20 with Paul Volcker in the 1970s. These issues have been discussed many times – moving to a neutral reserve asset. But there are complicated issues. The power to issue money is an indication of the power of a country and no-one gives up power voluntarily. So these are complicated issues, depending on the power balance. There are virtuous technical solutions but I don’t see these are the issues that can be resolved through technical analysis.”
“FT: Do you expect this to be an issue that arises at G20 meeting?”
“MS: It’s too early. You need a lot of preparation.”
J_AG on Fri, 3rd Apr 2009 2:47 pm
Next question is why the Philippines has given up the power over its ability to issue its own currency?
I wonder if any of the presidentiables would know the answer?
So much for this Tsao guy and his stupid rants.
Carl on Fri, 3rd Apr 2009 4:56 pm
China is definitely on the rise. The U.S. has been experiencing problems, but it’s still the world’s leading superpower. Rumors of its demise are greatly exaggerated.
At the recent G-20 summit, the eyes of the world weren’t on Hu Jintao, they were on Barack Obama. The Prime Minister of India, Manmohan Singh, wasn’t awed by anyone else but the American President, as he asked for President Obama’s autograph.
Talk of China’s ascendancy is good media fodder, but that remains to be seen several years ahead. Just like speculations about replacing the U.S. dollar with an international currency, primarily backed up by China and Russia. At the moment, it doesn’t seem to be in China’s interest to do so.
China does possess tremendous natural and human resources. And its wooing of other resource-rich countries with significant cash advances for future deliveries of oil and minerals. But China is still feeling its way around. At home, it still needs to maintain authoritarian control on its people in order to retain stability.
The promise of China as a superpower has titillated the world for centuries. Manolo even quotes Napoleon as having said that, someday, China will shake the world.
What could be possible in the not-so-distant future is for a financially debilitated U.S.A. to create some kind of demarcation line, allowing regional powers like China and Russia a certain amount of influence within their spheres. The Philippines would likely fall into that sphere. And we would have no shortage of Sino Sycophants, or Sinophiles, in our midst.
UP n grad on Fri, 3rd Apr 2009 6:57 pm
The reason for China holding an excessive amount of dollars is presented in this straightforward manner. China produced items that were not for domestic/Chinese consumption. A 50-inch plasma TV for every household is mantra for USA and Europe, not for Asian countries.
China needs a vibrant US (consumer) economy so that US consumers buy the products that enable Chinese factories to employ Chinese workers. Chi-merica.
This handshake between Pinas labor department and Pinas electronics industry owners to cut in half Filipino workers wages is a strategy to attract to Calabarzon more facilities to product consumer-goods for-US-and-Europe.
cvj on Fri, 3rd Apr 2009 9:26 pm
Isn’t your Filipina friend whom you had dinner with just exhibiting typical IMSCF Syndrome?
supremo on Fri, 3rd Apr 2009 9:52 pm
A Philippine-Indonesia merger is good for both countries.
supremo on Fri, 3rd Apr 2009 10:08 pm
Whoever conceptualized the imscf syndrome is a moron.
Jon Limjap on Fri, 3rd Apr 2009 10:40 pm
supremo,
Why should a person making a valid observation be considered a moron?
UP n grad on Fri, 3rd Apr 2009 10:50 pm
By the way, China rising to Great Power status will mean Pinas competing with Australia and even USA for teacher-jobs in Beijing and other China cities. And picture this 2020 possibility — Nanny jobs a-plenty, and another Chip Tsao who uses a Luisa as a foil to rib the politburo about this or about that.
supremo on Fri, 3rd Apr 2009 11:03 pm
The interpretation of the observation is not valid.
TheEQualizer on Fri, 3rd Apr 2009 11:08 pm
Is Justice Blind in The Philippines?
1)Malacañang’s consecutive pardons of convicts in high-profile cases, like former Zamboanga del Norte Rep. Romeo Jalosjos and the soldiers in the Aquino-Galman double murder.
2)Now,the the pardon of Rodolfo Manalili, the convicted mastermind of the abduction-murder of Beebom and her boyfriend, Ernesto “Cochise” Bernabe II!
UP n grad on Fri, 3rd Apr 2009 11:11 pm
IMSC is by Filipinos in Luzon, Visayas and Mindanao. Evidence : two bloggers Limjap: and blackshama crowing about their bloodline.
supremo on Fri, 3rd Apr 2009 11:16 pm
I agree with UP n grad. IMSCF syndrome is local. For Overseas Filipinos it’s more about pride and heritage.
cvj on Fri, 3rd Apr 2009 11:20 pm
Wow, Fil-Ams versus locals. Who needs the Chinese?
supremo on Fri, 3rd Apr 2009 11:22 pm
IMSCF has a local cousin. It’s IMUPALS syndrome.
Sons of Pampanga on Fri, 3rd Apr 2009 11:44 pm
“supremo on Fri, 3rd Apr 2009 9:52 pm
A Philippine-Indonesia merger is good for both countries.”
Idiot. So you’ll wind back the clock and waste the efforts of my Kapampangan ancestors and Spanish conquistas who rid the islands of the scourge that is Islam. We’re having enough trouble as it is containing a small Muslim minority in a small island that is Sulu, now you want to merge with the our large Muslim neighbor down south? Don’t you think they’ll outbreed and out-convert us?
Kapampangan warriors didn’t die so my daughters and granddaughters will grow up hiding behind a oppressive hijjab, praying five times a day to a God invented by pedophile Arab. Maybe you want you female progeny to? Why don’t you just get your ass out of the Philippines and move to Indonesia and leave us to our Christian Filipinos to fend off the Sino threat-no mergers required.
Alliance, yes. Merger-idiotic.
UP n grad on Fri, 3rd Apr 2009 11:49 pm
This reminds me of the first time many years ago — in Caloocan, very hot day in June — that I accidentally moved up the levers that “activated” the heater of my uncle’s Buick. “How stupid are these Americans?”, I knowingly bellowed. “Why would anyone build a car that sends heat into the passenger area?”
supremo on Fri, 3rd Apr 2009 11:57 pm
Since Gloria is an idiot and Kapampangan and you are Kapampangan then you must be an idiot too.
As too Kapampangan warriors, I have to admit that their treachery is legendary.
The merger is not about religion it’s more about economics. A merged Indo-Phil will have at least $1.3 Trillion economy with 300 million consumers.
Sons of Pampanga on Sat, 4th Apr 2009 12:01 am
And I do think China in the next 20 to 30 years would be like Japan in the 1920’s and 1930’s-resources starved and having cultural superiority complex. Only a matter of time before their economic inferiority catches up with their sense of superiority. By then you’ll see them implement stage 1 of Sino East Asia Greater Economic Co-Prosperity Sphere.
That’s the problem with the Japs and Chinks. Being of the Mongol race and having the smallest median penis size, they’re always trying to over compensate for their shortcomings.
UP n grad on Sat, 4th Apr 2009 12:04 am
to Sons of Pampanga: don’t use up all your anger that fast; you’ll need it later. You should also know that the ASEAN countries are moving towards liberalized travel between countries similar to what the EU now has. In your lifetime, the very poor of Indonesia, Thailand will legally settle in your baranggay to work (just as the poor of Pinas will settle in Kuala Lumpur, Bali, Bangkok to work (as teachers and nannies???)).
Sons of Pampanga on Sat, 4th Apr 2009 12:15 am
“cvj on Fri, 3rd Apr 2009 9:26 pm
Isn’t your Filipina friend whom you had dinner with just exhibiting typical IMSCF Syndrome?”
I’ve travelled many a places around the world and met many a Filipina who’ve spout “I’m Malay, Chinese, Spanish, American” line, it’s so fucking creepy. Usually, it’s second generation migrants who chide their first generation TNT, low-skill, low-paid, unfashionable (maong pants and jacket and white rubber shoes wearing Dad with the gold necklace and Mom with big, thick, dry hair and daggy clothes) parents who work and average 50 hours a week on hotels and nursing homes just so they can support their ungrateful tacky kids.
In a drunken state, I once blurted to an IMSC girl after she gave the usual line the dreaded reality check: “Andami mo pang pinagsasabing bansa, Bisaya ka lang naman” (which she was). She never spoke to me again.
Sons of Pampanga on Sat, 4th Apr 2009 12:23 am
“UP n grad on Sat, 4th Apr 2009 12:04 am
In your lifetime, the very poor of Indonesia, Thailand will legally settle in your baranggay to work (just as the poor of Pinas will settle in Kuala Lumpur, Bali, Bangkok to work (as teachers and nannies???)).”
What jobs are they gonna steal? Ain’t that many jobs going around now or in the near future in ASEAN. The EU model won’t work in ASEAN because only Singapore is rich. Unlike in EU, where polaks can go to Western Europe and do the jobs that Westerners don’t like.
When Indos and Cambodians start stealing the jobs of Pinoy metro aides, I’ll run on a rightist anti-immigration platform and be the Erap of the post-globalized Philippines.
Sons of Pampanga on Sat, 4th Apr 2009 12:40 am
Last rant before I bunk: Chimerica-what a bad catchword. So hard to pronounce, not obvious at all and difficult to remember. Sounds like the Chimera virus from Mission Impossible II.
Chinamerica would’ve been more catchy.
UP n grad on Sat, 4th Apr 2009 1:20 am
What jobs are they gonna steal?
You mean, what jobs will be given, right?
Answer : the jobs at Pinas garment- or electronics factories and at construction sites now being performed by Filipinos where the education or training-barriers are not that high, what else? [Remember... students spend more years in elementary/high-schools in Thailand and other countries.]
Also those less-than-high wages as fishermen…. because Pinas is a high-wage country.
d0d0ng on Sat, 4th Apr 2009 3:30 am
“When China sneezes, the US could catch a cold.”
It is the other way around. Right now, China is feeling the pressure of closing plants and factories due to low demand of imports brought by US financial meltdown.
d0d0ng on Sat, 4th Apr 2009 5:27 am
“Chinese citizen who remarks that China’s mistake was that it confused paper with power; that is, it bought American debt but in the end, even though it ended up holding vast amounts of that debt, the Americans, indebted as they are, still held on to the tangible manifestations of power: China might have paper, America continued to possess nuclear aircraft carriers for projecting influence -even to China’s shores.”
Press freedom is a precious commodity in China but there is no confusion in Chinese authorities in regards to power, so the Chinese citizen was largely mistaken. Chinese hawks knew the immediate extension of sovereign power China can have in an aircraft carrier within its sea-air coverage. It is a welcome approach in two folds (1) to advance the bogged-down issue in Taiwan, (2) to secure Chinese expanding oil interests abroad threatened by piracy.
The growth of Chinese navy is source of concern for Sec Robert Gates. In annual report, (1) China rapidly acquiring advance weapon systems including ballistic missiles that can home-in on US aircraft carrier and anti-satellite systems, (2) expanding its surface fleet currently at 320 warships which already outnumbers US navy, (3) outbuilding US submarines by 5 to 1 including experimenting in air-independent propulsion that can allow submarines to submerge for extended period, (4) building shore based strike fighters and cruise missiles that can vector on regional targets, (5) initiated the world’s largest shipbuilding industry in Hainan to start an aircraft carrier.
Last month incident with Chinese fleet harrassed a lone US navy research vessel was no accident. US dance to the tune of research while China invoked exclusive economic zone. Both prefers the world not to notice the underlying tension.
d0d0ng on Sat, 4th Apr 2009 6:46 am
supremo on, “Whoever conceptualized the imscf syndrome is a moron.”
Take it easy my friend, there is always the crab mentality of getting back, hence the imscf tag. Sons of Pampanga just displayed it with his “Andami mo pang pinagsasabing bansa, Bisaya ka lang naman” (which she was).”
Jon Limjap on Sat, 4th Apr 2009 8:24 am
UP n grad,
LOL.
First, I did not point out my own bloodline. I never did. That Emerchan/Everchan person did that for me.
Second, no, I’m not as Chinese Filipino as the regular Chinese Filipino. A lot of Chinoys migrated after the Communist vs. Nationalist civil war, and through the communist era. My ancestor came here back in the 1880s/1890s (no record of an exact date), married a Filipina, and every male in my line has married Filipinas ever since.
Just so happened that my paternal surname is Chinese sounding. So what?
Carl on Sat, 4th Apr 2009 9:34 am
“China lacks the moral authority to be a true superpower” – The Dalai Lama
That, being said, the U.S.A. isn’t a shining example of moral authority, either. The U.S., most unambiguously under George W. Bush’ neoconservative regime, was bent on manipulating the world for selfish national and corporate interests. Its rhetoric about freedom and liberation were only to conceal its agenda of domination and exploitation. While that may true of all superpowers, it is normally disguised in diplomacy.
The U.S. carries a lot of moral baggage, perhaps foremost being its unqualified, some would even say subservient, support for the state of Israel. This unquestioning support for a belligerent and brutal ally leaves the U.S. vulnerable to doubts about prejudice and double standards.
Then, there was the disastrous war with Iraq, where the U.S. blatantly lied to the world, and dragged in hapless allies, in order to have a pretext for that war. This was unprecedented in its brazenness.
The recent financial meltdown has also created doubts about the American economic model. To many, it has only confirmed what they always suspected: that, despite the sugarcoating about “the American dream”, that dream exists primarily for the interests of the corporations and the elite and that, when the chips fall, the American government will come to the rescue of the elite before it comes to the aid of the ordinary folk. Economist Robert Reich called it “Lemon Socialism” – Taxpayers end up with the lemons, while Capitalism is reserved for the elite. Others call it “No Fault Capitalism” – Large capitalists can afford to be reckless because taxpayers are there to bail them out.
However, the U.S. can still point to certain freedoms at home to bolster its moral authority. China cannot. And, recently, Barack Obama has been doing a lot to repair America’s badly tarnished image, trying to restore its moral high ground.
This moral standing, or at least its perception, is something that neoconservatives failed to appreciate. This is something that China will have to learn before it can be seriously be considered as a superpower. It has had missteps in Darfur and elsewhere, including the Philippines, where it indiscreetly dealt with corrupt elements and got involved in controversies. Of course, there are also those questions about melamine and other serious doubts regarding the regulation of safety and quality standards, which still undermine China’s image around the world.
J_AG on Sat, 4th Apr 2009 10:12 am
Stupid is as Stupid Does — They got hooked on the dollar trap and are now stuck. Currency swaps are closer to bilateral counter trade than anything else. Cheap credit and cheap goods were not sustainable. Now the U.S. says enough.
“Was there a deep strategy behind this vast accumulation of low-yielding assets? Probably not. China acquired its $2 trillion stash — turning the People’s Republic into the T-bills Republic — the same way Britain acquired its empire: in a fit of absence of mind.”
“And just the other day, it seems, China’s leaders woke up and realized that they had a problem.”
“The low yield doesn’t seem to bother them much, even now. But they are, apparently, worried about the fact that around 70 percent of those assets are dollar-denominated, so any future fall in the dollar would mean a big capital loss for China. Hence Mr. Zhou’s proposal to move to a new reserve currency along the lines of the S.D.R.’s, or special drawing rights, in which the International Monetary Fund keeps its accounts.”
“But there’s both less and more here than meets the eye. S.D.R.’s aren’t real money. They’re accounting units whose value is set by a basket of dollars, euros, Japanese yen and British pounds. And there’s nothing to keep China from diversifying its reserves away from the dollar, indeed from holding a reserve basket matching the composition of the S.D.R.’s — nothing, that is, except for the fact that China now owns so many dollars that it can’t sell them off without driving the dollar down and triggering the very capital loss its leaders fear.” Paul Krugman – China’s Dollar Trap
http://www.nytimes.com/2009/04/03/opinion/03krugman.html?_r=1
UP n grad on Sat, 4th Apr 2009 10:12 am
One of the surprising revelations now that Barack Obama is president is a series of cracks in the EU. The EU had always been proud of its ability to speak with one voice; unfortunately, the past 8 years, that “one voice” is one only because Europe was united against Bush. Now that Bush is gone, the European countries are finding out that they do not have a philosophy or economic program to speak of. They are just as united as Czechoslovakia was, and just as insightful into how the world runs.
J_AG on Sat, 4th Apr 2009 10:24 am
How China got caught in a trap pf its own making….
http://newsweek.washingtonpost.com/postglobal/pomfretschina/2009/04/obama_as_peacemaker_between_sarko_and_hu.html
http://www.nytimes.com/2009/04/03/business/global/03realestate.html?_r=1
J_AG on Sat, 4th Apr 2009 10:39 am
Europe got more out of the G-20 meeting than what the U.S. wanted. No more stimulus spending for Europe since they do have a better social welfare state better than the U.S. The U.S. and
They got everyone to increase contributions to the IMF and W.B. which would help their poor Eastern European countries who have seen a withdrawal of foreign investments precipating dangerous balance of payments problems.
The German centered Euro Central Bank is still trying to maintain its hard currency stance. They are philosophically against Keynesian policies.
Europe got its wish for more international regulation and more oversight over tax havens.
Carl on Sat, 4th Apr 2009 1:54 pm
Here’s a very interesting article by a former chief economist at the IMF. He tells of how the United States has been captured by a financial oligopoly and, despite causing the present financial crisis due to its recklessness and greed, how this oligopoly will do everything to block reforms and stricter controls being deliberated by the Obama administration.
Here’s the article:
http://www.theatlantic.com/doc/200905/imf-advice
Adventurero on Sat, 4th Apr 2009 2:55 pm
“how, exactly, do we define our national interest? Does a consensus exist? Could one be put together?”
Realpolitik dictates that RP now deepen and broaden its relations with China, not only economically, but geo-politcal considerations as well.
Remember, the Chinese are a very patient people. A civilization that has existed for five millennia could afford to wait for five more years to be Great Power.
Eventually China’s aim is to be a global Superpower.
To be a Superpower like the United States, China has to attain the following:
1.Global Military Power -> Almost there.
2.Global Economic Power -> They’re there!
3.Global Diplomatic Power -> Getting there.
4.Global Cultural Power -> Long ways to go.
5.Other Soft power -> Chinese taipans/dispora
This is also in the light of the lack of political clout of, and effective lobby, in Washington from the two to three million Filipino-Americans.
You cannot ignore a Bully Boy in your neighborhood even if you have a Big White Brother somewhere who promised to help, could you?
Sons of Pampanga on Sun, 5th Apr 2009 10:21 pm
China’s soft power is all but overrated. I’ve heard it bandied about during the Olympics in China (which was great show but all but forgotten now) and at present when they try to take a leadership position in the world because of West’s financial crisis.
I think America’s soft power is much more subtle and effective. Half the world wants to and can speak English, not Cantonese. A big part of this is Hollywood, American TV and the American free media. The way these three portray Americans and Chinese makes a lasting impression on the minds of impressionable youths (and adults too) the world over.
The sheep of the world are brainwashed into thinking that Americans are the shiznit (“America, fuck yeah!”, “100% American Bad Ass”, always the one to save the day, gets the girl in the end of the movie, is the world’s only hope to bring justice, peace, and freedom to the world’s oppressed people’s) while Chinese are still portrayed as shifty, stuck-up, untrustworthy, boorish, greedy, and evil. I mean, you can count with your fingers the # of times a Chinese male protagonist gets to kiss a non-Chinese woman on screen while other ethnic women on media always go gaga for White or Black American protagonists.
It’s little stuff like this that China can never replicate. They have to impose their language first before they can make some headway into brainwashing our heads. Unfortunately for them, the English speaking peoples have a hundred years lead.
They can’t even compete with non-English speaking soft powers, like Korean or Latin American Soaps and actors and actresses that have easily conquered Philippine media. I guess Chinks are just not that charming to the world’s eye.
Sons of Pampanga on Sun, 5th Apr 2009 10:28 pm
“Adventurero on Sat, 4th Apr 2009 2:55 pm
To be a Superpower like the United States, China has to attain the following:
1.Global Military Power -> Almost there.
2.Global Economic Power -> They’re there!
3.Global Diplomatic Power -> Getting there.
4.Global Cultural Power -> Long ways to go.
5.Other Soft power -> Chinese taipans/dispora”
My take:
1.Global Military Power -> Not yet (10 yrs behind America’s, but enough to intimidate their Asian periphery, except Japan)
2.Global Economic Power -> No (300 million chinks on poverty line, vulnerable holdings of American treasuries)
3.Global Diplomatic Power -> No (only to non-democratic dictator countries and Australia who sells them resources)
4.Global Cultural Power -> Agreed, Long ways to go.
5.Other Soft power -> Don’t agree, Chinese taipans/dispora are despised the world over.
Sons of Pampanga on Sun, 5th Apr 2009 10:39 pm
I also want to add that China’s export oriented, non-diversified, high-saving, low domestic demand,economy is a detriment to it attaining Global Economic Power.
Sons of Pampanga on Sun, 5th Apr 2009 11:02 pm
Manolo: “For us, there remains the question of how, exactly, do we define our national interest? Does a consensus exist? Could one be put together?”
The only national interest consideration that rubs with China is the Spratlys in my opinion.
I don’t care how strong American military is or how strong our American ties are, we’re weakened by geographical distance: American hardware is halfway around the world while China is just a stone’s throw away (and by stones I mean medium range ballistic missiles, fighter jets, submarines, and aircraft carriers). As we’re obviously weak militarily we should just portray ourselves as “kawawa” in the eyes of the World, a frail kid whose Spratly lunchbox is being shaken down by the big Chinese bully.
Maybe our government could get some PR types to train Manny Pacquiao, Arnel Pineda, and Charice Pempengco to utter a line like “This song/fight is dedicated to the brave men and women of the Philippine Navy who are risking their lives to protect the sovereignty of the Philippines in the Spratlys”.
Carl on Mon, 6th Apr 2009 8:45 am
Cultural power is, indeed, very important. The U.S. has, by promoting innovation through electric lighting and power, the telephone, the car, the airplane, cinema, comic strips, paperback books, nylon and plastics, television, the computer, the internet, been able to dominate commerce and culture for the past 100 years. That’s no mean feat and, undoubtedly, it took imagination and resourcefulness to be such a dominant presence worldwide.
Although China boasts of being one of the most ancient civilizations on earth, its cultural dominance is limited to its own people, albeit a significantly large population of the world. But even within China’s own borders, Chinese culture is not as homogeneous and established as China would want the world to think. China’s problems with Tibet and Xinjiang, for example, are well known.
Another important ingredient needed to lead as a superpower is credibility. While the U.S. has often gone astray on this, it still retains sufficient goodwill and cultural sway to make do. One of the reasons why the U.S. lost sight of the importance of credibility is that it got carried away by its own military power. After the demise of the U.S.S.R., the U.S. became the sole global power and its employment of “shock and awe” really amazed the world. But most of all, it amazed Americans themselves, who got carried away into thinking that military might was the only prerequisite to lead the world.
The Obama administration has taken notice of this flawed mentality, most prevalent in the neoconservative Bush administration. Obama is now taking steps to revive America’s credibility and reputation. Because that is the foremost quality a superpower needs to lead.
China is light-years away from achieving worldwide credibility. Military and economic might are not enough.
ramrod on Mon, 6th Apr 2009 10:11 am
Its during times like these that I remember the song of the great rastafarian…
War
Bob Marley and the Wailers
Until the philosophy which hold one race
Superior and another inferior
Is finally and permanently discredited and abandoned
Everywhere is war, me say war
That until there are no longer first class
And second class citizens of any nation
Until the colour of a man’s skin
Is of no more significance than the colour of his eyes
Me say war
That until the basic human rights are equally
Guaranteed to all, without regard to race
Dis a war
That until that day
The dream of lasting peace, world citizenship
Rule of international morality
Will remain in but a fleeting illusion
To be pursued, but never attained
Now everywhere is war, war
And until the ignoble and unhappy regimes
That hold our brothers in Angola, in Mozambique,
South Africa sub-human bondage
Have been toppled, utterly destroyed
Well, everywehre is war, me say war
War in the east, war in the west
War up north, war down south
War, war, rumours of war
And until that day, the African continent
Will not know peace, we Africans will fight
We find it necessary and we know we shall win
As we are confident in the victory
Of good over evil, good over evil, good over evil
Good over evil, good over evil, good over evil
magdiwang on Mon, 6th Apr 2009 10:23 am
The perceive rise of China is way too premature. Just like any other country before her, it will too come up short. Two trillion dollars of reserves will not translate into geo-political heft, economic, military, scientific and cultural dominance.
J_AG on Mon, 6th Apr 2009 11:06 am
Mature industrial economies have all evolved into financial capitalism centered on the power to create their own currency. All backstopped by their agro-industrial capacity world wide.
Their ability to create money almost at will, supported only by their credibility. Hence money today is backed up by nothing except a political standard.
Statism and not communism at play. Finance that is at the core of modern day civilization rests on only one asset. Faith…..That is in the end the meaning of finance. In today’s world the full faith and credit of the U.S. Republic .
“The stakes in the debate over international financial reform are huge. The dollar’s role at the center of the global financial system gives the US the ability to raise vast sums of capital without unduly perturbing its economy. Indeed, former US President George W. Bush cut taxes at the same time that he invaded Iraq. However dubious Bush’s actions may have been on both counts, interest rates on US public debt actually fell.”
“More fundamentally, the US role at the center of the global financial system gives tremendous power to US courts, regulators, and politicians over global investment throughout the world. That is why ongoing dysfunction in the US financial system has helped to fuel such a deep global recession.” Rogoff
http://www.project-syndicate.org/commentary/rogoff55
http://www.cnbc.com/id/29880401/?slide=16
http://www.ft.com/cms/s/5f673850-207e-11de-b930-00144feabdc0,dwp_uuid=063fb9c2-3000-11da-ba9f-00000e2511c8,print=yes.html
http://www.ft.com/cms/s/f945653c-1fb1-11de-a1df-00144feabdc0,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2Ff945653c-1fb1-11de-a1df-00144feabdc0.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fcomment%2Fcolumnists%2Fmartinwolf
ramrod on Mon, 6th Apr 2009 11:27 am
I don’t believe there’s anything wrong in aspiring to be or being a superpower, its how this power is wielded that makes a difference and the attitude/mindset that comes with it. There will always be better and lesser persons than ourself, but lesser peoples? Is arrogance the true nature of humanity when gifted with so much or is it compassion and reponsibility?
History shows that the Americans can be arrogant, cruel, but then again compassionate, if this is by design or not I hope the Chinese will learn from it. After all, what does the good book say about pride and humility? or about those who exult themselves?
Carl on Mon, 6th Apr 2009 2:52 pm
Good point, J_AG. Faith and credibility are more essential than shock and awe.
UP n grad on Mon, 6th Apr 2009 8:58 pm
When China has the equivalent of an H1B visa –300,000 visas yearly for engineers, programmers, investment analysts into China — then you know China has reached superpower status.
(USA grants about 80,000 H1B visas a year).
S o P on Tue, 7th Apr 2009 3:01 am
Only a re-militarized Japan will provoke China. Both are resource-starved, industrialized economies with a “don’t lose your face” culture.
China learned from Germany and Japan not to take the military route in obtaining resources.
Despite Chinese autocracy, it is still rooted socialism. It got rid of dynastic rule and its upper echelons are tied in a benign ideological battle between upper/intelligent class meritocracy and lower class socialist democracy, as mentioned by Manolo, re the Princelings and tuanpai.
The Japanese on the other hand still have a King and extreme right elements who view themselves as superior to other races. For now, those extreme elements are kept in check by America and economic progress, but I have a nagging feeling it could boil to the surface easily when circumstances turn bad.
I’m not as “afraid” of Chinese sense of racial superiority though. Chinese are composed of diverse ethnic groups and being that they can empathize with other nations who like to keep their independence and sense of cultural identity. The Japs on the other hand are a homogenized society who are not “used to” diversity and wouldn’t mind imposing that homogeneity on the rest of the world, as they tried half a century ago.
UP n grad on Tue, 7th Apr 2009 5:06 am
Side-topic: people interested in the growth engine called United-States-of-America may want to check out Doug Kass’s analysis (now often repeated by Cramer) that the doom-and-gloom Nouriel Roubini market-bottom was in the first week of March, 2009. Warren Buffett was wrong only in that he was early, but he is correct that money is again to be made by taking long-positions. Those with speculative-money available (and who believe they are nimble enough to time the market gyrations and choose from the various sectors) can use Direxion and Proshares double- and triple-fashioned ETF’s. The more rational can always piggyback on Berkshire Hathaway, Leucadia or even Gabelli.
Carl on Tue, 7th Apr 2009 7:33 am
A re-militarized Japan will certainly make many countries in Asia very nervous. However, Japan has a low population growth. It will be facing an ageing population in a few years. Japan still remains relatively homogeneous, not having opened its doors very widely even during the height of its industrial and commercial expansion.
Muslim countries in Asia, the Middle East and Africa, on the other hand, have surging population growth. There will be more Muslims in the world in the coming decades. We will all need to figure out a way of dealing with the Islamic world.
Karl Garcia on Tue, 7th Apr 2009 7:34 am
“So, the game plan seems to be:
1. Strong currency, strong country. Build up the Yuan.”
For years China has been doing all it can to have a weak currency.
For the meantime they can not stick to that idea since they cannot export to the US.
I wonder if they have learned from the roller coaster ride of the yen vis a vis the usd.
“3. Armed country, strong country. (see Tony Abaya, on the Chinese buying the HMAS Canberra for scrap, but making blueprints for future reference.)”
Unknown to some. For years China has been meeting with its neighbors discussing cooperation(military). They have set programs for maritime cooperation among neighbors. The Philippines has always been sending its representative.
So China does not plan on doing it alone,China wants to win over its neighbors.
CVJ and myself discussed a what if(in this blog.
What if China did not concentrate internally and sets its sights outwards. I think that can still happen.
Before(centuries hence) they had a fleet stronger than any European fleet,but they never go t to use it other than defending their land from invaders.
S o P on Tue, 7th Apr 2009 8:55 am
“Carl on Tue, 7th Apr 2009 7:33 am
Muslim countries in Asia, the Middle East and Africa, on the other hand, have surging population growth. There will be more Muslims in the world in the coming decades. We will all need to figure out a way of dealing with the Islamic world.”
The Philippines has always been criticized for having the last communist insurgency in Asia. But this resulted in Macapagal, Marcos, and Cory appeasing the leftist insurgency through the gentrification of Mindanao with Christian Maoist farmers. And so in this sense, its just a stroke of luck that we had a Maoist rebellion in our history. For if it were not for relocated leftists, Muslims will be the dominant majority in Mindanao.
Karl Garcia on Tue, 7th Apr 2009 9:53 am
“The Philippines has always been criticized for having the last communist insurgency in Asia”
Maybe the honors should go to Nepal.
J_AG on Tue, 7th Apr 2009 12:24 pm
When will the discussions on the global crisis move to the root causes????
The drastic imbalances in a structural lack of aggregate demand in the emerging economies and developing economies caused by free market fundamentalism of the last 30 years?
On one hand you have tremendous slack or an output gap in the more industrial and industrializing economies of the world. (Tremendous Overcapacity)
China, Germany and Japan the hardest hit countries.
The Philippines more a debt based consumption economy is only worried on whether its debt and remittance lifelines underpinning its narrow based consumption based economy will be affected….
Now even its status as a tax haven and tax refuge for criminals, tax evaders and corrupt governments has become exposed for the world to see and attempt to regulate.
http://www.thenation.com/section/meltdown101?rel=hp_picks
J_AG on Tue, 7th Apr 2009 12:33 pm
From Public TV in the U.S. dissecting their debt.
http://www.pbs.org/wgbh/pages/frontline/tentrillion/view/
This is not for lunatics or practitioners of corrupt governments.
James Galbraith University of Texas at Austin
Galbraith
Can you imagine a scenario in which the United States government actually goes bankrupt?
No. The United States government cannot go bankrupt because it can always pay debts issued in United States dollars. There is no operational risk of bankruptcy in any meaningful sense of that term. To use the term in the context of the United States government is, in my view, profoundly misleading. It’s a scare tactic. It is not a metaphor which fits the government which can issue its own currency and which can pay its own debts in that currency. That’s the government we have. …
… The National Debt Clock is running really fast. Have you noticed?
I heard that it actually ran out of digits. … And my suggestion was that they should try just turning it off.
Why?
Because it’s not the problem that we should be focusing on right now. Why don’t we have a clock there that tells you how many jobs are being created and how many jobs are being destroyed? Why don’t we have a clock that tells you how many states and cities are cutting their budgets and how many are able to go forward with the services that they have presently been running? Those are the priorities that we have to face. …
The national debt clock doesn’t tell us anything?
No, it doesn’t, and in particular this $11 trillion number, when many trillions of that actually are held by the government itself, which is basically just an accounting offset.
The total share of debt, [as a share of] U.S. GDP, our national output, held by the public before this crisis was on the order of 40 percent. It is not a big number either by the historical standards of the United States, nor compared to our major industrial democratic partners in Europe and elsewhere, where debt-to-GDP is 60 percent to 100 percent and higher. And those countries are as solid as we are. So we are not in a situation where this number tells you anything meaningful about the economy.
S o P on Tue, 7th Apr 2009 1:50 pm
But J_AG, already there is talk of the US having a treasuries bubble. The world and China has learned its lesson and won’t buy anymore what essentially are junk bills, and in order for the Fed to stimulate their economy, it has resorted to buying the U.S.’s treasuries, ie, monetizing the debt, printing more money. The reason being there isn’t much more they can do interest rate wise to stimulate the economy as the rate is near zero.
The “great recession” has also depressed assets prices in other categories, ie stocks and real estate, and pension and sovereign and Jo Blo funds will be investing them in those than T-bills. Or they may just elect to keep them as cash if they are not as optimistic and daring as Warren Buffett.
So they are in a situation where there will be lots of printed money to circulate in the coming years and that only means more inflation. Americans, and yes Pinoy Americans, will find that their American dream will require two more extra jobs (on top of the 3 jobs that they’re already juggling) to pay off.
The good news for the Philippines is that our debt servicing could go down now that the US dollar is cheaper. But then again, there’s the problem of our weak currency bogged down by the poor handling of our economy by inept politicians…
S o P on Tue, 7th Apr 2009 1:54 pm
http://www.rollingstone.com/politics/story/26793903/the_big_takeover
S o P on Tue, 7th Apr 2009 1:58 pm
“Karl Garcia on Tue, 7th Apr 2009 9:53 am
Maybe the honors should go to Nepal.”
Touche. But ask me again in 10 years, I might be correct after all.
istambay_sakalye on Tue, 7th Apr 2009 2:45 pm
http://opinion.inquirer.net/inquireropinion/columns/view/20090407-198287/The-war-abroad–
Carl on Tue, 7th Apr 2009 5:34 pm
J_AG, a good summation of the root causes\ of the global financial crisis is, I believe, provided by Simon Johnson, former IMF chief economist and currently professor at MIT’s Sloane School of Business.
“In its depth and suddenness, the U.S. economic and financial crisis is shockingly reminiscent of moments we have recently seen in emerging markets (and only in emerging markets): South Korea (1997), Malaysia (1998), Russia and Argentina (time and again). In each of those cases, global investors, afraid that the country or its financial sector wouldn’t be able to pay off mountainous debt, suddenly stopped lending. And in each case, that fear became self-fulfilling, as banks that couldn’t roll over their debt did, in fact, become unable to pay. This is precisely what drove Lehman Brothers into bankruptcy on September 15, causing all sources of funding to the U.S. financial sector to dry up overnight. Just as in emerging-market crises, the weakness in the banking system has quickly rippled out into the rest of the economy, causing a severe economic contraction and hardship for millions of people.
But there’s a deeper and more disturbing similarity: elite business interests—financiers, in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them.”
– The Quiet Coup – published in the Atlantic Monthly, by Simon Johnson, former chief economist at the IMF and presently professor at MIT
Johnson blames “a river of deregulatory policies” because the U.S. government was corrupted by the elite business interests.
These are among the “astonishing” deregulatory policies Johnson blames for the excesses that led to the financial collapse:
• insistence on free movement of capital across borders;
• the repeal of Depression-era regulations separating commercial and investment banking;
• a congressional ban on the regulation of credit-default swaps;
• major increases in the amount of leverage allowed to investment banks;
• a light (dare I say invisible?) hand at the Securities and Exchange Commission in its regulatory enforcement;
• an international agreement to allow banks to measure their own riskiness;
• and an intentional failure to update regulations so as to keep up with the tremendous pace of financial innovation.
Adds Johnson: “The mood that accompanied these measures in Washington seemed to swing between nonchalance and outright celebration: finance unleashed, it was thought, would continue to propel the economy to greater heights.”
Now, as for the much ballyhoed international currency to replace the dollar, that is just a pipe-dream, says Robert Samuelson:
“The attraction of an international currency depends on its presumed stability, what it will buy and how easy it is to invest. The euro (27 percent of government reserves) and the yen (3 percent) don’t yet rival the dollar. As for China, it hasn’t made its own currency (the renminbi, or RMB) automatically convertible for Chinese investments.
We’re stuck with the dollar standard for a while. To work, it requires that countries with huge trade surpluses reduce the export-led growth that fed the system’s instabilities. The Chinese increasingly recognize this. “They’re very aware of the need to promote consumer spending,” says economist Pieter Bottelier of Johns Hopkins University. In November, China announced a 4 trillion RMB ($586 billion) “stimulus.” In addition, says Bottelier, the government is improving health and pension benefits to dampen households’ need for high savings.”
S o P on Tue, 7th Apr 2009 5:52 pm
“J_AG on Tue, 7th Apr 2009 12:24 pm
When will the discussions on the global crisis move to the root causes???? ”
I prefer the simple Jewish/Rothschild/Federal Reserve conspiracy: loosening the money supply to increase per capita debt then tightening it all of a sudden to make the masses go bankrupt and have the banks seize all their property.
We’re in the loosen phase at the moment. Expect Bernake to tighten it when inflation hits 20% 5 years from now, then, the Rothschild family awash with wealth, goes on to finance Russia, China, Japan, Nato, Iran rearmament, then it’s World War III time baby!
Adventurero on Wed, 8th Apr 2009 2:37 am
With all due respect to economic purists here, a strong currency is not all about favorable balance of trade, low inflation, etc. A strong currency must be backed by a strong army, air force, and navy.
Talk about Japan and Switzerland with strong currencies but nary anything to growl about it. Japan is now even being bullied by North Korea.
Since the dawn of history, men were political animals. They let the wives run home economics.
Carl on Wed, 8th Apr 2009 9:04 am
This global financial crisis has exposed the weaknesses of what was thought to be an ideal economic model for emerging markets: export-led growth.
Most especially since after WWII, export-led economies were seen as the way to go for undeveloped and developing countries. The stellar examples of Japan and Germany, then later Taiwan, South Korea, Hong Kong and Singapore were proof that exports were the surest and quickest way to industrialization, structural change, productivity, prosperity and well-being.
Japan and the “tiger economies” were so celebrated as success stories that export-led growth was often called the “Asian model”. Malaysia, Thailand, India and, eventually, China followed this pattern.
For decades, it had been difficult to argue against this development strategy. The success of export-led economies spoke for itself. Per capita incomes of the “tiger economies” soon rivaled or surpassed countries in Europe. Asian countries that fumbled, due to political constraints or sheer incompetence, countries such as North Korea, Myanmar, Indonesia and the Philippines, continued to remain poor.
China, by stimulating its economy, is indicating that it wants to develop domestic consumption. It seems to be signaling that it will not be relying on exports, but will rely more on domestic demand-led growth in the future.
At the same time, China is signifying its intentions of increasing trade with emerging economies by extending loans and other facilities. Now that profligate consumers in mature economies like the U.S. and Europe are holding back, China wants to develop alternative markets in Russia, Africa, Latin America and Asia.
In the meantime, Japan, South Korea and other economies which flourished during the export-led boom, have to seriously rethink their economic models. They have to develop other sources of growth in order to maintain their living standards. After so many years prospering under what they thought was an established template, they seemingly need to reinvent the wheel.
J_AG on Wed, 8th Apr 2009 12:40 pm
The Americans for a long time refuse to believe that they do indeed have a class system.
Johnson flaw is they just now discovered that indeed they do have a financial capitalist class.
Most Asians including Pinoys are still steeped in 19th century ideas about industrial capitalism.
The history of the crisis of capitalism started in earnest in 1870’s then it transformed itself into financial led industrial capitalism with J.P. Morgan giving governments then the perfect model for government intervention with private capital in the economy. Federal Reserve backed up by the power of the state to monetize credit. The fiat currency system.
The whole of the 20th century was an age of the shift from industrial capitalism to financial capitalism.
From Adam Smith to the Keynesian world or its antithesis monetarism.
The Chinese now are trapped and have started into bilateral counter-trade deals masked by the so called currency swaps. These swaps are only ledger entries in both Central Banks and will be used exclusively to facilitate trade and goods. They cannot be used as reserve currency or traded for other currencies.
The Chinese are actually practicing pro-active protectionist policies versus the other emerging countries who do not have similar excess capacities and state support.
The units of account for world trade is still denominated in dollars.
The 19th century and the early part of the 20th century till the end of the second world war was about industrializing economies literally fighting for resources and markets and using finance to gain an advantage. FDR unilaterally defaulted on the U.S. gold debt by raising the price of gold and refusing to allow private ownership of gold. Really clever…
Today governments tax the almost whole by inflating their way as a means of discounting their debts. Only the very few who own the means of production gain. Real incomes remain stagnant and drop while the government collects more on taxes directly and indirectly. It distorts the natural pricing mechanism based on labor theory of value.
In the long run it destroys societies with societies not even knowing the reason of its own demise. The Philippines is a prime example.
http://www.washingtonpost.com/wp-dyn/content/article/2009/04/05/AR2009040501724.html
China’s Dollar Deception
By Robert J. Samuelson
Monday, April 6, 2009; Page A15
“We are in a race between economic recovery and economic nationalism. At last week’s Group of 20 summit, leading nations agreed to roughly $1 trillion of additional lending, mostly through the International Monetary Fund, to help end the worldwide slump. But beneath the veil of consensus, countries are maneuvering to protect their economies and blame someone else for the crisis. Will the world economic order overcome these stresses or give way to a global free-for-all, characterized by rampant protectionism and nationalistic subsidies and preferences?”
J_AG on Wed, 8th Apr 2009 1:01 pm
Except for Japan, India and China all the other export powerhouses in Asia made their economies export dependent. Japan and China net exports are less than 20% of their total GDP. They are both domestic based economies. India and China have huge populations and huge potential underdeveloped markets while Japan is already a mature industrial market living off its surplus savings.
The two countries that were not entirely coupled with the global economy, China and India will still have growth above 5%… Both economies will be the growth driver in Asia and the world for the next two to three years. But the contraction of the world economy (industrial economies)will take time to reverse and move up since there has been a huge paradigm shift that has been caused by the meltdown of global financial capitalism and corporate led globalization.
The huge imbalances and de-leveraging process will initiate a process of painful adjustment.
History is on the march. Countries like the Philippines will find it almost impossible to grab the reins of change without a violent upheaval or process of change.
The likelihood of that happening is almost nill since we are still so much “balkanized”
I suggest we sell the country to the Japanese for what we owe in foreign currencies and turn ourselves into becoming a Jap colony. We could eventually take them over when our women who will then impregnate themselves with Japs will have millions of Jap pinoys. We could then take over from the Chinese in S.E. Asia. We are more highly evolved than the Instsik as we have learned from the gulangan nature of the Chinese merchant class.
The Pinoys could then dominate S.E. Asia. Not to worry about India as their caste system will continue to impede their economic progress.
J_AG on Wed, 8th Apr 2009 1:14 pm
The credit bubble has as its prime cause the highly indebted household sector of the U.S.
Banks assets are tied to loans to households and businesses.
Bottom line is that households will have to work themselves out or lower their debt positions. That would mean businesses would have to adjust to the new reality. That would mean that there is no going back to normal.
That is the major difference between the internet bubble and the housing and credit bubble. Consumers in the U.S. and in parts of Europe overextended themselves.
The party and if you want to call it the orgy of consumption based on credit is over. That would mean that the production capacities that were ramped up which were also based on credit will have to be worked out.
Hence when credit froze and with financial institutions using light speed computers the economy responded by falling off a cliff.
Realized loses on banks skyrocketed in light speed.
Even the government did not know the extent of the accruing loses as exemplified by AIG.
Someone described government actions as similar to the reverse thrust of a jet when it uses its engines to brake to a stop.
Economists, governments were all caught with their pants down.
Greenspan had to confess that he was not a God.
J_AG on Wed, 8th Apr 2009 2:10 pm
From Bubble to a Depression
http://online.wsj.com/article_email/SB123897612802791281-lMyQjAxMDI5MzA4NjkwNzY2Wj.html
The theory still is that capitalism will create its own gravediggers.
So what is new in the idea that the government is the executive department of the finance capitalists??
It has always been that way. Crony capitalism is the handmaiden of capitalism.
Why is that idea so alien to so many when it is the reality and has always been the reality. Look at the list of Presidentiables in the Philippines.
All different forms of GMA but similar in substance.
supremo on Thu, 9th Apr 2009 4:06 am
mlq3,
Did your grandfather envision a Philippine territory bigger than what it is now?
Carl on Thu, 9th Apr 2009 9:00 am
“Life is a game, boy. Life is a game that one plays according to the rules.” – From J.D. Salinger’s “The Catcher In The Rye”
The problem is that the rules are either changed or manipulated.
As J_AG says, “history is on the march”. Game-changing and life-changing events are unfolding before our very eyes. The financial system that we knew the past couple of decades or so has broken down and is undergoing a painful evolution that may involve fragmenting it down to more manageable units. The concept of “bigger is better” has been discredited and “too big to fail” has now evokes images of a threatening behemoth instead of a rock of stability.
Export-led growth, for the past 5 decades accepted as gospel due to the shining examples of tiger economies, has proven to be a frail domino when consumption dries up.
How will these changes affect the Philippines? Will the thrust of our richer Asian neighbors to develop other markets be beneficial to us? Will this thrust to develop closer commercial relations with countries other than developed economies enable us to spur our own economy?
There are opportunities, as well as perils, out there. Can we make these evolving changes work to our favor? Or will we bumble and bungle our way through, as we have done many times in the past?
sa kiki mo on Thu, 9th Apr 2009 11:46 am
Bumble and bungle our way through.
Kaarl Garcia on Fri, 10th Apr 2009 7:45 am
Since we lost our export market wal sigurong choice ang mga exporter natin kundi ibenta sa domestic market ang mga nakatambak na inventory nila.
Ang mga garmnts ibenta nila sa mga tailors,o designers na kumuha pa ng kung saan para sa mga materyales nila.
ang mgasemicon microchip
sa mga computer shop,cell phone shop,o iba pang shop.
ang mga furnitures pagkatapos ibenta dito sa atin,itigil muna nila yan makaktulong pa sa ating kalikasan.
nag eexport din daw tayo ng mga yate at maliit na barko.Kailangan din natin yan.
sa mga tao, ibang storya na yan
Kaarl Garcia on Fri, 10th Apr 2009 7:50 am
Ang sinabi kong proposal na solusyon ay useless kung walang pambili ang mga consumer.
Kaya nga sa China at India na bilyones ang populasyon.
Kung wala ring atik ang kalahati dito, di madami pa ding imbentaryo matitira, unless bibilihin lahat ng imbentaryo ng me mga pera.
Kaarl Garcia on Fri, 10th Apr 2009 7:59 am
happy easter na lang sa inyo.
Carl on Fri, 10th Apr 2009 8:54 am
Palagay ko, halos isang taon pa bago maramdaman ang epekto ng mga stimulus program ng Tsina at Hapon. Kung aangat ang domestic demand ng mga bansa na ito, makakabuti kaya sa atin? O wala pa ring epek?
Karl, tungkol sa furniture industry, halos lahat ng raw materials ay imported na. Yung kahoy at rattan ay galing sa Indonesia at Malaysia. Ang inputs natin ay ang labor at ang mga disenyo.
Kaarl Garcia on Fri, 10th Apr 2009 9:31 am
madaming salamat, Carl!
Carl on Fri, 10th Apr 2009 9:39 am
Chimerica? No way, if American rednecks can help it! The American Bible Belt may be the home of a large number of fanatical Christians, but how many really practice the Christian virtues of love, generosity and tolerance?
In keeping with the spirit of Lent, here’s an article about how Middle America views Asians:
http://thinkprogress.org/2009/04/09/brown-asian-names/
By the way, would Filipino names be classified under Asian or Latino?
mlq3 on Fri, 10th Apr 2009 2:48 pm
supremo, yes, he proposed the union of the philippines and present-day indonesia. a spanish historian told me the commonwealth also made a claim on guam but i have not been able to find any record of that.
Bert on Fri, 10th Apr 2009 4:45 pm
HAPPY EASTER to all!